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EU Faces Potential Airline Collapse Amid Soaring Kerosene Prices Due to Iran Conflict
🇷🇸 Serbia /Conflict & Security

EU Faces Potential Airline Collapse Amid Soaring Kerosene Prices Due to Iran Conflict

From N1 Serbia · (11m ago) Serbian Critical tone

Translated from Serbian, summarized and contextualized by DistantNews.

TLDR

  • Soaring kerosene prices, driven by the conflict in Iran, are threatening the stability of European airlines and potentially leading to a collapse in air travel.
  • Airlines face a dual crisis of drastically increased fuel costs, which constitute a significant portion of their operating expenses, and a looming shortage of kerosene.
  • To mitigate the impact, airlines are urging the EU to ease regulatory obligations, including fuel-sourcing rules and emissions trading schemes, to prevent bankruptcies and service disruptions.

The European aviation sector stands at a critical juncture, facing an existential threat from the escalating price of kerosene, a direct consequence of the ongoing conflict involving Iran. As reported by DW, the price per barrel has more than doubled since February, pushing operational costs to unsustainable levels for many carriers. This dramatic increase, coupled with the specter of a kerosene shortage in Europe, paints a grim picture for the future of air travel on the continent.

If the high prices of fuel, which make up between a quarter and half of the total operating costs of airlines, remain high, and companies have not secured protection against price increases, they could go bankrupt.

— Marina EftimijuA professor of aviation management at the University of Dublin, explaining the severe financial risks airlines face due to rising fuel costs.

Industry experts, including Marina Eftimiju from the University of Dublin, warn that if fuel prices remain elevated and airlines lack adequate hedging strategies, widespread bankruptcies are a distinct possibility. The situation is exacerbated by the fact that kerosene costs represent a substantial portion of an airline's total expenses. Compounding the issue is the warning from the International Energy Agency about Europe's limited kerosene reserves, with a significant portion of daily consumption relying on imports through the Strait of Hormuz, a vital waterway now facing severe disruptions.

We are forced to do this, because otherwise we would go bankrupt within a few months.

— Sebastien JustumSenior Vice President at Air France, explaining the necessity of implementing surcharges and flight cancellations due to financial pressures.

In response to this crisis, airlines are taking drastic measures, such as imposing surcharges and canceling thousands of flights, as exemplified by Air France-KLM and Lufthansa. Airlines for Europe, representing a significant majority of the continent's air traffic, has implored the European Union to intervene. Their proposed solutions include temporarily suspending the Emissions Trading System and relaxing regulations that mandate a high percentage of fuel be sourced within the EU. These appeals highlight the urgent need for regulatory flexibility to navigate the current geopolitical and economic turbulence and prevent a complete unraveling of the European air transport network.

That uncertainty and the additional costs of maintaining full tanks make tickets more expensive for passengers.

— Andrew CharltonDirector of Aviation Advocacy, explaining how market uncertainty and logistical costs are driving up airfares.
DistantNews Editorial

Originally published by N1 Serbia in Serbian. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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