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Australia’s Qantas Airways, Scandinavia’s SAS and Air New Zealand announced airfare hikes on Tuesday, blaming an abrupt spike in the cost of fuel caused by the Middle East conflict that is rattling the global aviation sector.
Jet fuel prices, which were around $85 to $90 per barrel before U.S.-Israeli strikes on Iran, have soared to between $150 and $200, New Zealand’s flag carrier said as it suspended its financial outlook for 2026 due to uncertainty over the conflict.
The war, which disrupted shipping via the world’s most vital oil export route, has sent oil prices surging, upending global travel, pushing airline tickets on some routes sky-high, and sparking fears of a deep travel slump.
“Increases of this magnitude make it necessary to react in order to maintain stable and reliable operations,” an SAS spokesperson said in a statement to Reuters, adding it had implemented a “temporary price adjustment”.
The largest Scandinavian airline last year temporarily adjusted its fuel hedging policy due to uncertain market conditions and said that it had no fuel consumption hedged for the following 12 months.
Several Asian and European airlines, including Lufthansa and Ryanair, have oil hedging in place, securing a part of their fuel supplies at fixed prices.
A spokesperson for Air Canada told Global News it had taken hedging positions for “a small portion of our short-term needs, to manage fuel price volatility,” and would not comment on potential future airfare hikes.
Finnair, which had hedged over 80% of its first-quarter fuel purchases, warned that even the availability of fuel could be at risk if the conflict dragged on.
“A prolonged crisis could affect not only the price of fuel but also its availability, at least temporarily,” a Finnair spokesperson said, adding that this was not happening yet.
Kuwait, a major jet fuel exporter to north-west Europe, has faced output cuts.
WestJet acknowledged fuel is the largest input cost for any airline and hinted at future airfare hikes, adding it will continue to monitor the situation and “respond accordingly.”
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“The recent sharp increase due to the situation in Iran has already made operating flights more expensive, based on this, it’s likely further pricing adjustments may be needed,” a spokesperson told Global News.
AIRSPACE CHAOS IN THE MIDDLE EAST
Highlighting the airspace chaos in the Middle East, planes arriving in Dubai were briefly placed in a holding pattern on Tuesday due to a potential missile attack, flight tracking service Flightradar24 said on X. The planes eventually landed.
Qantas said in addition to increasing international fares, it was exploring redeploying capacity to Europe as airlines and passengers seek to evade disruptions in the Middle East, where drone and missile fire have curtailed flights.
Airfares have soared on Asia-Europe routes due to airspace closures and capacity constraints, and Hong Kong’s Cathay Pacific Airways 0293.HK said on Tuesday it was adding extra flights to London and Zurich in March.
Air New Zealand said it had raised 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 more adjustments to prices and schedules possible if jet fuel costs remain elevated.
Hong Kong Airlines said on its website it would raise its fuel surcharges by up to 35.2% from Thursday, with the sharpest increase on flights between Hong Kong and the Maldives, Bangladesh and Nepal.
Still, some European airlines said they saw no near-term need to act yet. A spokesperson 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 the end of its winter-season flights to Abu Dhabi because of the “continuing uncertainty”, cancelling all services until near the end of the year that were scheduled to run until April 11.
AIRLINE SHARES STABILISE AFTER SELLOFF
Some airline stocks rose and oil prices fell to around $90 a barrel on Tuesday from a high of $119 on Monday after U.S. President Donald Trump said on Monday the war could be over soon.
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 were down between 2% and 4% in early trading.
U.S. airlines rely less on hedging than their European and Asian rivals in managing their fuel costs, making their shares more vulnerable to oil’s volatility.
In Asia, Qantas closed 0.5% higher, Korean Air Lines 003490.KS rose 3% and Cathay Pacific 0293.HK was up 3.6%. All had recorded sharp declines on Monday.
Fuel is the second-largest expense for air carriers after labour, typically accounting for a fifth to a quarter of operating expenses.
CONFLICTS SHRINKING AVAILABLE AIRSPACE
In addition to high fuel costs, tightening airspace also threatens to derail the global travel industry, as pilots reroute to avoid the Middle East conflict and capacity on popular routes fills up.
Emirates, Qatar Airways and Etihad typically jointly account for about one-third of the passenger traffic between Europe and Asia and fly more than half of all passengers from Europe to Australia, New Zealand and nearby Pacific Islands, according to Cirium.
European airlines have already struggled with the shortage of available airspace created 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 has become even more challenging.
—With additional files from Global News
