By Brendan Berthold, Macro Economist, Industry Analysis, IATA
Macroeconomic developments are crucially important for the uniquely global industry that air transport is. GDP growth, exchange rates, and interest rate dynamics shape our industry’s operating environment on a daily basis and determine how external shocks are transmitted across markets. Airlines may face the same external shock but experience markedly different effects depending on local economic and financial conditions.
The major shock in 2026 has been the double crisis in the supply and pricing of oil and refined energy products, including jet fuel, unleashed by the war in Iran. Global jet fuel prices rose by more than 120% in US dollar terms between April 2025 and their April 2026 peak. Yet the impact on airlines was not uniform: differences in regional fuel prices and exchange-rate movements translated the global shock into markedly different local-currency cost increases across markets.
Regional jet fuel prices and currency movements shape airlines’ exposure to a global jet fuel shock. Currency movements are central because fuel is invoiced predominantly in US dollars, while airlines earn revenue in a range of currencies. When a currency depreciates against the US dollar, the local-currency cost of fuel rises further. Conversely, currency appreciation makes jet fuel cheaper in local currency terms.
Differences in regional jet fuel benchmarks can further reinforce or dampen this effect. For example, the appreciation of the Brazilian real and Mexican peso against the US dollar since April 2025, combined with less severe increases in regional fuel prices, limited the rise in local-currency jet fuel prices to 86%. By contrast, a stronger increase in regional jet fuel prices and the depreciation of the Indian rupee drove the local-currency price increase in India to 170%.
Exchange rate fluctuations affect all US dollar-denominated costs and liabilities of non-US-based carriers. Inflation shapes customer purchasing power, wages, and pricing decisions. Interest rates influence demand and can raise financing costs in an industry that depends on substantial and continuous capital investment. These forces interact: higher inflation may keep interest rates elevated, while interest-rate differentials can move currencies and further impact local cost pressures.
This also matters for aviation’s energy transition: a persistently high cost of capital can delay investment in new aircraft, sustainable aviation fuel production, and supporting infrastructure. Macroeconomic conditions, therefore, shape not only how airlines absorb today’s shocks, but also their capacity to invest for the future.
None of this means that macroeconomics explains every airline outcome. Operational efficiency, competition, and market structure remain essential. But the wider macroeconomic environment often determines whether an external shock is absorbed, amplified, or passed on to customers. These factors should therefore be considered integral to understanding not only how external shocks affect aviation across markets, but also how effectively the industry can respond.
