Issue link: https://maltatoday.uberflip.com/i/1538811
16 maltatoday | SUNDAY • 24 AUGUST 2025 NEWS AIRFARES in Malta have surged to un- precedented levels, with inflation in air passenger transport hitting 46% in April 2025 compared to a year earlier. The sharp increase is mainly driven by a post-pandemic tourism boom that has pushed passenger numbers far beyond pre-2019 levels, while available seat ca- pacity has struggled to keep up. This emerges from a Central Bank of Malta analysis published in the Outlook for the Maltese Economy. This supply-demand imbalance, com- pounded by elevated fuel and operation- al costs, has fuelled one of the steepest price escalations in Europe. The jump, far above Malta's historical average of 3.1%, was followed by 42% in May and 25% in June, making the rise both persistent and severe. In contrast, euro area inflation for air passenger transport stood at 14% in April 2025, highlighting how Malta's spike has been more pronounced and prolonged. Other tourism-heavy coun- tries such as Greece and Spain also saw steep increases, but unlike Malta, their inflation began to normalise earlier this year. Airfare prices push up inflation The report also notes that the airfare price surge has become a major driver of overall inflation in Malta. In April 2025, airfares accounted for 0.6 percentage points of the total inflation rate, making up around a third of services-driven in- flation. According to the CBM, the escalation stems from both strong demand and supply-side constraints. After collaps- ing during the pandemic, tourism has rebounded sharply. Since early 2023, inbound and outbound flights have consistently exceeded 2019 levels. Inbound tourism grew by an aver- age of 38% since 2024, outpacing Greece's 26%, and passenger move- ments in 2025 have averaged 42% above 2019 levels, putting intense pressure on available capacity. Despite growth in seat availability—up 17% above 2019 levels in 2024 and 35% higher in 2025—capacity has not kept pace with soaring demand. In February 2025, passenger movements were up 56% compared to February 2019, while seat capacity rose by only 47%, illus- trating the imbalance between demand and supply that has pushed ticket prices higher. Added to this, airlines are still grap- pling with increased opera- t i o n a l costs. Jet fuel pric- e s , which surged during the 2022 energy crisis when crude oil peaked at $125 per barrel, re- main a major factor. Although Brent crude oil has since d e c l i n e d , leading to a 12% year-on-year de- crease in jet fuel pric- es in 2024, costs remain el- evat- e d alongside broader increases in airline expenses. Inflation set to stabilise by 2027 The Central Bank forecasts that airfare inflation will remain elevated through the first half of 2026 before easing. Falling crude oil prices are expected to gradually stabilise ticket prices, while a moderation in the pace of demand growth would also help reduce infla- tionary pressures. By 2027, airfare inflation is projected to converge towards its long-run aver- age of around 3%. But other factors are expected to come in play. The EU Emis- sions Trading System for aviation will phase out free allowances by 2026, r a i s i n g costs for a i r - lines in a bid to re- duce the impact on climate change. Meanwhile, the introduction of Sustainable Aviation Fuels pre- sents a significant cost challenge. SAF was priced at 3.1 times higher than traditional jet fuel in 2024 and is pro- jected to rise to 4.2 times in 2025, with limited production levels adding further strain. These additional burdens, cou- pled with sustained demand, could slow the return to normal price levels. Reporting by James Debono Airfares in Malta have surged sharply due to strong post-pandemic tourism and limited seat capacity, driving inf lation to 46% in April 2025. Prices are expected to remain high through 2026 but gradually ease by 2027 Malta's airfare inflation soars 46%