Some airlines are expanding capacity for peak travel season despite jet fuel concerns

Spanish airlines are increasing seat capacity for the April-October peak travel season despite concerns over a fuel supply crunch linked to the Iran war.

The airlines are banking on strong tourist interest in the Mediterranean country with a rise in capacity to almost 260 million seats, in line with last year's 5.9% passenger growth.

It comes as industry players caution that inflation, geopolitical tension and economic uncertainty could weigh on demand.

"The outlook is good," Javier Gandara, president of Spanish airlines association ALA, said at a news conference Tuesday.

"The 6% increase shows confidence that many people will want to visit Spain this summer, and part of that demand is traffic diverted from conflict zones and neighbouring areas."

Route expansions will be concentrated in coastal regions such as Alicante and Andalusia, with capacity increasing by 14% and 8%, respectively, while Madrid and Barcelona airports will see an 8% rise in available seats.

However, actual demand during the summer peak remains unclear.

"We are facing a much more uncertain situation this year, with developments changing by the minute," Gandara added.

Spain's airlines are relatively insulated from potential fuel supply disruptions, as over 80% of their jet fuel comes from domestic refineries, with only 11% of their crude oil sourced from the Middle East, according to ALA.

International airlines serving Spain are also not expected to significantly alter fares, as approximately 70% of summer fuel needs are secured through pre-conflict hedging agreements.

However, Spanish low-cost carrier Volotea has introduced a temporary pricing policy linking ticket prices to fuel costs.

Consumer advocacy group Facua on Monday called for an investigation into the policy, alleging potential breaches of consumer protection laws.

Gandara said he was unaware of any other Spanish airlines implementing similar measures, adding: "We always expect that each company should be free to set its business strategy within the regulatory and legal framework".