Air travel costs increase as fuel prices surge amid Iran conflict

Airlines worldwide are raising ticket prices and fuel surcharges in response to soaring oil costs triggered by the conflict in Iran, and Canada is no exception.

Several carriers said this week that higher fares are either imminent or already in effect due to the cost pressures stemming from the ongoing conflict, now in its 12th day.

Air Canada spokesperson Peter Fitzpatrick told the Canadian Press that “all airlines are subject to the current volatility,” noting that booking prices fluctuate constantly, partly in reaction to these market swings.

The airline said it has contracts to lock in the cost of a “small portion” of its fuel purchases in the short term.

Major international airlines, including Air New Zealand, Australia’s Qantas Airways, and Scandinavia’s SAS, have also announced fare increases abroad.

Jet fuel prices surged 81 per cent last week and were 52 per cent higher on Tuesday compared with Feb. 27—the day before U.S. and Israeli attacks began—according to the Platts jet fuel index.

Globally, prices peaked near US$4.37 per gallon last week and stood at US$3.67 on Tuesday, up from around US$2.41 per gallon on Feb. 27.

This volatility closely mirrors the movement in crude oil prices, which have climbed more than 40 per cent since the attacks on Iran.

Jet fuel, diesel, and gasoline all come from crude oil, making them highly sensitive to its price.

Consequently, fares for flights from Canada to Europe could rise $100–$200, and flights to Asia could increase by up to $400, John Gradek, an aviation management instructor at McGill University told CP.

Air Transat has already begun to tack on higher fuel surcharges for flights to Europe.  

“What we’re also doing is currently raising fares on peak travel dates and routes where we see less competition,” Transat A.T. Inc. CEO Annick Guérard told analysts on a conference call Tuesday.

If elevaved fuel prices continue, airlines, along with trucking and shipping companies, will likely pass on more costs to consumers, potentially affecting the wider economy.

The U.S.-Israeli strikes on Iran, which began on Feb. 28, effectively closed the Strait of Hormuz, a critical route carrying about a fifth of the world’s oil.

Gulf nations typically produce 20 million barrels of oil and refined products daily, but roughly three-quarters of that supply has been taken offline. And even after hostilities end, production and supply will not rebound immediately.

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