The outbreak of the conflict in the Middle East caused a sharp increase in oil and fuel prices around the world. This has a significant impact on many industries. Recently, there has been a lot of talk about airlines openly talking about their concerns about possible shortages of aviation fuel.
In a recent conversation with Business Insider, Adam Sikorski, president of Unimot (a Polish fuel company), pointed out that aviation fuel may be the first segment in which Europe will feel the real consequences of congestion in global supplies. Airports operate in an almost continuous system, a fuel is an element that cannot be “put aside” without immediate consequences for schedules, connection networks and goods flows.
The director of the International Energy Agency (IEA), Fatih Birol, recently warned that Europe has about six weeks' supply of jet fuel.
PLL LOT responds to the crisis. What is he doing?
How does Poland's largest airline cope in these exceptional market conditions? There is a lot of information about new connections on the PLL LOT website in the news tab. The carrier boasts and there are no messages about canceled flights. In Business Insider, we asked PLL LOT to summarize the current changes in the flight network and present plans for the near future.
“LOT Polish Airlines does not reduce or eliminate connections from its network“- assures the press office of our national carrier.
See also: LOT is suffering because of the war in Iran. This is how he defends himself
“We see limited opportunities to translate fuel price increases into ticket prices – that's why we're focusing on operational optimization, adapting the shape of the connection network to new realities“- adds LOT Polish Airlines.
They specify that these adjustments are operational in nature and concern primarily single rotations – mainly within the short-haul and regional network.
“This means, among other things, flexible management of frequencies on selected routes, depending on current market and operational conditions,” we read in the information provided.
Fuel prices are also affecting PLL LOT
In the information provided to Business Insider, representatives of PLL LOT admit that the company is facing – like the entire industry – “an unprecedented increase in fuel prices, which significantly increases operating costs“.
How does he deal with it? “The company conducts hedging activitiesbut with such dynamic market changes, they are not able to fully neutralize the cost pressure,” he admits.
Hedging activities of airlines involve hedging against increases in aviation fuel prices by concluding financial contracts (e.g. futures or options) that “freeze” the fuel price at a specific level for the future. Thanks to this, even if market prices rise sharply, the airline purchases fuel at a previously agreed, lower price or receives financial compensation, which stabilizes operating costs and reduces the risk of sudden losses.
“At the same time, we constantly monitor the geopolitical situation and flexibly manage the fleet, directing it to where it is possible to maintain stable operations.” – indicates PLL LOT.
