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 initiated cuts to their flight schedules and raised ticket prices, citing a sharp rise in jet fuel costs driven by the US-Israeli war with Iran. This trend is not isolated, as numerous global airlines are taking emergency steps to manage the financial strain from soaring fuel expenses.

“Like airlines globally, we’re experiencing jet fuel prices that are more than double what they would usually be,” said a spokesperson for Air New Zealand.

Fuel typically accounts for 20-40% of an airline’s operating budget. Last week, the European jet fuel benchmark reached a record $1,838 per tonne, doubling the $831 rate observed before the conflict began. This spike reflects the disruption of Middle Eastern supply chains, particularly the closure of the Strait of Hormuz by Iran in response to US and Israeli attacks.

The Gulf region is a crucial supplier of aviation fuel, providing about half of Europe’s imports. The Al-Zour refinery in Kuwait alone contributes roughly 10% of these imports, according to Energy Intelligence. With the Strait of Hormuz blocked, the flow of fuel to global markets has been severely impacted, compounding the crisis.

Air New Zealand expects cancellations to focus on routes connecting Auckland, Wellington, and Christchurch, though flights to smaller airports remain unaffected. The airline, which had already trimmed some services last month, is offering alternatives to most passengers impacted by the changes.

Meanwhile, Air India has shifted its domestic fuel surcharge model to one based on flight distance. It has also raised international surcharges, attributing the adjustments to “one of the most challenging fuel cost environments that airlines globally have faced in recent years.”

Asian carriers, including China Eastern Airlines and Korean Air, have similarly scaled back operations and increased fares. Japan and South Korea, heavily dependent on Middle Eastern energy, have been particularly vulnerable. Korean Air has even entered emergency management mode to address the situation.

Global airlines such as United Airlines in the US and Scandinavian SAS have also reduced services and raised prices. Air France-KLM plans to increase long-haul fares, while Cathay Pacific is adjusting its fuel surcharge. In contrast, British Airways owner IAG and EasyJet have managed to avoid immediate changes, as they secured fuel at pre-war pricing levels.

Ryanair’s Michael O’Leary warned that fuel supply disruptions could worsen in May if the conflict continues. Analysts at Vortexa noted that the current shortage of Middle Eastern exports is intensifying the strain on an already tight market, suggesting sustained issues may force further price increases and flight reductions.

“Given global jet fuel exports are currently at their lowest in four years, the same level of demand will likely not be sustainable if disruptions persist,” said Mick Strautmann, an analyst at Vortexa.

George Shaw from Kpler added that Europe is not close to a fuel crisis, with April expected to maintain sufficient stock levels. However, localized shortages could emerge by May as the drop in imports becomes more pronounced.