Aviation, especially European aviation, has also become a hostage to the situation. Against the backdrop of the conflict over Iran, airlines in Europe are cutting flights en masse, and the cost of fuel and tickets is rising rapidly.
Only the Lufthansa group announced on April 22 that it would cancel 20,000 flights by October, mostly on short routes, Euronews reported. According to industry sources, the cuts have also affected Air France-KLM, Ryanair and other major carriers, which are revising summer schedules and cutting the number of flights.
The head of the International Air Transport Association (IATA), Willie Walsh, warned that Europe could face “widespread flight cancellations by early summer,” Reuters quoted him as saying.
The reason is a combination of two factors: a sharp rise in jet fuel prices and physical disruptions of supplies through the Strait of Hormuz, through which much of the world’s oil exports pass.
The problem does not only affect European carriers, it is also relevant for airlines in Asia and around the world. But it is in Europe that the crisis is felt most acutely – it is 75% supplied with aviation fuel from outside the EU, mainly from the Persian Gulf countries.
The financial blow is already measured in billions. For example, American airlines expect additional fuel costs of up to $4-11 billion a year, and globally, rising prices are actually “eating up” the industry’s profits, The Guardian writes.
Fuel: doubling prices and the risk of shortages
The scale of the problem is reflected in the figures. Since the beginning of the conflict (February 28), oil and jet fuel prices have risen dramatically. Brent benchmark oil has exceeded $100 per barrel, and the cost of jet fuel in Europe has reached about $188 per barrel – more than double last year’s level, Euronews reports.
The International Energy Agency (IEA) estimates that Europe may have enough jet fuel reserves for only six weeks. The Guardian quotes the assessment of the head of the IEA Fatih Birol, who called what is happening “the biggest challenge to energy security”.
Under these conditions, airlines are moving to strict optimization, closing unprofitable short routes, consolidating flights through hubs and reducing the frequency of flights.
As noted by analysts Transport & Environment, rising fuel prices have added an average of €88 per passenger on long-haul flights, emphasizes Reuters.
Tickets: rising prices and squeezed demand
Rising fuel costs are inevitably passed on to passengers. According to industry estimates, airlines have already started raising fares by 15-20% and in some cases are introducing additional fuel surcharges, reports The Wall Stret Journal.
The publication’s research found that while airlines are reluctant to admit to passing on the rising cost of fuel to passengers, ticket prices have already increased markedly since the start of the conflict in Iran:
– 29 euros on average for flights within Europe;
– about 129 euros on transatlantic routes.
It is impossible not to notice this. This is why airlines are increasingly calling for support measures for the industry and openly admit that they will either have to further reduce the number of flights and costs or increase ticket prices to compensate for the increased costs.
However, even this does not always lead to the desired results. Experts recognize that the industry is teetering on the brink of survival. Too sharp increase in ticket prices leads to an equally sharp drop in demand. And this is especially painful for low-cost carriers.
And the first signals of distress are already appearing. The other day, budget airline Spirit Airlines, the seventh-largest carrier in the United States by volume, announced the risk of ceasing operations in the coming days amid a weakening of its bankruptcy protection plan in the United States.
The company is now under the protection of Chapter 11 of the U.S. Bankruptcy Code for the second time in less than a year. Recent reports indicate that creditors have begun to question the viability of the restructuring plan, increasing the risk of liquidation, AeroFlap specified.
The company cited rising operating costs, especially jet fuel costs, caused by geopolitical tensions in the Middle East as the main factor contributing to the crisis.
Systemic crisis, not a temporary shock
The saddest thing about this situation is that almost all experts recognize that the current situation is not just a short-term price hike and temporary difficulties of airlines. It is a systemic crisis that combines a geopolitical factor (the war in Iran and the situation around the Strait of Hormuz), Europe’s structural dependence on imported jet fuel, as well as limited jet fuel reserves and the inability to replenish them quickly due to the lack of logistical and raw material alternatives.
As noted by almost all publications covering this topic, even if the situation around Iran normalizes in the near future, it will take months for the European aviation industry to recover and normalize supply chains. After all, it is not entirely clear in what condition oil and gas infrastructure facilities in the Persian Gulf countries will be after the war, and how quickly they will be able to restore production and supplies. It is possible that the shortage of aviation fuel in Europe will be felt at least until the end of this year.
Until then, European air transportation will live in a “managed contraction” mode – fewer flights, higher prices and growing uncertainty for passengers.
