Major airliner scraps all flights as fuel prices surge – full list | UK | News
The Iran war inflicted its first major aviation casualty in Europe after Scandinavian Airlines became the first major carrier to cancel flights on the continent in response to skyrocketing fuel costs.
SAS, which operates as the national carrier of Denmark, Norway and Sweden, confirmed on Tuesday that it had removed a significant number of services from its tariffs, blaming the energy market that has been disrupted by the conflict in the Middle East.
“Given the ongoing situation in the Middle East, including the sharp and sudden increase in global fuel prices, we are taking measures to strengthen our resilience,” a spokesman said.
“One such measure is the cancellation of a limited number of short-term flights.”
Hundreds of departures have been canceled this week as the airline focuses cuts on short domestic Scandinavian flights where alternative services are available. SAS is one of the continent’s busiest operators, connecting approximately 25 million passengers to destinations worldwide each year.
Threat to European aviation
According to the Telegraph newspaper, this decision increased fears that the Hormuz crisis could snowball across Europe and turn into an industry-wide emergency. The Bosphorus is the transit point for around half of Europe’s imported jet fuel in normal times, drawing heavily on supplies from Kuwait and Saudi Arabia; both are now cut off from western buyers due to the blockade.
With kerosene representing the largest item in any airline’s books and crude oil prices rising to levels not seen in four years, the commercial arithmetic on many routes is rapidly deteriorating.
Air New Zealand, which carries around 16 million passengers a year, also took the same step last week, but SAS’s scale suggests this is a more important signal.
An unprotected gamble
SAS’s exposure to price increases is partly self-inflicted. The carrier eliminated internal rules requiring it to underwrite at least 40 percent of its fuel consumption, leaving itself entirely at the mercy of spot market prices. It remains unclear where these protections will currently stand for the coming year.
Hedging contracts protect airlines from sudden price shocks by fixing the cost of fuel in advance. Without these, any movement in the price of crude oil would be directly reflected in operating costs.
Rivals performed better by maintaining more conservative positions. International Airlines Group, which owns British Airways, said last week that it had met the vast majority of its short-term fuel needs – 80 percent by the end of March and 70 percent in the following quarter.
Budget operators created the most comprehensive defense. Ryanair confirmed to investors in January that almost all of its short-term fuel exposure was locked in – 84 per cent for the current quarter was secured at $77 per barrel, while cover for the financial year opener in April was secured at $67 per barrel over 80 per cent of requirements.
