US President Donald Trump’s two-week truce with Iran is not likely to bring immediate relief to the global aviation sector, which is currently facing a severe crisis, according to industry executives. Despite a surge in airline stocks following the agreement, Willie Walsh, the head of the International Air Transport Association (IATA), cautioned that it could take months for jet fuel supply to stabilize even if Iran reopens the Strait of Hormuz due to disruptions in Middle East refining capabilities.
Delta Air Lines has projected lower profits for the second quarter and announced plans to reduce capacity across its operations to offset an estimated $2 billion in additional fuel expenses for the same period. Fuel costs are the second-largest expense for airlines, typically representing around 27% of their operating costs.
The closure of the Strait of Hormuz by Iran has led to a global shortage of jet fuel, with the news of the ceasefire and potential reopening of the Strait causing airline stocks to soar. Oil prices dropped below $100 per barrel following Trump’s announcement of the temporary truce with Iran.
Industry experts and executives have expressed concerns about the continued challenges faced by airlines, including surging jet fuel prices and supply constraints. Carriers worldwide have been implementing measures such as fare hikes, flight reductions, and extra fuel carriage to navigate the impact of the Middle East conflict on fuel supply.
While Walsh anticipates a decline in crude oil prices, he believes that jet fuel costs may remain elevated due to refinery disruptions. The increase in jet fuel prices has far outpaced the rise in crude oil prices, leading to cost escalations, operational disruptions, route cancellations, and higher ticket prices for travelers.
Despite the ongoing fuel supply issues, the ceasefire has been viewed as a positive development for the aviation industry, with some analysts seeing it as an opportunity to invest in quality airlines. However, the recovery of the tourism sector, including stranded cruise ships and impacted transit hubs, may still take significant time to normalize, with experts suggesting a potential post-ceasefire sentiment impact lasting around seven months.
TUI has reported that two of its cruise ships, “Mein Schiff 4” and “Mein Schiff 5,” have been stranded in Abu Dhabi and Doha since the conflict began. The company is working on preparing the ships for their next voyages, which could take at least four weeks depending on various factors. The Middle East’s tourism industry, valued at approximately $367 billion, is expected to undergo a gradual recovery post-ceasefire, with sentiments of safety gradually returning over time.
