Australia’s Qantas Airways, Scandinavia’s SAS and Air New Zealand announced fare hikes on Tuesday, blaming a spike in fuel costs caused by the Middle East conflict that has rocked the global aviation sector.
Jet fuel prices have risen to between $150 and $200 a barrel, from around $85 to $90 a barrel before the US-Israeli attack on Iran, as New Zealand’s flag carrier said it had suspended its financial outlook for 2026 due to conflict uncertainty.
The war, which has disrupted shipping through the world’s main oil export route, has boosted oil prices, boosted global travel, sent plane tickets sky-high on some routes and raised fears of a deeper travel slump.
“An increase of this magnitude is necessary to respond to maintain stable and reliable operations,” a SAS spokesman told Reuters in a statement, adding that it had implemented a “temporary price adjustment.”
Last year the largest Scandinavian airline temporarily adjusted its fuel hedging policy due to uncertain market conditions and said it had not hedged any fuel consumption for the next 12 months.
Several Asian and European airlines, including Lufthansa and Ryanair, have oil hedging, securing a portion of their fuel supply at a fixed price.
An Air Canada spokesperson told Global News it has taken hedging positions “for a small portion of our short-term needs, to manage fuel price volatility” and would not comment on potential future fare hikes.
Finnair, which controls more than 80% of its first-quarter fuel purchases, has warned that fuel availability is also at risk if the conflict drags on.
“A prolonged crisis could affect not only the price of fuel but also its availability, at least temporarily,” a Finnair spokesman said, adding that this is not happening yet.
Kuwait, a major jet fuel exporter to northwest Europe, faces production cuts.
Airspace Chaos in the Middle East
Flights arriving in Dubai were briefly placed in a holding pattern on Tuesday due to a possible missile attack, flight tracking service Flightradar24 said on X, highlighting the chaos in the airspace in the Middle East. The planes have finally landed.
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As well as raising international fares, Qantas said it was exploring the possibility of redeploying to Europe as airlines and passengers try to avoid disruptions in the Middle East, where drone and missile fire has curtailed flights.
Airfare on Asia-Europe routes has soared due to airspace closures and capacity constraints, and Hong Kong’s Cathay Pacific Airways 0293.HK said on Tuesday it was adding additional flights to London and Zurich in March.
Air New Zealand said it had increased one-way economy fares by NZ$10 ($6) on domestic routes, NZ$20 on short-haul international services and NZ$90 on long-haul, with further adjustments to prices and schedules possible if jet fuel costs rise.
Hong Kong Airlines said on its website that it will increase its fuel surcharge by up to 35.2% from Thursday, with sharp increases on flights between Hong Kong and the Maldives, Bangladesh and Nepal.
Still, some European airlines said they don’t need to operate yet. A spokesman for British Airways-owner IAG ICAG.L said it was well hedged for the immediate future and had no plans to change ticket prices.
British Airways said on Tuesday it had brought forward its winter-season flights to Abu Dhabi due to “continued uncertainty”, canceling all services until the end of the year that had been planned to run until April 11.
Airline shares stabilize after sale
Some airline stocks rose after US President Donald Trump said on Monday that the war could end soon, and oil prices fell around $90 to $119 a barrel on Tuesday.
When markets opened in Europe, airline shares were up between 4% and 7%. Shares of major U.S. carriers Delta Air Lines DAL.N, United Airlines UAL.O, Southwest Airlines LUV.N and American Airlines AAL.O fell between 2% and 4% in early trade.
US airlines rely less on hedging than their European and Asian rivals to manage their fuel costs, making their stocks more vulnerable to oil volatility.
In Asia, Qantas closed 0.5% higher, Korean Air Lines 003490.KS rose 3% and Cathay Pacific 0293.HK rose 3.6%. All recorded sharp declines on Monday.
Fuel is the second largest expense for air carriers after labor, typically accounting for one-fifth to one-quarter of operating costs.
Conflicts are shrinking available airspace
Along with higher fuel costs, tightening airspace threatens to derail the global travel industry as pilots reroute to avoid Middle East conflict and popular routes fill capacity.
Emirates, Qatar Airways and Etihad typically account for a third of passenger traffic between Europe and Asia and fly more than half of passengers from Europe to Australia, New Zealand and nearby Pacific islands, according to Sirius.
European airlines are already struggling with a shortage of available airspace caused by the war in Ukraine, with many avoiding Russian airspace and flying longer international routes. Now, with even less available airspace, they say their business is even more challenging.
– with additional files from Global News
(Tags to be translated)Iran(T)Airlines(T)Middle East Conflict(T)Oil Prices(T)Consumer(T)US News(T)World
