Leading European airlines including Air France & KLM have been forced to introduce surcharges on long-haul flights, in response to growing concerns about commercial jet fuel inventories across Europe.
Airlines Forced to Raise Prices
The move comes as Goldman Sachs estimates that European commercial jet fuel inventories could fall below the International Energy Agency (IEA)’s critical 23-day threshold as soon as June.
“We are obliged to do so, because otherwise we just are bankrupt in a few months”, said Sebastian Justum, Air France-KLM’s senior Vice President, speaking at a recent European Parliament event.
Globally, airlines are scrambling to respond to rising fuel costs, that typically make 20%-40% of their operating costs.
Air France-KLM join Air India, China Eastern Airlines and Cathay Pacific and other airlines who have all announced increases or changes in surcharges on long-haul flights.
Some airlines have gone further, with Lufthansa cancelling 20,000 flights between May and October.
Jet Fuel Import Fears
Europe is particularly vulnerable to the crisis in the Gulf, which accounts for 50% of all the region’s imports of jet fuel.
The UK imports 60% of its fuel from Saudi Arabia, UAE and Kuwait.
The benchmark for European jet fuel price has been consistently rising from $80 per barrel in February to $180 per barrel at the end of April, according to IATA.
Asia is a key exporter of refined jet fuel, but as Russell recently highlighted, there are businesses and sectors suffering from a shortage of crude oil, LNG, fertiliser and aluminium.
Experts are concerned that many of these nations will limit their exports of jet fuel:
“Much of the world’s jet fuel is refined in Asia – South Korea is the No.1 exporter – but Asian countries are starting to limit jet fuel exports because their crude also comes from the Middle East.”, said Marian Efthymiou, aviation management professor at Dublin City University, speaking to DW.
Comment from Russell
Russell’s Head of Communication and External Affairs Chris Don said: “It’s really no surprise that a globally connected and connecting sector such as aviation should be impacted so negatively. The conflict is revising our assumptions about air travel with another conflict in a key air corridor.
Geopolitically, while Iran’s military is no match for the US, it has used other methods such as blocking the Strait of Hormuz to gain leverage.”