Soaring fuel prices heighten the risk of stalling aviation recovery

WHEN a senior executive at a carrier from the oil-rich United Arab Emirates remarked that jet fuel prices are now “way above” what airlines can manage, it is time for investors to sit up and take notice. The aviation industry’s nascent recovery is facing a heightened risk of being stalled.

Emirates chief commercial officer Adnan Kazim was recently quoted by Nikkei Asia as having said that jet fuel is making it tough for airlines to turn a profit. He said jet fuel — the biggest single expense item and typically accounting for 20-30 per cent of total costs — needs to be at US$50-70 a barrel if airlines are to cope.

Prices are now more than double that, having risen 7.9 per cent week on week to US$158 a barrel last week, noted the International Air Transport Association (Iata). At an average price of US$136.80 year to date, Iata estimated this would translate into an impact of US$122.8 billion on the industry’s total fuel bill for 2022.