Flight cuts are spreading as fuel costs surge - and higher summer fares look likely

By Claudia Assis and Myra P. Saefong

Fewer routes and higher fares are emerging as a ripple effect for travelers and airline profits

Airlines in Europe are already slashing flights as jet-fuel shortages impact the global airline business.

More airlines are starting to cut flights just as summer travel demand heats up, with surging jet-fuel prices squeezing margins and forcing tough trade-offs.

Carriers are walking a fine line between strong demand and rising costs, and they're responding the only way they can in the short term: with fewer flights.

U.S. majors United Airlines (UAL) and Delta Air Lines (DAL), along with national flagships such as Air Canada (ACDVF) and the Netherlands' KLM Royal Dutch (KLMR), have already cut flights and plan to enter the summer peak air-travel season leaner. Germany's Lufthansa (XE:LHA) said Tuesday it was cutting 20,000 flights through October.

United Airlines executives said on a call Wednesday that the issue is most pressing for carriers in Europe and in Asia. Lufthansa declined to comment further on its capacity cuts. The other airlines mentioned in this report said they are monitoring the situation or declined to comment.

For investors, it's an early sign that the economic fallout from the Iran conflict may be far from fading away. Tensions rose this week as the U.K. Maritime Trade Operations, a Royal Navy organization, reported that two ships were attacked near the Strait of Hormuz on Wednesday and another on Tuesday, and Iran claimed it had escorted two container ships to the coast.

The looming threat of jet-fuel shortages in just a few months is a vivid reminder that the conflict could yet extract a toll that's truly global, as air travel is vital for global mobility and commerce.

The impact is already showing up in the airlines' performance and financial outlooks, raising questions about how long profits can hold up if fuel prices remain elevated for a long period.

President Donald Trump extended the two-week cease-fire that had been due to expire Wednesday, but there's still uncertainty whether talks will proceed. The Wall Street Journal, citing U.S. officials, reported that Trump will give Iran a few days to offer a peace plan. U.S.-traded crude-oil futures (CL00) were up more than 4% on Wednesday.

United Airlines late Tuesday cut its outlook for 2026 and cited rising oil prices as a reason for adjusting its schedule for the rest of the year, saying it expects to cut its planned growth by 5% and end the year with flat to 2% higher capacity.

On a post-earnings-report conference call with analysts Wednesday, United Chief Executive Scott Kirby said potential fuel shortages are centered in Europe and Asia and are "much less of an issue" for the U.S. And, even in those regions, "it's a price issue, not an availability issue," the CEO said.

"But we're watching it closely," Kirby said. The longer the strait remains closed, the greater the risk of fuel shortages, mostly for Europe and Asia and "not so much the U.S.," he said.

Alaska Airlines (ALK) on Monday suspended its outlook for the year on rising fuel prices, saying fuel "remains the largest source of near-term uncertainty." Alaska said it expects fuel to cost about $4.75 a gallon in April, up from an average of $2.98 a gallon for the January-March period.

American Airlines (AAL) is slated to report first-quarter earnings on Thursday before U.S. markets open. When Delta Air Lines reported results earlier this month, it downplayed concerns about fuel costs.

In yet another sign of stress for airlines, Bloomberg late Wednesday reported that American and Alaska are exploring a profit-sharing partnership, and Southwest (LUV) reported earnings that came in short of Wall Street's expectations.

The Bloomberg report about the talks between Alaska and American, which cited people familiar with the talks, said that the two airlines are also discussing the possibility of having Alaska join American's existing international arrangements. While the idea of a merger was raised, the talks didn't progress in that direction, the report said.

Fuel risks are especially acute in Europe, which imports around 60% of its jet fuel from the Middle East, according to OPIS, a unit of Dow Jones, the publisher of MarketWatch.

Much of the supply flows through a region increasingly disrupted by the conflict, including the Strait of Hormuz - a key artery for energy supplies worldwide.

Jet-fuel supplies at London's Heathrow -one of the world's busiest international hubs - are "very, very low" and coming down rapidly, according to Paul Sankey, president of Sankey Research. At the current pace, the airport could run out of fuel by July, he warned Monday.

Jet fuel is particularly vulnerable to a supply shock. It accounts for a smaller share of each barrel of oil than gasoline or diesel, and refineries have limited flexibility to quickly boost output.

Globally, the conflict has already removed an estimated 650 million to 850 million barrels of oil from the market, according to GasBuddy head of petroleum analysis Patrick De Haan.

As a result, jet-fuel markets have shifted from concern to what De Haan described as a likely supply disruption, especially in regions such as Europe that rely heavily on imports and have seen refinery capacity decline significantly.

Closer to home, U.S. jet-fuel prices hovered around $2.50 a gallon in late February and soared to nearly $5 a gallon earlier this month. Prices are around $4 a gallon currently.

Fuel is the second biggest cost for airlines after labor, accounting for about 25% to 30% of total airline operating costs, according to the International Air Transport Association.

Airlines have been racing to upgrade fleets with more fuel-efficient aircraft, but supply constraints have slowed that effort, with order backlogs at Boeing (BA) and Airbus (FR:AIR) stretching years.

-Claudia Assis -Myra P. Saefong

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

04-22-26 1801ET