Global airlines hike fares as fuel costs balloon

Airlines worldwide are warning that a surge in jet fuel prices—driven by the U.S.–Israeli conflict with Iran—is set to cost the industry hundreds of millions of dollars, likely leading to higher ticket prices and reduced flight routes.

Delta Air Lines CEO Ed Bastian said Tuesday (March 17) that fuel costs alone added up to $400 million in March, noting that airlines are already moving to offset these expenses through fare increases.

American Airlines also projected an additional $400 million in fuel-related costs for the first quarter.

Now in its third week, the conflict has disrupted global aviation, forcing cancellations, delays, and rerouted flights as much of Middle Eastern airspace remains closed due to security risks.

Fuel prices have become a major pressure point, with costs in Europe doubling and rising nearly 80 per cent in Asia since the strikes began in late February.

READ MORE: Air travel costs increase as fuel prices surge amid Iran conflict

Fuel typically makes up 20–25 per cent of airline operating expenses, second only to labour. And many airlines no longer hedge fuel prices, leaving them more exposed to sudden spikes.

Vietnam has warned airlines to prepare for possible flight cuts starting in April after China and Thailand halted jet fuel exports, raising concerns about supply shortages, Reuters reports. 

Airspace disruptions have added to the strain. The United Arab Emirates briefly shut down its airspace earlier this week amid missile and drone threats, while Frankfurt Airport reported 86,000 passengers affected by cancellations in the first two weeks of the conflict, with only about one-third of its Middle East routes still operating, according to Reuters.

The developments highlight how the impact of the war is rippling far beyond the region, creating the aviation sector’s most serious challenge since the COVID-19 pandemic.

While Delta says it can adapt by adjusting capacity and recovering fuel costs, airlines are being cautious about raising fares too aggressively given uncertain consumer demand.

Air France-KLM has already announced plans to raise long-haul ticket prices, and some airlines have introduced fuel surcharges.

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

Yet despite rising costs, it's not all doom and gloom as some markets continue to travel. 

American Airlines, for one, expects stronger-than-anticipated revenue growth of over 10 per cent for the first quarter, although its projected losses will remain within the lower end of earlier estimates.

The issue is also evident among Canadian airlines. 

Air Canada’s spokesperson Peter Fitzpatrick recently 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 reportedly has contracts to lock in the cost of a “small portion” of its fuel purchases in the short term.

Air Transat says it 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 earlier this month.

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.

Globally, jet fuel prices peaked near US$4.37 per gallon last week, 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.

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