Airlines cut flights and hike fares as fuel prices surge
Airlines cut flights and hike fares as fuel prices surge
Global airlines are adjusting their strategies amid a sharp rise in jet fuel costs driven by the US-Israeli conflict with Iran. Air India and Air New Zealand have announced plans to reduce flight schedules and increase ticket prices in response to the ongoing energy price hikes. This trend reflects broader challenges faced by carriers worldwide, as fuel expenses typically account for 20-40% of their operational budgets.
Last week, the European benchmark for jet fuel hit a record high of $1,838 (£1,387) per tonne, doubling the pre-war rate of $831. The Gulf region, which supplies about half of Europe’s fuel needs, has seen disruptions due to Iran’s closure of the Strait of Hormuz after US and Israeli attacks. This critical route has been blocked, reducing supply and amplifying price pressures.
According to Energy Intelligence, the Al-Zour refinery in Kuwait alone contributes roughly 10% of Europe’s jet fuel supply. Analysts emphasized that Middle Eastern refineries play a pivotal role in global aviation fuel markets, and their reduced output is intensifying the crisis. Air New Zealand anticipates route reductions in key cities like Auckland, Wellington, and Christchurch, while flights to smaller airports remain unaffected. The airline, which had already cut some routes last month, said on Tuesday that most impacted passengers would receive alternative flights on the same day.
Air India has introduced a distance-based fuel surcharge for domestic routes and raised international surcharges, citing “one of the most challenging fuel cost environments in recent years.” Similarly, Asian carriers are adjusting services and fares to manage the crisis, with Japan and South Korea among the hardest-hit due to their reliance on Middle Eastern energy sources. China Eastern Airlines and Korean Air have taken emergency measures, including surcharge increases and operational shifts.
Meanwhile, United Airlines and SAS in Scandinavia have joined the trend of cutting flights and raising prices. Air France-KLM and Cathay Pacific are also increasing fuel surcharges. IAG, owner of British Airways, and EasyJet have managed to delay cuts and fare hikes, as they secured fuel at pre-war prices. However, Ryanair’s Michael O’Leary warned that supply disruptions could escalate in May if the conflict continues.
Analyst Perspectives
“The existing tight market is being exacerbated by the reduced Middle East jet fuel exports, which are at their lowest in four years,” explained Mick Strautmann, an analyst at Vortexa. “Given this, the same level of air travel demand will likely not be sustainable if disruptions persist, meaning airlines will need to increase prices further and reduce flights.”
George Shaw, a senior analyst at Kpler, added, “Europe remains well-supplied, with domestic production and April’s stock levels ensuring stability, though localized challenges may emerge in May as import declines become more pronounced.”
Analysts highlighted that rising ticket fares and flight cancellations are likely to continue. As peak summer travel season approaches, the pressure on airlines to balance costs with demand is expected to grow, leading to more frequent adjustments in pricing and service levels.
