Rising aviation fuel costs, spurred by disruptions in the Strait of Hormuz, are prompting airlines like Lufthansa and Qantas to consider service cuts and fare increases.
Aviation Fuel Costs Rise, Airlines Issue Warnings
Aviation fuel prices are increasing, leading airlines to warn of potential flight groundings due to supply constraints resulting from the blockade of the Strait of Hormuz.
Australian airline Qantas announced it would not issue dividends to shareholders, while Lufthansa did not rule out the necessity of “grounding aircraft.”
Qantas and Lufthansa Respond to the Crisis
Qantas previously increased ticket prices and is adjusting its route network to prioritize more profitable routes, such as flights to European cities. The airline plans to reduce domestic connections by 5% in the second quarter of this year.
Lufthansa CEO Carsten Spohr stated that aircraft groundings or cost increases are inevitable due to limited aviation fuel supplies. The airline has contingency plans, including reducing capacity by 2.5 to 5% and grounding 20 to 40 older, less fuel-efficient aircraft.
Critical Fuel Availability in Asia and Airline Cost Increases
Spohr highlighted that fuel availability is “critical” at some airports, particularly in Asia. South Korean budget carrier T’way Air intends to send some cabin crew on unpaid leave in May and June.
Delta Air Lines announced last week that its fuel expenses for the current quarter will be approximately $2 billion higher than last year.
Price Hikes and Route Adjustments Following Conflict
Since February 28th, when Israel and the US began actions against Iran, airlines have raised ticket prices, implemented fuel surcharges, and reduced the number of flights, consequences of Iran’s blockade of the Strait of Hormuz.
Approximately 20% of global oil supplies normally pass through the Strait of Hormuz, but current tanker traffic has decreased by 70 to 80 percent.
European Vulnerability and Rising Costs
The International Air Transport Association (IATA) reported in March that Europe is among the regions most vulnerable to disruptions in fuel supplies from the Persian Gulf.
IATA noted that additional costs related to war risk, including higher insurance rates and longer routes (around Africa), are further increasing expenses. Fuel costs account for approximately 27% of airline operational costs and have risen by around 50% since the start of the conflict against Iran, with ticket prices increasing by over half in the same period.
European Commission and Industry Warnings
The European Commission warned on Tuesday that “difficulties in supplies (fuels – PAP) may occur in the near future, especially regarding aviation fuel.” Commission spokesperson Anna-Kaisa Itkonen stated that “fuel supplies are currently the main concern of the EC.”
ACI Europe, representing European airports, warned EU Transport Commissioner Apostolos Dzidzikostas of “systemic fuel shortages if the Strait of Hormuz is not unblocked within three weeks,” according to the Financial Times last Friday.
