The recovery of the global aviation sector has been hit with another curveball as oil and jet fuel prices have reached pre-pandemic levels.
This was highlighted in the latest Iata Financial Monitor (December 2020 to January 2021) released this week.
The report noted that oil supply cut extensions from OPEC+ (OPEC members and major non-OPEC oil-exporting nations), and expectations about global economic recovery had led the price rally, despite the global lockdowns.
Looking forward, airlines will face cost pressures once the recovery starts, as fuel is the largest variable cost and fuel hedging is limited at present.
Key findings from the report revealed that, globally, air travel was expected to gradually revive in the second half of 2021, following a weak H1. This will mean that airlines will continue to focus on limiting losses by implementing cost-cutting measures and preserving cash balances.
Looking ahead, there are uncertainties regarding the vaccination progress and lifting of travel restrictions. Therefore, the strength of the rebound in travel demand will depend on the pace of vaccine roll-outs and easing of travel restrictions.