Precious Anga
Lagos — The International Air Transport Association (IATA) has warned that escalating jet fuel price volatility is placing significant financial pressure on airlines worldwide, with many carriers lacking the tools needed to shield themselves from rising fuel costs.
The warning comes as jet fuel refining margins surge to record highs, increasing operating expenses across the global aviation industry and raising concerns about the sustainability of airline operations in markets heavily dependent on imported fuel.
Speaking at the S&P Global Energy Middle East Petroleum and Gas Conference, IATA’s Head of Fuel, Daniel Chereau, said airlines are experiencing varying levels of exposure to fuel price fluctuations depending on their ability to implement hedging strategies.
According to him, while some international carriers use financial instruments such as futures contracts, swaps and options to manage fuel risks, many airlines remain vulnerable to sudden market swings.
“Many airlines have been hit hard by price swings in the jet fuel market, and some are not in a position to hedge their exposure,” Chereau said.
He noted that soaring refinery margins, known as crack spreads, have intensified cost pressures throughout the aviation sector. In North-West Europe, jet fuel crack spreads reportedly climbed above $121 per barrel in March, compared to about $30 per barrel before geopolitical disruptions emerged earlier this year.
Chereau added that the industry is beginning to witness demand disruptions linked to higher fuel costs, flight cancellations and fuel supply challenges in some regions.
For Nigerian airlines, the situation presents a more significant challenge as jet fuel hedging remains largely absent from the country’s aviation fuel market.
Managing Director and Chief Executive Officer of Raven Energy, Adeyinka Adewole, said Nigerian airlines and fuel marketers currently do not hedge their jet fuel exposure, leaving operators fully vulnerable to fluctuations in global oil prices and foreign exchange movements.
He explained that unlike their counterparts in developed aviation markets, local operators lack access to sophisticated risk-management instruments that could help stabilise fuel costs and improve operational planning.
The absence of hedging mechanisms has amplified cost uncertainty for domestic carriers, particularly during periods of sharp movements in international energy markets.
Nigeria’s aviation industry has faced sustained pressure from volatile Jet A1 prices over the past year, forcing airlines to adjust operations and review ticket pricing structures.
The Airline Operators of Nigeria (AON) had previously warned that rising aviation fuel costs were threatening the viability of domestic flight operations. The association said Jet A1 prices climbed sharply within a short period, significantly increasing operating expenses for carriers already battling currency depreciation and infrastructure challenges.
Although government interventions, including temporary pricing measures and relief on statutory charges, helped ease immediate concerns, airlines continue to grapple with elevated fuel costs that account for a substantial portion of total operating expenditure.
Industry analysts say the challenge underscores the need for stronger risk-management frameworks, increased local refining capacity and deeper market reforms capable of reducing exposure to external shocks.
The concerns come as Nigeria’s refining landscape continues to evolve. The Dangote Refinery has emerged as a major supplier of aviation fuel, recently reducing its ex-depot Jet A1 price and expanding exports to international markets.
While increased local production could help improve product availability and moderate pricing pressures over time, experts maintain that the absence of fuel hedging strategies leaves Nigerian airlines exposed to future volatility in global energy markets.
