Ryanair warns Middle East war, fuel shortages could hit summer season flights
Ryanair RYA.I CEO Michael O’Leary said jet fuel supply to Europe could be disrupted from June if the Middle East conflict does not end in the next month, potentially forcing the airline and rivals to consider cancelling summer season flights.
O’Leary said the Irish carrier, Europe’s largest by passenger numbers, is holding daily calls with all of its fuel suppliers across Europe to assess the situation, which the suppliers say will remain stable until the end of May.
Global airlines are contending with fuel shortages and high prices as the month-old U.S.-Israeli war against Iran snarls the Strait of Hormuz, a major oil shipping waterway from the Persian Gulf. Jet fuel prices have spiked since the conflict began.
“If this (the conflict) continues through to the end of April, we’re looking at a risk to supplies in early June. If it runs into May, then we don’t know what goes on,” O’Leary told a news conference in London.
“If there’s a risk to 10% or 20% of the fuel supply in June or July or August, then we and other airlines will have to start looking at cancelling some flights or taking some capacity out.”
Germany’s Lufthansa LHAG.DE is also preparing for possible fuel shortages outside Europe, with the airline seeing early warning signs in Asia, CEO Carsten Spohr said on Wednesday.
“If shortages in the kerosene supply occur, they are likely to be felt first outside Europe,” Spohr told the FAZ newspaper, adding that some Asian airports were no longer accepting extra flights due to limited fuel availability.
NO KNOCK-ON IMPACT ON FARES
The head of the International Energy Agency said on Wednesday that oil supply disruptions will increase in April and begin to impact Europe’s economy, with the lack of jet fuel and diesel likely to be the biggest problem.
The situation has roiled airlines from Vietnam to the United States and badly dented major Gulf carriers including Emirates and Etihad. Scandinavian airline SAS and Vietnam Airlines HVN.HM have cancelled some flights, while United Airlines UAL.O is cutting some unprofitable flights due to high oil prices.
Ryanair’s O’Leary said the budget carrier would decide where to cut flights on a rolling weekly basis and focus on whichever airports have constrained fuel supply.
As European airlines make most of their profit from June to September, Ryanair does not have the luxury of cutting out loss-making routes, he added.
He singled out the United Kingdom as the European market most exposed to potential jet fuel shortages due to the amount of oil it imports from Kuwait.
The International Air Transport Association estimates that around 25% to 30% of Europe’s jet fuel demand originates from the Gulf, which it warned puts it among the most exposed regions.
However, European airline stocks rose on Wednesday on hopes of a de-escalation of the conflict.
O’Leary said Ryanair is not seeing much of a knock-on impact on its airfares from the conflict so far and that it still expects ticket prices to rise by 3 to 4% year-on-year from April to June, with traffic set to grow by about 5% over that period.