Concerns about fuel supplies are increasing with the Iran war as airlines cut flights

The rising price of jet fuel is not the only problem facing the aviation industry. Now it’s a question of whether there will be enough.

Since the U.S. and Israel attacked Iran on Feb. 28, the price of jet fuel in the U.S. has nearly doubled, from $2.50 a gallon on Feb. 27 to $4.88 a gallon on April 2, with increases even greater in other regions. Effectively closing the Strait of Hormuz will cut off supplies of crude oil and refined products such as jet fuel, further driving up prices.

This is forcing airlines to consider cutting back their flights, especially abroad.

Carsten Spohr, chief executive of Deutsche Lufthansa, told employees in a webcast last week that the airline was tasking teams with drawing up contingency plans due to the war in the Middle East, including for drops in demand or a shortage of jet fuel, a spokesman said. These plans could also include grounding some aircraft.

The US produces a lot of jet fuel and is not as exposed as other regions such as Europe and parts of Asia in comparison. But planes are overcrowded locally, meaning some US airlines could experience bottlenecks in international flights.

United Airlines CEO Scott Kirby told reporters late last month that the airline, which offers the most flights to Asia among U.S. airlines, would have to reduce its flights there. He also said it was “not impossible” that airlines would have to collectively reduce their service in this region.

He noted that the rise in jet fuel prices could be even more acute in parts of the U.S. that are not as heavily connected by pipelines.

“There is not enough refining capacity and therefore fuel prices are more vulnerable to supply weaknesses on the West Coast than elsewhere in the country before and in the future,” he said.

Kirby told employees in early March that the airline was preparing for oil prices to remain above $100 a barrel through 2027 and that it would cut some of its flights in the near future.

“To be clear, there is no change to our longer-term plans for aircraft deliveries or overall capacity for 2027 and beyond, but there is no point in burning short-term cash on flights that simply cannot cover these fuel costs,” he said in a March 20 message to employees.

Overall, airlines are canceling some flights for the coming months, but are frequently adjusting their schedules throughout the year to accommodate demand, aircraft availability or other complications.

U.S. airline domestic capacity increased 2.1% in the second quarter. Decrease from previous plans of 2.3% growth, Total capacity is expected to rise 1.1%, compared with 2.4% in the week ended March 20, according to a UBS report on Monday.

“We expect further capacity cuts in the coming weeks,” UBS said.

So far, airline executives have said travel demand is strong, but fuel shortages and price spikes are causing headaches for airlines and passengers alike as the peak summer travel season approaches.

Fuel is typically airlines’ biggest expense after work, and airlines are already raising fares and fees, such as for checked baggage, to offset the additional costs.

Investors will await further insight into how the rise in jet fuel could affect the industry when airline earnings begin on Wednesday Delta Air Lines. This airline owns a refinery and could therefore benefit from selling jet fuel.

Delta on Tuesday increased fees for checked baggagejoin JetBlue Airways and United, who did the same last week.

Strong demand, particularly compared to this time last year, could further isolate airlines, at least in the US. Last year, bookings fell as president Donald TrumpThe trade war began with high tariffs, falling markets and layoffs within the government led by Elon MuskThe so-called Department of Government Efficiency came into force.

“The positive commentary on demand still holds, but fuel at $4/$4.50 (per gallon) for an extended period of time is not something airlines can pass,” said Savanthi Syth, airline analyst at Raymond James. “If fuel consumption remains high, there will only be capacity cuts.”

Airlines could face a bigger problem if higher gas prices and other pressures on consumers lead to a decline in spending.

“We’re watching the airlines very closely right now. It doesn’t have to last too long at these (fuel price) levels before you see the possibility of ratings pressure,” said Joseph Rohlena, a senior director at Fitch Ratings who covers U.S. airlines.