Airlines across the globe are grappling with soaring jet fuel prices, leading to widespread flight cancellations and fare increases. The cost of jet fuel has skyrocketed from approximately $85-90 per barrel to $150-200 per barrel in recent weeks, driven by the ongoing U.S.-Israeli conflict with Iran. This represents a significant financial burden for carriers, as fuel can account for up to a quarter of operating expenses.
Major Airlines Respond
United Airlines CEO Scott Kirby warned that ticket prices may need to rise by as much as 15-20% to offset the surge in fuel costs. The airline has already implemented five fare increases in the first quarter and raised baggage fees. Lufthansa Group announced the cancellation of 20,000 flights over the next six months, saving 40,000 metric tonnes of jet fuel, which has doubled in price. The group permanently removed 27 aircraft from its Lufthansa CityLine subsidiary and axed unprofitable short-haul routes.
European Measures
The European Commission proposed a package called 'AccelerateEU' to address the impact on energy markets, including optimising jet fuel distribution among EU countries to avoid shortages. The EU Energy Commissioner warned of a challenging summer ahead, with potential jet fuel shortages even in the best-case scenario.
Global Impact
Air France-KLM plans to increase long-haul ticket prices by 50 euros per round trip, while KLM will cancel 160 flights in Europe. EasyJet warned of a bigger half-year pre-tax loss and said European consumers should expect higher ticket prices. In Asia, Cathay Pacific will cut about 2% of its scheduled passenger flights, and India's IndiGo introduced fuel charges on domestic and international routes. Nigerian airlines temporarily suspended a planned shutdown after government intervention, but warned of unsustainable operations due to fuel prices.
North America
Delta Air Lines cut capacity by 3.5 percentage points and raised checked baggage fees. Air Canada trimmed four daily flights to New York. Southwest Airlines forecast second-quarter profit below estimates and hiked baggage fees. Spirit Airlines asked the Trump administration for emergency funding to avoid liquidation.
Industry Outlook
Many airlines have revised financial outlooks downward. United Airlines cut its full-year profit forecast to $7-11 per share from $12-14 earlier. TUI, Europe's largest tour operator, cut its underlying operating profit forecast and suspended revenue guidance. Analysts note that TUI shares are down 25% in three months. The crisis underscores the aviation industry's vulnerability to geopolitical tensions and volatile fuel markets.
