Global air transport is going through one of its most complex and asymmetrical phases in the last two decades. The perception of definitive stabilization after the pandemic crisis has progressively clashed with a new geopolitical reality: persistent tensions in the Middle East, vulnerabilities along maritime trade routes, and growing instability in international energy markets.
Even under the hypothesis of a rapid geopolitical detente, the commercial aviation ecosystem will require months to rebalance supply chains, stabilize industrial costs, and recover sustainable operating margins. In these first months of 2026, the sector finds itself operating in a true emergency economy, characterized by energy volatility, financial pressures, and a scarcity of production capacity.
The Vulnerability of the European Market and Fuel Hedging Strategies
In recent weeks, statements by Ryanair CEO Michael O'Leary regarding the risks of severe financial stress for certain European carriers in the event of persistent pressure on energy costs have reignited the debate over the industry's financial health.
Although O’Leary’s tone is historically aggressive toward competitors, industry data highlights a sharp polarization within the European market, linked primarily to the flexibility and time horizon of fuel hedging strategies (financial coverage against fluctuations in aviation fuel prices).
Ryanair continues to find itself in a relatively favorable position thanks to a broader, longer-term hedging policy compared to numerous competitors. Conversely, carriers like Wizz Air and airBaltic suffer from greater exposure to short-term fluctuations in the Jet A-1 spot market, forcing them to continuously realign their financial positions.
Wizz Air Between Industrial Pressure and Operating Costs
Wizz Air has denied hypotheses of a potential financial collapse, maintaining a liquidity position that the market still considers solid. However, the airline continues to suffer the consequences of the industrial crisis tied to GTF engines.
The production and inspection issues affecting the Geared Turbofan family of powerplants force several carriers to keep parts of their fleets temporarily grounded for inspections and premature component replacements.
For Wizz Air, this translates into lower available capacity precisely on high-density point-to-point routes and within the VFR (Visiting Friends and Relatives)/Leisure markets of Eastern Europe and the Balkans. This scenario increases pressure on operating margins in a phase already characterized by expensive fuel and fierce tariff competition.
airBaltic and the Fragility of Regional Carriers
The situation at airBaltic continues to unfold within a complex financial framework. Despite revenues generated from wet lease activities (chartering aircraft and crews to other European groups), the carrier remains exposed to industrial cost pressures and capital market volatility.
Industry uncertainties and the slowdown in financial markets have also complicated the company's public listing (IPO) plans, shifting investor attention toward the medium-term economic sustainability of European regional carriers.
Major European Groups Resist with Margins Under Pressure
The main European legacy groups, such as Lufthansa Group and Air France-KLM, show no immediate solvency risks but are facing a significant compression of margins.
The rise in fuel costs, combined with the lengthening of flight routes to avoid certain geopolitically sensitive areas, is directly impacting operational profitability. Added to this are delays in new aircraft deliveries and the limited availability of additional capacity on the global market.
The North American Paradox and US Airlines Exposed to Volatility
Contrary to what one might imagine, the North American market is also facing a complex phase, despite being geographically distant from the main areas of crisis.
For years, many US airlines have progressively reduced or abandoned traditional fuel hedging strategies, preferring to face energy market volatility directly. In a scenario of high instability for Jet Fuel, this choice is now increasing pressure on the financial results of American carriers.
American Airlines highlighted pressured operating margins in the early months of 2026, while carriers more exposed to domestic and tourist traffic are navigating a particularly competitive operational environment.
The most interesting exception remains Delta Air Lines which, through its ownership of the Trainer refinery in Pennsylvania (managed via its subsidiary Monroe Energy), maintains a form of vertical integration. This asset allows Delta to mitigate part of the spikes in aviation fuel refining costs (crack spread), although it leaves the airline exposed, like the rest of the industry, to international fluctuations in the crude raw material (Brent/WTI).
Anatomy of the Energy Crisis and the Role of the Crack Spread
To understand the current crisis in air transport, it is not enough to look at the trend of Brent crude oil. A fundamental part of the economic pressure stems from the so-called Jet Fuel Crack Spread, which is the margin between the cost of crude oil and that of refined fuel destined for aviation.
In recent months, the European crack spread has recorded exceptionally high levels compared to historical averages, reflecting critical factors for the sector:
- Logistical tensions and bottlenecks along global trade routes;
- Reduced refining capacity available on European soil;
- Increased maritime insurance costs in crisis areas;
- Strong international demand for middle distillates.
A significant portion of the increase in the final price of Jet A-1 therefore derives from the expansion of margins along the refining and energy trading chain, rather than from the simple cost of the raw material. Europe is particularly vulnerable to this scenario due to the progressive reduction in domestic refining capacity over recent years, a factor that has increased dependence on refined product imports.
The New Strategic Push Toward SAF
In this extremely volatile context, SAF (Sustainable Aviation Fuel) is taking on an increasingly vital strategic role for decarbonization and flight stability.
Until a few years ago, bio-kerosene was considered primarily an environmental transition tool, penalized by production costs far higher than traditional fossil fuels. Today, with Jet A-1 subjected to heavy geopolitical and logistical pressures, the economic differential between fossil fuels and SAF is progressively narrowing.
For many airlines, integrating growing shares of sustainable aviation fuel no longer represents just a choice tied to sustainability or regulatory compliance, but also a form of strategic diversification against energy risk.
From a technical standpoint, SAF retains a fundamental advantage: it is a “drop-in” fuel, usable in blends with traditional fuel without requiring structural modifications to existing engines or airport infrastructure.
Furthermore, the significantly reduced content of aromatic compounds and sulfur present in many types of SAF is currently at the center of important industrial studies. Efforts are underway to evaluate how a combustion process with lower particulate and residue formation can contribute, over the long term, to reducing carbon deposits in the hot sections of the engine, including combustion chambers and turbines. The topic, however, remains subject to ongoing analysis and validation by aircraft manufacturers.
Europe and the United States: Two Opposing Industrial Strategies
The difference between Europe and the United States in the transition toward SAF concerns not only technology, but above all the industrial and regulatory approach.
The European Model
The European Union has chosen an approach based on regulatory mandates through the ReFuelEU Aviation program, which introduces minimum mandatory shares of SAF within the European market. Added to this is the ETS emissions trading system, which progressively increases the operational cost of fossil fuels.
The main problem for the European market, however, remains limited domestic production capacity, combined with extremely rigid sustainability criteria that exclude food crops. Operations-wise, many European airlines now find themselves forced to purchase SAF that is still relatively expensive and available only in small quantities.
The US Model
The United States has instead adopted a heavily incentive-based strategy through the Inflation Reduction Act (IRA). Thanks to fiscal tools like the SAF Blenders Tax Credit, the US government guarantees direct economic incentives for the production and use of sustainable fuels. This is complemented by state-level programs like California's Low Carbon Fuel Standard.
This regulatory ecosystem, while favoring use and tax benefits within the domestic American market, is altering global balances. Rather than generating a massive flow of physical product exports toward Europe, the IRA is acting as a powerful magnet for international capital. Many large European investors and energy players prefer to allocate their infrastructure investments to the United States, progressively widening the industrial competitiveness gap with Europe.
The New Frontier of SAF: African Potential and the Bottleneck of Instability
Within this complex map of energy transition, the strategic potential of the African continent emerges with force. On paper, Africa possesses all the ideal resources to become one of the main global hubs for SAF production: vast expanses of semi-arid or degraded lands that do not compete with the food supply chain, abundant agricultural residues, and a solar and wind potential unique in the world for producing the green hydrogen required for next-generation e-SAF (Power-to-Liquid).
However, the actual acceleration of this enormous potential clashes with sharp caution from international companies and large investment funds. The construction of biorefining plants or PtL industrial complexes requires billions in investments with very long-term amortization plans, often exceeding 15-20 years. Operations of this scale require high political, institutional, and legislative stability conditions that many African regions cannot yet guarantee in a homogeneous manner. Geopolitical risk, regime changes, and the fragility of certain internal logistical networks thus continue to act as a significant brake on the influx of private capital.
To overcome this barrier, the energy and aviation industries are adopting a strategic selection process, concentrating investments primarily in areas considered "islands of relative stability," such as Morocco for green hydrogen in North Africa or Kenya for biomass-related agri-hubs in East Africa. In parallel, the importance of supranational institutions like the World Bank or the European Global Gateway program is growing, as they are called upon to support the sector through financial de-risking mechanisms, including public guarantee funds capable of absorbing the first share of any potential loss. Only through a reduction in systemic risk will Africa be able to transform its enormous energy potential into a real industrial infrastructure capable of contributing to future global demand for sustainable fuels.
How the Aviation Sector Will Evolve
The global air transport industry will likely emerge from this phase of instability with a deeply transformed industrial structure.
Market Consolidation
Financial pressure will accelerate mergers, strategic partnerships, and market consolidations. Fragile or less efficient carriers regarding energy cost control could progressively be absorbed by large groups or exit the market.
Capacity Rationalization
Airlines will tend to concentrate capacity and investments on the most profitable routes, curbing aggressive expansion into secondary markets. The scarcity of available aircraft, aggravated by production delays at Boeing and Airbus, will further push carriers to maximize the load factor of every single flight.
New Energy Risk Management
Many airlines will likely be forced to review their energy procurement strategies, returning to more structured hedging programs and long-term contracts with SAF producers to lock in industrial costs over the long run.
The Transformation of the Low-Cost Model
For the end passenger, this transformation will lead to a new economic reality in air travel. The era of ultra-cheap tickets sustained by a relatively stable fuel price, unlimited capacity growth, and abundant access to credit may progressively draw to a close. The cost of energy security, industrial resilience, and the sustainable transition is now destined to become a structural component of the global air transport price.
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