A sharp rise in the price of fuel is threatening the airline industry’s slow recovery from the coronavirus crisis.
Oil prices climbed to their highest levels in seven years this week, triggering new concerns over carriers’ costs as patchy passenger demand persists after 18 months of travel restrictions.
The price ofjet fuel has doubled to almost $750 per metric tonne over the past year, according to data from the International Air Transport Association and Platts.
Delta Air Lines last week singled out fuel costs as it forecast a swing back to a loss in the final three months of the year, after only its second profitable quarter since the crisis began.
“Fuel prices continue to rise, which will pressure our ability to remain profitable,” the airline’s chief executive Ed Bastian said in a results call.
Airlines would typically try to pass rising costs on to passengers by raising ticket prices but the industry is still operating in a highly uncertain environment, with passenger numbers well below normal levels and some carriers trying to stimulate the market through low fares.
To make the situation worse, many airlines gave up on hedging their future fuel requirements when chaos ripped through the oil market last year, leaving them more exposed than usual to the subsequent sharp rise in crude prices.
Ryanair took a €300m hit in its 2020 financial year following the collapse in the price of oil after it employed a high level of hedging over the period.