Impact of crude prices on airline’s profitability

The airline industry is operational on miniscule profits and even the slenderest change in its operational costs can affect its overall profitability. Th e highest share of its operating cost (ranging from 20 – 50%) is accounted by fuel cost. Thus, crude price volatility becomes a cause of huge concern for all the airlines.


The airline industry is operational on miniscule profits and even the slenderest change in its operational costs can affect its overall profitability. Th e highest share of its operating cost (ranging from 20 – 50%) is accounted by fuel cost. Thus, crude price volatility becomes a cause of huge concern for all the airlines.

The Analytics & Consulting team of Accelya have presented a report “Th e Crude Catastrophe – Impact of crude prices on an airline’s profitability”, which provides an insight into the impact of crude price volatility and the strategies adopted by diff erent airlines to gain a better position.

Th e strategy of an airline is guided by its geography, business model, costs and financial position. While airlines such as in the gulf can plan to build infrastructure given their strategic location between the eastern and the western part of the world; others as those in Europe have to consider ancillary businesses given the stiff competition both from regional and gulf airlines.

While a downward movement in crude price improves profitability and liquidity of the airline, which enables re-investment in the business; however, some risks can emanate from lower crude oil prices. Th is can have a direct implication on the stock prices of airlines.