GENEVA, Switzerland: A weaker US dollar is expected to benefit non-US dollar-based airlines’ profitability and margins by reducing US dollar-denominated costs such as fuel, aircraft leases and maintenance, said the International Air Transport Association (IATA).
The Geneva-based air travel association said it estimates that 55 to 60 per cent of global airline costs are denominated in US dollar, compared to 50 to 55 per cent on the revenue side.
Based on this, a one per cent depreciation of the US dollar against global currencies could lift global airline profits by around one per cent and improve operating margins by around 0.05 percentage point (ppt).
IATA’s Sustainability and Chief Economist, Marie Owens Thomsen, said fuel efficiency gains were expected to reach only about 1.0 per cent, as supply chain issues continue to hamper fleet renewal and push the average aircraft age above 15 years, the highest on record.
“Factoring in industry growth, fuel consumption is expected to increase to 106 billion gallons in 2026, up 2.7 per cent from 103 billion gallons in 2025,” she said at the IATA Global Media Day held here on Tuesday.
She said consensus forecast point to Brent crude oil price declining to USD62 per barrel, while jet fuel prices are only expected to fall 2.4 per cent, from USD90 per barrel (USD1=RM4.11) in 2025 to USD88 per barrel in 2026, as the crack spread widens.
The crack spread refers to the price difference between crude oil and its refined products, which significantly impacts refiners’ profit margins.
“Fuel is set to account for 25.7 per cent of total operating expenses, down from 26.8 per cent in 2025,” she said.
Meanwhile, the incremental cost of airline purchases of sustainable aviation fuel (SAF) is projected to reach USD4.5 billion in 2026, with an estimated 2.4 million tonnes of SAF expected to be available.
On the industry supply chain, Thomsen said supply chain challenges continue to constrain airlines’ ability to meet consumer demand for air transport.
“While some improvement is expected in 2026, the backlog of aircraft orders is likely to continue growing. High load factors and stable yields are partly attributable to supply chain constraints,” she said.
However, she noted that the growth-constraining impact of supply chain challenges remains a drag on airline profitability.
“Even as aircraft deliveries are projected to increase significantly in 2026, the pace of new orders is outstripping production, causing the backlog to reach new highs and signalling that supply constraints and their financial impact will persist well beyond the near term,” she added. – Kisho Kumari Sucedaram/BERNAMA
