European Airlines Look to Shake Off Green Agenda as Fuel Prices Soar

European Airlines Challenge EU Green Rules as Soaring Fuel Prices Hit Sector

European Airlines Face Mounting Pressures Amid Green Mandates and Fuel Price Surge

BRUSSELS, March 19 (Reuters) - European airline chiefs are meeting in Brussels on Thursday under the cloud of war in the Middle East and rising oil prices, looking to push back against the EU's green agenda and what the industry says are cumbersome rules surrounding sustainable jet fuel.

Airlines Push Back Against EU Green Agenda

Citing a lack of available supply and prohibitively high costs, Europe's airlines are expected to call for regulators to roll back mandates for the use of synthetic sustainable jet fuel (eSAF) starting in 2030, Reuters reported this week.

The lobbying comes after Air France-KLM, Ryanair, Lufthansa, easyJet and British Airways-owner IAG have for years lamented what they see as an unequal burden on Europe's airlines, allowing Asian and Middle Eastern carriers a cost advantage.

Industry and Environmental Perspectives

The green jet fuel industry and environmental groups insist the shift is necessary to reduce the sector's reliance on oil.

Impact of Middle East Conflict on Aviation

Ripple Effects of War and Oil Prices

MIDDLE EAST WAR RIPPLES THROUGH SECTOR

While sustainability is in focus, the Iran war and oil prices above $100 a barrel will likely be front and centre.

The Middle East conflict, now well into its third ​week, has thrown aviation into turmoil, with flights cancelled or rerouted thousands of miles and most airspace over the Gulf still closed amid fears of missile and ​drone attacks.

Jet fuel prices have spiked, pushing up operating costs, with European prices doubling and Asian prices up almost 80% since U.S. and Israeli strikes on Iran began in late February.

Airline Responses to Fuel Price Surge

Air France-KLM and SAS have already said they will have to hike ticket prices due to the rising cost of jet fuel, while Finnair has warned of the risk of jet fuel supplies running out due to the effective closure of the Strait of Hormuz, a major oil transit route.

Christian Meisner, head of human resources at jet engine maker GE Aerospace, told Reuters the industry is forging ahead with investments in fuel-saving technology despite the uncertainty.

"As serious as things are in the world.... we do not see airlines stopping deliveries of new airplanes," he said. "What (the crisis) might do is put a more acute focus on efficiency, meaning fuel burn," he said in an interview.

Winners and Losers in the Airline Sector

WINNERS AND LOSERS?

Comparing U.S. and European Airlines

U.S. airlines such as Delta this week warned of higher ticket prices tied to fuel costs since many American carriers have not hedged their fuel costs. Spring travel demand, however, remains strong.

Europe's leading airlines have largely hedged their jet fuel costs and will be shielded, at least for the next few months, from the price shock triggered by the war.

Profitability and Travel Trends

IATA projected in December that European airlines are set to be the most profitable around the world, surpassing North American airlines this year.

Analysts say European tourists are likely to travel closer to home to cut flight times and avoid flying long-haul over the Middle East. But the jury is out on whether the Gulf conflict will result in a post-war shift towards European carriers over the longer term, given the historic market power of Gulf hubs.

Ryanair's CEO Michael O'Leary has said the budget carrier is expecting more bookings to travel within Europe, while British Airways is adding more flights to destinations like the Caribbean that avoid flying over Middle Eastern airspace.

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(Reporting by Joanna Plucinska and Tim Hepher, Editing by Adam Jourdan, Kirsten Donovan)