Airport strikes in Germany triggers uncertainty on jet fuel market strength

Ground staff walked out as part of an organized industrial action at major airports across Germany on Feb. 20, in a second strike this month as workers demanded higher wages.

Aviation strikes in Germany are affecting jet demand in Europe, but there's no clarity yet on the extent of the impact, a source said. "Pilots, security, ground service staff all striking -- and this is all lost volume on jet fuel."

While jet fuel demand is expected to pick up in the second half of the year, airline capacity will not be going back to pre-pandemic levels this year, another source said.

"If Lufthansa does not realize that has to take a big step towards us, then longer strikes will continue to be possible," labor union Verdi's lead negotiator, Marvin Reschinsky, said, according to media reports.

Between 80% to 90% of Lufthansa's flights were cancelled across Germany as ground staff go on strike Jan. 20, with airports at Frankfurt, Munich, Hamburg, Berlin, Düsseldorf, Cologne and Stuttgart affected, according to media reports.

The country, Europe's largest economy, has been hit with several strikes affecting air travel, railways and public transport, as workers demand greater pay to match inflation.

The additional loss in volumes could worsen the already lukewarm demand in the jet market, fueling mixed views on how tight the market will be despite the upcoming expected rise in seasonal demand.

Platts assessed the CIF NWE jet cargo cash differential down $5 Feb. 19 to a $40.50/mt premium to the front-month ICE LSGO contract.

"Jet is weak: physical market is weak, swaps will stay weak too," a trader said. The Platts Jet CIF NWE Cargo month 1 swap fell $7.25/mt to $51.25/mt Feb. 19.

"It doesn't look like demand will pick up very soon either," the trader added. "Airport strikes in Germany won't have a big impact on jet fuel as it's just a small part of the market."

While some sources believe the jet market might experience tightness with the summer schedule coming up and ongoing refinery maintenance in Europe, others are of the view that demanded recovery will be slow and diverted cargoes from the East of Suez will arrive just in time to meet fresh demand.

"Jet fuel is still coming into Europe, so I don't think market will be too tight in the coming weeks," a source said.

However, there's still considerable uncertainty around the shipping crisis in the Red Sea. Feb. 18 saw significant damage to a commercial ship in the Bab al-Mandab Strait, off the coast of Yemen, and a worsening shipping crisis could add to tightness in the market.

The latest attack marks the most significant vessel damage since Iran-backed Houthi militants started attacking ships they claimed to be linked to Israel, the US, or the UK over recent months in support of Hamas during its ongoing war with Israel.