By Stephen Wright
High inflation is a bigger downside risk for the recovery in global travel than the capacity constraints currently faced by airlines, the chief executive of Auckland International Airport says.
The airport, which is an international gateway for New Zealand and the South Pacific, has taken a conservative view on the pace of recovery, which reflects New Zealand’s slower reopening from the Covid-19 pandemic and economic risks, Carrie Hurihanganui told The Wall Street Journal.
“It’s not transitory inflation–which is kind of what the position was four or five months ago and we’ve all accepted that’s not the case–does that start to bite (into spending) and therefore then our trajectory, does that start to taper off or not,” she said.
Central banks have scrambled to raise interest rates this year as elevated inflation threatens to become entrenched in economies. Prices for commodities and everyday consumer goods have soared worldwide due to stimulus policies brought on by the pandemic, global shipping disruptions and Russia’s war on Ukraine.
The International Air Travel Association has forecast global travel to reach pre-pandemic levels in 2024, but there are some significant regional variations within that forecast.
Asia has been slower to reopen than Europe and North America, and New Zealand is six to nine months behind some big markets, said Ms. Hurihanganui, who became Auckland Airport’s CEO in February after senior roles at Air New Zealand Ltd. and in the banking industry.
“Ultimately we are optimistic,” she said. “We certainly aren’t trying to be too bearish, but some of the conditions have changed since those other markets got a head start.”
Airlines, which slashed staff and put a significant proportion of their aircraft into storage in response to Covid-19, have had problems meeting demand as borders reopened. More recently, some have had to slow the capacity recovery, partly due to staffing shortages as Covid-19 continues to cause illness.
“The capacity issues will work themselves through. It’s a matter of time such as getting aircraft out of the desert and reanimated, it’s hiring and training staff,” Ms. Hurihanganui said. “The bigger question or downside risk potential is inflation: as that bites, as people’s mortgages go up, as those things take hold over the next six months.”
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