European airlines, airports and tour operators are striking a bullish tone on jet fuel supply despite one of the worst crises in decades which has driven prices to double from pre-Iran war levels as the conflict snarls oil flows via the Strait of Hormuz.
The sector and regional officials are notably downplaying fears of shortages partly to reassure travellers ahead of the peak northern hemisphere summer and protect bookings at a critical time for earnings, analysts say.
The industry’s confidence contrasts with bleaker warnings from traders as the Strait of Hormuz, through which around a fifth of global oil flows, remains all but closed to shipping due to blockades by Iran and the U.S. as their conflict drags on. The Gulf supplies around a quarter of Europe’s jet fuel.
“There are always people who want to take a stand – we’re running out of fuel. There’s absolutely no indication of that,” said Sebastian Ebel, CEO of Europe’s largest tour company TUI, after presenting quarterly results on Wednesday.
“We think the discussion on fuel is a little bit artificial as we do see no shortages for the next weeks, and I would also see no impact in the summer at all, except prices.”
EUROPEAN AIRLINES PAYING A PREMIUM FOR JET FUEL
Not everyone is so optimistic. The International Energy Agency said on Wednesday global oil supply will not meet demand this year as the conflict wreaks havoc on Middle East production. And in some European regions such as the Amsterdam Rotterdam Antwerp area, jet fuel stocks are near record lows, LSEG Workspace data shows.
However, Lufthansa CEO Carsten Spohr said the company’s fuel supplies were secured at least to early summer.
“Supplies and deliveries will be sufficient through mid-July. After that, visibility decreases somewhat,” said Spohr, adding around a quarter of the group’s normal jet fuel came from the Gulf. Half of that had been replaced with fuel from other sources, he said, with the rest drawn from reserves.
Ryanair CEO Michael O’Leary said in late April that “the risk of a supply disruption is receding”.
Airlines have been able to secure jet fuel from countries including the U.S. and Nigeria by paying a premium, analysts say.
“I don’t think we’re going to be running out,” said Wizz Air CEO Jozsef Varadi, citing jet fuel prices near $1,400 a metric ton – around double pre-war levels – helping spur suppliers. “That creates a lot of room to get creative.”
NO CONCERN FOR SUMMER HOLIDAYS?
Airport operators have also built up reserves, with an over 60% increase in jet fuel stocks in April, according to aviation fuel tech firm i6 Group. That has helped ease worries after some Italian airports flagged shortages in April.
“In the short term, we’re certainly not seeing any impact in supply,” said Gary McLean, managing director of Dublin Airport. “We’re not hearing of any kind of concern on that for summer.”
Maintaining that message is critical for airlines to head off potential ticket cancellations, some analysts say.
“Summer is the key earnings season for airlines and of course they want to reassure customers that it is safe to book,” said independent aviation analyst John Strickland.
European officials remain positive too.
“We don’t expect a very serious security of supply issue on a very short term,” EU energy commissioner Dan Jorgensen told reporters on Wednesday.
“But we cannot exclude that there will be security of supply issues on a longer term. This all depends, of course, on the situation in the Middle East.”
(Reporting by Alessandro Parodi )
