Airlines cut flights and hike fares as fuel prices surge
Airlines cut flights and hike fares as fuel prices surge
As tensions between the US and Iran intensify, Air India and Air New Zealand have initiated measures to trim services and raise ticket prices, driven by soaring jet fuel costs. This trend reflects a broader challenge for global carriers, with fuel expenses accounting for 20-40% of their operational budgets.
Last week, the European jet fuel benchmark reached an unprecedented level of $1,838 per tonne, nearly triple the $831 per tonne seen before the conflict began. This sharp increase underscores the strain on airlines, many of whom are now scrambling to manage rising expenses. The Middle East, a critical supplier of aviation fuel, remains central to this crisis, with the Gulf contributing about 50% of Europe’s imports.
Most of these supplies pass through the Strait of Hormuz, which Iran has effectively shut down in response to US and Israeli strikes. The disruption has amplified the impact on fuel availability, highlighting the region’s vital role in global aviation supply chains. The Al-Zour refinery in Kuwait, for instance, alone provides roughly 10% of Europe’s jet fuel, according to Energy Intelligence.
“Like airlines globally, we’re experiencing jet fuel prices that are more than double what they would usually be,” said a spokesperson for Air New Zealand.
Air New Zealand’s service reductions are primarily impacting major hubs like Auckland, Wellington, and Christchurch, while flights to smaller airports remain unchanged. The airline, which had already trimmed some routes last month, pledged to offer alternatives to most affected passengers on the same day. Meanwhile, Air India is adjusting its domestic fuel surcharge to a distance-based model, while also increasing charges for international flights amid what it calls “one of the most challenging fuel cost environments in recent years.”
Asian carriers are also adapting, with China Eastern Airlines raising domestic surcharges and Korean Air entering emergency management mode. In the US and Europe, United Airlines and SAS are among the companies reducing flights and increasing fares. Air France-KLM and Cathay Pacific are also adjusting their fuel surcharge policies.
Some airlines, like British Airways owner IAG and EasyJet, have managed to avoid immediate cuts, as they secured fuel at pre-war prices. However, Ryanair’s Michael O’Leary warned that supply disruptions could worsen in May if the conflict continues.
Analysts predict that higher fares and cancellations will persist. “Starting from an already tight market, the current lack of Middle East jet fuel exports is exacerbating the situation,” noted Mick Strautmann of Vortexa. He warned that sustained disruptions could force airlines to further raise prices and cut routes, especially as summer travel demand rises.
“Europe is not close to running out, as jet fuel is produced domestically and April should be manageable in terms of stocks,” said George Shaw of Kpler. “But there may be some localized issues in May as the drop in imports becomes more pronounced.”
With fuel prices at a four-year low for global exports, the pressure on airlines is mounting. Travelers can expect ongoing adjustments as carriers seek to balance costs and demand in the coming months.