Flight capacity cuts hit Europe and Asia amid high jet fuel prices

The European market faces capacity cuts on airlines amid continued jet fuel pricing strength and potential shortages.

Wholesale jet fuel prices in Europe have soared since the beginning of the Iran-US war and the effective closure of the Strait of Hormuz at the end of February 2026. Platts, a part of S&P Global Energy, assessed the CIF Northwest European jet cargo flat price at $1,521/mt on average in March, around 97% higher than the pre-war average in February and $1,503/mt so far in April.

The prices continue to weigh on the industry despite the comparatively wider hedging of European airlines as the costs of non-hedged fuel rises place pressure on airline yields. The latest wave of cancellations was the announcement of the grounding of 20,000 flights between May and October by Lufthansa Group on April 21 which would lead to a capacity reduction of 1% for the airline and a reduction of around 40,000 mt of fuel demand.

Nevertheless, cuts have so far been concentrated on loss-making routes serviced by older less efficient planes which were due for phasing out in the next few years.

"Due to the increase in jet fuel prices, this will be achieved significantly more efficiently than before," the airline said in the note April 21. Lufthansa reported that its long-haul flight segment would be unaffected.

Airlines are choosing parts of the business that "give the lowest hanging fruit," one source close to the aviation market said. "There are new aircrafts that are 20-30% more efficient on fuel. In any event the airline wants more efficiency. I'd expect and acceleration of the phase out of older aircrafts and fuel efficiency to improve faster."

According to traders close to the European jet fuel market, supply has largely been fixed for April, with more uncertainty looming over May. A month-over-month decrease of 651,000 mt is expected in April, bringing total volumes to 1.26 million mt, according to Kpler ship tracking data. So far, only 221,000 mt has been fixed for May, predominantly from the US.

Asia strength closes arb, prompts flight cancellations

Despite the supply crunch in Europe, strength in the Asian regrade spread was keeping the East-West arbitrage shut, several market participants from both regions said.

Platts assessed the FOB Singapore front-month May regrade swap, the value jet fuel commands over 10 ppm sulfur gasoil, at plus $16.10/b at the 0830 GMT April 22 Asian close, remaining in double-digit premium territory since April 9.

While the recent emergence of spot cargoes from South Korea has relieved some pressure in Asia, the gap left in the market by China's export ban leaves overall supply strained.

Due to elevated jet fuel prices driven by supply disruptions amid the Middle East war, Cathay Pacific said it would cut back on capacity from mid-May to end-June.

"In the past month, we have pursued every suitable means to keep our flights operating as normal, including the adjustment of fuel surcharges. However, these measures have not been enough to mitigate the significantly increased fuel costs," Cathay Pacific Chief Customer and Commercial Officer Lavinia Lau said in an April 17 statement.

"Cutting back on capacity has always been our last resort, but regrettably, we have had to consolidate a small number of passenger flights from mid-May to end-June. This has affected around 2% of Cathay Pacific's total frequencies and around 6% of HK Express's total frequencies during this period."

In March 2026, the flagship airline carried 2.81 million passengers, up 9.78% month over month and 24.3% year over year despite the onset of the war.

"March was a month of contrast. On the one hand, the ongoing situation in the Middle East shifted demand towards other aviation hubs and generated robust volumes on our flights. On the other hand, the price of jet fuel has increased significantly since the start of March and this is placing huge cost pressure on airlines around the world," Lau commented.

The benchmark Platts-assessed FOB Singapore jet fuel/kerosene outright price rose $6.49/b day over day to $184.34/b on April 22. In March, it averaged $195.40/b, jumping from $89.03/b in February and $83.32/b in January, according to Platts data.