Rising Fuel Costs Force Airlines to Cut Flights and Raise Fares

Global airlines are adjusting their operations and pricing strategies amid a sharp increase in jet fuel costs, driven by the ongoing US-Israeli conflict with Iran. The surge has compelled carriers to cancel routes and boost ticket prices, with significant impacts felt across major aviation hubs.

Jet Fuel Prices Reach Record Highs

European jet fuel prices hit a new peak last week, climbing to $1,838 per tonne—more than double the $831 rate prior to the war. This dramatic rise, which accounts for 20-40% of airlines’ operating expenses, has triggered urgent responses from carriers worldwide.

Supply Chain Disruptions in the Middle East

The Gulf region, responsible for about half of Europe’s aviation fuel imports, has become a critical battleground. The Strait of Hormuz, a vital shipping route, has been effectively blocked by Iran in retaliation for US and Israeli strikes, disrupting global supply chains. Middle Eastern refineries, including Kuwait’s Al-Zour facility—which supplies roughly 10% of Europe’s needs—face heightened pressure as exports decline.

Regional and Global Adjustments

Some airlines, like Air New Zealand, have already reduced services on key routes such as Auckland, Wellington, and Christchurch, while maintaining flights to smaller airports. Air India is shifting its domestic fuel surcharge from a flat fee to a distance-based model, citing “one of the most challenging fuel cost environments in recent years.” Similar measures are being taken by carriers in Asia, with China Eastern Airlines and Korean Air entering emergency management modes.

Analyst Predictions and Market Trends

Analysts warn that rising fares and cancellations will persist as the conflict continues. “Starting from an already tight market, the current lack of Middle East jet fuel exports is worsening the situation,” noted Mick Strautmann of Vortexa. He suggested that with global exports at a four-year low, airlines may need to raise prices further and cut flights to meet demand. However, George Shaw of Kpler cautioned that shortages are still a few months away, stating, “Europe is not close to running out, as jet fuel is produced domestically and April should be manageable in terms of stocks.”

Industry Response and Future Outlook

United Airlines and Scandinavian carrier SAS are among the companies reducing services and increasing ticket prices. Air France-KLM and Cathay Pacific are also raising fuel surcharges, while IAG and EasyJet have temporarily avoided similar steps by securing fuel at pre-war rates. Ryanair’s Michael O’Leary hinted at potential disruptions in May, saying, “Jet fuel supplies could start to be disrupted if the conflict continues.” As peak summer travel approaches, these challenges are expected to intensify, reshaping the aviation landscape for the foreseeable future.