This week the price of jet fuel reached its highest point in well over 5 years, at almost $103/bbl at the time of writing. That’s 70% up on a year ago and presents yet another challenge for the industry.
Jet Fuel Is a Major Cost for Airlines
Fuel is a major cost component of operating an airline, often accounting for 20-30% of operating costs. A look at Delta Air Lines’ earning release for Q4 2021 puts the cost of fuel and related taxes at 17% of total operating expenses quarterly while the results for Air France in the first half of 2021 put their fuel cost at 27% of operating expenses. So, a rise in fuel costs of this scale means airlines have to reduce costs elsewhere or increase fares. In the current operating environment neither is easy.
Oil prices are high as consumption has exceeded production since the second half of 2020 but that situation is likely to reverse in 2022 as production increases and growth in demand slows down. While oil prices are expected to fall in…