British Airways' parent company has warned that its profits will be impacted as it anticipates spending approximately two billion euros (£1.72 billion) more than budgeted on fuel this year amid the ongoing Iran oil crisis.
IAG's Response to Fuel Price Surge
International Airlines Group (IAG) chief executive Luis Gallego stated that the company is “managing the uncertainty” caused by the fuel price increase by “taking the necessary action on yields, costs and capacity.” He added: “Whilst the impact of the higher fuel price will inevitably lead to lower profit this year than we originally anticipated, we are confident in our business model and strategy.”
Mr Gallego noted that IAG is “not currently seeing any jet fuel supply disruptions across our main hubs or markets” and is “confident in fuel availability through the summer.”
Flight Cancellations on the Rise
New figures reveal that 120 flights from the UK have been cancelled this month as jet fuel prices surge and fears of shortages intensify. Aviation analytics company Cirium reported that airlines have axed 120 of the 22,613 departures initially scheduled from UK airports in May, equivalent to 0.53% of the total. The number of outbound flights planned for June is 36 lower than a week ago, representing a 0.2% reduction, meaning capacity for the month has decreased by 7,972 seats. The final week of May is a peak period for holidays as it coincides with half-term at many schools.
Globally, some 13,005 flights planned for May were cancelled between April 10 and April 21, equivalent to 1.5% of all departures, reducing capacity by nearly two million seats.
Industry Reactions and Government Measures
Julia Lo Bue-Said, chief executive of Advantage Travel Partnership, a network of independent travel agents, said airlines are “assessing poor performance flights and consolidating or cancelling as required.” She added that UK departures to popular summer hotspots “remain unaffected” and insisted “customers can continue to book with confidence.”
Paul Charles, founder of travel consultancy The PC Agency, commented: “Airlines are now being forced to cut flights and make difficult decisions ahead of the peak season. It is better for them to cancel flights well in advance so that passengers are less inconvenienced than a last-minute change of plan. As the Iran conflict continues, there will need to be many more cancellations as the jet fuel supply is squeezed.”
Lufthansa’s airline group announced in April that it would cancel 20,000 flights over the following six months to save fuel. Iran continues to exert control over tankers passing through the Strait of Hormuz, leading to a surge in oil prices and concerns over jet fuel shortages.
However, on Sunday, Transport Secretary Heidi Alexander stated that summer holiday plans will not face major disruption due to the fuel situation. She revealed that more fuel has been imported from America, while refineries have increased their production. The Government has also introduced a temporary rule change allowing airlines to group passengers from different flights together onto fewer planes to save fuel.
