The international aviation sector is increasingly affected by fluctuations in currency exchange rates and fuel prices, according to a recent report by the International Air Transport Association (IATA). The depreciation of local currencies against the US dollar leads to higher operational costs for airlines, notably because jet fuel is typically purchased in dollars. As a result, regions like Russia and Brazil have experienced significant financial strain, with currency weakening influencing their cost structures.
In Russia, sanctions following the invasion of Ukraine have limited the price of Russian oil, while in Brazil, markets expect monetary easing amid ongoing fiscal challenges, further impacting their currencies. Meanwhile, currencies in the European Union, China, and India have also depreciated but to a lesser degree, helping some carriers reduce fuel expenses.
Impact on Airline Margins
Fuel accounts for approximately 26% of airline operating costs. IATA findings show that about 55-60% of these costs are denominated in dollars, contrasting with 50-55% of revenues. Consequently, a 1% rise in the US dollar can diminish operating margins by 0.1 percentage points. Conversely, a similar depreciation can improve margins. As of August 2025, the average jet fuel barrel price has declined to roughly US$86 from US$99 in 2024, translating into an estimated US$25 billion in global savings.
Despite these cost reductions, the aviation industry faces challenges in decarbonization efforts in Latin America, where no active projects for sustainable aviation fuel (SAF) are currently underway. The Latin American and Caribbean Air Transport Association warns that transitioning to SAF could add US$318 billion in costs, potentially affecting air connectivity and future growth.
While some airlines have managed to cut losses partly due to lower fuel prices and stable demand, analysts highlight ongoing risks, including geopolitical conflicts, supply chain disruptions, and increased labor and maintenance costs, which could impact future performance. The industry remains sensitive to energy price swings and currency fluctuations, necessitating strategic management to limit exposure.
