Australian airlines among ‘most exposed’ if jet fuel runs dry

Morningstar DBRS released its report just before the US and Iran reached a two-week ceasefire, which included a pledge by Iran to reopen the Strait of Hormuz during the cessation of fighting.

Since the start of the war on February 28, jet fuel prices have almost doubled, with airlines passing on the costs through ticket increases.

Analysts say airlines with aggressive fuel hedging – a risk management strategy to maintain prices – should be better protected in the short term.

But if the global supply of jet fuel runs out, other airlines will be exposed. 

“In addition to price pressures, a prolonged supply chain disruption in the Middle East – coupled with export restrictions by major jet fuel suppliers such as China – increases the risk of physical jet fuel shortages in certain regions,” the report said.

“In such a scenario, airlines that rely more heavily on imports from affected regions are likely to be most vulnerable, including airlines in Australia, Asia and some European markets.”

Airlines around the world are grappling with volatile oil markets as fighting near the Strait of Hormuz disrupts global supplies.

About a fifth of the world’s oil typically flows through the narrow waterways, and the threat of that bottleneck is driving up the price of jet fuel, which is refined from crude oil.

Fuel is typically the largest expense for airlines after labor.

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