Jet fuel shortages could make summer travel 'total mess', push fares higher

Facing sky-high fuel costs linked to the war in Iran, airlines are cutting routes and raising prices; European vacations are looking a lot less affordable

By Christine Chung

 

This summer is shaping up to be an expensive and uncertain time to fly, especially if you’re planning a European vacation. 

Volatile fuel prices because of the war in Iran are straining airlines around the globe, but perhaps nowhere as much as in Europe, where jet fuel supplies could run low by mid-May. European airlines like Lufthansa and KLM have announced they are cutting flights, and others could follow. 

Carriers everywhere are increasingly passing costs on to passengers wherever they can by raising airfares, charging more for bags and tacking on additional charges for fuel. Some are cancelling flights. 

 

For travellers, the prospect of a reasonably priced summer vacation is growing dimmer by the day. 

“There is a level of uncertainty here that we have not seen since Covid when it comes to travel,” said Katy Nastro, a travel expert at Going.com, a membership service for finding cheap flights, adding, “This will be a challenging year for the average traveller hoping to take an affordable summer vacation.” 

Cutting Capacity 

US airfares — both domestic and international — have continued to climb since the war began at the end of February, according to an analysis of economy round-trip tickets by the travel search engine Kayak. On April 13, an average international trip cost $1,064, compared with $776 on Feb. 23, and a domestic US trip cost $358, compared with $335 on Feb. 23. 

Global prices of jet fuel have soared by more than 70 per cent since the start of the war, according to the Platts Jet Fuel Price Index. This situation has US carriers expecting to spend billions extra on fuel this year, and at least one, Spirit Airlines, already in bankruptcy, has asked the government for a bailout. Jet fuel is one of the highest operating costs for airlines. 

Rob Britton, an adjunct professor of crisis management at Georgetown University and a retired American Airlines executive, emphasised that even when the war ends, it will take months for fuel prices and airfares to stabilise. 

“It won’t happen overnight,” Dr Britton said. “It’s a total, total mess.” 

While domestic airlines noted in earnings reports this month that consumer demand has remained steady, some said they were bracing for it to taper off. Some are scaling back routes through the end of the year and reconsidering planned growth for next year if jet fuel remains so costly. 

Andrew Nocella, United’s chief commercial officer, said in an earnings call on Wednesday that the airline had raised prices “across the board” five times since the start of the war. He also said United was “proactively” cancelling lower-demand flights like red-eyes as well as those on off-peak days like Tuesday, Wednesday and Saturday, ultimately removing 5 per cent of capacity through the rest of the year. 

Airlines have levers they can pull, such as consolidating several low-demand flights into fewer, fuller flights, said Mike Arnot, a spokesman for Cirium, an aviation analytics firm. Across US airlines, domestic capacity is down by up to 2 per cent this summer compared with before the war, Cirium data shows. 

For now, airlines are making small adjustments largely tied to regional flights, Ms Nastro said. This means that while international nonstop routes may not be as affected, multi-leg journeys to small cities or flights booked on separate carriers could be riskier for travellers, she added. 

Europe as a ‘Leading Indicator’ 

The outlook for American carriers is rosier than that of European and Asian airlines, which rely far more heavily on oil from the Middle East, aviation analysts said. The United States has significant oil reserves and refining infrastructure. 

For European airlines, fuel supplies are currently guaranteed to the middle or end of May, according to a J.P. Morgan report published this week. However, fuel shortages and continued high prices will “likely lead to summer capacity cuts from June onwards, starting with domestic and marginal routes,” the report said. The bank’s analysts flagged Britain as a higher risk relative to other European countries because of its reliance on Middle Eastern oil imports. 

“Europe is going to be like this, a leading indicator. Any of the issues that are going to sort of hit the US traveller, we’re going to see those roll out in Europe first,” said Christopher Anderson, a professor of services management at Cornell University. “If this persists, air travel is going to get way more expensive and with way less flexibility to get there.” 

In recent days, European and Asian airlines have made notable flight reductions. 

The German airline Lufthansa announced it would remove 20,000 flights over the next six months in a bid to conserve jet fuel. The Dutch carrier KLM said it would axe 160 flights from destinations it serves with multiple daily flights, such as London and Düsseldorf, Germany. Norse Atlantic Airways, a low-cost Norwegian carrier, cancelled its flights to Los Angeles. Hong Kong-based Cathay Pacific is eliminating 2 per cent of its flights from early May through the end of June, a move that the airline called a “last resort.” 

Experts advised that travellers planning to fly this summer and fall book now, if they haven’t already, stressing that nobody knows how long the fuel shortage will last and how much worse the pressures on airlines could become. 

“At some point, the cost of the trip, including the price of fuel, will exceed the revenue that can be earned,” said Arnot, the Cirium spokesman.