Rising jet fuel prices are exposing deep structural vulnerabilities among low-cost airlines and regional operators.
Restrictions in the Strait of Hormuz caused spot prices to more than double in April, leading to capacity cuts, the introduction of surcharges and accelerated fleet retirement programs at low-cost and regional airlines with minimal coverage coverage.
International Air Transport Association (IATA) CEO Willie Walsh said “the cost of jet fuel more than doubled in April,” contributing to a 2.9% decline in available global seat kilometers year-on-year that month and a 3.4% drop in global passenger demand. Middle Eastern airlines suffered the sharpest contraction, with demand plummeting 46.6% over the same period.
Fuel now accounts for between 25% and 30% of total airline operating expenses across the sector, with low-cost carriers (LCCs) unhedged and regional operators exposed to the full force of the spot market. Some legacy airlines, which have secured lower costs through long-term hedging positions, have absorbed the jet fuel price increase with materially less damage to margins.
The Lufthansa group announced that cancel 20,000 short-haul flights until Octobertargeting unprofitable regional routes operated by its Lufthansa city line subsidiary. This measure is expected to save more than 40,000 metric tons of jet fuel. Despite the magnitude of the cut in absolute terms, it represents less than 1% of the group’s total summer capacity, and long-haul operations are not affected.
SunExpress is among operators introducing fuel surcharges on short-haul routes to offset exposure to the spot market. Industry analysts have warned that surcharge mechanisms risk eroding demand among price-sensitive leisure travelers, compounding the revenue impact of rising jet fuel prices on LCC-dependent networks.
easyJet confirmed in early May that it is operating its full schedule without interruptions to fuel supplies and, along with other low-cost airlines, will not apply surcharges to existing bookings. However, the airline reported widening first-half pre-tax losses of £552 million, a result driven substantially by fuel costs. In response, easyJet is accelerating the retirement of its remaining Airbus A319 aircraft by fiscal 2029, replacing them with Airbus A320neo family aircraft to reduce fuel consumption per seat in the medium term.
The Petroleum Coordination Group of the European Commission has warned member states about difficult conditions in the regional jet fuel marketand EU traders experienced direct price shocks related to the Hormuz disruption. The Strait of Hormuz carries approximately 20% of global maritime oil traffic, including significant volumes of refined products.
Energy Intelligence Group mackenzie wood has warned that a prolonged closure will extend until the end of the year could push Brent crude towards $200 per barrelcharacterizing the scenario as potentially “the biggest global energy supply crisis in 100 years.” For the regional and low-cost airline sector, a prolonged disruption points to sustained network contraction, accelerated consolidation and increased liquidity risk among operators with limited cash reserves and no hedging cushion.
Average U.S. airfares rose in the high teens percentage range year-over-year through March, and network airlines including JetBlue, United Airlines and Delta Air Lines raised ancillary fees this spring, each citing higher fuel costs as the direct factor.
