The chief executive of budget carrier Wizz Air has cautioned that rival airlines across Europe face a heightened risk of financial collapse by September if jet fuel prices persist at unprecedented levels due to the ongoing conflict in the Middle East.
Warning from Wizz Air's Leadership
Jozsef Varadi, the airline's boss, predicted that the industry's vulnerability will become apparent once the seasonal boost from summer bookings subsides. He stated: "At the moment, all airlines are selling against summer demand, which is the highest-priced capacity during the year. But you run out of steam by the end of June. Airlines go bust two times a year, in September and February. Airlines with weak liquidity positions will come under immense pressure in September."
Jet fuel prices have more than doubled since the Iran war erupted at the end of February, placing immense strain on carriers already grappling with post-pandemic recovery challenges.
Collapse of UK-Based Ascend Airways
The fallout from the conflict has already claimed a victim: UK-based Ascend Airways, which supplies aircraft to other carriers, has reportedly entered liquidation. The company had leased planes to travel airline Tui and Oman Air. Ascend attributed its difficulties to the Middle East conflict and the surge in fuel prices, which created a "challenging outlook" for the summer season. An insider told The Sun: "It's gone bust today, we got the news this afternoon. We've all been given the letters that it's all going into liquidation." The Mirror has contacted the company for comment.
Lufthansa Cancels Thousands of Flights
The surge in fuel costs and fears of shortages have prompted German carrier Lufthansa to axe 20,000 summer flights. Lufthansa joins approximately two dozen airlines that have scaled back operations in response to soaring fuel bills.
Regional Airports Face Existential Threat
Industry body Airports Council International (ACI) has warned that smaller regional airports confront an "existential threat" due to the sector's turmoil. Olivier Jankovec, ACI Europe director general, commented: "The post-Covid-19 reality had already revealed a multi-speed regional airport market – with a clear divide between small regional airports, whose passenger traffic still remains more than 30% below 2019 levels, and larger ones, who have seen their traffic increasing by more than 16%. The current levels of jet fuel prices and the prospect of a new cost-of-living crisis mean that many regional airports across our continent are likely to face both a supply and demand shock. For them, this is nothing short of an existential threat."
Wizz Air's Position and Outlook
Despite the challenging environment, Wizz Air has announced that its leisure summer schedule will expand by 17% this year, with growth concentrated in the Balkan and Caucasus markets. Varadi asserted: "We are much stronger on summer bookings this year than last year," following profit warnings and drops in forward bookings from rivals such as easyJet and Tui. He maintains that jet fuel will not run out in the coming weeks.
Varadi also suggested that the crisis presents an opportunity for Europe to reassess its dependence on Middle Eastern fuel sources. He remarked: "If you look at the very nature how Europe is accessing jet fuel, I mean, we are far over-dependent on the Middle East. I mean, that's kind of crazy."
