Lufthansa to incur $2 billion in extra fuel costs due to Middle East conflict

• Lufthansa has hedged 80% of its jet fuel but still expects 1.7 billion euros in extra costs; the airline has already cut 20,000 short-haul flights to save 40,000 metric tons of fuel
• Jet fuel prices surged 103% by end of March compared to the prior month, with Europe weeks away from running out of supply according to IEA warnings
• Middle East refineries provide around 75% of Europe's jet fuel; demand is expected to increase 40% during peak travel season, putting pressure on alternative suppliers like the U.S. and Nigeria

Summary: Lufthansa Faces $2 Billion in Extra Fuel Costs from Middle East Conflict

Key Financial Impact:

Germany's Lufthansa reported an expected €1.7 billion (approximately $2 billion) in additional fuel costs for 2026 due to the ongoing Middle East conflict and blockade of the Strait of Hormuz. Despite having hedged 80% of its jet fuel, the airline faces significant cost pressures.

Q1 2025 Performance:

• Adjusted EBIT: €612 million
• Revenue: €8.7 billion ($10.2 billion), up 8% year-over-year from €8.1 billion
• CEO Carsten Spohr noted improved financial results but warned of "enormous challenges" ahead

Market Context:

Jet fuel prices surged 103% by end-March compared to the previous month. Europe faces a critical supply crunch, with the IEA warning the continent is weeks from running out of jet fuel. Middle East refineries typically provide 75% of Europe's jet fuel supply, with demand expected to increase 40% during peak travel season.

Cost-Saving Measures:

Lufthansa has cut 20,000 short-haul flights to save 40,000 metric tons of jet fuel and eliminate unprofitable routes. The airline plans to offset additional costs through further cost-saving measures and increased ticket revenue.

Broader Industry Impact:

Other European carriers are similarly affected. British budget airline EasyJet reported £25 million ($34 million) in additional March fuel costs, with only 70% of summer fuel hedged. EasyJet also noted weaker forward bookings and delayed customer booking patterns.

Supply Chain Concerns:

With Asian export restrictions and limited alternative sources (U.S., Nigeria), European airlines face severe operational constraints heading into peak travel season.