Qantas, Lufthansa and Virgin Atlantic are among the Airlines facing a sharp rise in fuel costs as the Iran conflict jolts oil markets and tightens jet fuel supplies. The pressure has pushed airlines to raise fares, cut routes and rethink plans as the war continues to disrupt travel between Asia and Europe.
The crisis deepened on Tuesday when Australian Airline, Qantas Airways warned of higher costs, German Airline, Lufthansa said it may have to ground planes, and British Virgin Atlantic flagged a looming supply crunch, Reuters said in its Report.
This comes after Global aviation body International Air Transport Association (IATA) has warned that jet fuel supply constraints could persist for months even if Iran reopens the Strait of Hormuz, citing significant disruptions to refining capacity in the Middle East, Reuters reported.
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Jet fuel prices have more than doubled since the conflict escalated, while airlines across the world are already feeling the strain from tighter supply and volatile prices. Fuel is typically airlines' second-largest cost after labour and accounts for about 27% of operating expenses, making the sector highly vulnerable to further oil-market shocks.
Qantas has delayed a planned share buyback because of higher and volatile fuel prices, Reuters reported. The Australian carrier is also raising fares, shifting capacity toward stronger routes such as Europe, and trimming domestic capacity by about 5 percentage points in the June quarter. The airline remains exposed to the spike in jet fuel spreads even though it has hedged much of its crude exposure.
As per the report, company spokesperson said the market environment had become “more volatile” because of the conflict. Underscoring efforts to preserve cash, Qantas has delayed a planned share buyback, citing higher and volatile fuel prices, one of the first major carriers to stall shareholder returns.
Whereas, Lufthansa chief executive Carsten Spohr told the German Newspaper Frankfurter Allgemeine Zeitung that kerosene will remain in short supply and more expensive for the rest of the year. “We expect fuel to stay scarce and costly,” he said.
He added that grounding planes may become unavoidable if the situation worsens, saying availability is already critical at some airports, especially in Asia.
ALSO READ | Jet Fuel Crunch May Linger For Months Even If Strait Of Hormuz Reopens: IATA
Lufthansa has also prepared contingency plans, including cutting capacity by 2.5% or 5% and grounding 20 to 40 older aircraft scheduled for early retirement.
Virgin Atlantic Chief executive Corneel Koster said the airline has only about six weeks of secure jet fuel supplies before the outlook becomes more uncertain. “Beyond that, visibility becomes harder,” he said.
European airlines have asked Brussels to step in with emergency measures, including EU-level kerosene purchasing, a temporary pause in the bloc's carbon market for aviation and the removal of some aviation taxes.
In South Korea, low-cost airline T'way Air will place some cabin crew on unpaid leave in May and June, according to a local report, becoming one of the first carriers to cut staffing as pressure on the aviation sector grows.
Meanwhile, the Strait of Hormuz remains shut, removing roughly a fifth of global oil and liquefied natural gas supplies from the market.
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