SINGAPORE: Global supplies of jet fuel will take months to recover even if the Strait of Hormuz remains open, meaning oil prices could stay elevated for some time, said the director-general of global airline industry body International Air Transport Association (IATA) Willie Walsh on Wednesday (April 8).
Noting that many major refineries in the region have been severely damaged by drone strikes, he added that the recovery is “not going to happen quickly”.
“If we get crude oil flowing, that will provide some immediate relief – but it will take a little bit of time to get the full supply of jet fuel currency back to where it needs to be,” he added.
The United States and Iran on April 8 morning agreed to a two-week ceasefire, resulting in the temporary reopening of the strait that handles about a quarter of the world’s seaborne oil trade.
But if oil prices continue to skyrocket, air fares will remain high given their “almost direct correlation”, Walsh told reporters at a press conference on the sidelines of the IATA World Data Symposium.
The symposium brings global aviation leaders together to discuss and collaborate on topics such as data, technology, and cybersecurity.
Walsh addressed questions about the lessons that countries and airlines can learn from the current situation, the next steps they can take, and the longer-term impact of the crisis and recent ceasefire.
The current situation is not an “existential challenge” for the industry, nor is it a crisis anywhere close to what unfolded during the Covid-19 pandemic, Walsh said.
In fact, he expects that global demand for air traffic will not dampen significantly, with the industry to see slower but continued growth.
He noted that airlines will respond to significant and sudden increases in oil prices through higher ticket prices as they have in the past, likening the current oil price hikes to the impact of the 2008 global financial crisis triggered by the bankruptcy of investment bank Lehman Brothers.
The issue is that airlines are shouldering the higher oil prices for now, but it takes some time for higher ticket prices to translate to actual airline revenues, he added.
This is because many tickets have already been sold before the Middle East conflict broke out, and airlines have not introduced retrospective fuel surcharges.
In addition to increasing ticket prices, Walsh said airlines still have many levers left to pull to keep costs in check – such as cutting the frequency of flights.
For instance, Philippine low-cost carrier Cebu Pacific has said it will decrease the frequency of flights between Cebu and Singapore from seven to five times a week from mid-April to the end of October.
It will also suspend operations between Iloilo and Singapore from mid-June to the end of October.
Addressing a question on the increase in air traffic passing through Asia in the past month, Walsh said there is “no way” that Asian carriers can replace the capacity provided by the Gulf carriers, which accounted for 14.6 per cent of global air travel capacity in 2025.
As at March 24, around 1.7 million scheduled seats, equivalent to one-third of the capacity in the Middle East due to operate in the last week of February, had been cancelled, according to aviation data consultancy OAG Aviation.
The major Gulf carriers such as Emirates and Qatar Airways are also operating at a reduced capacity of 40 to 62 per cent, OAG Aviation figures show.
Most of the air space in the Middle East remains partially closed with limited flights operating to and from the region, although Changi Airport has helped fill the vacuum.
Noting that the additional traffic through Asia is temporary, Walsh said he believes that the Gulf hubs will “recover very quickly”.
On the takeaways from the current crisis, Walsh cautioned Asian governments to relook their production capacity for refined oil products – including jet fuel – instead of focusing on the supply of crude oil.
He also said that countries should secure their supplies of both crude and refined oil to ensure greater energy security, adding that the destruction of major oil refineries in the Middle East could further protract the issue of high oil prices.
Singapore is one of the world’s largest oil trading and refinery export hubs, which grants the nation access to crude oil in exchange for its refined petroleum products.
A question about the impact of Singapore’s postponement of its green jet fuel levy was also raised.
Responding, Walsh described the delay as a “very sensible reaction from the Government” here.
As the objective of the levy was to incentivise higher production of green jet fuel, he said the current situation with the Middle East war has pushed the prices of sustainable jet fuel up so the levy would not have encouraged additional production – but would instead lead to putting in more money for a smaller amount of fuel. - The Straits Times/ANN
