Fuel prices are so high that airlines are at risk of disappearing, according to Deutsche Bank
On February 28, the United States and Israel bombed several cities in Iran, starting a conflict that has already spread to other countries in the Middle East, when Iranian missiles responded to Bahrain, Qatar, Saudi Arabia, Kuwait or Dubai and other emirates. One of the consequences has been the rise in fuel prices at a dizzying pace due to the paralysis of a key corridor for global energy: the Strait of Hormuz. The days go by, prices continue to rise and when something as strategic as oil rises, it is a matter of time before the accounts come together. Deutsche Bank warns: the sword of Damocles is on the neck of the airlines. The context. Bloomberg collects the information sent by the German financial institution to its clients: while the price of crude oil has increased by 50% so far this year, it is aviation fuel that takes the cake. The British Argus Media collects the price of the jet in recent days for the hubs of Chicago, Houston, Los Angeles and New York, where we see how it goes from 2.17 dollars per gallon on January 5 to 2.29 on February 5 until approaching 4 dollars per gallon on March 5 (3.95). In the United States, the price differentials between jet fuel and the price of crude oil range between $85 and $95 per barrel, equal to or higher than the cost of oil. That huge gap between the price of crude oil and that of refined products (called the crack spread) wreaks havoc. The last time a crack spread like this occurred was in 2005, when hurricanes Katrina and Rita. Why is it important. Because as the German entity highlights, 20 years ago the crack spread caused significant and widespread damage to the airline industry, which was the trigger for airlines to Delta Air Lines and Northwest Airlines filing for bankruptcy. The historical precedent sets off all the alarms. And Deutsche Bank is not alone: the CEO of United Airlines At the moment it has already warned that the increase in jet fuel prices will have a “significant” impact on first quarter results and that there could be an increase in air fares. Deutsche Bank analyst Michael Linenberg is forceful: Without immediate price relief, “some of the most financially vulnerable airlines could halt operations” and “airlines around the world could be forced to ground thousands of aircraft.” In detail. At the moment, airlines have plummeted on the stock market since the beginning of the conflict. American Airlines has lost 19% so far this year, but the blow is global: a group of 29 airlines, hotels and travel companies from Europe, Asia and North America together lost $22.6 billion in market capitalization in a single day, according to Reuters. In Xataka | The rocket and the pen: the theory that explains why the rise in gasoline is here to stay In Xataka | There is a hidden war to sell us the cheapest possible gasoline. One that Ballenoil and Plenergy already dominate Cover | Dawn McDonald and Daniel Shapiro