Oil’s new normal undercuts jet maintenance boom

Ryanair Holdings

07/10/2026 10:47

The author is a Reuters Breakingviews columnist.  The opinions expressed are his own.
By Oliver Taslic
LONDON, Oct 7 (Reuters Breakingviews) - Oil’s new normal is a problem for the aerospace sector. In a year when crude prices have spent extended periods above $100 a barrel, US carrier Spirit has ceased operations and even financially strong airlines like Ryanair RYA.I are cutting flights. That’s a headache for engine specialists like $322 billion GE Aerospace GE.N, $150 billion Safran and $158 billion Rolls-Royce RR.L, which benefit as airlines fly more and require maintenance and spare parts via the “aftermarket”.
When air travel came roaring back after Covid-19, Airbus AIR.PA and Boeing BA.N couldn’t build new jets as fast as airlines wanted them. Carriers filled the gap by keeping older planes in service longer, fattening top and bottom lines at aftermarket players. But that requires airlines having the desire – and ability – to pay to keep their fleets airborne. In that context, the renewed spike in fuel costs since the US-Iran ceasefire collapsed in July is a big problem.
Jet fuel prices are over double last year’s average, according to airline trade body IATA, which in June slashed its forecast for 2026 passenger traffic growth to 2.1% from 4.9% previously. Such a sharp increase in costs puts airline profitability under pressure. That’s concerning for maintenance mavens: Citi analysts recently wrote that carrier margins are a good predictor of total shareholder returns for aftermarket players.
Some cracks are already showing. Carsten Spohr, CEO of Deutsche Lufthansa LHAG.DE, which owns maintenance outfit Lufthansa Technik, said in August that customers were saving cash by delaying major “heavy check” refits. Following September’s AeroEngines Europe conference in Lisbon, Citi analysts cited a rising trend of airlines opting for shorter-term, more targeted maintenance rather than full overhauls.
The engine players do have extensive backlogs of work. Given the war’s unpredictability, carriers may be hesitant to lose maintenance slots or retire aircraft, given pandemic-era memories of downsizing and then being caught flatfooted when demand came rocketing back. Bernstein analysts have also noted that – for now at least – the Iran energy shock has not been accompanied by the sort of 1990s-style recession that really hammers aviation. And long-haul flying is benefiting from both a tighter supply of aircraft and a greater ability to pass on fare increases, shielding Rolls-Royce in particular and to some extent GE, which also has a large short-haul business.
Still, heady valuation multiples could make any slowdown more painful. Before a recent selloff, GE was trading around 45 times forward earnings, per LSEG data. Rolls-Royce and Safran are both above their 10-year averages on an enterprise value to forward operating profit basis, excluding the pandemic years. With no obvious off-ramp to the US-Iran stalemate, these could start to look toppy.
Follow @Breakingviews on X
     
CONTEXT NEWS
Amin Nasser, chief executive of the world’s biggest oil company, Saudi Aramco, told the Energy Intelligence Forum in London it could take up to two years to refill global stockpiles drawn on as an emergency measure, Reuters reported on October 5.
“Until Hormuz fully re-opens and confidence returns, the crude reality is that pressure at both ends of the barrel will intensify. Even then, replenishing inventories while meeting demand could take up to two years,” he said. Both ends of the barrel refers to unrefined crude and refined products, such as diesel and jet fuel, Reuters reported.
The International Air Transport Association said on September 30 that global passenger demand was down 0.8% year-on-year in August.
“Excluding the Middle East carriers, demand for air travel grew by 0.6% year-on-year in August, half the pace seen in July,” said Marie Owens Thomsen, IATA’s chief economist. “The coming months will reveal whether travelers, whose purchasing power has been reduced by higher energy prices, are adjusting their travel budgets, and might be discouraged from traveling due to the prevailing geopolitical instability.”
Deutsche Lufthansa’s additional jet fuel bill this year will exceed the €1.5 billion it flagged in August as the Iran war drags on ​and oil prices spike, Reuters reported on September 29, citing group CEO Carsten Spohr.

(Editing by George Hay; Production by Varun H K)
((For previous columns by the author, Reuters customers can click on TASLIC/oliver.taslic@thomsonreuters.com))