Airline margins: squeeze is on as Brent crude oil touches USD80

On 17-May-2018 Brent crude oil touched USD80 for the first time since Nov-2014. As of 17-May-2018, the average Brent crude oil price for the year to date was USD69 - a 28% increase on 2017's average price of USD54. If the price were to remain at USD80 for the rest of the year, the average for 2018 would then be USD76, which is 40% up on last year.

Based on the year to date jet fuel price of USD83 per barrel, IATA estimates that the world's airlines will pay USD39.3 billion more for fuel in 2018 than in 2017. With net profit at USD34.5 billion in 2017, this is a significant additional cost.

It is a sign of the airline industry's greater resilience that it can face the prospect of such a significant increase in fuel costs without the prospect of losses. Nevertheless, it is likely to be a factor in taking airline operating profit margins further down from recent cyclical peaks.