Jet fuel volatility continues to weigh on airline profitability, warns IBA

New analysis from IBA has revealed that jet fuel prices remain significantly elevated, continuing to place pressure on airline finances despite a short-term easing in global markets.

According to IBA, jet fuel prices were still around 54% above pre-conflict levels as of 8 April. Although prices fell from a peak of $114 per barrel on that date to approximately $94 on 9 April following a temporary ceasefire-driven market response, the broader trend of volatility persists.

The firm notes that this sustained uncertainty is having an uneven impact on airline cost bases worldwide, with knock-on effects for fleet planning decisions and aircraft asset values. Fuel remains a major component of Cost per Available Seat Kilometre (CASK), and IBA’s modelling accounts for regional variations in fuel exposure, hedging strategies, and local pricing dynamics.

Assuming fuel prices remain elevated over the next 12 months, IBA has revised its global airline profitability outlook. EBIT margins for 2026 are now forecast to fall by 1.7 percentage points to 5.5%, down from a pre-conflict baseline of 7.2%.

However, the impact is expected to vary sharply by region. Airlines in Asia-Pacific are forecast to see the steepest decline, with EBIT margins dropping by six percentage points. This reflects a combination of long-haul heavy networks, lower levels of fuel hedging, and intense competition across international markets.

Carriers in the Middle East are also expected to face significant pressure, with margins projected to fall by 4.9 percentage points due to similarly fuel-intensive hub-and-spoke operations. In Africa, margins are forecast to decline by 5.1 percentage points, driven by structural challenges such as older fleets, lower load factors, and limited pricing power.

By contrast, airlines in North America and Europe are expected to be more resilient. IBA forecasts comparatively modest margin reductions of 0.6 and 0.5 percentage points respectively, supported by stronger hedging positions, higher domestic market exposure, and greater ability to pass on costs to passengers.

North American carriers are identified as the least exposed to fuel price volatility, benefiting from favourable domestic supply dynamics, with jet fuel prices tracking at roughly 100–110% of 2025 levels. Meanwhile, airlines in Asia-Pacific and the Middle East have seen fuel costs rise by around 60%, compared with increases of approximately 40% in Europe and Africa.

IBA also highlights that European airlines continue to benefit from extensive fuel hedging, with many major carriers more than 80% covered for 2026. However, this protection is expected to diminish into 2027, potentially exposing the region to greater volatility in the longer term.

Despite the recent dip in prices, IBA cautions that ongoing instability in fuel markets will continue to shape airline profitability, with wider implications for capacity planning, route networks, and long-term fleet strategy.