Fuel costs strain airlines

Airlines are facing financial challenges due to rising fuel prices, which are complicating their efforts to transition to more sustainable energy sources. This issue was discussed by aviation leaders during a meeting in Brussels on October 13 and 14.

Kerosene prices have surged

Kerosene prices are about 70% higher than they were a year ago, according to Marie Owens Thomsen, chief economist of the International Air Transport Association (IATA). Fuel typically accounts for 31% of an airline's base costs, and the increase is reducing the financial flexibility of carriers.

Projected fuel costs are high

IATA estimated in its June outlook that the aviation sector's fuel costs would reach $350 billion in 2026, up from $252 billion in 2025. The association also predicted a global net margin of just 2%, leading to a profit of $23 billion.

High fuel prices will persist

Roberto Alvo, CEO of LATAM Airlines, believes that high fuel prices will remain for a long time. He warns that it is unrealistic to expect a significant drop in fuel prices by 2027, similar to what was seen in July of the previous year.

Airlines vary in financial resilience

Not all airlines are equally able to handle the financial strain caused by high fuel prices. Roberto Alvo notes that some airlines have a strong revenue base, while others rely on price-sensitive customers. He warns that some have already used up all their financial cushions.

Cash reserves may lead to bankruptcies

According to IATA, the pressure on cash reserves could lead to more bankruptcies and the consolidation of the airline sector. Once reserves are exhausted, airlines must borrow, but a weakened balance sheet increases financing costs and makes recovery harder.

Traffic growth does not eliminate risk

Despite an 8.3% increase in traffic, measured in passenger kilometers, for the first nine months of 2026, LATAM Group's executive remains concerned about the persistence of high costs.

Sustainable aviation fuel is not a solution

Sustainable aviation fuels (SAF) are not currently helping to ease the economic burden on airlines. Their production is growing slowly, and their prices remain significantly higher than those of traditional kerosene. Production costs have also increased this year.

SAF production is limited

IATA estimated global SAF production at 2.4 million tons in 2026, which would account for about 0.8% of aviation fuel consumption. The additional cost for airlines is expected to be $4.3 billion for the year.

Regulatory challenges hinder progress

Marie Owens Thomsen criticizes the gap between the goals set for the aviation sector and the available supply of sustainable fuels. She highlights insufficient fuel supply and conflicting regulations as major obstacles to achieving sustainability targets.