Airlines cut flights and hike fares as fuel prices surge

Airlines Reduce Routes and Raise Prices Amid Fuel Cost Increases

As tensions between the US and Israel intensify with Iran, aviation companies are adjusting their operations. Air India and Air New Zealand have announced cuts to flight schedules and higher fares, citing a sharp rise in jet fuel prices. This trend is not isolated to these carriers, as airlines worldwide are implementing urgent measures to manage the increased operational expenses.

Jet fuel, which constitutes 20-40% of airlines’ expenses, has seen unprecedented cost hikes. In Europe, the standard price for aviation fuel reached a record $1,838 per tonne last week, up from $831 before the conflict escalated. This surge has forced carriers to rethink their strategies, with some already reducing services and others preparing to raise fares further.

Global Impact of Fuel Shortages

Airlines across Asia, the Middle East, and the Americas are feeling the strain. For instance, China Eastern Airlines and Korean Air have both taken drastic steps, with the latter entering emergency management mode. In the US, United Airlines and Scandinavian carrier SAS have similarly reduced routes and boosted ticket prices. Meanwhile, British Airways and EasyJet have managed to avoid immediate cuts, as they secured fuel at pre-war rates.

Analysts predict that price increases and cancellations will persist. “With exports already at their lowest in four years, maintaining current demand levels is unsustainable,” noted Mick Strautmann from Vortexa. He warned that as summer travel peaks, the pressure on airlines to adjust pricing and reduce capacity will grow. “The situation is worsening due to the Middle East’s limited exports,” he added.

“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.

Strategic Adjustments by Carriers

Some airlines are adopting specific strategies to cope. Air India, for example, is modifying its domestic fuel surcharge structure, shifting from a flat fee to a distance-based calculation. The carrier also increased surcharges for international routes, calling it “one of the most challenging fuel cost environments in recent years.”

Analysts highlight the Gulf’s significance in fuel supply, which accounts for around 50% of Europe’s imports. Much of this flow passes through the Strait of Hormuz, a key passage closed by Iran in response to recent attacks. The disruption has amplified price volatility, with the Al-Zour refinery in Kuwait contributing roughly 10% of Europe’s imports.

“Europe is not close to running out, as jet fuel is produced domestically and stocks should be manageable in April,” said George Shaw of Kpler. “However, some localized issues could arise in May as import declines become more pronounced.”

Uncertainty Over Summer Travel

Despite the current challenges, experts caution that shortages remain distant. Ryanair’s Michael O’Leary warned of potential disruptions in May if the conflict continues, though he acknowledged the risks are not immediate. The combination of rising costs and reduced supply is expected to further tighten the market, prompting airlines to scale back operations and pass on expenses to passengers.