European airlines, EU spar over calls to delay green-fuel rules

By Joanna Plucinska and Tim Hepher

BRUSSELS, March 19 (Reuters) - European airline chiefs urged the EU on Thursday to postpone the "broken" parts of its green agenda, warning of higher fares due to the conflict in the Middle East, but the bloc swiftly rejected any delays saying climate targets remained on track.

"We have a path that we need to follow. We continue with our targets and the industry needs to invest," Apostolos Tzitzikostas, the EU commissioner for sustainable transport and tourism, told Reuters.

Citing a lack of available supply and high costs, the airline industry's A4E lobbying group had urged regulators to roll back mandates for the use of synthetic sustainable jet fuel (eSAF) starting in 2030, confirming a Reuters report.

"We are calling for the eSAF mandate to be postponed until eSAF is actually available," easyJet EZJ.L CEO Kenton Jarvis told a news conference.

UNEQUAL BURDEN ON EUROPE'S AIRLINES?

Air France-KLM AIRF.PA, Ryanair RYA.I and other major carriers have for years lamented the green fuel mandate as imposing an unequal burden on Europe's airlines, allowing Asian and Middle Eastern carriers a cost advantage.

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

"It would endanger our future energy security just for the sake of short-term quarterly results," said Matteo Mirolo, special advisor to the CEO, Arcadia eFuels.

MIDDLE EAST WAR RIPPLES THROUGH SECTOR

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.

While most European airlines are cushioned by fuel hedging contracts, those are set to run out in the coming months, with CEOs warning at the annual summit in Brussels that Europe won't be immune to higher ticket prices tied to more expensive oil.

Jarvis said consumers should book their flights early to avoid a rise in prices.

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 that jet fuel supplies may run out due to the effective closure of the Strait of Hormuz.

WINNERS AND LOSERS?

U.S. airlines such as Delta DAL.N 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.

Ryanair CEO Michael O'Leary said European tourists are likely to travel closer to home to cut flight times and avoid flying long-haul over the Middle East.

CEOs said it was too early to tell how the aviation ecosystem will be reshaped by the war in the longer term.

British Airways is adding more flights to destinations like the Caribbean that avoid flying over Middle Eastern airspace, while Lufthansa CEO Carsten Spohr told reporters the carrier is set to launch a new route to Malaysian capital Kuala Lumpur as it expands flights to Southeast Asia.

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