Analysis: 5 Industry Factors Affecting Airline Businesses Around The World
By Nicole Kylie
Tuesday, 9th April 2024

In today's world, navigating the airline industry is no easy feat and in the dynamic world of aviation, numerous factors intersect to shape the trajectory of airline businesses globally.

From economic fluctuations to technological advancements, regulatory landscapes to geopolitical tensions, the airline industry is subject to a myriad of influences that can significantly impact its operations and growth.

In this article, we delve into five critical factors that exert substantial influence on the airline business worldwide, shedding light on the complexities that shape this challenging industry.

1. Jet fuel prices

Rising and uncertain fuel prices have a significant impact on operational costs

According to Investopedia, fuel costs account for around 22% of an airline’s operating expenses. Given the operational scale of large airlines, a slight increase in fuel price can cause substantial impacts on operational costs.

For example, when oil prices hit a new all-time high of $147 per barrel in 2008, many airlines were forced to undergo serious restructuring in order to survive – some, like Eos and ATA Airlines folded. Headlines such as The Guardian's “Fuel costs kill off a US airline every week” demonstrated just how hard fuel prices hit certain airlines.

Photo: IATA

Today, the impact of geopolitical tensions (more on this later) on jet fuel prices has disrupted the competitive landscape of airlines. Following the onset of the Ukraine conflict in February 2022, there was a significant disruption in global oil supply, leading to a sharp increase in jet fuel prices.

Making matters worse, hopes of recovery were dashed when the Israel-Gaza war and Red Sea shipping crisis began.

2. Uncertainty on the global stage

Geopolitical tensions, such as the ongoing Israel-Gaza conflict, wield a significant impact on the airline industry, often leading to heightened uncertainty and volatility. Political conflicts, trade disputes, and geopolitical instability can result in airspace closures, route disruptions, and more stringent security measures – all of which pose challenges for airlines.

Additionally, shifts in diplomatic relations between countries, sanctions, and regional conflicts can also affect international travel patterns and passenger demand, leading to fluctuations in ticket sales and revenue for airlines operating in affected regions.

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