Airlines cut flights and hike fares as fuel prices surge

Airlines Cut Flights and Raise Fares Amid Fuel Price Surge

Jet fuel costs have skyrocketed, prompting Air India and Air New Zealand to reduce services and boost ticket prices. The spike follows the escalation of the US-Israeli conflict with Iran, which has disrupted global energy markets. As of last week, European jet fuel prices reached a record high of $1,838 per tonne, compared to $831 before the war began.

Analysts predict continued price hikes and flight cancellations. Mick Strautmann from Vortexa noted that the current shortage of Middle Eastern fuel exports is intensifying an already strained market. With global jet fuel exports at their lowest in four years, he warned that airlines may need to cut services and raise fares to sustain demand.

Supply Chain Vulnerabilities in the Gulf

The Gulf remains a critical supplier of aviation fuel, contributing about 50% of Europe’s imports. Most of this fuel transits the Strait of Hormuz, which Iran has closed in response to US and Israeli strikes. This bottleneck has pushed prices up, highlighting the region’s strategic role in energy distribution.

Energy Intelligence reports that the Al-Zour refinery in Kuwait alone accounts for roughly 10% of Europe’s jet fuel needs. As tensions persist, the flow of fuel through this vital waterway is under threat, compounding the challenges faced by carriers.

Regional and International Responses

Across Asia, airlines like China Eastern and Korean Air have implemented emergency measures, including fare adjustments and service reductions. Japan and South Korea, reliant on Middle Eastern energy supplies, have been particularly hard hit by the disruptions.

In the US and Scandinavia, United Airlines and SAS have also trimmed routes and raised fares. Air France-KLM plans to increase long-haul prices, while Cathay Pacific is adjusting its fuel surcharge. British Airways owner IAG and EasyJet, however, have managed to avoid immediate changes, as they secured fuel at pre-war rates.

Short-Term Outlook and Passenger Impact

Air New Zealand has already canceled some flights, with further reductions expected on key routes. The airline assures that most affected travelers will receive same-day alternatives. “Jet fuel prices are over double the usual level,” said a spokesperson, emphasizing the financial pressure on carriers.

“Starting from an already tight market, the current lack of Middle East jet fuel exports is worsening the situation,” Mick Strautmann added. “Given global jet fuel exports are currently at their lowest point in four years, the same level of air travel demand will likely not be sustainable if disruptions persist.”

Despite the crisis, George Shaw from Kpler noted that Europe is not at risk of a fuel shortage. “April should be manageable in terms of stocks,” he said, though warned about potential localized issues in May as import declines become more pronounced.