Iran War: Airlines Face Worst Crisis Since Pandemic – Fuel Shortage & $50B Losses

The airline industry is facing its most significant crisis since the coronavirus pandemic, according to a report in the British newspaper Financial Times. Escalating conflict in Iran has led to flight cancellations and losses exceeding $50 billion for major global carriers, raising concerns about potential jet fuel shortages.

As the conflict enters its fourth week, airline executives are warning of the repercussions for the aviation sector, driven by rising oil prices and the possibility of a decline in global travel demand.

The Financial Times reports that passengers flying routes that bypass the Persian Gulf are likely to see a sharp increase in ticket prices in the coming months.

The cost of jet fuel, which accounts for roughly one-third of airline expenses, has doubled since the United States and Israel launched attacks on Iran on February 28, and continues to climb.

Jet Fuel Supply Concerns

Airline officials have cautioned that the sharp increase in jet fuel costs will force them to raise ticket prices. EasyJet CEO Kennton Jarvis told the Financial Times that current fuel prices far exceed those following the outbreak of the Russia-Ukraine war in the spring of 2022.

The conflict represents the most significant disruption to the aviation sector since the coronavirus pandemic grounded global air travel in 2020, the airline executive added.

Losses and Demand Decline

The 20 largest publicly traded airlines have lost approximately $53 billion in market capitalization since the start of the conflict, according to calculations by the Financial Times. Investors have also increased their bets on further declines in airline stock prices.

Lufthansa CEO Carsten Spohr expressed concern that higher prices could lead to a long-term decline in demand, but affirmed that Germany’s largest airline had no choice but to raise ticket prices. “Our average profit is around €10 (approximately $11) per passenger, and we simply cannot absorb the additional cost,” Spohr told the British newspaper.

In a sign of the widespread impact of this disruption, airlines are developing contingency plans to address potential jet fuel shortages.

KLM CEO Ben Smith said his company is developing plans to address any potential supply shortages, including reducing flights to some parts of Asia. The disruption has also extended to air freight, with shipments shifting from severely impacted global maritime transport to air freight, leading to congestion at some airports.