Willie Walsh, director general of the International Air Transport Association, told reporters in Singapore that while crude prices had fallen below $100 per barrel following a U.S.-Iran ceasefire announcement, jet fuel costs were likely to remain elevated due to constraints on refining output.

“If it were to reopen and remain open, I think it will still take a period of months to get back to where supply needs to be given the disruption to the refining capacity in the Middle East,” Walsh said, adding that the region is critical to global supply of refined products beyond aviation fuel.

The Strait of Hormuz, which carries about a fifth of the world’s oil trade, has been heavily disrupted during the recent conflict, squeezing fuel availability and driving up costs across the aviation sector.

Airlines in Asia have responded by cutting flights, carrying additional fuel from origin airports and adding refueling stops, measures that have increased operational costs for carriers already dealing with a sharp rise in jet fuel prices.

The impact has been most acute in import-dependent markets such as Vietnam, Myanmar and Pakistan, where supply constraints have tightened further after China and Thailand halted jet fuel exports and South Korea capped shipments at previous levels.

Walsh said a resumption of crude flows could encourage exporters such as China and South Korea to restart shipments of refined products, easing pressure on the market over time.

However, he noted that higher refinery margins, known as crack spreads, would be needed to incentivize increased jet fuel production.

“There is capacity available once we get the crude oil flowing, but it’ll take a little bit of time,” Walsh said.

Lessors of Go First, which was granted bankruptcy protection on May 10, have made several attempts to reclaim planes for missed payments, filing over 50 requests with the watchdog to allow repossession.

The lessors argue the airline has no rights over planes as the leases have been terminated, but India’s government, and the airline, say the bankruptcy law imposes an asset freeze.

The Delhi High court judge said on Wednesday that the leasing companies can “access the airport” and inspect aircraft, carrying out all interim maintenance at least twice a month

ATF exports from India have reached a record high average daily volume of 208,433 barrels (bpd) so far in June. Kpler records show that the 206,871 bpd previous peak occurred in June 2018. Since the voyage generally takes roughly a month, more than half of the ATF volumes despatched from India this month are destined for Europe, where they are likely to arrive in July.

According to an analysis of data shared by commodity market analytics and intelligence firm Kpler, India’s export of aviation turbine fuel (ATF) could reach an all-time monthly high in June, and the nation is likely to be Europe’s largest source of jet fuel in July, which also happens to be the peak of the continent’s summer travel season.

ATF exports from India have reached a record high average daily volume of 208,433 barrels (bpd) so far in June. Kpler records show that the 206,871 bpd previous peak occurred in June 2018. Since the voyage generally takes roughly a month, more than half of the ATF volumes despatched from India this month are destined for Europe, where they are likely to arrive in July.

According to Kpler’s projections, 131,136 bpd, or more than 30%, of the 435,482 bpd in ATF imports to Europe in July are projected to come from India. As Europe avoids Russian crude oil and petroleum fuels due to the conflict in Ukraine, Indian refiners, particularly export-focused private sector giants Reliance Industries and Nayara Energy, have emerged as important providers of refined petroleum products to the continent. It’s interesting that this is happening at the same time as Indian refiners are buying up cheap Russian oil, giving the impression that goods made from Russian barrels may be travelling through India to reach European beaches.

According to the Kpler statistics, India contributed the most to the deliveries of jet fuel imported into Europe in April and May as well. However, in June, volumes significantly decreased while imports from Kuwait showed a robust increase.

The month of July falls in the middle of the June through August summer travel season in Europe. The continent typically has increased travel demand at this time, which leads to an increase in jet fuel consumption. According to recent data on jet fuel imports into Europe, Kuwait, India, South Korea, the United Arab Emirates, and Saudi Arabia are the continent’s main suppliers of jet fuel.

Lead Crude Analyst at Kpler, Viktor Katona, claims that from the perspective of Indian refiners, the increase in jet fuel exports from India is timely. “The monsoon season has historically hampered domestic fuel consumption in India, so this (high ATF export quantities) is really helpful to Indian refiners. Therefore, having many export markets aids in maintaining high refinery run rates, according to Katona. In India, demand for refined goods and transportation fuels decreases during the monsoon because some sectors see a reduction in production owing to the rains, which in turn reduces demand for refined products and other petroleum products.

As of March 4, when the Indian government eliminated the cess on jet fuel exports, there are no restrictions on the fuel’s exports, according to Katona. In order to collect super-normal profits made by oil producers and gasoline exporters due to the rise in global oil prices and fuel margins, the government began enforcing windfall gains taxes through cesses on domestic crude oil and exports of refined fuels, including petrol, diesel and ATF, from July 1, 2022.

Despite being the third-largest consumer of crude oil in the world and relying on imports for more than 85% of its oil needs, India is a net exporter of petroleum products due to its higher than necessary refining capacity of 250 million tonnes annually, or roughly 5 million bpd. India is now playing a more significant role in the global crude oil and refined products supply map as a major refining hub that has increased purchases of discounted Russian oil.

In spite of the initial annoyance of the West over India’s increasing purchases of Russian oil in the wake of Moscow’s invasion of Ukraine, major Western nations like the US have come to terms with the growing flow of Indian refined goods to Europe. The key reason for this, in their opinion, is that despite Russian oil and goods being rejected by many nations, refiners in nations like India are allegedly guaranteeing that the world market for oil and processed products is balanced and adequately supplied.

In fact, according to a number of experts, the achievement of price limitations on Russian oil and refined goods imposed by the G7 countries and their allies without triggering a shock to the global supply chain depends on increased purchases of Russian oil and expanding exports of petroleum products from nations like India to Europe.

Indian budget airline IndiGo (INGL.NS) announced at the Paris Airshow on Monday the biggest ever plane order by number of aircraft with a deal for 500 Airbus (AIR.PA) narrowbody jets.

A day later, rival Air India firmed up an order for 470 Airbus and Boeing (BA.N) aircraft that, until Monday, had been the industry leading plane deal.

With a total of almost 1,000 jet orders between them, IndiGo and Air India are betting an economic boom and growing middle class will spur demand for domestic air travel, and new jets will help them grab a bigger share of international traffic.

The number of domestic air passengers in India is expected to surge to 350 million by 2030, up from 144 million in 2019, with international air travellers up to 160 million from 64 million in 2019, according to aviation consultancy CAPA India and government data.

The number of airports in India is also set to climb to 200 over the next five years from 150 today, as the government looks to connect the country’s remotest areas by air.

“It is time to seize the skies,” civil aviation minister Jyotiraditya Scindia told reporters in New Delhi on Tuesday, adding the new planes would help Indian airlines expand at home and across continents.

IndiGo, which operates a fleet of 300 planes, is yet to take delivery of some 500 jets from previous orders with Airbus.

This puts the total deliveries by planemakers to Indian carriers at more than 1,500 over the next decade and beyond – double India’s existing fleet of 700 planes across all airlines.

That makes India a key market for planemakers, especially Airbus which has bagged the bulk of new orders, outdoing U.S. rival Boeing, and engine manufacturers whose wares will be put to test.

Leasing Concerns

But while the opportunity in India is big, so are the risks, says Ameya Joshi, an independent aviation analyst.

The recent failure of Go First, the third Indian airline to go under in 11 years, has exposed a gap in local regulations over the protection of rights of foreign leasing firms that finance many large plane deals. Indian budget carrier SpiceJet (SPJT.NS) is also facing the ire of lessors over unpaid dues.

Leasing companies warn that restrictions on repossessing their assets in case of defaults will drive up costs for all Indian airlines – even for IndiGo and Air India.

“There needs to be a huge regulatory revamp to protect lessors’ interests. It will eventually help Indian airlines by lowering risk and moderating lease rental costs,” said Joshi.

India is a critical market for lessors. Sale-and-leaseback deals – where airlines sell planes to lessors to free up capital and then rent them back – accounted for 75% of plane deliveries in India from 2018 to 2022, compared with a global average of 35%, data from aviation analytics firm Cirium shows.

This is causing concerns among some leasing companies that fear being too exposed to a market fraught with risks.

Some analysts also say that the airlines could be over-ordering jets in pursuit of the same passengers.

The bullish outlooks from IndiGo and Air India, which together control about 80% of the domestic market, suggest both are starting to benefit from their scale compared to rivals.

Joshi expects annual passenger growth in India to taper to 6%-10% going forward, coming off highs of 20% seen in the immediate aftermath of the pandemic. But he thinks the market will stabilise as weaker airlines will fall by the wayside.

“India is moving towards becoming a stable market where growth will not be as high but airlines will be profitable and connectivity will be better despite higher fares,” he said.