AIRLINES are trimming flights as soaring jet fuel costs and Middle East disruption threaten summer travel, squeezing margins and raising shortage fears
Escalating oil prices are beginning to hit the aviation sector hard, with airlines cutting flights and reviewing weaker routes as soaring jet fuel costs erode profitability and deepen concerns over fuel supply.
Dutch carrier KLM has become the latest airline to scale back operations, saying on Thursday, (April 16), that it would reduce 80 inbound flights at Amsterdam Schiphol Airport over the coming months.
The move places KLM alongside other major carriers including United Airlines Holdings Inc, Deutsche Lufthansa AG and Cathay Pacific Airways Ltd, all of which have begun trimming broader travel plans in an effort to limit damage.
According to aviation analytics firm Cirium Ltd, global airline capacity for May has fallen by around 3%, with one in 20 of the world’s largest airlines cutting flights. The firm has also revised its preliminary forecast for full-year airline revenue growth to 4-6%.
“There appears to be a very high probability that further flight reductions are coming,” Richard Evans, a senior adviser at Cirium, said in a report issued on Thursday.
The disruption comes as the war involving Iran increasingly affects airlines, airports and airspace across the Middle East.
What began as a regional operational problem is now spreading further, threatening to disrupt the highly profitable global summer travel season.
The situation has been worsened by the US naval blockade of the Strait of Hormuz, which has choked off Iranian oil shipping routes and pushed tensions in the region even higher.
Airlines are now reassessing routes that were already under pressure before fuel costs surged.
“Any flight we are already operating that is only marginally profitable, or not generating the level of return we want per flight, is likely to be reviewed again, and may be cancelled or reduced,” said Ed Bastian, chief executive of Delta Air Lines Inc.
He added that the airline industry is carrying an additional US$2.5 billion in fuel costs this quarter alone, describing the current period as a real stress test for the sector.
At the same time, concerns are growing that the industry may also face a shortage of jet fuel.
The International Energy Agency (IEA) has warned that Europe may have enough jet fuel for only about six weeks under current conditions.
Meanwhile, Ryanair Holdings, Virgin Atlantic Airways and easyJet are all reported to expect jet fuel supplies to remain tight until at least the middle of May.
A spokesperson for the European Union said the bloc could face jet fuel shortages in the near future, and that joint action is already under way in case the crisis around the Strait of Hormuz is not resolved soon.
The result is a growing threat to the global aviation industry just as it heads into one of the busiest and most lucrative travel periods of the year.
With fuel costs soaring, supply security in doubt and flight schedules already being cut, airlines are entering the summer under mounting pressure. - The Nation/ANN
