Many airlines are canceling flights due to the fuel crisis

The conflict between the United States, Israel and Iran hits the air sector squarely. The closure of the Strait of Hormuz has triggered a colossal energy crisis that the airlines have not seen coming, which has resulted in thousands of flights canceledrising rates and an uncertainty that, for the moment, has no expiration date.

Start. On February 28, the United States and Israel launched coordinated attacks against Iran, triggering the closure of the Strait of Hormuz, a sea lane through which about 20% of the world’s oil trade transits. According to Kevin Bookco-founder of the analytics firm Clearview Energy Partners, when analysts study what can go wrong in global oil markets, this is “the worst thing that can happen at any single point of failure,” he told NPR.

Iran did not achieve this with a naval blockade, but with cheap drones. A few attacks in the vicinity of the strait were enough for insurers and shipping companies to decide that it was too risky to cross it. The result: The price of Brent exceeded $100 per barrel on March 8 for the first time in four years, reaching a high of $126.

The impact in commercial aviation. The closure of airspace over the Middle East has caused complete chaos in global aviation. According to CNBC, more than 25,000 flights over the Middle East have been canceled since the attacks began, and the price of aviation fuel skyrocketed 58% in just days, reaching more than 170 euros per barrel.

Who is canceling and how much. There is a flood of airlines that have canceled flights around the world. Among the main ones are:

• The Americans: United (5% of capacity); Delta, which already accounts losses of more than 400 million dollars for fuel; American and Southwest, which are also exposed without price coverage. “The price of fuel has more than doubled in the last three weeks. If prices remained at this level, it would mean an additional expenditure of $11 billion a year on fuel alone,” counted Scott Kirby, CEO of United.
• The Europeans:SAS, canceling about 1,000 flights in April; the entire Lufthansa Group (Lufthansa, Austrian, Swiss, Brussels Airlines), KLM, Finnair, ITA Airways, Wizz Air and easyJet, whose CEO publicly warned that the situation in Europe could become seriously complicated starting in mid-May. “Although we try to absorb cost increases as much as possible, it is a shock that directly hits the sector,” counted SAS CEO Anko van der Werff.
• Asia-Pacific: Air New Zealand, about 1,100 flights until May (affecting about 44,000 passengers); Cathay Pacific, which have applied supplements of fuel to all its routes; Thai Airways, which already plans to raise rates between 10-15%; AirAsia; Qantas, with price increases and suspending departures on specific routes, and Vietnam Airlines.

Where it hurts the most. The crisis does not hit everyone the same. Southeast Asia is especially exposed due to its dependence on supplies from the Gulf. According to Aerotime, China and Thailand have restricted exports of fuel, and the possibility of further calendar disruptions and other potential problems looms over the entire Asia-Pacific region.

On the other hand, the situation in Sri Lanka is particularly extreme. And the country not only faces rising prices, but also a real shortage of foreign currency to pay for it, to the point of having declared Wednesdays holidays to reduce fuel consumption throughout the country.

What’s coming A recent assessment from the Defense Intelligence Agency (DIA) concludes that Iran could maintain the closure of the strait for between one and six months. kirby warned in its memo that United is preparing for a scenario in which oil reaches $175 per barrel and does not drop below $100 until the end of 2027. If this scenario comes to pass, the wave of cancellations and rate increases that we are seeing now could be just the beginning.

Cover image | David Syphers

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