Airlines cut flights and hike fares as fuel prices surge

Airlines cut flights and hike fares as fuel prices surge

Air India and Air New Zealand have announced plans to reduce flight schedules and raise ticket prices in response to a spike in jet fuel costs triggered by the ongoing US-Israeli conflict with Iran. The situation has forced many carriers worldwide to implement urgent cost-cutting strategies, as fuel expenses typically account for 20-40% of their operational expenses.

The European benchmark for jet fuel reached a record high last week, climbing to $1,838 (£1,387) per tonne—nearly double the $831 level seen before the war began. This surge highlights the vulnerability of the aviation sector to Middle Eastern energy dynamics, which have been disrupted by the conflict.

Iran’s closure of the Strait of Hormuz, following attacks from the US and Israel, has severely impacted fuel supply routes. The Gulf remains a critical supplier of aviation fuel, contributing about 50% of Europe’s imports. Refineries in the region, such as Kuwait’s Al-Zour facility, provide roughly 10% of Europe’s jet fuel, according to Energy Intelligence. Their shutdowns have amplified price volatility.

Air New Zealand’s cancellations are primarily affecting major hubs like Auckland, Wellington, and Christchurch, though smaller airports remain unaffected. The airline, which had already trimmed some services last month, said Tuesday that most passengers impacted by the changes would be offered alternative travel options on the same day. A spokesperson noted, “Jet fuel prices are more than double their usual levels, compounding our operational challenges.”

Meanwhile, Air India has adjusted its fuel surcharges for domestic routes, shifting from a flat rate to one tied to flight distance. International surcharges have also increased, reflecting the airline’s statement that “this is one of the most challenging fuel cost environments globally in recent years.”

Asian carriers, including China Eastern and Korean Air, have also taken measures. China Eastern raised domestic surcharges, while Korean Air entered emergency management mode. In the US and Europe, United Airlines and SAS have cut services and raised fares. Air France-KLM and Cathay Pacific similarly announced fuel-related price adjustments.

British Airways owner IAG and EasyJet have managed to avoid immediate cuts, as they secured fuel at pre-war prices. However, Ryanair’s Michael O’Leary warned Sky News that supply disruptions could escalate in May if the conflict persists. Analysts at Vortexa predict that rising fares and cancellations will continue, with Mick Strautmann stating, “The current shortage of Middle Eastern exports is worsening an already strained market. If disruptions linger, demand may not meet supply, leading to further price hikes and reduced flights.”

Despite the tight supply, George Shaw of Kpler noted that Europe is not facing an imminent shortage. “Jet fuel is produced domestically, and April should see manageable stock levels,” he said. However, localized challenges might emerge in May as the decline in imports becomes more pronounced.