Strong US dollar, high oil prices hit airlines

Strong US dollar, high oil prices hit airlines

DOHA: Global airlines are struggling with a double whammy due to a combination of a strong US dollar and high oil prices at a time when broad inflationary pressures and worker shortages are also placing pressure on the pandemic-hit industry's recovery.

The inverse relationship between oil price and US dollar helps to even out the financial impact of airlines that operate in other currencies when one is high, the other is low.

The US is a net oil exporter and the US dollar is getting a boost from interest rate rises designed to temper inflation and the correlation has broken down in recent months due to the war in Ukraine.

Airlines gathering at the International Air Transport Association annual meeting in Doha this week expressed concern about the US dollar rising in tandem with the oil price.

It is not good for airlines at all. Tony Webber, a former chief economist at Australia's Qantas Airways, said it was the perfect storm.

The US trade-weighted real exchange rate index, which was established in 2006, is at a record high and the benchmark Brent oil price is around US $115 a barrel.