Energy Expert Varune Maharaj Explains the Fuel Shock Exposing a Major Vulnerability for U.S. Airlines

For years, many U.S. airlines have operated with limited fuel hedging, effectively accepting exposure to market prices rather than paying to protect themselves against a major spike. In a relatively stable oil market, the strategy offered flexibility and avoided the potential cost of being locked into unfavorable contracts. The latest energy shock has exposed the other side of that bet.

According to the International Air Transport Association, jet fuel prices are expected to average nearly 70% higher in 2026 than last year. In North America, the exposure is particularly significant because carriers have largely moved away from fuel hedging, allowing increases in jet fuel prices to move more quickly into airline cost structures.

Higher energy costs can pressure already thin margins, change which routes remain economically viable, force airlines to reconsider capacity, and ultimately increase what businesses and consumers pay to travel. They also make existing inefficiencies considerably more expensive. Varune Maharaj, an energy engineering and offshore operations expert who has spent more than 25 years managing complex energy projects and operational risk, sees the current situation as a case study in what happens when an uncontrollable cost rises sharply, and businesses are forced to look much harder at the costs they can control.

“Prior to the Iranian conflict, U.S. carriers did little to no large-scale fuel hedging, a strategy taken in recent years, with the preference being to ‘roll the dice’ on spot pricing, which has resulted in their high exposure,” Maharaj said.

Refining capacity, transportation and fuel logistics can compound an energy shock before jet fuel reaches an aircraft. Maharaj has spent much of his career working within complex energy operations where disruptions at one point in the system can quickly translate into lost production and millions of dollars in additional costs. The same dynamic becomes more consequential when the underlying commodity is already expensive because delays, excess consumption, and operational inefficiencies now carry a higher price.

At large U.S. airports, airlines typically participate in fuel consortiums that share infrastructure and capacity. When supplies tighten, members can work collectively with fuel providers and pipeline operators to secure additional reserves, reroute shipments and swap inventory. It is an unusual example of competitors cooperating because severe fuel constraints can lead to cancellations, lower airport throughput, and disruption across interconnected route networks.

Maharaj does not view the industry’s retreat from hedging as an obvious strategic mistake. Hedging carries its own costs, and the years following the pandemic demonstrated how quickly locked-in fuel prices could become a disadvantage when market prices fell. Southwest Airlines, historically one of the industry’s most prominent fuel hedgers, ended that strategy in late 2024.

Instead, Maharaj points to how much risk the industry’s assumptions could tolerate. “The assumption on pricing was that the oil regime was stable enough across the forecasting that spikes would be shorter and lower magnitude, and could be offset by fare fluctuations and efficiencies rather than large financial hedges,” he said.

When the cost of fuel itself cannot be controlled, airlines have to focus more aggressively on the costs they can control. Carriers can consolidate flights, eliminate weaker routes, reduce aircraft weight, use single-engine taxiing, tighten fuel-loading practices and deploy their most fuel-efficient aircraft more strategically. Those efficiencies matter more as fuel becomes more expensive because every unnecessary gallon, delay, or operational disruption carries a greater financial penalty.

It is a principle Maharaj has applied throughout his career in high-cost energy operations. When the underlying cost of an operation is already significant, reducing non-productive time, improving reliability, and identifying inefficiencies before they compound can materially change the economics of a project. His engineering and operational leadership has generated savings ranging from more than $20 million on shorter campaigns to more than $1.2 billion across major deepwater programs.

That creates a particularly difficult equation for low-cost carriers, whose competitive advantage depends heavily on keeping operating costs low enough to sustain cheaper fares. Larger carriers have greater ability to raise prices or concentrate capacity around routes and time slots that generate higher revenue per seat. If elevated fuel costs persist, Maharaj expects fewer flight options, more consolidation, and higher fares, moving the impact from the energy market to airline margins and eventually to the customer.

Maharaj argues that airlines should examine the total savings generated by their post-hedging strategies against the losses created during an extreme event. The answer may not be a wholesale return to traditional hedging. “Perhaps the answer lies somewhere in between, in a form of hybrid-hedging,” he said.

Companies cannot control every geopolitical event, supply disruption, or sudden increase in the cost of energy. What they can control is how efficiently their operations respond when those pressures arrive. For Maharaj, that means understanding where costs are being lost, where disruptions are most likely to occur, and which operational improvements can create the greatest financial impact.

The current fuel crunch is showing U.S. airlines how expensive those vulnerabilities can become when energy prices rise quickly. Maharaj has spent his career addressing that same fundamental challenge within complex energy operations, reducing costly disruptions and improving efficiency in environments where relatively small operational decisions can have significant financial consequences. As energy volatility puts greater pressure on American businesses, his work demonstrates why managing the costs and risks companies can control becomes even more important when the biggest cost is the one they cannot.