Air travel in Europe could turn chaotic this summer as serious jet fuel shortages and supply disruptions caused by the war in Iran are expected to linger for months, regardless of whether the Strait of Hormuz’s chokepoint is finally opened, officials say.
The head of the International Energy Agency this week said Europe had only about six weeks of jet fuel supply on hand. The warning was echoed by European and Asian airline executives at a recent airline industry conference in Barcelona, said Richard Mann, president of the aviation consulting firm R.W. Mann & Co.
The jet fuel shortages would not stop all planes from flying, but holidaymakers and vacation seekers overseas could face widespread flight cancellations as European airlines struggle to support a full flight schedule during the busy summer period. European flights are usually booked solid in June, July and into early August. There’s no slack in the system.
Even if fuel shortages can be avoided, airfare prices both overseas and in the United States are expected to continue to climb.
“The reality is that this is not a days or weeks issue. It’s a months and a years issue,” Mann said. “There will be some disruption. There is just a question of how much.”
For now, the jet fuel picture is less dire for American airlines flying domestically.
But the world’s oil market has been reeling since the start of the U.S. and Israeli bombing campaign against Iran. Some officials have described it as the largest shock to oil prices in history. The price of Brent crude — the global oil benchmark — jumped by about 50 percent before falling back some. The average price at U.S. gas pumps is about 35 percent higher than in late February, adding about $1 to a gallon.
The cost of U.S. jet fuel is up about 50 percent since the war began, according to the Argus U.S. Jet Fuel Index.
The surging price of jet fuel has hit airlines hard. Jet fuel typically makes up 25 to 35 percent of an airline’s operating cost, Stephen Rooney, lead economist at Tourism Economics, wrote in an analyst note earlier this month.
Airlines have raised prices in response. U.S. airlines have raised fares on some routes anywhere from 10 to 50 percent, said Dan Bubb, a professor in residence at the University of Nevada at Las Vegas and a commercial aviation expert.
“We’re going into the busy season now,” Bubb said. “Opening up the strait won’t return things to normal right away. It’ll be a long time before they resettle to normal.”
Airlines are also struggling to deal with how quickly the price of jet fuel soared. Travelers who bought tickets months ago can’t suddenly be charged more. Some airlines have responded by hiking prices for baggage fees and seat selection.
Joe Brusuelas, chief economist at RSM, called bag fees and the like “fuel surcharges by other names,” adding that once those rates go up, “they rarely come back down.”
But compared to the rest of the world, American carriers and their customers are relatively insulated from rising jet fuel costs.
Brusuelas said the United States is ultimately a jet fuel exporter, selling to trade partners as far away as Australia. Meanwhile, American industries can draw from domestic production to mitigate weeks, if not months, of a crisis.
But the risks don’t vanish altogether. In the coming days, the last jet fuel shipments that were already at sea when the war began will arrive on the West Coast, shifting reliance to traffic flowing through the strait.
Some regions are inherently more vulnerable to conflicts in the Middle East than others.
When Iran effectively shut the Strait of Hormuz, for example, some 25 to 30 percent of Europe’s jet fuel got blocked off, Rooney wrote.
Some European carriers already have prices locked in, giving them some breathing room.
Still others have been forced to pass costs on to customers and cancel hundreds of flights.
Meanwhile in the Gulf, carriers like Qatar Airways, Emirates and Etihad can lean on robust cash reserves to buffer against rising costs in the near-term.
But they, in turn, are more exposed to long-haul traffic, where fuel makes up a bigger chunk of a ticket price.
Still, in the United States and elsewhere, people are expected to keep flying.
“While this will deter some of the most price sensitive travelers,” Rooney wrote, “it is not expected to derail an otherwise positive growth trajectory for global air passenger demand this year, outside of the Middle East and Africa.”
Bubb, at UNLV, said he was most worried about how higher prices would affect recreational travelers, such as families on summer vacation.
Some of them may delay or cancel their plans. Or they might cut back on spending in other areas.
“It’s going to affect everyone,” Bubb said. “All of this is so interconnected. There’s going to be a cascading effect.”
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