US aviation in particular suffers from high fuel prices

Explosive rise in kerosene prices puts pressure on industry

Since the outbreak of tensions in the Middle East, kerosene prices have soared worldwide. According to figures from International Air Transport Association (IATA), the price per ton of kerosene has nearly doubled in a short period of time. This is putting increasing pressure on airlines, especially in the United States.

U.S. airlines extra vulnerable

American airlines such as United Airlines are being hit especially hard. Unlike many European competitors, they have largely phased out their hedge contracts in the past. This makes them more sensitive to sudden price increases in the fuel market. Analysts estimate that United Airlines could lose as much as $11 billion extra in fuel costs if prices remain persistently high, leading to network adjustments in the meantime.

Regional price differences and shortages in Asia

The impact of the price increases varies by region. In Asia, fuel prices are significantly higher than in Europe, putting additional pressure on routes to this region. At the same time, a new risk is emerging: possible shortages of kerosene at specific airports.
These include warnings of limited supplies at airports such as Bangalore. Airlines, including Air France-KLM, are therefore preparing for scenarios in which destinations may be temporarily cancelled or adjusted.

Hedge strategies offer partial protection

European airlines have partly protected themselves from price increases through hedge contracts. Air France-KLM, for example, has committed much of its fuel procurement for this year, while airlines such as Lufthansa and British Airways are also using such strategies. Still, these measures provide only temporary relief and cost increases remain inevitable.

Impact on air cargo and supply chains

Rising fuel costs are directly affecting the air cargo market. Shippers and forwarders are facing rising fuel surcharges, which are now being reintroduced by several airlines. This leads to higher transportation costs and can affect the choice of transport modes, especially for price-sensitive or less urgent shipments.

Targeted approach and support by Neele-Vat

For customers who depend on air freight, Neele-Vat actively monitors developments regarding fuel prices, surcharges and capacity changes at airlines. On this basis, specific advice is given to manage costs and risks.

Specifically, Neele-Vat supports by:

• Provide transparency into current fuel surcharges and fare trends
• Alternative routes or departure points to be identified in case of capacity pressure
• Thinking along about modal shifts, e.g., from air to ocean freight for less time-critical shipments
• Plan shipments strategically to avoid peak times and high costs.

This proactive approach allows clients to better anticipate price volatility and availability risks within the air cargo market.

Want to know what rising fuel prices mean for your shipments and cost structure? Get in touch with your contact at Neele-Vat for up-to-date and practical advice.