Strait of Hormuz Blockade Disrupts Jet Fuel, Increases European Airfare

LONDON (Substrate) -- Europe's aviation sector faces deepening disruptions this summer as jet fuel supplies dwindle from the eight-week blockade of the Strait of Hormuz, which has halted exports from the Gulf region accounting for 20% of daily international trade under normal conditions. S. and Israeli airstrikes escalated the Middle East conflict.

Prices in Europe surged from $831 per tonne in late February to $1838 per tonne by early April, and have held above $1500 per tonne since then. K.

Amaar Khan, head of jet fuel pricing at Argus Media, noted that rising demand against this shrinking supply has exacerbated the crisis, with stocks at the Amsterdam-Rotterdam-Antwerp hub reaching their lowest level in six years. Airlines, where fuel comprises 25-30% of operating costs according to the International Air Transport Association, have responded with cuts and price hikes.

EasyJet hedged 80% of its fuel for the first half of the year at $717 per tonne but still faced an extra £25 million in costs in March alone.

Air France KLM, Air Canada, and SAS have trimmed their summer schedules, while Lufthansa announced it will remove 20,000 flights between now and the end of October. Long-haul routes have seen the sharpest fare increases, with a June flight from London to Melbourne now costing 76% more than last year, according to Teneo.

Virgin Atlantic has imposed surcharges from £50 on return economy tickets to £360 for business class fares.

IAG, owner of British Airways, Iberia, Aer Lingus, Vueling, and Level, stated that travellers will have to pay more as costs rise. United Airlines CEO Scott Kirby told investors the company would do whatever it takes to recover 100% of the increase in jet fuel prices as quickly as possible.

Before the conflict, Europe held about 37 days' supply of jet fuel, but that has likely dropped to 30 days, according to Beroe.

The International Energy Agency views 23 days as the critical threshold where some airports would run out. S. imports poised to replace a little over half of the lost Middle Eastern supplies.

The agency's analysis indicated that if trends persist, reserves could hit critical levels by June, potentially leading to physical shortages at select airports and flight cancellations. K.