A looming jet fuel crunch in Europe and Asia, triggered by the Iran war and the near-shutdown of the Strait of Hormuz, threatens to disrupt global air
travel within weeks. With oil flows choked, airlines are bracing for higher fares and potential cancellations just as the summer travel season approaches. The International Energy Agency's director, Fatih Birol, has warned that Europe may have only “six weeks” of jet fuel left, calling the situation the “largest energy crisis” facing the global economy. According to experts, with every passing day that the Strait of Hormuz remains shut, Europe is edging closer to a supply shortage. The world is losing 10 million to 15 million barrels of oil a day due to the closure of the Strait of Hormuz since the war began. "The strait accounts for around 40 per cent of Europe's jet fuel imports, but no jet fuel has passed the strait since the war broke out," Amaar Khan, head of European jet fuel pricing at Argus Media, told AP. "There are exactly the same refineries in exactly the same places in Asia and Europe, but if there is not enough oil for those refineries to operate, it's going to lead to physical supply disruption," he said. Even though the IEA has released 400 million barrels of oil from members' emergency reserves, that won't help in the short term. The ripple effects are expected to trickle down to flyers ahead of the summer season. Also Read: MANPADs: The $50K Weapon Grounding Million-Dollar US Jets in Iran
How this could affect you
Reacting with caution, airline officials across the globe have acknowledged potential fuel issues while trying to reassure customers. Still, some carriers have already passed costs on to consumers by increasing fees for baggage and other add-ons, embedding costs into ticket prices, or raising fuel surcharges.
A handful of airlines already are also cutting flights. Experts say other parts of air travel -- such as scheduling flexibility and routes -- would likely be impacted. Travellers might see "a market with later booking patterns, more schedule volatility and fewer low-fare options if this disruption lasts into the core summer season.
Air India has increased its domestic and international flight fares effective April 8, due to surging aviation turbine fuel (ATF) prices. It has added up to Rs 25,000 in fees to some flights earlier this month.
Big international carriers like Emirates, Lufthansa and KLM have also adjusted fees or fares to keep pace with the price volatility. Lufthansa also said that labour disputes and high fuel prices are forcing it to immediately shut down feeder airline CityLine, earlier than planned.
Hong Kong's Cathay Pacific has also bumped fuel surcharges by roughly 34 per cent across all routes.
Europe, however, is likely to be the hardest hit.
Dutch airline KLM and UK budget carrier EasyJet are among those that have seen higher costs eat into their budgets. On Thursday, KLM said it would cut 160 flights next month -- about 1 per cent of its total European routes. The airline cited "rising kerosene costs" and said a limited number of flights are "no longer financially viable to operate."
Most airlines have sounded the alarm about rising fuel prices, with some already passing along new costs to travellers, often embedded into ticket prices and add-on fees.
US carriers Delta, United, American Airlines, Southwest Airlines and JetBlue have all increased checked baggage fees, for example, in recent weeks.
United CEO Scott Kirby said in a recent memo to staff that if fuel prices stay elevated, it could add $11 billion in annual costs.
How does jet fuel factor into the cost?
Jet fuel -- a refined kerosene-based oil product -- is airlines' biggest cost, making up about 30 per cent of overall expenses, according to the International Air Transport Association. Jet fuel is made from crude oil at refineries, which also create gasoline and diesel.
Airlines generally buy jet fuel from refineries or fuel companies, similar to drivers buying gasoline from stations, but on a much larger scale. Jet fuel travels on ships and through pipelines and is stored by airlines at airports.
Purchasing is handled by airlines. If fuel supplies are running out in a region, that does not necessarily mean there will be no flights. Some airlines might have more stored than others. But remaining flights are likely to be expensive, reflecting fuel costs.
Larger airlines have advantages in regions with shortages.
In Europe, a number of countries are now relying on less than 20 days of coverage in their fuel supplies, according to this week's IEA report. Supplies have not dropped below 29 days since 2020, the report said.
If that falls under 23 days, physical shortages may emerge at some airports, resulting in flight cancellations and lower demand, the report warned.
(With AP inputs)
