IATA: Jet Fuel Supply Recovery Could Take Months Despite Hormuz Reopening
The International Air Transport Association (IATA) has issued a warning regarding the prolonged recovery of jet fuel supply. The reopening of the Strait of Hormuz by Iran may not be enough to mitigate current supply disruptions.
Jet Fuel Supply Challenges
Willie Walsh, IATA’s Director General, stated that even with the Strait of Hormuz reopened, the recovery period for jet fuel supplies could extend for several months. He attributed this slow recovery to ongoing disruptions in the Middle East refining capacity.
Jet fuel is the second-largest expense for airlines. It typically constitutes around 27% of operating costs. The recent upheaval has led to a dramatic increase in jet fuel prices, with figures more than doubling since the onset of the Iran conflict.
Comparisons to Previous Crises
Walsh clarified that the current situation is not analogous to the COVID-19 pandemic. He noted that during the pandemic, international travel capacity plummeted by 95% due to border closures—a stark contrast to the current disruption. Instead, he likened the crisis to previous shocks such as the downturns of 2008-09 and the aftermath of the September 11 attacks.
Historically, recovery from these events took between four to twelve months. Walsh expressed optimism that the Gulf carriers, which provided 14.6% of international capacity last year, would eventually recover, though not completely. He emphasized the difficulty of replacing the capacity offered by these airlines with others from outside the region.
Market Reactions and Airline Strategies
The stock market reacted positively to news of a ceasefire and the potential reopening of the Strait of Hormuz. Major airlines such as Qantas, Air New Zealand, and Cathay Pacific saw significant increases in their stock prices, spurred by hopes for improved fuel supply and recovery.
- Qantas Airways: +9%
- Air New Zealand: +4%
- Cathay Pacific: +5%
- IndiGo: +10%
- Wizz Air: +14%
- Air France-KLM: +14%
Meanwhile, many airlines are adjusting their operations to combat jet fuel shortages. Strategies include cutting flights, increasing fuel reserves at home airports, and adding additional refueling stops on existing routes.
Future Outlook for Refineries
Walsh highlighted that a sustained reopening of the Strait would benefit refining capabilities. He pointed out that countries like India and Nigeria have the potential to increase their refined product output in the meantime. Furthermore, he anticipates that both China and South Korea could resume exports of refined products once crude oil flows normalize.
Despite the current challenges, Walsh remains hopeful about the airline industry’s resilience and the eventual recovery of jet fuel supplies.
