Aviation: Why flying will be even more expensive next year

More oil tankers are passing through the Strait of Hormuz again. Nevertheless, kerosene remains expensive. The first managers are warning their own industry not to exaggerate prices.

Refueling a plane: How much does the kerosene cost? Photo: REUTERS

According to IATA, kerosene prices are 118 percent higher than last year's average at $1,550 per ton, which is putting a heavy burden on airlines.

Protection against price fluctuations through hedging will decrease for European airlines in 2027; Ryanair is 85 percent uninsured, Lufthansa has over 60 percent insured.

Due to high fuel costs, airlines are reducing their offerings to improve earnings, which, according to Wizz Air boss József Váradi, is supporting demand and prices.

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Frankfurt. Will flying be another 20 percent more expensive next year? Ryanair boss Michael O'Leary assumes: "In my opinion, we will see the largest increase in flight prices ever in Europe in the next twelve months." The head of the Irish low-cost airline predicted this at an event organized by the European airline association A4E at the beginning of October and referred to the still tense situation in the Middle East and the persistently high kerosene prices.

The industry has rarely been as united as it is on this topic. Lufthansa boss Carsten Spohr also said last week: “Ticket prices will rise in double digits next year, we see it that way too.” Condor boss Peter Gerber had previously declared at an event in Frankfurt: “Flying is becoming more expensive for everyone.”

More oil tankers are again traveling through the Strait of Hormuz, which was closed for months due to the Iran war. But higher processing and transport costs ensure that kerosene remains expensive. There are also other reasons that drive up the prices of airline tickets.

According to the global airline association IATA, airlines worldwide had to pay an average of $1,550 per ton of jet fuel in the week ending October 23rd. That is 118 percent more than the average for last year.

Swings in the price of jet fuel are nothing new for airline managers. Most airlines - the large US companies are an exception - protect themselves against excessive fluctuations through so-called hedging.

This is not about a discount card. Because the airlines also pay the market price. But they enter into contracts for certain financial instruments, such as oil or gas derivatives. These guarantee profits if the price exceeds a certain level. This income in turn offsets the higher fuel bill.

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The problem: This year, high hedging rates among European airlines are ensuring that the additional costs for refueling are within a certain limit. But the proportion of hedged kerosene that will be consumed in 2027 is falling. Take Ryanair, for example: “We are 85 percent unsecured for 2027,” said O’Leary in Brussels. According to CFO Till Streichert, Lufthansa has now reached more than 60 percent in the hedging ratio for the coming year.

How well you protect yourself is a difficult decision in advance. Because buying derivatives costs money, which must be taken into account as an expense in the overall calculation.

If the global economic situation deteriorates in the coming year, less oil would probably be needed. As a result, prices fell. However, a high hedging rate can then lead to a significant loss for the airlines. The hedging costs would ensure that the overall expense remains high even though the price of kerosene is cheaper.

Low-cost airline Wizz Air: The airline's fuel requirements are covered by 85 percent over the next six months. Photo: REUTERS

The hefty fuel bills have another effect: airlines are taking capacity out of the market. In particular, routes that are poorly utilized and unprofitable will be canceled.

“This improves the price environment because the supply decreases,” said József Váradi, co-founder and CEO of the Hungarian low-cost airline Wizz Air, describing the approach two weeks ago at the “World Routes 2026” industry conference in Frankfurt. This is possible because “demand remains quite solid overall”.

Simply put: less supply with the same high demand causes prices to rise. Take Wizz Air, for example: According to Váradi, the airline originally wanted to grow by 30 percent this winter. “Of course we had to adapt in this environment and we are now at 20 percent growth.” You're trying to manage two things at the same time: limiting capacity to increase revenue and managing overall financial development.

We are now more or less reaching price limits. Peter GerberCEO Condor

But early industry representatives are warning not to overdo the price increases. "We see in winter that tourism is going well. People want to travel," said Condor boss Gerber at the "World Routes 2026" conference in Frankfurt. But he also added: "It works to a limited extent on the continental routes. We are now more or less reaching price limits there."

Current data from the service provider “Travel Data + Analytics” (TDA) confirms this. According to this, fewer winter trips were booked by the end of September than in the previous year. For travel agencies the loss is three percent, for online sales it is two percent.

Only cruises save the balance sheet. Without them, sales from tour operators would be five percent lower than in 2025. The travel industry is now increasingly relying on short-term bookings, but will probably have to stimulate demand with discount campaigns.

The big unknown variable in the current situation is competition. Airlines can only raise prices significantly if direct competition basically follows suit. Even if a provider entices you with competitive prices on a connection, it becomes difficult.

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Wizz Air boss Váradi has exactly that in mind. At the conference in Frankfurt he referred to his own hedging. The company has 85 percent of its fuel requirements covered for the next six months, at around half of the current kerosene prices. Wizz Air is also 50 percent insured for the coming summer of 2027.

"If the conflict in the Middle East lasts another year, I will have a huge competitive advantage," said Váradi: "Everyone else will shrink and increase prices to cover the higher fuel costs. In this environment I can maneuver very well and continue to grow."

The conclusion: Flying will become more expensive on average in 2027. But that doesn't mean that passengers have to pay more on all routes.

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