American Airlines has suspended six routes as jet fuel prices remain high due to the war in Iran.
The company noted that the decision is not permanent. "American is not suspending any routes indefinitely as part of this adjustment," a company spokesperson told CBS News. Affected customers will be rebooked or offered a refund.
Jet fuel accounts for at least a quarter of airlines' overall costs, and different carriers have taken measures to deal with the increase. KLM Royal Dutch Airlines, Air Canada and Lufthansa have also announced they will be flying fewer routes as a result.
Strategists who spoke to The Washington Post recently said fuel prices will remain elevated even if a deal is reached to end the war in Iran and reopen the Strait of Hormuz because inventories are almost depleted.
"These shock absorbers have been surprisingly effective," said Jim Burkhard, global head of crude oil research at S&P Global Energy. He was making reference to the use of inventories by authorities around the world. However, he warned that reserves continue to dwindle as the key waterway remains closed by both the U.S. and Iran.
Exxon Senior Vice President Neil Chapman said last week that "we're approaching unheard-of inventory levels" and once that happens "you'll see prices shoot up." Brent crude oil, the international benchmark, could soar to $150 or $160 in such a scenario, he added. "You can see the trajectory of these inventories in the data, and it is concerning."
Ryanair CFO Neil Sorahan has also weighed in on the matter, saying the company has prepared for an "Armageddon situation."
"Do we have plans for some kind of Armageddon situation? Of course, we do, but I don't see that coming to pass. As things stand, we're operating a full schedule this summer, and plan to operate a full schedule into the winter period," he told CNBC.
However, he said other companies likely won't be able to survive if the situation continues: "I think we will see some of the weaker carriers who were already struggling before the war possibly go to the wall in the winter," he added.
The company's CEO had already made a similar claim recently. Also speaking to CNBC, Michael O'Leary said the airline is protected because it had hedged 80% of its fuel but noted that others could face "real failures."
