UpdateUK reopens airspace as jet fuel prices continue to fall

20 April 2010 23:40  [Source: ICIS news]

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HOUSTON (ICIS news)--The UK reopened its airspace late on Tuesday evening with a flight arriving at London’s Heathrow Airport, authorities said, signalling that concerns were easing regarding volcanic ash clouds from Iceland.

The air crisis lowered jet fuel prices, which sank rapidly as diminished use led to excess supply.

The new guidance called for a phased reintroduction of UK air traffic beginning at 22:00 hours London time (21:00 GMT), according to the Civil Aviation Authority (CAA), the UK's independent regulator that oversees aviation safety.

There would continue to be some no fly zones over parts of Europe where concentrations of ash were too high for flights, although they had dropped since the eruption. Moreover, none covered the UK as of late Tuesday, the CAA said.

“The major barrier to resuming flight has been understanding tolerance levels of aircraft to ash,” the CAA said. “Manufacturers have now agreed increasing tolerance levels in low-ash density areas.”

The CAA said the analysis was based on new data collected from test flights as well as additional analysis from manufacturers over the past few days.

The revised guidance also called for airlines to conduct risk assessments as well as put in place intensive maintenance ash damage inspections before and after each flight.

European jet fuel prices had fallen by more than $20/tonne (€14.80/tonne) this week to the lowest levels recorded in April, as excess supply built up due to the effects of Iceland’s volcanic ash clouds, industry sources said.

One trader said that the biggest problem facing airlines was fuel storage, as most were at full capacity.

“With the lost demand of jet fuel, the build-up of excess product concerns [us the] most as we are still getting deliveries that were negotiated weeks ago. The question is: where do you put it?” said one trader.

After five days of disruption, a small number of flights had taken off in northern Europe, including some UK domestic flights, and the Eurocontrol air safety agency said that it had expected up to 60% of flights over the continent to go ahead on Tuesday.

However, the emergence of a new ash cloud from Iceland was affecting plans to re-open airspace, according to news reports.

The UK's air traffic control body, the National Air Traffic Service (NATS), said the situation remained unpredictable.

The trader said: “As it has been said many times, we can only hope that the situation clears up soon, and with this new development, who knows when that will be.”

Another trader said: “Yes, the volcanic ash cloud has had an impact on jet fuel; however, once the air travel embargo has ended, the issue of supply and demand will be resolved quickly ahead of the summer travel season.”

The latest jet fuel barge prices were assessed by ICIS at $720.75-724.75/tonne FOB (free on board) ARA (Amsterdam Rotterdam Antwerp).

This represented a drop of $23.75 at the lower end of the range and $21.75/tonne at the upper end from Friday’s prices of $744.50-746.50 FOB ARA.

The differentials to May ICE gasoil futures dropped from $39-41/tonne FOB ARA on Friday to $33-37/tonne on Monday.

Earlier, ICIS news reported that US jet fuel prices had fallen by around 3%.

US Gulf jet fuel prices were assessed at 214.25-214.50 cents/gal, down 7.25 cents from Friday.

($1 = €0.74)

Franco Capaldo and Ila Halai contributed to this article

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