Concerns are growing over the price and availability of jet fuel as the US and Iran remain deadlocked, keeping the vital Strait of Hormuz shipping lane closed to traffic.
Figures from global industry body, the International Air Transport Association (IATA), show that the kerosene used in commercial aircraft averaged $181 (€154) a barrel through last week, more than twice what it cost a year earlier.
Airlines are axing flights or signalling possible ticket price increases as they grapple with the problem, while fears that supplies could run short during peak summer flying lurk in the background.
Air travel analysts Cirium estimate airlines around the world have axed 13,000 flights form their schedules as a consequence of the crisis, blaming the higher fuel costs for the cuts.
RM Block
In Europe, Germany’s Lufthansa is among the higher-profile airlines to have cut services, dropping 20,000 flights, including from Cork to Frankfurt.
While Irish carriers Aer Lingus, Ryanair and Emerald Airlines have announced cuts or adjustments to their proposed summer services, they have blamed other reasons, including maintenance and the Dublin Airport passenger cap, for their decisions.
[ Trump continues to make threats as Iran reviews US proposal to end warOpens in new window ]
Industry analysts have consistently singled out Ryanair and Aer Lingus owner, International Airlines Group (IAG), as among the European operators best-positioned to weather the crisis.
Earlier this week, Alex Irvine, aviation analyst at brokerage and equity research specialist, Bernstein, noted that both groups remained in a strong position, adding that Ryanair in particular could actually grow market share as a consequence.
Ryanair’s chief executive, Michael O’Leary, last week argued that his organisation was the best insulated against the crisis among European airlines, some of whom he predicted could go out of business if the deadlock continued.
PrepayPower are hiking their prices - will other energy suppliers soon follow suit?
O’Leary acknowledged that elevated fuel prices had cost Ryanair about $50 million extra so far, a figure that could rise to $600 million should the conflict drag on for the rest of the year.
Local air travel industry figures agree that Ryanair and Aer Lingus, the carriers with which most Irish people travel, are less vulnerable than some European rivals.
This is down to hedging. Both buy jet fuel in advance, guaranteeing them a price and cutting the risk that they will be vulnerable to price shocks. Ryanair has already ordered 80 per cent of its needs up to the end of March 2027. IAG has made similar provisions for this year.
That practice has so far insulated Irish people from the sharp rises in ticket prices that travellers in Asia and the US have experienced since the conflict began when the US and Israel struck Iran at the end of February.
Industry sources say that the big challenge for airlines so far has been price rather than getting actual supplies of the fuel.
[ Ireland’s moment of truth in the energy crisis is fast approachingOpens in new window ]
One argues that decisions such as Lufthansa’s move are down to weaknesses in individual airlines’ hedging strategies more than anything else.
As the summer nears, questions around supplies remain. Irish airlines import jet fuel as none is produced at the Republic’s one refinery. However, the State’s National Oil Reserves Agency does have supplies.
Minister for Energy Darragh O’Brien recently said that the agency held enough for 70 days, slightly more than two months.
Europe imports up to 40 per cent of its jet fuel, with around half of that coming through Hormuz. “So we have 15 to 20 per cent less than normal,” one source says.
Britain, the Netherlands and Norway, a leading oil and gas producer, all produce jet fuel. The UK government this week asked its refiners to increase their production.
The US is one of the leading sources outside Europe. Refiners in New York regularly ship large quantities across the Atlantic.
As the crisis drags, countries around Hormuz could look at other options and “workarounds” sources say.
Both Saudi Arabia and the United Arab Emirates have pipelines and access to ports that allow them avoid the blocked strait.
What do sky-high jet fuel prices mean for travellers?
Many observers are still betting that the US and Iran will reach a settlement that will at least reopen Hormuz in coming weeks, as both sides have their own pressing reasons for doing so.
Should that happen before the end of this month, that should avoid a crunch on supplies.
In fact, some sources argue that if Hormuz reopens jet fuel will be among producers’ and refiners’ priorities, as the high prices at which it is trading give them a “large incentive” to start shipping it quickly.
“And they just have to get it somewhere proximate to Europe, where it can be picked up, it’s not like they have to bring it into Dublin Port,” said one.
