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High crude oil prices after the pandemic and the Russia-Ukraine war ate into the margins of airlines across the world. IATA expects the fuel costs to come down from current levels.
“Fuel is one of the main operational cost items for an airline, typically accounting for 20-25% of the total,” the report said. “Looking forward, we expect oil prices to moderate somewhat over the forecast horizon, easing to around $92 in 2023, from around $102 this year.”
Fuel costs are estimated to account for 40% of the Indian airlines’ operational costs.
Even when the fuel prices have come down from the peak they touched earlier in the year, the challenge remains as jet fuel prices haven’t come down as much as crude oil.
“This phenomenon is related to a lack of refining capacity which creates a scarcity of jet fuel, leading to a higher price of the latter,” IATA said.
The agency sees the global refining capacity rising in the current year and next year, meaning the spread between crude oil and jet fuel are likely to have peaked, but may remain higher than the historical average.
“For airlines, this implies a lesser benefit from any crude oil-price decline compared to other industries, as the price of jet fuel will in all probability decline by less,” it said.
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Image and article originally from www.bqprime.com. Read the original article here.