Just as the aviation industry was poised to make a rebound, the Russia and Ukraine crisis caused a ripple in the recovery for the industry. Oil prices as it was were already high, but adding another layer on top of it has made the situation that much worse.
Airline’s profitability is ultimately dependent on keeping costs low, especially operationally. With costs somewhat manageable for the airlines, the one cost that affects profitability the most is fuel. Because there is a shortage of oil since countries have cut off their relationship with a world-leading supplier of oil, prices have elevated as a result.
Given the fact that there are a multitude of countries eliminating their buyer and supplier relationship with Russia as it pertains to oil, airlines are struggling to manage the high oil prices. With oil hovering around $110 a barrel , it could end up being reminiscent of 2008 where it was nearly $150 a barrel.
This could have a direct impact on ticket prices and air fares, with consumers being the ones to pay for these effects. Not to mention, because not many (or, if any) airlines are allowed to fly over the area, airlines have to spend more time and in turn, more fuel to take a different route to the desired location.
This could easily slow down the recovery for the aviation industry, and it could have repercussions on the profitability for these aviation companies. With the prices being fairly elevated with no means to an end just yet, it could directly affect the prospects of the balance sheet for airlines and aviation companies.