Airlines around the world are facing rising financial pressure after jet fuel prices surged far faster than crude oil, raising concerns about profitability across the aviation industry.
The sharp increase follows the escalation of the conflict involving Iran, the United States and Israel, which has pushed up energy prices and disrupted refining markets.
While crude oil prices have climbed by roughly one-third, jet fuel prices have more than doubled, creating an unexpected cost shock for airlines.
Fuel costs outpacing oil prices
Jet fuel normally moves broadly in line with crude oil prices. However, since the start of the conflict, refining margins – the difference between crude oil and refined fuel prices – have widened dramatically, driving aviation fuel costs higher.
Many airlines hedge their fuel purchases using crude oil contracts, but these do not always protect them against increases in the price of refined jet fuel.
Rebecca Sharpe, chief financial officer of Cathay Pacific, said the company’s hedging programme provided only partial protection.
She said the airline hedges crude oil rather than jet fuel, meaning it is not fully shielded from the recent surge in aviation fuel prices.
Airlines respond with fare increases
Carriers worldwide have begun raising fares, introducing fuel surcharges and reducing capacity as they attempt to offset the higher costs.
Industry analysts warn that the impact could persist if refining margins remain elevated, as has often happened during periods of geopolitical tension in the Middle East.
Budget airlines most exposed
Experts say low-cost carriers may face the greatest pressure because their passengers are more sensitive to ticket price increases.
Research by JPMorgan Chase suggests that a sustained 10% rise in jet fuel prices could cut the operating profit of Wizz Air by as much as 31% this year.
Other major European airline groups – including Air France-KLM, Deutsche Lufthansa AG, International Airlines Group, owner of British Airways, and Ryanair – could see profit impacts of between 3% and 10%.
Hedging strategies vary
Some airlines remain more exposed than others. Several major carriers in the United States and China do not hedge fuel costs, leaving them fully vulnerable to price swings.
Meanwhile, Air New Zealand and Qantas have hedged more than 80% of their crude oil needs for the current half-year, but have still raised fares to protect profit margins.
Analysts say the jet fuel hedging market is much smaller and more expensive than crude oil hedging, making it difficult for airlines to fully protect themselves against sudden price spikes.
Profit outlook under pressure
According to research by Bank of America, the net profits of Asian airlines could fall by around 6% in 2026 for every $10 per barrel increase in refining margins sustained over three months, assuming airlines do not offset the costs through higher ticket prices.
With fuel typically accounting for 20–30% of airline operating costs, the recent surge in jet fuel prices has become one of the biggest challenges facing the aviation sector as it navigates ongoing geopolitical uncertainty.
