Due to the Middle East conflict, Lufthansa faces nearly $2 billion in additional fuel costs.

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The aviation fuel supply crisis triggered by the Middle East conflict is having a profound impact on Europe’s aviation industry.

On May 6, Lufthansa released its first-quarter financial report, estimating it will bear an additional 1.7 billion euros (about $2 billion) in costs for the year due to rising fuel prices, and warned that the situation in the Middle East poses a "huge challenge" to the global aviation industry. CEO Carsten Spohr stated that although the company’s financial performance improved significantly compared to the same period last year, ongoing geopolitical conflicts, combined with rising fuel costs and operational restrictions, have placed severe pressure on the company. He emphasized that Lufthansa has sufficient resilience to cope with these shocks.

According to the financial report, Lufthansa’s adjusted EBIT loss for the first quarter was 612 million euros, with revenue up 8% year-on-year to 8.7 billion euros, and net profit at 665 million euros, down from 885 million euros in the same period last year.

Low-cost carrier EasyJet has also been affected, incurring an additional 25 million pounds in fuel costs in March alone. International Energy Agency (IEA) director Fatih Birol warned last month that Europe’s aviation fuel inventory is tight, with only a few weeks left before depletion.

Surging fuel costs force European airlines to cut capacity

The blockade of the Strait of Hormuz has pushed up jet fuel costs in Europe, and market supply continues to tighten. According to data from the International Air Transport Association (IATA), as of the end of March, aviation fuel prices were up 103% compared to the previous month.

In the face of rapidly rising costs, Lufthansa has canceled 20,000 short-haul flights, expecting to reduce fuel consumption by 40,000 tons and withdraw from loss-making routes. The company has hedged about 80% of its jet fuel demand and plans to offset remaining extra expenditures through cost reduction and higher ticket revenues.

Low-cost airline EasyJet has also suffered considerably. The company stated that in March alone, extra fuel costs reached 25 million pounds, and for the first half of its fiscal year ending March 31, it expects a pre-tax loss of between 540 million and 560 million pounds. EasyJet also noted that passenger booking habits are becoming more delayed, and bookings for the remaining flights this year are weaker than the same period last year. The company has hedged 70% of its summer jet fuel needs, with the remaining 30% still exposed to price volatility risk.

IEA warning: Peak season demand may rise by 40%, Europe faces unresolved jet fuel shortages

IEA director Birol warned that with the peak travel season approaching, Europe’s aviation fuel demand is expected to rise by 40% from March, and the supply shortfall may further widen.

In terms of supply structure, Middle Eastern refineries account for about 75% of Europe’s jet fuel imports. Birol pointed out that the remaining portion mainly comes from some Asian countries, but these countries have imposed export restrictions. Europe is trying to seek alternative sources from the US and Nigeria. Birol stated, "If we cannot obtain extra imports from these countries, we will be in trouble."

This supply pattern means that until the Middle East situation is clarified, the fuel cost pressure on Europe’s aviation industry will be difficult to fundamentally ease, and the industry’s profitability outlook remains highly uncertain.

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