The global aviation industry is facing a prolonged period of volatility as the jet fuel supply recovery is expected to grab several months, even with the easing of immediate geopolitical tensions in the Middle East. While the reopening of critical shipping lanes provides a necessary first step, the physical destruction of refining infrastructure means that the path back to stability will be slow and costly.
Willie Walsh, the director-general of the International Air Transport Association (IATA), warned on April 8 that the industry cannot expect a quick return to normalcy. Speaking at the IATA World Data Symposium in Singapore, Walsh noted that while the flow of crude oil is essential, the bottleneck has shifted from transportation to production. Many major refineries in the region have been severely damaged by drone strikes, creating a deficit in refined products that cannot be solved simply by reopening a strait.
“If we acquire crude oil flowing, that will provide some immediate relief – but it will take a little bit of time to get the full supply of jet fuel currency back to where it needs to be,” Walsh said. He emphasized that due to the fact that the recovery of these complex industrial facilities is “not going to happen quickly,” oil prices—and by extension, the cost of flying—are likely to remain elevated.
The Bottleneck: Crude Oil vs. Refined Fuel
For the casual observer, the reopening of the Strait of Hormuz—which handles approximately one-quarter of the world’s seaborne oil trade—might seem like the finish of the crisis. However, from a financial and industrial perspective, there is a critical distinction between crude oil and refined jet fuel. Crude oil is the raw material; refineries are the factories that transform it into the kerosene-based fuel required for jet engines.
When refineries are damaged, the global supply chain breaks at the processing stage. Even if crude oil is flowing freely into ports, We find fewer functioning facilities to turn that crude into usable aviation fuel. This structural deficit creates a price floor that keeps fuel costs high, regardless of the diplomatic status of the region.
This imbalance has direct implications for the consumer. Walsh pointed to an “almost direct correlation” between skyrocketing oil prices and air fares. While demand for air travel remains resilient, the cost of maintaining that demand is shifting toward the passenger.
Airlines Absorbing the Shock
Despite the rising costs, the financial impact on airlines is not instantaneous. In a phenomenon common to the travel industry, there is a significant lag between a spike in operating costs and the realization of new revenue. Many passengers are currently flying on tickets purchased months ago, before the Middle East conflict escalated.
Because airlines have generally avoided introducing retrospective fuel surcharges, they are currently shouldering the increased costs themselves. Walsh likened the current volatility to the stresses seen during the 2008 global financial crisis following the collapse of Lehman Brothers, noting that while airlines eventually pass these costs to consumers, the interim period creates a severe cash-flow squeeze.
To mitigate these losses, carriers are pulling various operational levers. Some are increasing ticket prices for new bookings, while others are reducing flight frequencies to optimize fuel burn and capacity. For example, the Philippine carrier Cebu Pacific has announced reductions in flight frequencies between Cebu and Singapore, dropping from seven to five times a week from mid-April through October, and suspending Iloilo-Singapore operations from mid-June through October.
Impact on Global Capacity
The crisis has caused a massive redistribution of global air traffic. With much of the Middle Eastern airspace remaining partially closed, the “Gulf hubs”—which accounted for 14.6 per cent of global air travel capacity in 2025—have seen their operations severely curtailed.
According to data from OAG Aviation, the impact has been stark:
| Metric | Impact Detail |
|---|---|
| Cancelled Seats | 1.7 million scheduled seats cancelled |
| Capacity Loss | One-third of February’s final-week capacity gone |
| Gulf Carrier Operations | Operating at 40 per cent to 62 per cent capacity |
While airports like Singapore’s Changi have helped fill the vacuum by absorbing diverted transit traffic, Walsh cautioned that Asian carriers cannot realistically replace the massive capacity provided by giants like Emirates and Qatar Airways. He believes the Gulf hubs will recover quickly once the airspace fully opens, but the immediate capacity gap remains a challenge for global connectivity.
Lessons in Energy Security
The current crisis has prompted a rethink of energy policy across Asia. Walsh urged governments to shift their focus from merely securing the supply of crude oil to increasing their domestic production capacity for refined petroleum products. The ability to refine fuel locally provides a critical buffer against geopolitical shocks in the Middle East.
This perspective too informs recent policy shifts in Singapore. The Singaporean government recently postponed its green jet fuel levy, a move Walsh described as a “very sensible reaction.” The levy was intended to incentivize the production of sustainable aviation fuel (SAF), but the war has already driven SAF prices higher. Implementing the levy now would have resulted in higher costs for a smaller volume of fuel, rather than actually stimulating additional production.
While the aviation industry is not facing an “existential challenge” on the scale of the Covid-19 pandemic, the current situation serves as a stark reminder of the industry’s vulnerability to energy shocks. The transition to more secure, diversified refining capacities is no longer just an environmental goal, but a strategic necessity for operational survival.
Disclaimer: This article contains financial analysis regarding market trends and aviation economics. It is intended for informational purposes and does not constitute investment advice.
The industry now looks toward the expiration of the two-week ceasefire agreed upon by the United States and Iran on April 8. The outcome of these diplomatic negotiations will determine whether the Strait of Hormuz remains open, though the physical repair of refineries will remain the primary driver of the jet fuel supply recovery timeline.
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