Holidaymakers choose train, staycations amid airlines’ jet fuel crisis

Europe’s jet fuel crisis is threatening peak travel season, but consumers are instead looking to holiday closer to home to save money and avoid flight disruptions.

European airlines have taken a hit since the U.S.-Iran war began, as they battle surging fuel costs as well as a jet fuel shortage while the Strait of Hormuz remains blocked. The region typically imports 75% of its jet fuel from the Middle East.

Jet fuel prices increased 103% by the end of March compared to the month prior, according to the International Air Transport Association.

The International Energy Agency chief, Fatih Birol, warned in April that Europe was just weeks away from running out of jet fuel if it was unable to secure alternative export sources.

As fuel costs form around 20 to 40% of an airline’s operating costs, many are now offloading those costs by increasing surcharges and canceling unprofitable routes. German carrier Lufthansa, Scandinavian airline SAS, and Dutch-French airline Air France-KLM are among those cutting flights.

British holidaymakers are now looking at destinations closer to home in Southern Europe, including France, Spain, and Greece, and considering alternative travel options, including rail, as the Iran war raises the stakes of taking long-haul flights.

“I think the trend you will see this summer in Europe is people will start to holiday at home,” Ryanair‘s CEO Michael O’ Leary told CNBC’s Ben Boulos at the Norges Bank Investment Management Conference in Oslo in April.

 “I think people will increasingly decide, let’s book Portugal, Spain, Italy, and let’s avoid the Middle East or going long haul… we’re seeing people switch away from going to the Middle East or going long haul, towards going short haul,” O’Leary added.

Airlines face strong competition from rail this summer, especially as Europe’s trains have a history of consistently transporting more passengers annually than aviation, Allianz Trade noted in research published in April.

The research warned that Europe is one of the “most structurally exposed regions” to the jet fuel crisis as it produces only around 50% of its kerosene — a type of jet fuel — domestically.

Meanwhile, between 2014 and 2024, railways transported 81.2 billion passengers, compared with 8.9 billion passengers transported by air companies, according to Allianz.

“The big game changer currently is higher flight tickets and also the price of gasoline being quite expensive,” Allianz’s Head of Corporate Research Ano Kuhanathan said.

He noted that UK travelers typically drive to France and other nearby European destinations when the price of diesel is quite low, and cheaper than the train.

“But right now, with high diesel and gasoline prices, I think there might also be a bit more interest in traveling by train,” he said.

He added that potential flight cancelations are also adding to travelers’ decisions to choose rail.

“If you decide to travel abroad and, for some reason, your return flight is canceled, you’re on your own, you’re stuck in most likely a foreign country, and you need to find accommodation. So clearly, I think all of this is weighing on people’s thinking.”

Tourism firm TUI Group reported a strong trend of consumers booking last-minute vacations to Western Mediterranean countries in particular this year, with Spain, the Balearic and Canary Islands, and Greece set to be the most popular destinations this summer.

Meanwhile, booking trackers point to a 32% year-on-year gain for Spain, and 20% for Italy, Greece, and Portugal, according to Allianz Group.

Kuhanathan explained that U.K. travelers have historically favoured southern Europe, and the Iran war will “reinforce” this pattern. “What is clearly going to take a bit of a toll is the long-haul flights to Asia, maybe Latin America.”

Stephen Furlong, senior transport and logistics analyst at Davies, previously told CNBC that airlines are responding to rising fuel prices by “reducing frequencies and higher frequency routes, because some routes don’t make sense at these higher oil prices.”

Furlong said customers may vacation closer to home as uncertainty continues.

“Possibly we’d see in the near term more demand for increased leisure trips closer to home, like Spain, Portugal, and France, as opposed to the eastern Mediterranean,” Furlong said.

Lisa Marçais, general manager for Northern Europe and EMEA at Airbnb, said there’s a clear uptick in demand for U.K. getaways during the spring and summer seasons, which are generally more accessible and offer better value for money.

“If you are not very confident about your economic future, your holidays are more and more expensive, maybe you will decide to save money for rainy days instead of vacationing in southern Spain,” Kuhanathan added.