Jet fuel shock hits airlines: fares rise, flights cut as Middle East airspace stays volatile

Global airlines warned that a sharp rise in jet fuel prices triggered by the war involving the United States and Israel against Iran will drive hundreds of millions of dollars in additional costs, higher airfares and cuts to some routes, Reuters reported on Tuesday (March 17).

Delta Air Lines chief executive Ed Bastian said the rapid jump in jet fuel prices would lift the carrier’s costs by as much as US$400 million in March alone, with the industry already moving to pass higher costs on to passengers through fare increases, he told a JPMorgan industry conference.

American Airlines said it expects first-quarter expenses to rise by US$400 million because of higher fuel costs. The carrier also said first-quarter revenue is now expected to grow by more than 10%, above its earlier 7%-10% forecast, though adjusted loss per share is expected at the low end of its previous 10-50 cent range.

In Europe, SAS, Scandinavia’s largest airline, said it is cutting some flights as fuel prices surge, adding pressure across the region’s aviation system.

The conflict, now in its third week, has disrupted global aviation, with flights cancelled, delayed or rerouted as much of Middle East airspace remains closed due to missile and drone threats.

Jet fuel has become the key pressure point: Reuters reported prices have doubled in Europe and risen by nearly 80% in Asia since late February, when US and Israeli strikes on Iran began. Fuel is typically the industry’s second-largest cost after labour, usually accounting for around one-fifth to one-quarter of operating expenses.

The report noted that many US airlines have largely moved away from fuel hedging over the past two decades, while SAS said last year it had not hedged fuel use for the following 12 months.

The wider disruption has also hit major hubs. The UAE temporarily closed its airspace on Tuesday as a precaution amid threats, following fresh disruption linked to drone activity near Dubai’s airport earlier in the week.

In Europe, Frankfurt Airport said about 86,000 passengers were affected by cancellations during the first two weeks of the war, with only about one-third of its weekly flights to the Middle East still operating.

In Southeast Asia, Vietnam’s authorities have warned its aviation industry to prepare for possible flight cuts from April after jet fuel exports from China and Thailand were halted, raising the risk of shortages.