European airlines are facing significant challenges due to rising jet fuel prices caused by the Iran war, creating uncertainty for the summer holiday season. Jet fuel prices have increased by nearly 84% since the conflict began on February 28. Airlines have managed costs through hedges but may face fuel shortages if the war continues. Willie Walsh, head of the International Air Transport Association, noted that while the current situation is concerning, it is not as disruptive as the COVID-19 pandemic in 2020, which severely reduced travel demand.
Airline shares have been affected by the war and uncertain peace talks regarding the Strait of Hormuz. Airlines are warning that their price hedges may be running out, and travelers are delaying bookings or choosing local trips to avoid potential disruptions. Sweden’s Energy Minister, Ebba Busch, raised concerns about possible jet fuel shortages, urging caution with travel plans. In contrast, Ryanair’s CEO Michael O’Leary believes the risk of supply disruption is decreasing, based on supplier discussions.
Wizz Air’s CEO Jozsef Varadi reported strong summer bookings, although easyJet and TUI noted drops in forward bookings and issued profit warnings. Even if the war ends, Varadi believes fuel prices are unlikely to return to previous levels quickly. Major airlines like Air France-KLM, British Airways, and Lufthansa plan to report their first-quarter results soon, having raised prices and reduced flight capacity in response to the crisis.
Middle Eastern airlines have been hit hardest, with a 50% drop in operations in March and a 42.5% decrease in Q2 and Q3 bookings. Despite these challenges, global passenger capacity has shown resilience, rising nearly 2% so far this year. Some airlines, like Finnair and Norwegian, have reported positive impacts or downplayed supply risks. Industry experts note that airlines have become more agile in adapting to crises compared to previous decades.
With information from Reuters
