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Jet Fuel Cost Shock Hits Airlines Unevenly as Currencies Diverge, IATA Says

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Global jet fuel prices rose 121% year-on-year to their April peak, but airlines in different markets faced sharply different increases in their fuel costs as currency movements and regional fuel benchmarks amplified or softened the shock, the International Air Transport Association said in a Friday note.

Jet fuel is predominantly priced in US dollars, while airlines generate much of their revenue in local currencies. As a result, exchange-rate movements played a significant role in determining the increase in fuel costs that carriers faced in individual markets.

IATA said regional differences in jet fuel benchmarks also meant the global price surge was not uniform, producing varying impacts across airline markets.

Japan was among the hardest-hit markets, with the local-currency price of jet fuel rising 173%. The increase reflected a 148% jump in the regional jet fuel price combined with a 10% depreciation of the Japanese yen against the dollar.

India also experienced a sharp increase, with local jet fuel prices climbing 170%, driven by an above-average rise in its regional fuel price and currency depreciation.

Some markets were partly shielded by stronger currencies. The Brazilian real and Mexican peso each appreciated by roughly 15% against the US dollar.

Combined with less severe increases in regional jet fuel prices, that limited the rise in local-currency jet fuel prices in both markets to about 86%.

In the euro area, the stronger euro similarly cushioned airlines, limiting the increase in local-currency jet fuel prices to 118%.

China was an exception. Despite a stronger renminbi against the dollar, above-average regional fuel price increases pushed the local-currency price of jet fuel up 132%.

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