SINGAPORE: Jet fuel prices will still take months to normalise, Asian airline bosses say, even after Iran agreed to open the Strait of Hormuz as part of a two-week ceasefire deal with US President Donald Trump.
While crude oil prices fell as much as 16% to below US$100 a barrel yesterday after Trump announced the ceasefire, the chief executive officers of Malaysia Aviation Group (MAG) and Thai Airways International Pcl said the impact on prices and supply concerns will remain.
“Even if the war stops, it’s going to take many, many more months for the price to stabilise,” MAG’s Nasaruddin A Bakar said at an International Air Transport Association event in Singapore.
Carriers globally are grappling with a more than doubling of jet fuel costs since the war broke out, and the threat of supply shortages in some regions has forced some airlines to reduce services.
Thai Airways chief executive officer Chai Eamsiri said this is the worst oil shock in his near-four decade career.
“This is the worst one,” he said.
“This time is about the infrastructure that was destroyed. It will take some time to call back all the supply, the facilities, the refinery, the infrastructure.”
Malaysian low-cost carrier AirAsia X Bhd
earlier this week said it had increased fares as much as 40% and hiked fuel surcharges to cope with the price shock.
In the United States, United Airlines Holdings Inc has trimmed roughly 5% of capacity. Air New Zealand Ltd has pushed through a second round of cuts to flight schedules and further increased fares to manage with higher oil prices.
Meanwhile, airlines could look to accelerate the retirement of older aircraft, potentially benefiting planemakers Airbus SE and rival Boeing Co.
“If fuel prices go up, there will be an incentive to buy the latest and greatest aircraft,” Wouter van Wersch, executive vice-president of Airbus’ international business, told Bloomberg at Latin America’s main aerospace exhibition in Chile.
Brent prices hit a record US$144 a barrel on Tuesday, though later fell after US President Donald Trump agreed to suspend the bombing of Iran for two weeks.
Van Wersch made his comments before Trump announced the ceasefire.
The six-week Middle East conflict has slashed energy flows through the Strait of Hormuz, which normally handles about a fifth of the world’s oil. In addition to choking off crude, the disruption in Hormuz is hitting fuel supply, prompting carriers to ramp up fees and ticket prices.
Boeing forecasts that Latin America passenger air traffic will increase 4.3% annually, with the region’s airlines needing more than 2,300 new airplanes through 2044 – in line with Airbus projections.
“We are optimistic about long-term regional economic growth, driven mainly by an expanding middle class, and the ensuing increase in travel and cargo traffic within Latin America and beyond,” Jose Sicilia, a Boeing vice-president, said in a news release timed to the event.
Meeting that demand won’t be easy. Airbus is already targeting record aircraft deliveries in 2026, but production is strained by engine shortages that are delaying output.
In February, the company faulted one of its main suppliers, RTX Corp’s Pratt & Whitney unit, for failing to deliver enough engines, forcing Airbus to scale back its ambitious production plans even as orders reach all-time highs.
Van Wersch said the supplier is working to resolve the issue, “but it’s all going to be very backlogged and challenging to reach the figures that we will need”.
Earlier this year, the company said monthly production of A320 aircraft may fall short of 75 units by the end of next year because Pratt & Whitney isn’t able to meet agreed obligations.
For years, Airbus production has been held back on its bestselling A320 family of jets, mainly because of engines.
“Despite the uncertain outlook, Airbus has not changed any of its guidance for this year yet,” van Wersch added.
Planemakers are also worried that some of their customers may push back deals amid the war in Iran as carriers weigh the implications on travel demand, the cost of fuel and their ability to navigate hostile skies.
Customers have not yet asked to defer orders from Airbus or pause deliveries, according to van Wersch.
“They need efficient aircraft,” he said. But “it will have, if it continues, an impact in our customers”. — Bloomberg
