Zimelis Warns: Rising Oil Prices Threaten Global Airlines Bankruptcy

Impacts of the War on the Global Aviation Industry

The Lithuanian-Turkish billionaire Gediminas Zimelis, residing in Dubai, warned about the impact of the war between the United States and Israel on one side and Iran on the other on the aviation industry.

He stated that the ongoing conflict leads to operational disruptions and a decline in demand, with no clear vision on when the war will end, threatening the stability of airlines worldwide.

Rising Oil Prices Double Financial Pressure on Airlines

Oil prices have risen by 50% since the beginning of the conflict in February, reaching $100 per barrel, making fuel costs account for about 25% of the total operating costs of airlines.

Zimelis explained that this significant increase might force some companies to impose additional fees, while others may have to cancel some flights due to growing uncertainties about fuel availability.

Zimelis' Strategies to Face Previous Crises

Bloomberg reported that Zimelis faced similar challenges during the COVID-19 pandemic six years ago, when demand for short-term aircraft leasing collapsed.

At that time, he converted his fleet at Avia Solutions Group to air cargo to ensure business continuity.

Relocating the Fleet to Asia and Brazil to Reduce Losses

Zimelis plans to relocate a significant portion of his fleet, which includes 145 aircraft, from Europe to Asia and Brazil, as demand for European flights declines due to the war in the Middle East and disruptions in air traffic in the region.

This is considered a strategic move to reduce operational risks in the European market.

Decline in Bookings and the War's Impact on Customers

European airlines typically resort to leasing aircraft from his company during the peak summer season, but this year has seen a significant decline in bookings compared to previous seasons.

Zimelis explained that customers in Turkey are not eager to sign new contracts, but he noted that he has distributed his fleet across several major hubs, while continuing his expansion plans in Dubai.

Zimelis' Preparedness for Geopolitical Risks

Zimelis, who left his home before the war began and plans to return to the UAE soon, said:

"We must be prepared for any geopolitical risks, whether at the regional, provincial, or jurisdictional level."

He added: "If the war continues for more than a month, we may witness bankruptcies of airlines worldwide."

Wet Leasing Activity and the Importance of Market Flexibility

Zimelis established the wet leasing business, a risky activity involving leasing aircraft for short periods with crew and maintenance services.

This model has proven its resilience during previous crises, helping the company cope with fluctuations in global demand, and his net worth is approximately $1.7 billion according to Bloomberg's billionaire index.