The warning of the CEO of Rainier: the fuel supply may be affected

In an interview with Sky News, O’Leary said that “if the war continues, there is a risk of supply disruptions in Europe during May and June, and we hope that the war will end before then and the risk will disappear.” He also added that “we estimate that there is a reasonable risk, because between 10%-25% of the company’s fuel supply may be at risk during May and June.” According to him, if the war ends by April and the Strait of Hormuz is reopened, “there will be almost no risk to supplies.”

The concern comes amid a sharp increase in jet fuel prices since the start of the fighting at the end of February. According to IATA (International Airline Organization), jet fuel prices doubled during this period.

O’Leary also noted that the company hedged about 80% of its fuel consumption, but for the remaining 20% ​​it pays almost double, around $150 per barrel. According to him, most of the jet fuel supply to Europe comes from the US, West Africa and Norway, which reduces the direct dependence on the Middle East, but some suppliers are still influenced by the region.

O’Leary is not the only one to warn of the consequences of the crisis. In the past week, other senior officials in the industry also joined in: United Airlines CEO Scott Kirby stated in a memo to employees that if jet fuel prices remain at these levels, the company will face an additional $11 billion in annual expenses. At the same time, the chairman of Avia Solutions Group, Gediminas Zimlis, said that if the situation continues beyond a month, we may see the first bankruptcies in the aviation industry. The company, which is engaged in leasing aircraft to airlines, serves as a central supplier in the industry.

Passing on the costs to passengers

In recent days, airlines around the world have started rolling out the increase in fuel prices for passengers. In Asia, IndiGo has updated fuel surcharges on domestic flights, depending on the distance of the flight. Cathay Pacific also raised fuel surcharges by about 34% during the last week.

In the US, the companies at this stage avoid imposing an official fuel levy, and instead raise baggage fees. United Airlines announced today (Friday) an increase in baggage fees by $10 to $50, and at the beginning of the week Jet Blue Airways also raised baggage fees by $4 to $9.

At the same time, there was also an impact on demand patterns. According to Rainier, travelers in Europe recently prefer closer destinations, such as Italy, Spain, Portugal and Greece, instead of flights to the Middle East or via Asia. According to O’Leary, this is a trend that is already being felt during the Easter vacation, and he estimates that if the fighting continues, it may also affect travel plans for the summer.