Lufthansa Cuts 20,000 Flights as Iran War Doubles Jet Fuel Costs

Germany's Lufthansa will cancel 20,000 short-haul flights through October, a move the carrier said will save 40,000 metric tons of kerosene after jet fuel prices doubled since the start of the Iran conflict. The cuts represent about 1 percent of the airline's available seat kilometers and follow an earlier decision to ground 27 older, less efficient aircraft.

"It won’t be long before larger ones follow suit, as they have in Asia," said Thomas Pugh, an economist at consulting firm RSM UK, calling the wave of cancellations "demand destruction in action."

The move by Lufthansa is the largest among two dozen carriers that have been forced to scale back operations. British Airways is reducing Middle East flights, Ryanair has warned it may cut up to 10% of its summer schedule, and KLM cancelled 160 flights last week. To offset the soaring costs, Virgin Atlantic has already added fuel surcharges of up to £360 on first-class tickets.

The crisis stems from the blockage of the Strait of Hormuz, a critical artery for global energy flows. The European Union imports 30 percent to 40 percent of its jet fuel, with roughly half coming from the Middle East, exposing the continent's acute vulnerability. The International Energy Agency has warned that physical fuel shortages could begin as early as June, threatening widespread disruption during the peak summer travel season.

EU Scrambles for Contingency Plans

In response to the escalating crisis, EU transport ministers are discussing emergency measures to preserve air travel. The European Commission is set to present a package that includes the potential for collective management of jet fuel stocks and allowing member states to increase purchases from the United States.

"If real supply issues arise, our emergency stocks must be put to best use," said EU Transport Commissioner Apostolos Tzitzikostas, who warned a prolonged blockage of the strait would be "catastrophic" for Europe's economy. While some officials, like the Dutch government, estimate the EU has at least five months of kerosene reserves, others believe more urgent action is needed. "The principle of solidarity is deemed important in contingency plans and in practice this will come down to fuel sharing between hubs and countries," Rico Luman, a senior transport economist at ING, told DW.

Airlines Brace for Financial Impact

The combination of higher costs and potential capacity reductions is hitting airline balance sheets. Package holiday giant Tui has already cut its full-year profit forecast, citing uncertainty from the conflict. Analysts expect a wave of similar warnings as European airlines begin reporting first-quarter results, with the financial pain rippling from rising fuel bills and curtailed routes.

In a starkly different approach, the CEO of cross-Channel operator Brittany Ferries, Christophe Mathieu, slammed airlines imposing fuel surcharges as "the unacceptable face of capitalism." He pledged that his company would not add any surcharges, a move that has seen its bookings for July and August jump 37 percent in the last two weeks. The crisis highlights the fragility of the aviation industry's operating assumptions, where geopolitical stability and affordable fuel are paramount.

This article is for informational purposes only and does not constitute investment advice.