BRUSSELS, March 19 (Reuters) - European airline chiefs are meeting in Brussels on Thursday under the cloud of war in the Middle East and rising oil prices, looking to push back against the EU's green
European airlines warn of higher fares, fuel shortages due to Iran war
Impact of Middle East Conflict on European Airlines
By Joanna Plucinska and Tim Hepher
Rising Costs and Fuel Shortages
BRUSSELS, March 19 (Reuters) - European airline chiefs warned on Thursday that a prolonged conflict in the Middle East would lead to higher air fares as flight cancellations drive up costs and aviation fuel prices, with some carriers even flagging risks to jet fuel supplies.
"The longer it goes on, the bleaker it will look," Ryanair Chief Executive Michael O'Leary told Reuters on the sidelines of an aviation conference.
The Middle East conflict, now well into its third week, has thrown aviation into turmoil, with flights cancelled or rerouted thousands of miles and most airspace over the Gulf still closed amid fears of missile and drone attacks.
Jet fuel prices have spiked, pushing up operating costs, with European prices doubling and Asian prices up almost 80% since U.S. and Israeli strikes on Iran began in late February.
Most European airlines are shielded by fuel hedges, but those contracts expire in the coming months, and CEOs at the annual Airlines for Europe (A4E) summit warned that Europe will not remain immune to the oil price shock hitting other carriers.
Airlines' Response to EU Green Agenda
Calls for Delay in Green Mandates
CEOs URGE DELAY TO PARTS OF EU GREEN AGENDA
The airlines chiefs urged the EU on Thursday to postpone the "broken" parts of its green agenda, warning of higher fares due to the conflict in the Middle East, but the bloc swiftly rejected any delays saying climate targets remained on track.
"We have a path that we need to follow. We continue with our targets and the industry needs to invest," Apostolos Tzitzikostas, the EU commissioner for sustainable transport and tourism, told Reuters.
The A4E lobbying group had urged regulators, amid scant supply and high costs, to roll back mandates for the use of synthetic sustainable jet fuel (eSAF) starting in 2030, confirming a Reuters report.
"We are calling for the eSAF mandate to be postponed until eSAF is actually available," easyJet CEO Kenton Jarvis told a news conference.
Debate Over Unequal Burden
UNEQUAL BURDEN ON EUROPE'S AIRLINES?
Air France-KLM, Ryanair and other major carriers have for years lamented the green fuel mandate as imposing an unequal burden on Europe's airlines, allowing Asian and Middle Eastern carriers a cost advantage.
The green jet fuel industry and environmental groups insist the shift is necessary to reduce the sector's reliance on oil.
"It would endanger our future energy security just for the sake of short-term quarterly results," said Matteo Mirolo, special advisor to the CEO, Arcadia eFuels.
Sector-Wide Effects of the Middle East War
Flight Cancellations and Price Hikes
MIDDLE EAST WAR RIPPLES THROUGH SECTOR
Jarvis said consumers should book their flights early to avoid a rise in prices, adding that easyJet has cancelled its plan to relaunch Tel Aviv flights for the timebeing.
"The longer prices are elevated, the more you're going to have to start covering your position with more expensive fuel, so my expectation is that prices go up," he told reporters.
Air France-KLM and SAS have already said they will have to hike ticket prices due to the rising cost of jet fuel, while Finnair has warned that jet fuel supplies may run out due to the effective closure of the Strait of Hormuz.
Winners and Losers in the Aviation Industry
Impact on U.S. and European Airlines
WINNERS AND LOSERS?
U.S. airlines such as Delta this week warned of higher ticket prices tied to fuel costs since many American carriers have not hedged their fuel costs. Spring travel demand, however, remains strong.
Ryanair CEO Michael O'Leary said European tourists may travel closer to home to avoid flying long-haul over the Middle East.
Future of the Aviation Ecosystem
CEOs said it was too early to tell how the aviation ecosystem will be reshaped by the war, with the head of industry association IATA Willie Walsh telling Reuters there are "no winners" in this conflict.
British Airways is adding more flights to destinations like the Caribbean, while Lufthansa CEO Carsten Spohr told reporters the carrier is set to launch a new route to Malaysian capital Kuala Lumpur as it expands flights to Southeast Asia.
(Reporting by Joanna Plucinska and Tim Hepher; Editing by Adam Jourdan and Bernadette Baum)
