Jet fuel shocks airlines

Airlines are cutting flights and raising fares as a jet-fuel squeeze ripples into the summer travel season. (thepointsguy.com) The pressure started after access through the Strait of Hormuz was largely shut following the Iran war at the end of February, choking off a key route for crude and refined fuel shipments. The International Air Transport Association’s fuel monitor showed global jet fuel averaging $184.63 a barrel in the latest weekly reading, after topping $200 earlier this month. (thepointsguy.com) (iata.org) Air Canada said on April 17 that jet fuel prices had doubled since the conflict began and suspended six routes it said were no longer economical. The cuts include Toronto and Montreal to John F. Kennedy International Airport from June 1 to Oct. 25, Fort McMurray to Vancouver from May 28, and Yellowknife to Toronto from Aug. 30. (cbc.ca) (apnews.com) Delta has also trimmed summer flying, with Chief Executive Ed Bastian saying earlier this month that the airline was “meaningfully reducing capacity” in the current quarter until fuel conditions improve. The carrier has paused select routes from hubs including New York, Detroit and Boston, according to published schedule changes. (thepointsguy.com) (usatoday.com) Norse Atlantic, a low-cost long-haul carrier, said on April 14 that it would raise $110 million, secure a $70 million bridge loan and start a strategic review as fuel costs hammered its business. It has since pulled all Los Angeles flights for the summer, cutting budget links to London, Paris and Rome. (news.cision.com) (foxla.com) Jet fuel is refined from crude oil, but airlines cannot simply swap to another energy source when prices jump. They buy huge volumes for daily operations, so a spike in refinery output costs quickly turns into route cuts, fuel surcharges or higher ticket prices. (sun-sentinel.com) (spglobal.com) Europe has emerged as the most exposed market. International Energy Agency Executive Director Fatih Birol told the Associated Press on April 16 that Europe had “maybe six weeks or so” of jet fuel left if the disruption persisted, and Lufthansa said this week it would cut 20,000 short-haul flights through October. (apnews.com 1) (apnews.com 2) U.S. travelers are not facing an immediate fuel shortage, but American carriers are still paying more. Airlines for America’s daily index put the U.S. jet fuel spot price at $4.23 a gallon on April 22, and CNBC reported the U.S. price had climbed from $2.50 a gallon on Feb. 27 to $4.88 on April 2. (airlines.org) (cnbc.com) Some airlines are trying to pass part of that increase to passengers instead of cutting as many seats. Delta told investors it expected to recover 40% to 50% of higher fuel costs in the second quarter through fares and fees, and United said this week it would raise summer fares by 15% to 20%. (travelweekly.com) (msn.com) For travelers, the pattern is already visible in fewer nonstop options, more seasonal suspensions and pricier tickets on busy summer dates. If fuel flows stay tight into May and June, airlines are likely to keep pruning the weakest routes first. (washingtonpost.com) (marketwatch.com)