Global aviation industry faces tough test from fuel, interest rates: Bloomberg Intelligence Official

The global aviation industry is confronting significant challenges as soaring fuel prices and rising interest rates impact consumer demand and financial performance, according to George Ferguson, Lead of Aerospace, Defense and Airlines Analysis at Bloomberg Intelligence. Speaking at the 59th General Assembly of the Arab Air Carriers' Organization (AACO) in Doha, Ferguson highlighted that jet fuel prices have nearly doubled since early 2026, while higher borrowing costs are straining consumer spending.

Ferguson's comments, based on third-quarter results from US airlines, suggest that the industry is experiencing early indications of shifting trends in a high-fuel-cost environment. Rising jet fuel prices, particularly on the US Gulf Coast and in key benchmark markets in Europe and Asia, have led to a sharp increase in refining margins, which now account for nearly half of the fuel price. This makes refining a major factor in the final cost of aviation fuel.

Higher interest rates are also weighing heavily on the industry, with the US Treasury yield curve reaching around 5 percent. While the Federal Reserve has shown hesitation about further rate increases, this environment is placing an additional burden on airlines, as aircraft purchases are made in US dollars and global borrowing costs are determined by US interest rates.

Ferguson noted that high-risk US carriers are suffering the most, with some showing signs of potential exit from the market. However, even creditworthy airlines have not been spared, as credit default swaps (CDS) reflect the rising costs of insuring airline debt. Ferguson warned that keeping fuel prices at current levels could slow global economic growth and further strain travelers, presenting an additional challenge for the aviation industry.