Europe’s largest airlines warned on Thursday that they will be forced to pass on higher fuel costs to passengers as the conflict in Iran escalates and oil tankers remain stranded in the Persian Gulf.
Many of the continent’s airlines are well hedged, protecting them in the short term from oil market increases, but any additional costs will ultimately lead to higher ticket prices, said Michael O’Leary, CEO of Ryanair Holdings Plc.
“My average profit is about €10 per passenger,” said Carsten Spohr, CEO of Deutsche Lufthansa AG. “There is no way to absorb this extra cost.”
The prolonged war is raising concerns about fuel shortages, as tankers struggle to pass through the Strait of Hormuz. Fuel is one of the largest expenses for airlines, and the surge in Brent crude oil prices above $118 per barrel has already forced some carriers to introduce fuel surcharges and even cancel certain flights.
In response, passengers are rushing to buy tickets to lock in lower prices. U.S. airlines were the first to report rising demand, noting some of their strongest booking trends as premium and business travelers secure seats in advance.
“Demand is very healthy” for new Air France-KLM routes to Asia and Africa, said CEO Ben Smith.
Lufthansa has added 40 extra flights to Asia after reducing capacity in the Middle East.
“But in the medium term, let’s be honest, fuel prices and ticket prices will affect demand, and we all need to see how this develops,” he added.
Ask me anything
Explore related questions