Soaring fuel costs could close some airlines, aviation chief warns

Soaring fuel costs could spark a rise in air fares and threaten to close some airlines, one European aviation chief warned on Thursday.

Eamon Brennan, director general of air traffic control body Eurocontrol, noted that oil had spiked to $152 (€144) a barrel as a consequence of Russia's invasion of Ukraine.

“I would say with the price of fuel we will probably see fares starting to rise in the longer term, with possible fuel surcharges later this year,” he said.

Mr Brennan pointed out that many airlines were not viable with oil at $100 a barrel.

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He added that it remained to be seen how these carriers would cope with higher oil prices, particularly those that had not hedged their fuel needs.

Irish carrier Ryanair is 80 per cent hedged for this year, while Aer Lingus's parent, International Airlines Group, recently confirmed that it had hedged 70 per cent of its needs.

However, Mr Brennan said that air travel continued to recover from Covid lockdowns around Europe, despite Russia's invasion of Ukraine.

Traffic is at 82 per cent of the levels it hit in 2019, the year before the pandemic struck.

“The biggest strain on the system is at airports,” Mr Brennan noted, saying that many were struggling with security, baggage handling and other services as passengers returned in droves.

Mr Brennan was speaking ahead of a Eurocontrol live broadcast interview with fellow Irishman Dómhnal Slattery, chief executive of aircraft lessor Avolon.

Air taxis

Mr Slattery predicted that electric-powered air taxis, known as E-Vtols, could become a common sight in some cities by the end of this decade.

Avolon is an investor in Vertical, a company developing E-Vtols. It has ordered up to 500 of the craft, destined for use as air taxis in big cities, for which it has already agreed leasing deals with airlines around the world.

Mr Slattery suggested that the first E-Vtols could start flying in 2024, while people would start seeing them the following year.

“By the start of the next decade they will not be ubiquitous, but we will be saying ‘Wow’, that’s starting to look a bit more normal than just science fiction,” he said.

Avolon is likely to lodge insurance claims for 10 aircraft it has leased to Russia but has not been able to recover since that country invaded its neighbour.

“We believe our aircraft are fully insured and we will be pursuing the appropriate claims process in due course,” Mr Slattery confirmed.

The Irish company had largely avoided doing business in Russia as it regarded the country as a political risk.

Avolon originally had 14 aircraft based there, but was able to recover four of them after Russia sparked the conflict with Ukraine.

Airlines there continue to use aircraft they have leased from western businesses such as Avolon, despite not paying rent for them.

Mr Slattery told interviewer Andrew Charlton that Avolon believed its aircraft were "effectively stolen".

Insurance rates

He agreed that the problem would also have consequences for insurance costs. “The net impact will be that insurance rates will go up for lessors,” he said.

The Avolon chief speculated that insurers could also review their terms and conditions to exclude some risks.

Meanwhile, Co Clare native Mr Slattery, declared that Shannon was his favourite airport in the world.

His father had a business supplying fresh fruit and vegetables to the flight kitchen at Shannon and brought him along on deliveries when Mr Slattery was a child. “It was the first place I smelled kerosene,” he recalled.