The global jet fuel shortage caused by the Iran war has created a bigger crisis for airlines than the Covid-19 pandemic, according to Tony Fernandes, chief executive of AirAsia. Fernandes stated, "I thought I'd seen it all with Covid… but having seen jet fuel go up almost three times — this is much worse."
Unprecedented Fuel Price Surge
Jet fuel supplies have plummeted to their lowest level since records began, as the conflict in Iran disrupts fuel shipping lanes. Fernandes described the situation as unprecedented, noting that waking up to a tripling of major costs was a new experience despite his extensive career. The crisis has already led to the collapse of US budget airline Spirit earlier this week, and Fernandes warned that other low-cost operators could follow suit.
Asian Airlines See Silver Lining
Despite the turmoil, Fernandes highlighted that demand in Asia has not dropped. Geopolitical tensions are encouraging more Asians to travel within the region rather than abroad. "The Gulf capacity has been taken out and there is a massive increase in price to Europe, which has driven more traffic to our side," he said. AirAsia has sold 50,000 tickets for flights to Kuala Lumpur to London via Bahrain in June, and the airline remains committed to using Bahrain as a stop-off hub, barring further conflict.
Impact on Global Aviation
The conflict has resulted in the cancellation of 13,000 flights in May, leading to a loss of up to two million seats. Airports in Istanbul, Turkey, and Munich, Germany, have experienced the steepest declines in air traffic. German airline Lufthansa has cut 20,000 short-haul flights, while Irish carrier Aer Lingus has removed hundreds of trips from its summer schedule.
UK Most Exposed to Fuel Shortage
Researchers at Allianz Trade have identified the UK economy as the most "structurally exposed" to jet fuel shortages. In response, Transport Secretary Heidi Alexander has relaxed "use it or lose it" rules to alleviate pressure on airlines. These rules require airlines to use airport slots for a certain amount of time to retain their rights. Alexander is also promoting staycations to manage expectations in case British summer holidays are canceled.
