The European aviation market is facing the real challenge of soaring fuel costs. The Middle East conflict has disrupted supply chains through the Strait of Hormuz, and global jet fuel prices have nearly doubled compared to pre-conflict levels. On Tuesday, April 28th, the latest global average price had risen to $179 per barrel, while the US spot index was $4.20 per gallon. This change has directly amplified the proportion of airlines' fuel expenditures, with fuel, which typically accounts for 30% to 40% of total costs, becoming the biggest variable in profitability.

Several airlines have issued profit warnings and initiated flight optimization programs. Lufthansa has cancelled 20,000 short-haul flights to save 40,000 metric tons of fuel, and easyJet expects its losses to widen significantly in the spring. Low-cost carriers are facing additional pressure on their business models. On the regulatory front, the aviation industry is using this opportunity to push the EU and the UK to temporarily relax several long-standing controversial rules, aiming to alleviate cost pressures and maintain industry stability.

Soaring fuel prices and restructuring of aviation operating costs

The doubling of jet fuel prices has directly impacted the cash flow and profitability of European airlines. Lufthansa explicitly stated that many short-haul routes are no longer profitable due to fuel costs, and therefore cancelled 20,000 flights ahead of schedule, mainly involving domestic European routes between Frankfurt and Munich hubs. This move is expected to save 40,000 metric tons of fuel, equivalent to a slight reduction in summer capacity of about 1%. EasyJet's latest financial report warns that its pre-tax loss in the spring will far exceed previous expectations, with additional fuel expenses in March increasing by £25 million. Virgin Atlantic also acknowledged that the pressure to turn a profit for the whole year has significantly increased.

Low-cost carriers are particularly sensitive, as their reliance on high turnover and low-fare strategies makes them less resilient to rising fixed costs. Fuel hedging has become a key buffer: Ryanair hedges approximately 80%, Lufthansa approximately 77%, easyJet approximately 70%, and Wizz Airways approximately 55%. Wizz Airways CEO Joseph Varady recently stated, "I didn't start the war with Iran, so why should I bear the consequences?" and emphasized that high prices have attracted tankers from the US and other regions to supplement European supplies, meaning there will be no substantial shortage in the short term, but high prices may persist for several months.

From a financial perspective, a 10% increase in fuel costs typically erodes airlines' EBIT margins by 2 to 4 percentage points. Coupled with the current doubling of fuel costs, the industry's overall gross margin faces a risk of compression of 10% to 15%. Airlines are attempting to pass on the cost through fare increases and surcharges, but demand elasticity limits the scope for complete cost passing. The remaining pressure must be absorbed through capacity and cost control.

Major airlines	Fuel hedging ratio	Latest Actions	Expected impact
Lufthansa	Approximately 77%	20,000 flights canceled	Save 40,000 metric tons of fuel
easyJet	Approximately 70%	Spring Loss Warning	Additional expenditure of £25 million
Wiz Airlines	Approximately 55%	Maintaining summer capacity expansion	Cash reserves of approximately 2 billion euros
Ryanair	Approximately 80%	Minor adjustments to some routes	Strongest buffering capacity

The aviation industry collectively pushes for regulatory rule adjustments.

Faced with a cost crisis, the European aviation industry, through lobbying groups, is pressuring the EU and UK governments to temporarily suspend or ease several long-opposed regulatory measures. Key demands include the European Parliament's proposed rule of two free carry-on bags (one personal item and one small carry-on bag), which low-cost carriers argue will lengthen boarding and disembarkation times, disrupt their 15-20 minute turnaround time model, directly increase unit costs, and force ticket price increases.

Another key focus is the adjustment of passenger compensation schemes. Current rules require airlines to pay compensation for cancellations or delays caused by fuel shortages. The aviation industry is demanding that the government exempt airlines from these "force majeure" obligations to avoid additional financial burdens. The tankering ban is also attracting significant attention; this rule prohibits airlines from refueling with cheap fuel before entering the EU, and the industry is currently calling for a temporary suspension to optimize procurement strategies.

Airport time slot usage rules have also been included in the list. The UK government has agreed that airlines can apply for exemptions from the "use or lose" clause if they are unable to operate due to fuel shortages, preventing them from forcing airlines to operate unprofitable flights in order to maintain their time slots. Overall, the aviation industry emphasizes that these rules already create a competitive disadvantage, and temporary relief is needed during the crisis to achieve a "level playing field."

Last week, EU Transport and Tourism Commissioner Apostolos Tsitsikostas stated his willingness to provide "temporary legislative adjustments" in areas such as time slot allocation, the tankering ban, public service obligations, and passenger rights, provided the situation worsens further, but explicitly stating he would not interfere with people's travel habits. This statement provides short-term certainty for the industry, but also highlights the tension between regulation and commercial realities. Temporary flexibility can reduce short-term cash outflows for airlines and help maintain jobs—the European aviation industry supports over 5 million jobs—but in the long run, if the rules revert to their original state, low-cost carriers will still face structural pressure.