By Shivangi Lahiri and Sameer Manekar
Australia’s Qantas Airways, Scandinavia’s SAS and Air New Zealand announced airfare hikes on Tuesday, blaming an abrupt rise in the cost of fuel caused by the Middle East conflict.
Jet fuel prices, which were $85-$90 per barrel before US-Israel strikes on Iran, have risen to $150-$200 per barrel in recent days, 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 that could lead to widespread grounding of planes.
“Increases of this magnitude make it necessary to react in order to maintain stable and reliable operations,” an SAS spokesperson said in a statement, adding it had implemented a “temporary price adjustment”.
The largest Scandinavian airline said last year it had temporarily adjusted its fuel hedging policy due to uncertain market conditions and that it had no fuel consumption hedged for the next 12 months.
While several Asian and European airlines, including Lufthansa and Ryanair, have oil hedging in place, securing a part of their fuel supplies at fixed prices, Finnair warned that even the availability of fuel could be at risk if the conflict dragged on. Kuwait, a major jet fuel exporter to northwest Europe, has faced output cuts.
“A prolonged crisis could affect not only the price of fuel but also its availability, at least temporarily,” a Finnair spokesperson said, adding that it had not seen this happening yet. It had hedged more than 80% of its first-quarter fuel purchases.
Airspace disruption
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 options to redeploy 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. Hong Kong’s Cathay Pacific Airways 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 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.
Stocks stabilise
Some airline stocks rose and oil prices fell to about $90 a barrel on Tuesday from a high of $119 on Monday after US President Donald Trump said on Monday the war could be over soon.
However, defence secretary Pete Hegseth said Tuesday would be the most intense day of strikes against Iran in the campaign so far. The military would bring the most fighter jets and bombers against Iran, he said.
When markets opened in Europe, airline shares were up 4%-7%. In Asia, airline shares showed signs of stabilising with Qantas closing up 0.5%, Korean Air rising 3% and Cathay Pacific 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.
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 Aviation Analytics.
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.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.