Crude Oil Price Plunge Below IATA Forecast: Will Airlines Slash Ticket Prices?

January 2, 2026 at 02:40 PM•2 min read

Crude oil's fall to $57.30, significantly below the IATA's $62/barrel forecast for 2026, offers a major tailwind for global airline profitability by lowering operating costs.

Key Points

1Crude oil for February delivery fell to $57.30, significantly below the IATA's 2026 forecast of $62/barrel for Brent crude.
2Lower fuel costs are expected to reduce the fuel share of airline operating expenses to 25.7% in 2026, down from 26.8% in 2025.
3The global airline industry is projected to achieve a record $41 billion net profit in 2026, supported by easing fuel costs and expiring high-cost fuel hedges.
4OPEC+ is expected to uphold a production pause amid oversupply concerns, while geopolitical tensions remain a key risk to the stable jet fuel market.

Crude oil prices have continued to edge lower. This extends a pullback over two trading sessions. Crude for February delivery was last seen at $57.30. This price follows the biggest annual drop since 2020. Lower oil prices provide a significant financial tailwind. Fuel is a major airline operating cost.

The Aviation Cost Tailwind

The International Air Transport Association (IATA) released a 2026 forecast. IATA had projected Brent crude oil at $62 per barrel. The current price of $57.30 is below this projection. This creates a more favorable jet fuel market. Jet fuel prices are directly tied to crude oil. However, refining costs widen the crack spread. IATA expected jet fuel to average $88 per barrel. This was only a modest 2.4% decline from 2025.

Profitability and Fleet Efficiency

Fuel is expected to be 25.7% of total airline operating costs in 2026. This is a drop from 26.8% in the previous year. Global airlines are forecast to achieve a $41 billion net profit. This record profit is supported by lower fuel expenses. Lower Aviation Turbine Fuel (ATF) costs boost profitability. For example, India saw a 7.3% ATF price cut. This benefits carriers like IndiGo significantly.

Hedging and Passenger Impact

Many airlines use fuel hedging strategies. These strategies lock in a price for future fuel. Lower market prices can hurt hedged airlines. Yet, the expiration of higher-cost hedges from 2025 is positive. This allows carriers to realize lower average prices. Cost savings may lead to more competitive ticket pricing. This benefits passengers during the slower travel season.

Geopolitical and Supply Risks

Market stability faces several ongoing risks. Traders are currently weighing global oil oversupply concerns. This is balanced against escalating geopolitical tensions. The Organization of the Petroleum Exporting Countries and its allies (OPEC+) will meet soon. The group is expected to uphold a production pause. This decision aims to counter oversupply fears. Geopolitical events could quickly reverse the price trend. Supply chain issues still constrain new aircraft deliveries. Manufacturers like Airbus face backlogs. Fleet efficiency gains are therefore modest. This makes the current low fuel price even more crucial for airlines. Stay updated on the latest commercial aviation news at flying.flights.