Aviation operators navigate the fuel crisis

The global aviation industry is once again navigating a period of significant turbulence. Jet fuel prices have risen sharply, reintroducing industry volatility at a scale not seen since the COVID-19 disruption.

Faced with these volatile conditions, sustaining operations and profitability requires more than operational efficiency – operators need sophisticated multi-asset financial solutions to decouple margins from the geopolitical volatility.

Why jet fuel prices are rising so sharply

Jet fuel prices reached $179 per barrel by late April 2026 as the conflict in the Middle East sent crude oil prices surging amid production and supply constraints. The pace of this increase significantly exceeded price movements in other refined fuel markets, suggesting particularly strong supply tensions in the aviation fuel segment.

What makes the sharp price reaction more severe for the aviation sector is the widening jet fuel crack spread (the difference between the price of refined products and crude oil), which climbed to almost $100 per barrel and reached levels noticeably higher than those observed in the diesel market.

As airlines typically spend between 30% to 38% of their total operating costs on fuel, many aviation operators were forced to implement contingency measures, such as major capacity cuts or adding fuel surcharges, resulting in margin squeeze.

It is therefore unsurprising that operators across regions have responded with route rationalisation, pricing adjustments and a renewed focus on cash preservation. In South Africa and across much of Africa, these pressures have been amplified by import dependency and limited refining depth.

Africa’s supply chain vulnerability

Beyond the price shock, aviation operators across Africa may soon face other structural challenges, as many are trying to navigate the crisis without buffers, such as the refining, storage and logistics depth that other regions can fall back on.

The major issue is that most African countries don’t produce enough refined jet fuel domestically, and around 70% of the continent’s imports move through the Strait of Hormuz. Furthermore, even if refining comes back online when this bottleneck in the supply chain is resolved, the demand to restock global supplies will likely keep oil prices high for some time.

While Nigeria’s domestic refining capacity and South Africa’s storage capacity offer some relief, aviation operators must plan strategically to navigate the turbulence currently impacting the sector.

A critical starting point is finding solutions to reduce risk by stabilising variable pricing. In a poll of travel industry executives conducted by Globetrender, 49% of respondents expect week-to-week price fluctuations. 

Managing fuel risk through hedging

A strong corporate and investment banking (CIB) partner can combine risk management with tailored financing solutions to provide greater predictability and stabilise cash flows and balance sheets.

Commodities desks can use derivatives for fuel hedging to reshape uncertain fuel costs into more stable and predictable outcomes. There are various tools available to suit differing procurement benchmarks and mandates, as there is never a one-size-fits-all solution to address different operator needs.

Fixed-for-floating swaps provide certainty over cost, while options offer insurance-style protection by giving an operator the right, not the obligation  to buy at a capped price, providing downside protection with potential upside participation.

Collars provide cost-efficient hedging by putting a cap on maximum prices and a floor on minimum prices, providing operators with some protection and greater certainty within a banded fuel price range.

Derivative structures are also useful for smoothing volatility over time rather than point-in-time spikes.

How airlines are protecting margins

Numerous operators have successfully leveraged these financial tools to maintain a competitive advantage amid the crisis. For example, EasyJet hedged 70% of its fuel needs to September 2026, which enabled the low-cost carrier to launch a “book with confidence” policy, guaranteeing no price increases after the fact.

When CIBs align hedging with financing, they can also deliver greater value by embedding risk management into lending structures.

Crucially, there is no one-size-fits-all solution. The most effective outcomes occur when financing and hedging are structured together, rather than in isolation. CIBs can embed well-structured facilities with hedging arrangements to stabilise cash flows, protect downside and improve earnings visibility.

This can provide operators with better pricing and higher leverage capacity, allowing carriers to lock in margins between ticket pricing and fuel costs and preserve optionality. From a lender’s perspective, disciplined risk mitigation strengthens credit profiles.

Access to capital remains essential to support industry trends, like the accelerating global aircraft replacement cycle, as the economics now strongly favour fleet renewal into fuel-efficient, next-generation aircraft.

As jet fuel pricing is often linked to crude benchmarks and US dollar (USD) exposure, CIBs can also reduce commodity risk tied to financing through cross-commodity and forex (FX) hedging structures.

This is especially relevant in South Africa, where the rand (ZAR) is a highly sensitive emerging market currency to global geopolitical risk. A fuel commodity-risk hedge coupled with a USD/ZAR FX-risk hedge creates a holistic approach to enhance resilience during extreme shocks.

A capable CIB can provide bespoke risk and financing solutions to address the specific pressure points and challenges operators currently face, and create more resilient operations capable of navigating the volatility in global markets by deleveraging some of the prevailing risk.

Periods of disruption often accelerate strategic change. Today’s fuel environment is already reinforcing the economic case for fleet modernisation, operational efficiency and tighter financial discipline.

Operators that respond early and are supported by experienced financial partners are better positioned to protect margins, strengthen balance sheets, access funding on competitive terms, and invest through the cycle, rather than retreat from it.