Airline passengers should brace for more aggravation in the next few months as carriers around the world deepen cancellations and ground planes to cope with stratospheric increases in jet-fuel prices.
Global capacity for May has been reduced by about 3 percentage points, with all but one of the 20 largest airlines slashing flights, according to data compiled by analytics firm Cirium Ltd. It’s revising an initial prediction of 4%-6% growth for the year and says a decline of as much as 3% is possible under certain conditions.
“It appears extremely likely that more reductions are ahead,” wrote Richard Evans, a senior consultant at Cirium, in a report released Thursday.
The disruptions roiling the aviation industry after the war in Iran started were initially limited to Middle Eastern airlines, their airports and airspace. They’ve since become contagious and threaten to upend the lucrative summer travel season globally. And with the US naval blockade of the Strait of Hormuz cutting off Iranian oil shipments, there’s no immediate end in sight.
The European Union said it may face supply issues for jet fuel “in the near future.” The bloc is preparing a joint action plan in case the situation in the Strait of Hormuz persists, a spokesperson said Friday in Brussels.
For now, the industry may have gained some breathing room when Iran said Friday the strait was “completely open” to commercial traffic. Benchmark Brent crude subsequently fell as much as 11%. But any agreement remains brittle, with both sides seeking to maintain leverage in the conflict.
The recent adjustments in capacity signal that many airlines are entering self-preservation mode with the expectation that the conflict will be detrimental to business for the foreseeable future. Even if all fighting ends soon, damaged infrastructure will likely take months or years to repair.
“The package to accelerate fleet and capacity measures is unavoidable given the sharp rise in jet fuel costs and ongoing geopolitical instability,” Till Streichert, the group’s chief financial officer, said Thursday.
The list goes on. The group’s Edelweiss brand suspended Denver and Seattle flights and reduced frequencies to Las Vegas.
Air Canada on Friday announced that it has canceled services from Montreal and Toronto to New York’s John F. Kennedy airport, though it will continue to serve Newark and La Guardia.
Qantas Airways Ltd. is reducing its flights to the US and will also cut domestic flight capacity by about 5% as it estimates an extra A$800 million ($575 million) on its fuel bill in the second half of its fiscal year.
Hong Kong’s Cathay Pacific is cutting 2% of flight frequencies across the Asia-Pacific region from mid-May to the end of June. Its money-losing budget unit, HK Express, is implementing a steeper 6% pullback.
The cuts come after fuel levies of as much as $400 were imposed on long-haul, round-trip services.
“We have pursued every suitable means to keep our flights operating as normal,” Cathay Chief Customer and Commercial Officer Lavinia Lau said in an April 11 release. “However, these measures have not been enough to mitigate the significantly increased fuel costs.”
Many European airlines are well-hedged on fuel at least for the coming months, while most US airlines — the biggest carriers in the world by capacity — don’t hedge and wind up facing the biggest bills.
Mainland China-based airlines, which also lack fuel-hedging protection, are stepping up daily flight cancellations, according to a Bloomberg News analysis of data from Chinese provider DAST. The uptick in cuts comes as Chinese carriers schedule fewer daily domestic flights, according to data compiled by BloombergNEF.
Scores of Chinese travelers have taken to social media to complain about late-notice cancellations just before the five-day “Golden Week” public holiday in May. And as travelers around the world book their summer and fall vacations, they may find that many routes to lesser-flown destinations have been wiped off the global aviation map.
“If the price of jet fuel remains elevated for an extended period there will be more cancellations,” said Dudley Shanley, an analyst at Goodbody.
