Holidaymakers face price hikes, reduced flight schedules and cancellations this summer as the Middle East crisis rattles the aviation industry.
The global upheaval caused by the Iran war and the ongoing closure of the Strait of Hormuz have prompted fears of jet fuel shortages, and carriers including WizzAir have called on governments to relax strict rules on compensation for passengers.
UK visitors to popular holiday destinations including Spain, Greece and Italy could also face passport control chaos because of the European Union’s problem-hit Entry/Exit System.
On Sunday, the UK Government confirmed that airlines facing fuel shortages would be allowed to cancel flights weeks in advance, without running the risk of losing valuable take-off and landing slots at busy airports like Heathrow, Gatwick and Manchester.
The move will allow carriers to reduce the number of services on busy routes, narrowing choice for travellers but reducing the risk of last-minute cancellations.
Despite a warning from the International Energy Agency last month that Europe may only have six weeks of jet fuel in reserve, there is no evidence of an immediate suply emergency.
But Bryan Terry, managing director of Alton Aviation Consultancy, said a crisis for airlines caused by sharply rising fuel prices was “genuine” – and that the cost would be passed on to passengers.
“Fewer seats, thinner margins, and higher fares are coming regardless of how the [regulatory] conversation lands,” he said.
“Travellers booking summer trips should focus less on policy headlines and more on schedule resilience, frequency, and connection risks.”
Price rises
Air France-KLM, the fourth largest airline group in Europe by passenger numbers, announced last week that it was raising ticket prices as part of a package of measures to cope with a £1.8bn rise in its fuel bill this year.
The cost of kerosene aviation fuel, which has a shorter shelf life than petrol or diesel, has roughly doubled since the start of the US-Israeli campaign against Iran. About a quarter of world’s aviation fuel supply usually passes through the Strait of Hormuz, which Iran has effectively blocked since the conflict began on 28 February.
UK Airlines, the industry body for British carriers, insists its members are not experiencing any issues with supply. The Government has asked UK refineries to prioritise jet fuel production as part of a range of contingency measures.
But some major airlines have warned of plunging profit margins, as well the possibility of more expensive fares.
United Airlines, which operates the world’s biggest aircraft fleet, has said it may have to hike prices by as much as 20 per cent. Scandinavian operator SAS and Portugal’s TAP have also increased fares.
Other operators, including easyJet and Virgin Atlantic, have issued profit warnings because of the ongoing crisis.
Most UK airlines are insulated from immediate price rises by dint of buying some, or all, of their fuel at a set price a few weeks or months in advance – a practice known as hedging.
But once that hedging expires, price rises seem inevitable. EasyJet has already warned this is likely to be the case.
One small UK carrier has already gone bust. Ascend Airways, a charter operator with seven Boeing 737 jets, whose clients includes TUI Airways, Oman Air and Air Sierra Leone, surrendered its operating licence last week and has gone into liquidation. Tthe airline blamed a surging fuel bill and higher costs associated with being based in the UK.
Perhaps counterintuitively, the average price of return flights from the UK to Europe fell at points last month compared to the same period last year.
But experts say that such bargains represented excess capacity, which may be short-lived if carriers opt to trim under-booked flights on popular routes from their schedules.
The Package Travel Regulations, which govern the package holiday business, allow for a tour operator to impose a surcharge of up to eight per cent if the “price of the carriage of passengers resulting from the cost of fuel” rises significantly between the time of booking and departure.
The extra costs could amount to several hundred pounds for a family. But the three largest UK tour operators – Jet2, easyJet Holidays and TUI – have all pledged not to impose surcharges for flights or holidays. Between them, the companies account for about 65 to 70 per cent of the package holiday market.
Compensation
The Middle East crisis has prompted lobbying from airlines and industry bodies for a re-examination or suspension of various regulations and passenger perks.
Under consumer protection rules – known as Regulation 261, and applicable both in Britain and the EU – passengers are currently entitled to compensation in the event of a last-minute flight cancellation due jet fuel shortages. Most travel insurance policies do not cover this scenario.
Wizz Air, the Hungary-based budget operator, has said that governments should waive such rules. Jozsef Varadi, the airline’s chief executive, told the Financial Times: “I didn’t start a war in Iran. So why do I have to bear the consequences of that?”
Both London and Brussels have signalled openness to temporary measures to alleviate the pressure on carriers.
For example, last week the i Paper revealed that the UK is will allow an alternative type of jet fuel, currently only used in America, to be imported to be British airports as a way of diversifying supply.
The fuel, known as Jet A, has slightly higher freezing point than the European standard but could be certified for short-haul, lower-altitude flights.
Several carriers are also fighting a rearguard action against EU proposals, already approved by the European Parliament, which would force airlines to allow passengers to bring two free cabin bags – one weighing up to 7kg – on every flight.
While airlines such as British Airways already allows this, no-frills operators including Ryanair and easyJet have long made charging for baggage, both in the cabin and in the hold, a centrepiece of their revenue models.
Kenton Jarvis, the chief executive of easyJet has dubbed the plans “lunatic” and “terrible for the consumer”.
The airline said aircraft lack the cabin space for all passengers to have a second bag, risking delays if carry-on luggage then has to be transferred to the hold.
Cancellations
Under existing rules, airlines must pay compensation and a refund if a flight is cancelled 14 days or less before the departure date.
But the same rules do not apply over longer timescales, and a significant number of operators have already trimmed their schedules.
Last month, the German flag carrier Lufthansa announced the cancellation of 20,000 flights over a six-month period in order to save 40,000 tonnes of aviation fuel.
The airlines said it would have had to operate those services at a loss and has also permanently removed 127 aircraft used by one of its subsidiaries.
Low-cost Norwegian carrier Norse Atlantic has cancelled its London Gatwick to Los Angeles route, citing fuel costs, while Scandinavian operator SAS scratched 1,000 flights from its schedule last month.
Terry, from Alton Aviation Consultancy, said travellers should consider paying for refundable or flexible fares in order to deal with the increased risk of cancellations.
Passport chaos
Ironically, one of the biggest threats to travel this summer is nothing to do with the Iran war.
The EU’s Entry/Exit System (EES), which requires travellers from outside the bloc to register passport and biometric details when arriving and departing, has caused long delays at multiple airports since its full rollout last month.
There have been a number of reports of flights taking off without UK passengers who had remained stuck in long queues. Elsewhere, airport staff have reverted to the previous system of stamping passports because of faulty computer terminals or excessive delays.
This weekend, border control officers at Milan Malpensa, one of Europe’s busiest airports, warned that UK passengers should arrive three to four hours before their flights this summer in order to clear passport control in time for their flights.
In Greece, the authorities have already suspended the use of EES for UK nationals, while Italy and Portugal are reportedly considering following suit.
This weekend, Ryanair called on governments in the 29 countries covered by the EES system to suspend the checks until September.
And from 10 November, Ryanair baggage drop and check-in desks will close an hour before the scheduled departure time, rather than the existing 40-minute cut-off.
The airline said this was to ensure its customers had enough time to negotiate the EES system.