In April, jet fuel prices surged from around 830 USD per tonne to over 1,800 USD per tonne. Economists believe that this massive increase could potentially raise fuel costs, which typically account for 25%-30% of operating expenses, to 45%-50%.
Airlines have been forced to implement temporary measures such as raising fares, imposing fuel surcharges, and cutting or suspending unprofitable routes. These measures help airlines maintain operations and avoid losses, but they have led to a decrease in passenger numbers.
In North America, Canadian airlines cancelled numerous flights last week. The list of airlines cutting flights continues to grow, even as the peak travel season approaches. Although fuel supply in Canada is not as critical as in Asia and Europe, due to the North American nation having nearly 10 refineries producing aviation fuel and 85% of its aviation fuel being domestically produced, it has not been immune to the global crisis.
Major airlines such as Air Canada, WestJet, Porter Airlines, and Air Transat have all announced plans to increase fares or add surcharges to offset rising fuel costs. The airlines revealed that they are losing hundreds of millions of Canadian dollars (CAD) and have been forced to raise fares up to an unacceptable level for customers.
Air Transat announced a reduction of approximately 1,000 flights, equivalent to 6% of its total capacity, between May and October, despite this being the busiest travel season for the airline.
WestJet also cut its flight capacity by 1% in April, then increased it to 3% in May and 6% in June by consolidating flights on some routes.
Air Canada also announced the temporary suspension of six routes, while increasing checked baggage fees from 35 CAD to 45 CAD (25-32 USD).
Similarly, Europe is facing a serious aviation fuel crisis as supplies may only last for about six weeks. Anxiety grips European airlines, as 30% of the continent's aviation fuel is imported from the Middle East.
According to a warning from the International Energy Agency (IEA), if the blockade of the Strait of Hormuz continues, many domestic and international flights in Europe could be cancelled due to fuel shortages.
IEA Director-General Fatih Birol stated that this is part of the biggest energy crisis in world history. Dutch airline KLM announced the cancellation of 80 flights to and from Amsterdam Schiphol Airport in May. German national airline Lufthansa is considering cutting capacity by 2.5-5%, temporarily suspending operations of 20-40 aircraft. Meanwhile, Nordic airline SAS cancelled 1,000 flights in April.
Against this backdrop, business leaders are calling on the European Union (EU) to implement urgent measures such as coordinated fuel purchases, temporary tax exemptions, and financial support to mitigate the energy price surge. The EU is also considering purchasing fuel from the US.
However, the difficulty lies in the fact that Jet A fuel, primarily used in the US, has differences in standards and compatibility with aviation infrastructure. The current crisis once again highlights the continent’s significant dependence on imported energy, as well as the fragility of global supply chains in the face of geopolitical fluctuations.
Even if the conflict in the Middle East ends, the wounds of the crisis are far from healed. The International Air Transport Association (IATA) estimates it will take months for fuel supplies and prices to return to normal. In this context, at the heart of the fuel price storm are passengers, who are paying more for flights.
