Source: US Energy Information Administration, U.S. Gulf Coast Kerosene-Type Jet Fuel Spot Price FOB, USD per gallon.
Fuel accounts for about 40% to 50% of air transport operating costs of a single flight, depending on the type of plane used (economies of scale and fuel efficiency are directly related). While jet fuel prices were very stable during the 1990s, the beginning of the 21st century is marked by a surge in prices and large fluctuations. Since 2000, the airline industry has faced an environment of much higher fuel prices and greater volatility. Between 2005 and 2016, fuel prices ranged from 20% to 35% of an airline’s operating expenses. In the 2010s, jet fuel prices stood at six times the level in the 1990s. While jet fuel prices declined sharply at the onset of the Covid-19 pandemic, they bounced back sharply afterward due to inflationary pressures and the war in Ukraine in early 2022. This volatility complicates long-term planning for air operations, as aircraft design prioritizes fuel efficiency.
When jet fuel prices rise significantly, airlines are likely to cancel services and connections where profitability is low, as operational costs exceed revenue.