IATA chief: Jet fuel prices to recover slower, later than crude oil

It may take several months for the commercial aviation industry to see a recovery in jet fuel supply, given the scale of disruptions to Middle Eastern refining capacity, Willie Walsh, Director-General of the International Air Transport Association (IATA) warned.

Speaking to reporters in Singapore, the head of the global airline body noted that even if the Strait of Hormuz were to reopen immediately, there would still be a delay before the aviation sector feels the benefits, despite expectations of a near-term drop in crude oil prices, Caliber.Az reports, citing Reuters.

Fuel remains the second-largest expense for airlines after labour, typically accounting for around 27% of operating costs. While jet fuel prices usually track crude oil trends, they have more than doubled since the Iran conflict, significantly outpacing the roughly 50% rise in crude prices seen prior to the two-week ceasefire.

Iran’s closure of the Strait of Hormuz in response to US-Israeli strikes has disrupted global jet fuel supplies. Although the announcement of a two-week ceasefire and upcoming negotiations between Tehran and Washington has boosted airline stocks across Europe and Asia, this optimism is driven not only by expectations of lower fuel prices but also by the potential reopening of key Middle Eastern air routes in the near future.

However, Walsh dismissed comparisons to the COVID-19 pandemic, from which the aviation industry is still recovering.

"This is not similar to COVID. This is not a crisis anywhere close to what we experienced [in COVID]," he said. "In COVID, capacity reduced by 95% because borders closed. We're nowhere near that."

Instead, he said the situation more closely resembles previous economic shocks, such as the 2008–2009 downturn or the aftermath of the September 11 attacks.

"Post-9/11 [terror attacks on the United States], the recovery took about four months. In 2008-2009 it was probably 10 to 12 months," he said.

The IATA chief also expressed confidence in the Gulf region’s recovery, stating that he expects "the Gulf hubs to recover, and recover quickly."

By Nazrin Sadigova