Expiring fuel hedges squeeze airline margins, BTG Consulting says
XLI•Airline margins face pressure as cheaper fuel hedges expire through 2027, while European jet fuel averaged $207.61 a barrel in the week ending October 16, up 127.9% year over year. Ryanair’s CEO warned fares could rise up to 20% in 2027.
1. Fuel costs pressure airlines
Airline margins face sustained pressure as cheaper fuel hedges expire through 2027, limiting protection against elevated replacement costs. European jet fuel averaged $207.61 a barrel in the week ending October 16, up 127.9% year over year.
2. Fares and cost recovery
Ryanair CEO Michael O'Leary warned fares could rise up to 20% in 2027, risking weaker demand among price-sensitive passengers. IAG recovered around 60% of additional second-quarter fuel costs through revenue initiatives and cost reductions, leaving a substantial shortfall.
3. Supplier risks
Capacity cuts and delayed customer payments increase suppliers' insolvency risk, with limited flexibility to replace lost work or redeploy resources.
