The Gulf is a major source of aviation fuel, accounting for about 50% of Europe's imports, according to multiple reports. The bulk of these imports comes through the Strait of Hormuz, which is effectively closed, and the Al-Zour refinery in Kuwait alone provides roughly 10% of Europe's jet fuel imports, according to Energy Intelligence. These are the highest jet fuel prices the industry has seen since 2022, in the wake of Russia's invasion of Ukraine, multiple reports indicate.
Airlines are being compelled to raise fares and revise their financial outlooks due to the fuel price surge, according to research. Wizz Air warned that the conflict would cut its annual profit by €50m, with jet fuel costs playing a major role. Aegean Airlines expects suspended Middle East flights and a spike in fuel prices to have a 'notable impact' on its first-quarter results, the Greek airline said. Malaysia Airlines' executives said the company had cut 10% of flights across the group, with a surcharge of about 20% on fuel in general.
Many airlines use financial derivatives to secure supplies at fixed or capped prices months or years in advance, a process known as hedging, multiple reports indicate. Airlines known to have hedged include British Airways, Virgin Atlantic, EasyJet, and Ryanair. However, a number of large US carriers have historically preferred not to hedge and could be exposed to short-term price increases, according to multiple reports.
Air France-KLM group said it planned to increase long-haul ticket prices to address surging fuel costs, with cabin fares set to rise by 50 euros ($58) per round trip. Air India said it would revise its fuel surcharge from a flat domestic surcharge to a distance-based grid, and that surcharges on international routes did not compensate for the exponential rise in fuel prices. The war in the Middle East has helped to trigger a surge in air fares, with the lowest-priced economy tickets costing 24% more on average than they did a year ago, according to new research from the consultancy Teneo.
KLM said on April 16 it would cancel 160 flights in Europe in the coming month due to rising fuel costs. Airspace restrictions caused by the conflict have forced airlines to reroute many flights, increasing the amount of fuel they have to use, according to the report from Teneo. There has been a significant loss of capacity on long-haul routes normally served by Gulf carriers, which have had their operations heavily disrupted, research indicates. Although rival airlines have expanded their operations to some long-haul destinations, there are still fewer seats available than normal.
The biggest impact on ticket prices has been felt on routes between Europe and East Asia, with a flight from London to Melbourne in June now costing 76% more than last year, and the price of a flight from Hong Kong to London up by 72%, the report says. Air tickets this summer could become 'really, really expensive,' according to the EU. The fuel crisis could hit the summer holiday season, multiple reports indicate.
Nigerian airlines have temporarily suspended a planned nationwide shutdown of flight operations, which was set to begin on Monday, after the government intervened amid crippling fuel prices, according to research. The Airline Operators of Nigeria (AON) had warned they would halt services from April 20, citing that surging jet fuel costs had rendered operations unsustainable. The decision to pause the action came after an appeal from Nigeria’s Minister of Aviation and Aerospace Development, Festus Keyamo, who called for restraint and dialogue, research shows. This suspension is conditional on the outcome of a meeting scheduled for April 22, convened by the minister, involving all concerned parties.
Airlines operating out of the UK have warned that if the conflict in the Middle East continues or worsens, it will force them to cut flights and push up fares. UK airlines have called on the government to take steps to protect them from the effects of disruption caused by the closure of the Strait of Hormuz, including allowing delays and cancellations due to fuel shortages to be classified as 'extraordinary circumstances' to avoid paying compensation. However, sources have suggested to the BBC that this demand for classifying delays as 'extraordinary circumstances' is not being seriously considered.
UK airlines have asked for Air Passenger Duty to be cut or suspended, and for a major emissions trading scheme to be temporarily stood down. The demands are contained in a confidential briefing document sent to ministers and the Civil Aviation Authority by Airlines UK, representing carriers including EasyJet, Ryanair, British Airways and Virgin Atlantic, according to research. The document also calls for restrictions on night flights to be eased and rules on the allocation of take-off and landing slots at busy airports to be relaxed to prevent airlines losing valuable slots if unable to operate services. It says the government should establish 'targeted refinery obligations' to force oil refineries to prioritise jet fuel production over other products if necessary.
An EasyJet spokesperson said the carrier was not currently being affected by higher fuel prices.
Thousands of flights have been cancelled, according to multiple reports. The trend of high prices could continue for several years ahead, multiple reports indicate.
Specific government response measures remain uncertain, as does the exact timeline of widespread flight cancellations. It is unclear whether a physical shortage of jet fuel will materialize and affect airlines with hedging strategies. The duration of the Strait of Hormuz closure and its long-term effects on global jet fuel supply chains are also unknown.