The aviation industry is entering a period of intense pressure, as the surge in fuel prices - a result of geopolitical tensions in the Middle East - leads large companies to cancel flights and rethink their pricing policy, with Europe at the center of developments.
The explosive rise in jet fuel prices, as a direct consequence of the conflict between the US, Israel and Iran in the Middle East, is forcing leading airlines to radically rethink their operation and pricing policy.
The cost of jet fuel has skyrocketed
United Airlines and the Lufthansa group are among the latest major airlines to warn of price hikes and massive flight cuts, as fuel costs have skyrocketed from $85-90 per barrel to levels now between $150 and $200 in a matter of weeks.
The CEO of United Airlines said the company may raise ticket prices by up to 20%, in an effort to offset rising operating costs. At the same time, the company was forced to revise downwards its financial forecasts for the full year, now estimating earnings of between $7 and $11 per share, compared to a previous forecast of $12-14 before the escalation of the crisis in the Middle East.
The pressure is extremely intense, given that fuel can account for up to 25% of an airline's total operating expenses. The sharp increase in prices leaves little room for manoeuvre, leading companies to either increase freight rates or curtail their activity.
Europe with 'AccelerateEU'
In Europe, the situation is even more fragile. The European Commission has presented a package of measures called "AccelerateEU", aimed at managing the impact of the energy crisis on the aviation sector. Among the proposals is a better distribution of jet fuel among member states in order to avoid serious shortages.
Already, the EU's energy commissioner has warned that Europe is heading for a particularly difficult summer, even in the most optimistic scenario, due to a possible fuel shortage.
A central role in the crisis is played by the Strait of Hormuz, through which a significant part of energy flows passes. About 75% of Europe's aviation fuel supply comes from the Middle East, while the Strait itself accounts for about 40% of this supply.
The disruptions on this route have already caused serious delays and concern about widespread shortages.
The effects of the war on aviation
The effects are already visible in individual companies. Low-cost Transavia has announced that it will cancel up to 2% of its scheduled flights for the months of May and June, in order to limit the impact of increased fuel costs. The company confirmed that this decision was taken in view of the impending crisis in the aviation industry.
Passengers affected by the cancellations will be notified via SMS and email, with the majority of flights expected to be rescheduled within 24 hours. At the same time, options such as free rebooking, vouchers or a full refund will be offered. However, there is no additional compensation, as cancellations fall under the scope of "extraordinary circumstances", according to European law.
Transavia's parent company, Air France-KLM, is pursuing a different strategy, opting to pass on some of the costs to passengers. In particular, it plans to impose additional charges of up to €100 for long-haul flights, while in some cases the increases are estimated at around €50 per return ticket.
Drastic measures and predictions for a difficult summer
EasyJet is under similar pressure, warning of increased pre-tax losses in the first half of the year, estimated at between £540 million and £560 million. This amount includes additional fuel costs of approximately €25 million for March alone, writes the Independent. Chief Executive Kenton Jarvis has already pointed out that consumers in Europe should expect further price increases towards the end of the summer, when the hedging contracts that have so far held costs back expire.
The Lufthansa group has taken even more drastic measures, announcing the cancellation of 20.000 flights over the next six months, with the aim of saving about 40.000 tons of fuel, the British newspaper points out. Airlines are cancelling flights and imposing extra charges amid the jet fuel crisis. The company has already started eliminating "unprofitable" short-haul flights through its subsidiary, Lufthansa CityLine, reducing its total capacity by 1% in available seat kilometers for the summer.
The first 120 daily cancellations came into effect and will continue until the end of May, while passengers have already been informed of the changes. At the same time, the company proceeded with the permanent withdrawal of 27 Lufthansa CityLine aircraft from circulation.
Some routes have been completely cancelled, such as flights from Frankfurt to Polish cities such as Bydgoszcz and Rzesov, as well as to Stavanger in Norway, which have been temporarily removed from the schedule.
With fuel prices more than doubling from last year and the supply chain under pressure, airlines are faced with a balance between maintaining their viability and meeting growing travel demand.
iefimerida.gr
