The volatility of aviation fuel jeopardizes the profitability of airlines in Colombia

TL;DR

Aviation fuel price volatility is a major operational risk for Colombian and regional airlines.
Fuel and oil account for 29.1% of total flight operating costs in Latin America and the Caribbean.
Recent geopolitical conflicts have caused sharp increases and supply risks for aviation fuel.
The unpredictable nature of fuel prices, rather than just the price level, is the main challenge for airlines.
Past crises (2008, 2020, 2022) saw uncontrolled fuel price hikes leading to near-zero or negative margins for the airline industry.
A period of stable prices (2015-2019) allowed airlines to maintain positive margins around 7%.
The "crack spread" between crude oil and jet fuel has widened significantly due to refining capacity limitations and energy crises.
In Colombia, high taxes exacerbate the impact of rising fuel prices, affecting demand, sector competitiveness, and air connectivity.
Iata suggests that reducing VAT on tickets to 5% has a positive market effect and urges the government to address tax pressure and strengthen air transport.

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