Europe jet fuel drop comes too late to lift demand

12 September 2008 17:35  [Source: ICIS news]

LONDON (ICIS news)--A drop of around $400/tonne in European jet fuel values since its peak in mid-July has not been enough to lift demand or save some air operators from continuing operations, market players said on Friday.

European jet fuel was at $1,039.75-1,048.75 CIF (cost, insurance and freight) NWE (northwest Europe) by global chemical market intelligence service ICIS pricing, some 40% lower than its peak of $1,458/tonne CIF NWE set on 3 July.

Crippling fuel costs resulted in the collapse on Friday of the UK’s third largest package holiday group, XL Leisure Group.

A statement issued on XL’s website cited "volatile fuel prices and the economic downturn" as reasons for going into administration. The group’s 21 aircraft have been grounded, leaving thousands of holidaymakers stranded in 50 destinations.

The grounding of its fleet follows just weeks after the similar collapse of Zoom Airlines.

Industry players said the $400/tonne fall was not enough to salvage profitability for some airlines this year, with European jet kerosene traders reporting very quiet spot market activity for some weeks and no immediate prospect of relief.

"I can see nothing that is going to change the situation in the short term," said one trader.

The International Air Transport Association issued a recent forecast of industry losses of $5.2bn (€3.7bn) in 2008, and projected losses of $4.1bn in 2009.

Although there is to be a further round of US-EU Open Skies talks later in the month to help create more flexible air traffic laws, industry analysts believed this would do little to aid flight demand, and thus jet fuel demand, in the short term.

"The [Open Skies] talks will help the major airlines ride out the tough conditions, but it won’t have any bearing on demand," said another trader.

($1 = €0.72)

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By: Alex Davis
+44 20 8652 3214

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