Airline leaders in Rio face fuel cost surge and aircraft delivery delays

Global airline chiefs gathered in Rio de Janeiro on Saturday for the annual summit of the International Air Transport Association (IATA), facing a sharper test of the industry's post-pandemic recovery. The Iran war has driven up fuel costs and disrupted airspace, while carriers try to cushion the blow with higher fares and tighter capacity.

The June 6-8 meeting comes as the fuel shock collides with a shortage of new aircraft. Delivery delays from Boeing and Airbus have forced many carriers to keep older, less fuel-efficient jets in service longer, raising maintenance and fuel bills just as oil prices climbed.

IATA, representing more than 370 airlines accounting for about 85% of global air traffic, had forecast a record $41 billion in net profit for the industry this year before the war. Industry executives and analysts expect that outlook to be lowered at the meeting.

A Deloitte survey of 21 global airline CEOs published this week found that fuel price volatility and inflation sit at the top of the industry's risk agenda, pushing carriers to focus more heavily on cost control and financial health. "Together, they've turned what was supposed to be a record year into a fight for margin," the survey said.

Airlines have two primary costs: fuel and labor. Sudden increases in fuel are hard to absorb because many tickets are sold weeks or months before travel. Longer routes also burn more fuel and make aircraft and crews less efficient. The challenge is how much of the latest fuel hit can be passed on to travelers before higher fares start to weaken demand.

So far, travel demand has held up in several large markets, especially among premium and corporate travelers, giving carriers more room to raise fares.