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The airline industry is operational on miniscule profits and even the slenderest change in its operational costs can affect its overall profitability. The highest share of its operating cost (ranging from 20 – 50%) is accounted by fuel cost. Thus, crude price volatility becomes a cause of huge concern for all the airlines.
While a downward movement in crude price improves profitability and liquidity of the airline, which enables re-investment in the business; however, some risks can emanate from lower crude oil prices. This can have a direct implication on the stock prices of airlines.
This IMPACT article provides an insight into the sensitivities of crude price volatility and the strategies adopted by different airlines to be in better control from the ‘Crude Catastrophe’.