Willie Walsh, Director General of IATA stated on the sidelines of the World Data Symposium currently being held in Singapore from April 8-9, that reopening the Strait of Hormuz, through which approximately one-fifth of the world's oil trade passes, will not be enough to quickly rebalance the jet fuel market, given the continued pressure on refining capacity in the Middle East.
These statements come at a time when crude oil prices have declined, supported by a temporary easing of geopolitical tensions and the announcement of a two-week ceasefire between the United States and Israel on one side and Iran on the other.
This ceasefire included the safe reopening of the Strait, as announced, which has somewhat alleviated concerns about global fuel supplies.
Despite this decline, Walsh pointed out that jet fuel prices will remain relatively high due to ongoing bottlenecks in the refining sector, which is the decisive factor in determining supply levels, not just crude oil flows.
He explained that airlines have already begun implementing operational measures to cope with the crisis, including reducing flight frequencies, increasing fuel loads, and adding technical refueling stops, given the supply shortages and high costs.
In contrast, IATA expressed cautious optimism that the situation could gradually improve with the return of crude oil flows and the resumption of refinery activity. However, restoring refining capacity to full efficiency will take time, meaning continued pressure on the jet fuel market in the coming months.
Fuel is one of the most significant cost components in the aviation industry, representing approximately 33 percent of operating costs, which increases airlines' sensitivity to any supply disruptions.
Willy Walsh explained that the current crisis differs in nature from the repercussions of the COVID-19 pandemic, suggesting that the recovery path will be faster.
Regarding the crisis's impact on Gulf airlines, he indicated that the effect will be limited in duration, despite the significant importance of the region's airlines, which represent about 14.6 percent of international capacity.
He anticipates that regional airlines will recover their operations at a faster pace than others, although fully recovering operational losses will remain a challenge in the near term.
Short link: