A fuel line is connected to an underground tank near a parked U.S. Airways plane at the Oakland International Airport July 18, 2008 in Oakland, California. (Photo by Justin Sullivan/Getty Images)
Worldwide aviation executives said that it could still take months to recover the jet fuel supply even if Iran reopened the Strait of Hormuz.
International Air Transport Association (IATA) Director General Willie Walsh warned that the disruptions to the Middle East refining capacity led to the worst crisis in years for the aviation industry.
What we know:
News of a ceasefire has sent airline stocks soaring, according to a report from Reuters. Hours after the ceasefire was announced, which would effectively open the strait, oil fell below $100 per barrel. Despite this, there will not be much relief for jet fuel.
Even though global airline stocks have grown since the announcement, executives and experts say airlines still face a doubling of jet fuel prices. Carriers have already been raising fares, cutting flights and carrying extra fuel from home airports.
What they’re saying:
Walsh said he expected jet fuel costs to remain slightly higher than crude oil prices.
“If it were to reopen and remain open, I think it will still take a period of months to get back to where supply needs to be given the disruption to the refining capacity in the Middle East,” Walsh said.
Dig deeper:
Delta said it expects to pay $4.30 a gallon for jet fuel starting in June. They’re likely going to cut capacity across the board to make up for the extra fuel costs they expect to have.
Analysts at Panmure Liberum said the ceasefire helps with a “buying opportunity” for quality airlines.
Jet fuel prices have more than doubled since the war with Iran started. Accounting for 27%, fuel is the second-largest expense for airlines, right behind labor.
The Source: This story was written with information provided by Reuters. This story was reported from Orlando.
