Etihad CEO flags jet fuel costs as key challenge for airlines in 2027; warns fares could rise

Abu Dhabi: Etihad Airways chief Antonoaldo Neves has identified rising jet fuel costs as the biggest challenge facing airlines in 2027, warning that airfares could come under pressure from the second quarter as industry fuel hedging positions begin to run down.

With fuel accounting for a substantial share of airline operating expenses, 35-40 per cent according to rough estimates from Neves, carriers may have limited room to absorb higher costs indefinitely, particularly as the protection offered by advance fuel purchases diminishes.

"Jet fuel right now is about all in $150 a barrel of Brent," Neves told Gulf News. He was referring to the combined cost of the underlying oil benchmark and the refining premium, known in the industry as the crack spread.

He said many airlines had bought fuel in advance through hedging arrangements this year, but those positions were expected to be considerably lower from the second quarter of 2027.

"You've seen many CEOs of airlines saying, 'Look, if jet fuel doesn't come down, we may see prices going up, and that's going to happen,'" he said.

"Something's got to give, but we hope for that to go down, and we like low prices. We like low prices because this is a way to stimulate demand."

The comments come as airlines balance capacity expansion against operating costs and the possibility of passing higher expenses on to passengers.

Neves said the fuel challenge was not unique to Etihad and was being felt across the global aviation industry. However, he does not expect higher fuel costs to change the airline's immediate network strategy.

Asked whether fuel prices would affect the geographies Etihad targets next year, he said: "As of now, no." The airline operates its network as an interconnected system, with stronger markets helping offset weaker ones.

"We see this as a network. So, one compensates for the other. What we do for one geography, we do for the other geography," he said. But he acknowledged that airlines have less pricing flexibility in markets where passengers have lower purchasing power.

"Geographies that have less, I would say, purchasing power, you cannot pass on as much. It's a balance in the end."

Despite the cost pressures, Neves said Etihad was entering the final months of 2026 with stronger passenger demand and more capacity than a year earlier.

The airline is running approximately 15 per cent more seats than last year, with demand also 15 per cent higher, according to the CEO.

"Our planes are full," he said, putting the airline's load factor at approximately 85 to 87 per cent during the week of the interview. He compared this with a typical 78 to 82 per cent load factor among network carriers, although the comparison was not accompanied by a specific industry dataset.

Etihad has been adding aircraft and launching routes as it expands its network, which now serves more than 120 destinations. Neves said the airline was carrying between 25 million and 27 million passengers annually and expected that figure to reach 30 million next year, a target that the airline has remained steadfast on over the past several years.

The growth is being supported by investment in premium services, including chauffeur arrangements, meet-and-assist services for First Class passengers and additional aircraft offering First Class cabins.

The airline is also preparing for the busy November and December travel period, when Abu Dhabi receives international visitors for the Formula 1 Etihad Airways Abu Dhabi Grand Prix and the wider winter season.

Neves said the airline's plans for the period were solid, despite the uncertainty that had affected aviation markets earlier in the year. "We came back stronger from the time that we had to reduce capacity back in March," he said.

Demand is not uniform across the network. Neves identified travel between Europe and Southeast Asia as particularly strong, while corporate travel into and out of Abu Dhabi was also performing better than a year earlier.

"Abu Dhabi is strong," he said. He expects Etihad's supply and demand balance to remain broadly similar through the end of the year and is confident that the first quarter of 2027 will record growth of at least 10 per cent year on year.

Beyond adding aircraft and routes, Etihad's next phase of growth will depend on whether it can deliver a more consistent passenger experience across its fleet.

Neves said the airline would begin retrofitting aircraft next year, with the aim of bringing 95 per cent of its fleet into a new configuration by the end of 2028.

"The next step for Etihad is consistency," he said. He pointed to the airline's investment in premium cabins, including the return of the Airbus A380, its Airbus A321 featuring a First Class cabin and the introduction of new Airbus A330 aircraft next year.

The airline has also introduced a home luggage collection service, allowing passengers to have their bags picked up before travelling to the airport.

But Neves acknowledged that having different aircraft configurations and cabin products can make it difficult to deliver a uniform experience. "We are going to have a big bang by the end of 2028. By the end of 2028, 95 per cent of our fleet are going to be brand new," he said.

Technology and passenger data are expected to play a bigger role in the airline's customer service strategy.

Neves said Etihad was equipping flight attendants with iPads, with the intention of giving cabin crew access to information that could help them respond to individual passenger preferences and resolve problems during flights. He gave the example of First Class passengers whose preferences are recorded, from how they like their coffee served to their preferred arrangements when using the onboard shower.

"In two, three years, our objective is to be able to really understand on an individual basis what every customer wants," he said.

The airline also wants cabin crew to be able to resolve service failures during the journey rather than leaving passengers to pursue complaints after landing.

"If you have a contingency, we're going to solve your contingency on the spot during the flight," Neves said.

He gave the example of a passenger who had ordered a special meal but did not receive it because of an operational problem. In such a situation, he said, the airline wanted to be able to offer compensation while the passenger was still onboard.

Etihad's partnership with McLaren is another part of the airline's strategy to build international awareness as its network grows. Neves said the relationship was not simply about promoting the Abu Dhabi Grand Prix, which the airline has sponsored since 2009.

The objective is to have the Etihad brand associated with McLaren throughout the Formula 1 calendar, including races in markets such as Las Vegas.

"We didn't do that because we do Formula One. We did that because we do Formula One," he said, explaining that the association was intended to extend beyond the UAE's annual race.

The McLaren partnership gives Etihad visibility at races across the world, while the specially branded Boeing 787 will carry the team's papaya identity across the airline's network.

Neves said the airline and the racing team had similar commercial challenges: both had to deliver performance consistently and win over customers.

"We deal with the public, with a big number of fans. To a certain extent, our customers also have to become our fans, and fly more with Etihad."

For an airline targeting 30 million passengers next year, the challenge will be converting that visibility and capacity growth into sustained customer loyalty, while managing the fuel bill that could make flying more expensive in 2027.