Analysis: Concerns over jet fuel need not compromise summer getaway

The chorus of concern at an imminent shortage of jet fuel has grown despite government attempts to downplay a sense of crisis.

 

President Trump’s three-week extension of a ceasefire with Iran last week offered some hope of a resolution. But peace talks have appeared more off than on since, sending the oil price above $110 a barrel on Tuesday and suggesting the crisis will extend well into May if not considerably longer. 

 

The UK Foreign Office and departments for transport and energy issued a joint statement late last week entitled ‘Jet fuel and travel plans: what you need to know’, insisting: “UK airlines are not currently seeing a shortage of jet fuel. There is no current need for passengers to change travel plans.”

 

Yet it acknowledged: “Should circumstances change [and] your flight is cancelled, you have . . . the right to a full refund or re-routing”.

 

It noted plans “for a range of contingencies” but gave no details other than a relaxation of the ‘use it or lose it’ rule on slots at airports which will allow carriers to cancel flights and consolidate schedules if needed. 

 

The European Commission went further, announcing a series of measures including establishment of a Fuel Observatory to track production, imports and stocks of transport fuels – including jet fuel – and balance their distribution, while noting: “There is no immediate security of supply concern.” 

 

It stated: “As an initial priority, the Commission will coordinate with member states, fuel suppliers and the aviation sector on sourcing alternative jet fuel supply.” 

 

The Commission also relaxed airport slot rules, announced plans for an “optimisation of refinery production” and pledged to make more sustainable aviation fuel (SAF) available.

 

Yet it warned: “Jet fuel shortages may have a significant impact, especially in view of the busy summer aviation season.” 

 

European airports association ACI Europe, which has led industry calls for action to mitigate potential jet fuel shortages, at least in public, welcomed the measures saying they “largely reflect the key asks” of the sector.

 

However, Ryanair chief Michael O’Leary appeared not to have received the ‘keep calm and carry on’ message.

 

Speaking in Italy, he noted Ryanair only has fuel supplies guaranteed to the end of May and said: “If the war ends at the end of April or beginning of May, there will be no problems during the summer. But if it continues, we don’t know.”

 

May is now upon us, of course. 

 

Four weeks’ visibility of jet fuel supplies is the norm for airlines in Europe, so a guarantee of availability only to the end of May is no cause for alarm in itself. But there would normally be no uncertainty about what happens in June.

 

EU energy commissioner Dan Jorgensen also strayed from the ‘no need for panic’ line last week, warning it is “very likely many people’s holidays will be affected, either by flight cancellations or very expensive tickets”.

 

In reality, expensive fares are more likely than cancelled flights, with carriers already paring schedules to remove loss-making services.

 

Lufthansa cut 20,00 flights from its summer schedule last week while British Airways’ owner IAG warned it was “not immune” to the higher cost of fuel despite being well hedged and this would be reflected in fares.

 

BA’s US partner American Airlines went further, putting a $4-billion figure on the increased cost of fuel it would buy this year at unhedged market prices – an amount it made clear it would “make sure” to recoup from passengers.

 

The relaxation of airport slot rules will allow a consolidation of services – meaning passengers may find holiday flight times changed. But this should reduce the possibility of last-minute cancellations.

 

The ‘no fuel surcharge’ pledges of Jet2, easyJet Holidays and Tui should help settle nerves – although these businesses, each with their own airline, can seek to cover the higher costs they will pay for a small proportion of their fuel this summer through higher fares for remaining unsold seats.

 

Smaller operators won’t have that option but will likely see an increasing number of carriers impose fuel surcharges, especially on long-haul flights.

 

That could prove a challenge, if the crisis continues, as balances fall due. 

 

A sudden end to the US-Iran confrontation could have contradictory impacts. On the one hand, jet fuel supplies and prices will not return to where they were pre-war for many months after a re-opening of the Strait of Hormuz – likely not until next year at the earliest.

 

On the other hand, the Gulf carriers can be expected to release a slew of cheap seats on to the market.

 

The issue then will be how permanent does any ‘peace deal’ appear, how is that reflected in Foreign Office travel advice, and how confident do consumers feel – in regard to both their security and their finances.