Jet fuel price volatility is squeezing airlines as weak currencies and USD-driven cost spikes intensify financial pressures across global markets

According to new insights from the International Air Transport Association, Jet fuel price volatility is hitting airlines unevenly across global markets as currency weaknesses intensify fuel-related cost pressures.

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The association recalled that a decade ago, its weekly chart revealed how falling jet fuel prices had unequal effects across economies because of fluctuations between local currencies and the US dollar.

The report now warns that the situation has become even more unpredictable.

IATA stated that Jet Fuel Price Volatility in US dollar terms has grown more intense since 2020. It attributed the surge to the pandemic’s collapse in demand, a turbulent post-pandemic recovery marked by supply chain disruptions, and rising geopolitical tensions.

These forces have combined to create a powerful destabilising effect on airline operating costs.

Countries with weaker currencies are facing the steepest increases. The analysis identified Russia and Brazil as the most affected, with both currencies depreciating significantly since 2014.

Russia’s ruble has continued its downward slide following the invasion of Ukraine and subsequent sanctions, while Brazil’s real is weakening amid expectations of looser monetary policy and ongoing fiscal challenges.

The impact has also reached major economies. IATA noted that the EU, China and India have all experienced currency depreciation since mid-2022.

However, the report observed a contrasting trend this year, as the US dollar has lost about 10 per cent of its value against several currencies, allowing some countries to benefit from cheaper fuel bills in local currency terms.

Fuel remains a massive operational burden for airlines. According to IATA, it accounts for about 26 per cent of total operating expenses, alternating with labour as the largest cost category.

Compounding the challenge is the fact that roughly 55–60 per cent of global airline costs are denominated in US dollars, compared to only 50–55 per cent of revenues.

This imbalance feeds directly into profitability.

The association explained that a one per cent appreciation of the US dollar against global currencies can reduce airline operating margins by about 0.1 percentage points, while a one per cent depreciation can offer an equivalent improvement.

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As markets continue to grapple with shifting exchange rates and unstable energy prices, airlines worldwide face a critical test of resilience in managing these rapidly evolving financial pressures.