Jet fuel price spike hits LCCs as Hormuz disruption grows
The jet fuel price spike is exposing a deep structural vulnerability among low-cost carriers and regional operators.
Restrictions in the Strait of Hormuz caused spot prices to more than double in April, triggering capacity cuts, surcharge introductions, and accelerated fleet retirement programmes across budget and regional carriers with minimal hedging cover.
The International Air Transport Association (IATA) director general Willie Walsh stated that “the cost of jet fuel more than doubled in April,” contributing to a 2.9% decline in global available seat kilometres year-on-year that month and a 3.4% fall in global passenger demand. Middle East carriers bore the sharpest contraction, with demand collapsing 46.6% over the same period.
Fuel now represents between 25% and 30% of total airline operating expenses across the sector, with unhedged low-cost carrier (LCC) and regional operators exposed to the full force of the spot market. Some legacy hub-and-spoke carriers, which secured lower costs through long-term hedging positions, have absorbed the jet fuel price spike with materially less damage to margins.
Lufthansa Group announced that it would cancel 20,000 short-haul flights through October, targeting unprofitable regional routes operated by its Lufthansa CityLine subsidiary. The move is projected to save more than 40,000 metric tonnes of jet fuel. Despite the scale of the cut in absolute terms, it represents less than 1% of the group’s total summer capacity, with long-haul operations remaining unaffected.
SunExpress is among the operators introducing fuel surcharges on short-haul routes to offset spot market exposure. Industry analysts have cautioned that surcharge mechanisms risk eroding demand among price-sensitive leisure travellers, compounding the revenue impact of the jet fuel price spike on LCC-dependent networks.
easyJet confirmed in early May that it is operating its full schedule without fuel supply disruption and, along with other LCCs, will not apply surcharges to existing bookings. However, the carrier reported widened 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 financial year 2029, replacing them with Airbus A320neo-family jets to reduce per-seat fuel consumption over the medium term.
The European Commission’s Oil Coordination Group has warned member states of tight conditions in the regional jet fuel market, with EU operators experiencing direct price shocks linked to the Hormuz disruption. The Strait of Hormuz carries approximately 20% of global seaborne oil transit, including significant volumes of refined products.
Energy intelligence group Wood Mackenzie has warned that a prolonged closure extending through the end of the year could drive Brent crude towards $200 per barrel, characterising the scenario as potentially “the greatest global energy supply crisis in 100 years.” For the LCC and regional sector, an extended disruption points towards sustained network contraction, accelerated consolidation, and heightened liquidity risk among carriers with limited cash reserves and no hedging buffer.
Average US airfares rose in the mid-teens percentage range year-on-year through March, with network carriers including JetBlue, United Airlines, and Delta Air Lines raising ancillary fees this spring, each citing higher fuel costs as the direct driver.
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