Impact of fuel price rises on aviation

After two years of slowdown in our sector, caused by the COVID crisis, we have had a summer of significant recovery and a remarkable awakening in the demand for travel within the airline industry.

However, just as we were turning the page on the latest impact of the Omicron variant, the Russian invasion of Ukraine shocked the world. The immediate consequence of this fact was a sharp rise in fuel prices.

The volatility of the markets regarding the price of a barrel of oil makes it really complicated for the airlines to foresee the 18-month hedges they usually use and manage. This is even harder for European airlines due to the euro weakness against the dollar. Prior to the Ukrainian conflict, the price of fuel meant the 27% of airlines’ total costs, paying $80 per barrel of oil. During this period of uncertainty, the price of fuel has reached almost $120, causing an unprecedented challenge.

The fear of new unforeseen events leads travellers to make their reservations in the short term. This affects demand what makes it very difficult for the airlines to forecast their future incomes. Therefore, it still remains to be seen how many airlines are able to assume this additional cost generated by the increase of fuel prices without raising tickets fees, which would have a directly proportional impact on the demand for travel.

However, due to the high demand and future need for pilots in the industry, aviation schools are adjusting prices in order to offer training programms that boost the industry and, thus, attract future pilots.. At the same time, mitigating measures are being implemented to help absorb the impact of soaring fuel costs, such as investing in more efficient, state-of-the-art aircrafts that optimize resources. All this contributes to create highly competitive training centers with great quality training.