IATA: Europe Faces Fuel Risk

Flights in Europe could start being canceled by the end of May if jet-fuel supplies tighten further, the airline industry’s main trade group said on April 17. (iata.org) The warning came from the International Air Transport Association, whose director general Willie Walsh said shortages are already disrupting parts of Asia and could spread into Europe during the summer rush. IATA said governments should prepare coordinated rationing plans and temporary airport slot relief if fuel runs short. (iata.org) The immediate problem is supply, not just price. The European Union is drafting guidance for member states after the Iran war disrupted fuel flows from the Gulf, and a European Commission spokesperson said Brussels plans to present a response next week that includes jet-fuel measures. (finance.yahoo.com) Europe is exposed because it imports about 30% to 40% of its jet fuel, and at least half of those imports come from the Middle East, according to Reuters’ April 17 report on the EU plan. A separate Reuters report on April 15 said Europe had relied on the Gulf for nearly 75% of its jet-fuel imports, or about 375,000 barrels a day, before the war disrupted tanker traffic through the Strait of Hormuz. (finance.yahoo.com) (money.usnews.com) That matters because airlines cannot simply swap airports or fuel up anywhere they want. Reuters reported the EU is considering whether shortages would justify exceptions on compensation, airport slot rules and the bloc’s anti-tankering rule, which limits airlines from carrying extra fuel loaded at cheaper airports. (finance.yahoo.com) The International Energy Agency warned on April 14 that Europe could start seeing physical shortages by June if it replaces only half of the fuel it normally gets from the Middle East. On April 17, IATA said its own estimate now points to cancellations starting even earlier, by the end of May. (kitco.com) (iata.org) Airlines have already started trimming service as costs climb. CNBC reported on April 7 that United Airlines was cutting some Asia flying, while Lufthansa was drawing up contingency plans that could include grounding aircraft if fuel shortages or weaker demand worsen. (cnbc.com) The squeeze is showing up on the ground, too. In early April, several airports in northern Italy imposed temporary fuel restrictions before local suppliers stepped in to stabilize deliveries, one of the first signs that the shortage risk was becoming operational inside Europe. (bloomberg.com) (msn.com) Europe is trying to plug the gap with record inflows from the United States and Nigeria, according to Kpler and LSEG data cited by Reuters on April 15. That has bought time, but the Commission said availability of supply remains the main concern if safe passage through Hormuz does not hold. (money.usnews.com) (finance.yahoo.com) The next test comes in late April and May, when the EU is expected to publish its guidance and airlines finalize peak-summer schedules. If replacement cargoes keep arriving, the worst case may be avoided; if they do not, carriers may have to cut flights before Europe’s busiest travel weeks begin. (finance.yahoo.com) (iata.org)