European jet fuel paper market hits all-time lows after Flybe collapse, IATA warning

The European jet fuel market was dealt two more blows Thursday as UK carrier Flybe went into administration and the International Air Transport Association (IATA) revised up expectations of the financial impact from the coronavirus, pushing the paper market to all-time lows.

The balance-month CIF NWE jet differential swap was assessed at a $9.25/mt premium over ICE low sulfur gasoil futures Thursday, the lowest level S&P Global Platts has ever assessed since the assessment began in October 2010. Likewise, the equivalent front-month swap was assessed at $12.50/mt, the lowest since since the assessment began in April 2000.

UK low-cost carrier Flybe went into administration Thursday, with the company saying the coronavirus was partially to blame.

"Every drop counts I guess. In the big picture [the Flybe news] is not massive. Although it is bad for sentiment, as people realize it will not be the last airline to go bust," a trader said Thursday.

In a statement Thursday, IATA said it "now sees 2020 global revenue losses for the passenger [airline] business of between $63 billion (in a scenario where COVID-19 is contained in current markets with over 100 cases as of March 2) and $113 billion (in a scenario with a broader spreading of COVID-19)."

This comes as a revision to the previous analysis of revenue losses at $29.3 billion based on a scenario that the virus would be largely associated with markets in China, released on February 20.

The physical market also declined further. CIF NWE jet cargoes declined to a $9.25 premium over ICE LSGO futures, the lowest since October 2015, while FOB FARAG jet barges fell to a $6/mt premium, a level not seen since November 2015.

The jet fuel market has been under pressure from cancellation of flights, events and travel plans in response to the outbreak of the coronavirus.

Market sources said refiners will attempt to blend jet fuel into the diesel pool and implement run cuts in an attempt to trim the supply glut.