Aviation

Fuel price down but airlines fear fewer passengers

April 8, 2025, 2:05 PM

Jet fuel costs are a substantial outlay for airlines but falling oil prices may bring them down

Aviation fuel costs may fall
Travellers face economic uncertainty
US tariffs up almost three times

While the lowest oil prices in four years may translate into lower jet fuel costs for airlines, slower economic growth in Europe and Asia could dampen international travel demand for Gulf carriers, analysts say.

At Dubai’s Emirates, for example, jet fuel represented the company’s largest single cost in its fiscal year to March 31, 2024 – AED34.2 billion ($9.3 billion) or one-third of its total operating expenses – at a time when oil prices were hitting $90 per barrel and above.

Since last week, however, the price of benchmark Brent crude has plunged almost 15 percent from $75 per barrel to $64 per barrel, amid concerns that Donald Trump’s global tariff war could prompt a global recession.

Around the world stock markets have crashed on lower expected corporate profits.

“Gulf carriers especially benefit here, as fuel efficiency gains bolster long-haul competitiveness,” said Linus Bauer, managing director of Singapore-based aviation consultancy BAA & Partners.

This could be offset by rising costs and inflation, linked to higher tariffs, sustained interest rates and lower consumer confidence, dampening demand for international travel.

“A prolonged trade war or inflationary pressures could stifle outbound travel from price-sensitive markets in Asia,” Bauer said.

East Asia and Australasia made up more than a quarter of Emirates’ revenue in its last fiscal year, and West Asia and the Indian Ocean region another 10 percent.

Even as early as February, data from the International Air Transport Association suggested a slowdown in passenger demand growth, from 10 percent year on year in January to 3 percent in February.

That was before Trump announced on April 2 a near tripling in US effective tariff rates from 9 percent to 25 percent, the highest in more than a century.

The effective tariff rate – which is tariffs as a percentage of total US imports, taking into account different rates on different products and on different countries – was 2.5 percent before Trump’s election.

“While uncertainty remains elevated, it is now becoming clear that the tariff increases will be significantly larger than expected,” Jerome Powell, chairman of the US Federal Reserve said on April 4.

The same is likely to be true of the economic effects, which will include higher inflation and slower growth, Powell said.

“Mass job cuts across the US government have shaken consumer confidence (there), dampening spending on holidays and flights,” said John Grant, a partner at Midas Aviation and AGBI columnist.