Fwd: The Fuel Crisis and the Airline Industry
Chandana Liyanapatabendy
The Fuel Crisis and the Airline Industry
A Case for Equality of Opportunity
by Dr. Ruwantissa Abeyratne
May 4, 2026
11 mins read
Skellefteå Airport [Niklas Jonasson/Unsplash]
“Equality consists in the same treatment of similar persons.” — Aristotle
The Current Crisis
The ongoing hostilities involving Iran have engendered a complex and far-reaching perturbation within the global civil aviation ecosystem, revealing once again the fragile interdependence between geopolitical stability, energy security, and the economic viability of air transport. The conflict has not merely disrupted established air navigation patterns—necessitating widespread rerouting of aircraft to circumvent volatile airspace—but has also precipitated a profound escalation in jet fuel prices, largely attributable to constraints imposed on the flow of shipping through the strategically indispensable Strait of Hormuz.
At the heart of the matter lies the temporal dimension of the conflict. Should hostilities persist, particularly with any renewed closure of the Strait over the coming weeks, the global aviation industry may confront a critical diminution in jet fuel availability precisely at the threshold of the peak summer travel season. Early manifestations of this stress are already discernible. Airlines operating within South Asia—owing to their structural reliance on Gulf-based fuel supplies—have begun to implement capacity reductions and fare escalations. Concurrently, European carriers have sought recourse through supranational mechanisms, urging the European Commission to adopt emergency measures aimed at averting systemic fuel shortages. In the United States, carriers have opted for a more incremental approach, transmitting cost pressures to consumers through ancillary charges and selective fare increases.
The escalation in jet fuel prices constitutes a defining feature of the present crisis. The conflict, involving both the United States and Israel, has triggered what may aptly be described as an energy shock, constraining oil logistics through one of the world’s most vital maritime corridors. The resulting price surge—exceeding 100 percent within a matter of weeks—has significantly amplified operational costs for airlines, for whom fuel traditionally represents the second-largest expenditure after labour, yet the most volatile. While futures markets suggest a potential moderation of prices in the near term, such projections remain contingent upon an expeditious resolution of the conflict—an outcome that remains, at best, uncertain.
Even in the event of a nominal reopening of the Strait, structural impediments persist. Reduced refining capacity within the Middle East implies that downstream effects on jet fuel pricing will likely endure beyond the immediate cessation of hostilities. This lag effect underscores a critical reality: aviation, as an industry, is not merely reactive to supply disruptions but is structurally sensitive to the broader energy infrastructure within which it operates.
Challenges
Historical analogy offers a sobering perspective. The 1973 oil crisis similarly catalyzed a dramatic escalation in fuel costs, compelling the aviation sector to pursue technological innovation and operational efficiency. In the contemporary context, one observes a parallel albeit more nuanced response. The increasing adoption of sustainable aviation fuels—driven in part by regulatory mandates within the European Union—may gain further traction as the price differential between conventional and alternative fuels narrows. Yet, paradoxically, the exigencies of conflict have also led to inefficiencies: rerouted flights, extended flight durations, and the necessity for aircraft to carry contingency fuel loads have collectively exacerbated fuel consumption.
Geographically, the impact of the crisis is markedly asymmetrical. Airlines within the Asia-Pacific region emerge as particularly vulnerable, given their pronounced dependence on Middle Eastern fuel supplies. Operational adjustments—including schedule reductions and the imposition of fuel surcharges—have already been implemented. In Europe, where approximately half of jet fuel imports originate from the Gulf, the spectre of a systemic shortage looms large. Industry bodies have advocated for coordinated measures, including joint procurement strategies reminiscent of those employed during the early stages of the Russia–Ukraine conflict. The economic stakes are considerable, particularly as the summer travel season underpins both airline profitability and the broader tourism-dependent economies of the region.
The United States presents a comparatively insulated case, owing to its access to domestic refining capacity. Nevertheless, American carriers are not immune to the cascading effects of global price escalation. While many have refrained from overt fare increases, preferring instead to adjust ancillary fees, the underlying financial pressures are evident. Certain carriers have undertaken more decisive measures, including capacity rationalization and fare restructuring, reflecting divergent strategic responses within the industry.
It is also necessary to distinguish between business models. Legacy carriers, endowed with greater pricing power and financial resilience, are better positioned to absorb or transfer cost increases. In contrast, low-cost carriers—whose competitive advantage is predicated upon price sensitivity—face a more precarious equilibrium. Their limited financial buffers render them particularly susceptible to sustained cost shocks, thereby amplifying the risk of market consolidation or operational contraction.
Ultimately, the trajectory of the crisis will hinge upon geopolitical developments. The tentative reopening of the Strait of Hormuz following a ceasefire offers a measure of cautious optimism. Should stability prevail, the disruption may be contained as a transient supply shock. However, a protracted conflict carries more insidious implications—not only in terms of fuel scarcity but also through its potential to erode consumer confidence and suppress demand. The experience of the 2008 financial crisis serves as a pertinent reminder that elevated fuel costs, when coupled with broader economic uncertainty, can precipitate a contraction in air travel demand, compelling airlines to recalibrate capacity, pricing, and operational strategies.
In sum, the present crisis underscores an enduring truth within international civil aviation: that the industry, notwithstanding its technological sophistication and global reach, remains inextricably tethered to the vicissitudes of geopolitics and energy markets. The war involving Iran thus serves not merely as a regional conflict but as a systemic stress test for the resilience, adaptability, and strategic foresight of the global aviation community.
The Airline Industry
A more insidious challenge now confronts the airline industry—one that transcends the volatility of pricing and enters the more precarious domain of physical availability. The issue is no longer confined to the affordability of jet fuel, but rather to the existential question of whether sufficient quantities will be accessible to sustain scheduled operations across an increasingly strained global network.
The disruption to supply chains—already attenuated by geopolitical tensions—has exerted a constricting effect on the distribution of both crude oil and its refined derivatives. The functional impairment of the Strait of Hormuz has introduced a level of uncertainty that compels airlines to engage in anticipatory operational recalibration. In practical terms, this has translated into a reassessment of route viability, particularly in long-haul international markets where fuel uplift logistics are integral to network continuity.
Within Europe, strategic responses are already underway. Senior leadership at Lufthansa has initiated internal contingency planning, reflecting a recognition that the crisis may necessitate both demand-responsive adjustments and more drastic measures, including the temporary withdrawal of aircraft from service. Such prudential planning underscores a broader industry realization: that resilience in aviation is as much about operational elasticity as it is about financial robustness.
As already mentioned, although the United States benefits from a relatively diversified refining infrastructure, its carriers are not insulated from localized vulnerabilities. Aviation, by its very nature, is dependent on geographically specific fuel availability; aircraft uplift at points of departure and transit, not at the locus of national production. Consequently, certain long-haul operations—particularly those extending into Asia—may encounter logistical constraints. United Airlines, whose network exhibits a pronounced trans-Pacific orientation, has already signalled the possibility of service rationalization in response to these pressures. This reflects a broader industry calculus: that route sustainability must now be evaluated not solely on demand metrics, but on the reliability of fuel access along the operational chain.
Compounding this concern is the structural inadequacy of refining capacity in specific regions. Even within the United States, disparities in pipeline connectivity and refining distribution—particularly along the West Coast—render certain markets more susceptible to supply perturbations. This introduces a layer of intra-national asymmetry, whereby the impact of a global crisis is unevenly distributed within domestic aviation systems.
In anticipation of a protracted period of elevated energy costs, airlines are adopting a dual temporal strategy: preserving long-term fleet and capacity planning objectives while exercising short-term prudence through tactical reductions in unprofitable flying. This approach reflects an underlying economic rationality—namely, that the continuation of marginal routes under conditions of inflated fuel costs would constitute an imprudent dissipation of capital.
Economics
The trajectory of the industry cannot be assessed solely through the prism of supply. Demand, that elusive and often unpredictable variable, introduces an additional layer of complexity. While current indicators suggest a degree of resilience in passenger demand, this equilibrium remains fragile. Airlines have already begun to moderate capacity growth projections, signaling a cautious alignment of supply with anticipated market conditions. Financial institutions and market analysts have intimated that further reductions may be imminent, particularly if prevailing uncertainties persist.
The interplay between sustained demand and escalating operational costs presents a paradox. On the one hand, robust passenger volumes provide a buffer against financial erosion; on the other, there exists a threshold beyond which cost pass-through mechanisms—such as fare increases and ancillary charges—risk dampening consumer appetite for air travel. The experience of prior economic disruptions suggests that this threshold, once crossed, can precipitate a contraction in discretionary spending, thereby undermining the very demand that sustains the industry.
Investor sentiment, too, reflects this precarious balance. The commencement of airline earnings cycles—led by major carriers such as Delta Air Lines—is expected to provide further clarity on the sector’s capacity to absorb and adapt to ongoing fuel-related pressures. Notably, vertically integrated entities possessing refining capabilities may enjoy a degree of insulation, illustrating the strategic advantage of supply chain integration in times of crisis.
Ultimately, the industry stands at a critical juncture where operational continuity, financial discipline, and market responsiveness must converge. Should fuel constraints persist alongside broader economic pressures—such as increased consumer expenditure on energy and essential goods—the risk of diminished travel demand becomes increasingly pronounced. Credit rating agencies have already signalled the potential for downward pressure should current conditions endure, thereby reinforcing the notion that the present crisis is not merely operational but systemic in nature.
In essence, the aviation sector is navigating a delicate equilibrium—one in which the availability of fuel, the elasticity of demand, and the prudence of strategic decision-making will collectively determine its resilience in the face of sustained geopolitical and economic uncertainty.
My Take
The foregoing discussion inexorably leads to a juridical and ethical inflection point that transcends the immediacy of operational exigencies and enters the normative realm of international air law. At a time when the scarcity of jet fuel threatens to impair the continuity of global air transport, the conduct of States assumes heightened significance. At the very threshold of this discourse lies the enduring wisdom of the preambular vision of the Convention on International Civil Aviation (Chicago Convention), which articulates, with remarkable prescience, that international civil aviation must be developed in a manner that is both safe and orderly while ensuring that air transport services are established on the basis of equality of opportunity and operated soundly and economically. This formulation is not a mere rhetorical flourish; it embodies a foundational norm that transcends technical regulation and enters the realm of distributive justice in aviation. Equality of opportunity, in this context, must be understood as the unimpeded right of all carriers—irrespective of nationality—to access the conditions necessary for operation and to compete within a fair and non-distortive environment. Any deviation from this principle, particularly in times of resource scarcity, would not only offend the spirit of the Convention but would also erode the delicate equilibrium upon which the global air transport system is predicated.
It is precisely in moments of crisis that the foundational principles of Chicago Convention must be neither diluted nor subordinated to parochial economic interests. Among these principles, the obligation of non-discrimination—enshrined in Article 15—emerges as both a legal imperative and a moral compass guiding State behavior in the allocation of critical aviation resources.
Article 15, in its essence, proscribes the imposition of discriminatory charges, practices, or conditions upon foreign aircraft in relation to the use of airports and air navigation facilities. Although the provision is often interpreted through the prism of airport charges and user fees, its teleological ambit is far broader. It reflects a fundamental commitment to equality of treatment, ensuring that international civil aviation operates within a framework of fairness, predictability, and reciprocity. To construe the provision narrowly, as being confined solely to pecuniary charges, would be to undermine its normative purpose. In contemporary circumstances—where fuel constitutes not merely a cost element but a sine qua non for operation—the equitable provision of fuel must be viewed as falling within the spirit, if not the explicit letter, of Article 15.
The temptation for States to privilege their national carriers in times of scarcity is neither novel nor unexpected. Aviation, as an industry, is deeply intertwined with national economic interests, and flag carriers are often perceived as instruments of sovereign prestige and economic resilience. However, such inclinations, if translated into discriminatory practices in the allocation of jet fuel, would constitute a departure from the obligations voluntarily assumed by States under the Chicago Convention. The denial, restriction, or preferential allocation of fuel based on nationality would not merely distort competition; it would erode the very fabric of international civil aviation, which is predicated upon mutual trust and adherence to agreed norms.
In my writings I have consistently emphasized that the Chicago Convention is not a static instrument but a living corpus of principles that must be interpreted in light of evolving operational realities. He has argued that non-discrimination is not merely a procedural requirement but a substantive obligation that permeates all aspects of aviation governance. From this perspective, the allocation of essential resources—such as jet fuel—cannot be divorced from the broader obligation to ensure equitable access to the infrastructure and services necessary for the conduct of international air transport.
It may be contended that fuel, being a commercial commodity, falls outside the regulatory ambit of State obligations under the Convention. Such an argument, however, is untenable when one considers the degree of State involvement in the production, regulation, and distribution of aviation fuel, particularly in jurisdictions where supply chains are closely linked to national energy policies. Where the State exercises control—whether directly or through regulatory frameworks—it cannot abdicate its responsibility to ensure that such control is exercised in a manner consistent with international obligations. The distinction between sovereign authority and commercial activity becomes blurred in such contexts, thereby invoking the applicability of Article 15’s non-discrimination principle.
Moreover, the discriminatory allocation of fuel would have cascading effects that extend beyond individual carriers. It would disrupt established air transport agreements, undermine bilateral and multilateral reciprocity, and potentially provoke retaliatory measures by affected States. The resultant fragmentation of the global aviation system would be antithetical to the objectives of the Convention, which seeks to promote the safe and orderly development of international civil aviation. In a globalized industry characterized by interdependence, unilateral actions driven by national preference risk engendering systemic instability.
The jurisprudential approach advocated by me underscores the importance of good faith in the performance of treaty obligations. Drawing upon principles akin to those articulated in the Vienna Convention on the Law of Treaties, he posits that States must not only adhere to the letter of their commitments but also to their spirit. In the context of fuel allocation, this entails a proactive commitment to fairness, transparency, and non-arbitrariness. It requires States to resist the expedient allure of protectionism and instead uphold the integrity of the international aviation system.
Equally compelling is the argument that non-discrimination serves not merely as a legal constraint but as an instrument of collective resilience. In times of crisis, the equitable distribution of scarce resources ensures that the burden of disruption is shared, thereby preserving the continuity of global connectivity. Aviation is not an insular industry; it is the circulatory system of the global economy. To privilege one segment at the expense of others is to compromise the functionality of the whole.
In practical terms, this necessitates the adoption of regulatory frameworks and contingency protocols that explicitly preclude discriminatory practices in fuel allocation. States must ensure that airport authorities, fuel suppliers, and regulatory agencies operate within clearly defined parameters that uphold the principle of equality. Transparency in allocation mechanisms, coupled with oversight and accountability, will be essential in maintaining confidence among international carriers.
The present crisis, therefore, offers an opportunity for States to reaffirm their commitment to the principles of the Chicago Convention. It is a test not merely of operational resilience but of normative fidelity. The manner in which States respond—whether by adhering to or deviating from their obligations—will have enduring implications for the credibility of the international aviation regime.
In conclusion, the equitable provision of jet fuel, even in times of scarcity, is not a matter of discretion but of obligation. Article 15, when interpreted in its full teleological context, imposes a duty upon States to eschew discriminatory practices and to ensure that all carriers—irrespective of nationality—are treated with parity. My view is that the strength of international civil aviation lies not in the dominance of individual actors but in the collective adherence to shared principles. To depart from these principles in times of crisis would be to imperil the very system that has, for decades, facilitated global connectivity and economic integration. The true measure of State responsibility, therefore, lies not in the protection of national carriers at all costs, but in the preservation of a fair, equitable, and resilient international aviation order.
Dr. Ruwantissa Abeyratne DCL, PhD, LL.M, LLB, FRAeS, FCILT
Senior Associate, Aviation Law and Policy
Aviation Strategies International
This message (including any attachments) is sent without prejudice to any rights and privileges as shall legally accrue to ASI, and may contain privileged or confidential information that should not in any way be compromised, duplicated or misused in any manner whatsoever. Any disclosure, copy, distribution or any inappropriate action taken relying upon the content of this information is strictly prohibited. Any views or opinions expressed do not necessarily represent those of ASI. ASI accepts no liability for the content of this email, or for the consequences of any actions taken on the basis of the information provided. / Ce message (incluant ses pièces jointes) est envoyé sans préjudice aux droits et privilèges légaux d’ASI, et peut contenir des informations privilégiées et confidentielles ne devant pas être compromises, copiées ou utilisées de quelque manière que ce soit. Quelconque divulgation, copie, distribution ou action inappropriée liée à son contenu est strictement interdite. Les opinions y étant exprimées ne représentent pas nécessairement celles d’ASI. ASI n’accepte aucune responsabilité quant au contenu de ce message ou pour les conséquences des gestes posés sur la base des informations y étant fournies.