Cathay Pacific, AirAsia and Thai Airways are among a growing number of airlines raising airfares as conflict in the Middle East drives up oil prices and sends travelers to alternative stopover destinations in Asia.
The US-Israeli war against Iran has sent oil prices soaring and restricted access to refineries, and experts predict airfares could rise for months even if the conflict ends.
Some airlines have priced a portion of their crude oil purchases but not the costs of refining it into jet fuel, leaving them exposed to price shocks.
Cathay Pacific planned to increase fuel surcharges for travelers as it had not covered any of its refinery margins and only 30% of its fuel costs, its chief executive, Ronald Lam, told investors on Wednesday.
“Given that jet fuel has almost doubled (in price), I believe we will make an announcement on increasing fuel surcharges for both travel and cargo in due course,” he said.
AirAsia announced on Thursday that it would temporarily increase fares and fuel surcharges, promising to readjust them as market conditions change. The airline declined to comment on reports that it had not fixed its fuel prices.
Thai Airways officials have told investors and the media that they expect airfares to rise by 10% to 15%. Qantas and Air New Zealand said on Tuesday they had raised prices, and the latter added on Thursday that it would cancel thousands of flights from March 16 to May 3, affecting about 44,000 passengers.
Flight cancellations and disruptions in the Middle East have also driven up prices in the short term by pushing international travelers to seek alternative routes, generating growing demand.
Cathay has attracted attention for selling A$39,577 business class round-trip travel from Sydney to London in mid-April. Their economy class fares for the same route cost more than 3,000 Australian dollars.
Flights from Australia to Europe and from India to the United States – routes typically traveled through the Middle East – had seen especially significant increases, Lam said.
Long routes with few operating airlines would likely see the biggest price increases, especially routes previously served by airlines such as Emirates, Etihad and Qatar, according to Ellis Taylor, an analyst at aviation analytics firm Cirium.
Australian connections to Europe, North America and northern Asia would likely drive prices higher and faster, he said.
Taylor said flight prices were unlikely to rise dramatically on domestic flights in Australia and to nearby Southeast Asian destinations such as Bali, as they use less jet fuel and are served by more airlines, but “all airlines will feel the impact of fuel prices,” he said.
Bookings made in the next two weeks are likely to be more expensive and the number of flights offered appears to be falling – even as early as July – putting pressure on fares, Taylor said.
According to Rico Merkert, a transport professor at the University of Sydney, customers looking to fly in the coming months should book immediately to avoid widespread price increases of up to 30%.
Even if hostilities ended immediately, it would take about two months for airlines to be confident they will be able to reduce prices for advance bookings, he said.
“It’s not that they want to make huge profits,” Merkert said. “For some of them it’s pure survival.”
For travelers hoping to fly in September or later, it may be best to wait in case the war ends imminently, Merkert said.
“I’d probably just wait and see over the next couple of weeks… if this is going to be a long war or if they can come to an agreement very quickly.”
Booking site WebJet reported that Australians have already reduced their long-haul flights, switching to domestic and other nearby destinations in the Asia-Pacific region.
