Jet fuel crunch threatens summer travel as airlines cut flights

The shortage of refined products stemming from the Middle East crisis is particularly acute when it comes to jet fuel. This has implications for both airlines and consumers.

Airline stocks fell immediately after the US-Israel attacks on Iran began at the end of February — anticipating how expensive fuel would likely dent profitability. Even if airlines were fully able to pass on surcharges to ticket buyers, an absolute shortage of jet fuel would likely lead to flight cancellations in the key summer travel period.

Indeed, Lufthansa (Europe’s largest airline) has already opted to pare back its flights sharply; at one point in April, Germany’s flagship carrier was running half as many flights as it did a year earlier, according to real-time data from Eurocontrol.

Lufthansa plans to cut 20,000 more summer flights; KLM, Ryanair and EasyJet have warned that they might do the same.

With rival US and Iranian blockades in the Strait of Hormuz throttling crude-oil supply to refineries, British aviation finds itself in the most precarious position in Europe.

Just 31 days of UK jet-fuel demand are covered by existing inventories, versus 70 in Denmark, according to data from the Joint Organisations Data Initiative (JODI). Like the UK, Spain, Germany and France also have a notably negative net refinery balance — i.e., the degree to which daily jet-fuel demand outpaces local supply. (The Netherlands, supported by the Rotterdam refining cluster, finds itself in the best position.)

To smooth out these national differences, the European Union is considering mandatory jet-fuel sharing amongst its members, and has also proposed lower energy taxes to navigate the crisis. (The EU imports 30% to 40% of its jet fuel needs, with about half coming from the Middle East.)

Finally, our last two charts show how US and European travellers historically foot the bill when oil gets more expensive — charting the pass-through from jet-fuel prices to plane tickets. Even though the US has much less danger of running out of fuel, tighter global supply is still pushing fuel costs higher for airlines like Delta, United and JetBlue.