Transport & Logistics
Global air travel growth is set to rebound to 5% in 2027, but airlines face tougher conditions. Demand remains resilient, but the fuel price shock will spill over into 2027, while new aircraft supply remains constrained. This creates divergent fortunes across airlines, segments and regions
Rico Luman
• The fuel-price shock will continue into 2027. Jet fuel could account for close to 35% of airlines’ operating costs in 2026, up from 27% in 2025. Tight refinery capacity and low inventories are likely to keep prices elevated even if oil prices ease.
• European air fares will have further to rise. Hedging initially protected many European airlines, but that cover will progressively expire during 2027. US fares have already adjusted more quickly because American carriers tend to hedge less.
• Budget airlines are particularly exposed. Fuel represents a larger share of their costs, while price-sensitive passengers make it harder to pass on the full increase. Premium carriers have more scope to raise fares without significantly weakening demand.
• Ticket prices are unlikely to return to early-2026 levels. Even if fuel becomes cheaper, resilient demand, limited aircraft availability and wider inflationary pressures should keep fares relatively high.
• The Middle East disruption has reshaped global traffic flows. Traffic in the region halved in March and April 2026 and was still 15% lower year-on-year in August, knocking an estimated 2-3 percentage points off global passenger growth. This will also still impact 2027. European airlines have benefited from some traffic shifting away from Middle Eastern hubs.
• Aircraft shortages will continue to constrain capacity. Airbus and Boeing had a combined backlog of around 15,000 aircraft by mid-2026. Scarcity is keeping aircraft values and leasing rates high and forcing airlines to operate older, less fuel-efficient planes for longer. (....)