Oil prices have been soaring in recent weeks, and crude futures (CLV23) just reached their highest point since last November on the back of ongoing supply cuts. Rising oil prices are already having a significant impact on the airline industry, which is one of the largest consumers of fuel. Jet fuel accounts for a significant portion of operating expenses at most airlines, and carriers without effective fuel cost hedging - or those operating on a low-cost model - are particularly sensitive to oil price variations.
For example, in a regulatory filing, American Airlines (AAL) once warned, “we estimate that a one cent per gallon increase in the price of aircraft fuel would increase our 2021 annual fuel expense by $38 million" [emphasis added].
