Body representing global airlines, the International Air Transport Association (IATA) warned on Wednesday that it would take months for jet fuel supply to recover despite Iran reopening the Strait of Hormuz, given disruptions to Middle East refining capacity.
Willie Walsh, Director General of IATA, told reporters in Singapore that while he expected crude oil prices to fall, jet fuel costs were likely to remain slightly elevated due to refinery impacts, Reuters reported.
“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.
Fuel is the second-largest expense for air carriers after labour, typically accounting for about 27% of operating expenses, according to the Association.
Iran’s closure of the Strait of Hormuz as part of retaliatory moves in the war has choked supplies of jet fuel globally and news of a ceasefire and the possibility of safe passage through Hormuz sent airline stocks soaring.
Oil fell below $100 per barrel after U.S. President Donald Trump said he had agreed to a two-week ceasefire with Iran that was subject to the immediate and safe reopening of the Strait of Hormuz.
Walsh shrugged off comparisons to the COVID-19 pandemic, which crippled global travel.
“This is not similar to COVID. This is not a crisis anywhere close to what we experienced (in COVID),” he said. “In COVID, capacity reduced by 95% because borders closed. We’re nowhere near that.”
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The situation was more comparable to other shocks such as the downturns of 2008-09 or the aftermath of the September 11 attacks, he added.
“Post-9/11, the recovery took about four months. In 2008-2009 it was probably 10 to 12 months,” he said.
Airlines across the world have been cutting flights, carrying extra fuel from home airports and adding refuelling stops as the Middle East conflict squeezes jet fuel supply, piling pressure on an industry already hit by a doubling of jet fuel prices.
