in brief
- Some 4.4 million eats have been taken off the market since the conflict in the Middle East began, driving up demand.
- Passengers are being warned that some routes may become "uneconomical".
The ongoing war in the Middle East has already begun to lift airfares, with Australian travellers expected to fork out substantially more for flights to Europe and elsewhere for the short-term future and potentially beyond.
But there's debate over how much exactly fares will increase, with an expert suggesting that fuel costs could impact flights less than we think, with Australia's major carrier tending to "hedge" its fuel supplies.
Airlines in Asia and Europe, including Qantas, Air New Zealand, and Scandinavia's SAS, have all announced price increases, while others warn that the crisis in the Middle East could threaten aviation fuel supplies and force further schedule changes.
Jet fuel has soared in price from its pre-conflict USD$85 ($119) to $US90 ($126) per barrel to between $US150 ($210) and $US200 ($280), Air New Zealand said, as it suspended its 2026 financial outlook because of uncertainty over the conflict.
Jet fuel's price is influenced by oil prices, which have been volatile. Oil fell to around $US90 ($126) a barrel on Tuesday from a high of $US119 ($166) on Monday after US President Donald Trump said on Monday the war could be over soon.
Iran continues to threaten the passage of oil tankers through the strategically-crucial Strait of Hormuz.
Cirium aviation analyst Ellis Taylor told SBS' On the Money podcast that he expects to see flight costs rise by as much as 30 per cent through to the end of the year.
"There's going to be pressure, particularly on long haul routes, because obviously they're burning a lot more jet fuel to get there, and jet fuel is the input that's getting a lot more expensive", Taylor said.
"There are some routes which may become uneconomic if the oil price sort of stays relatively high".
Qantas has announced that it is exploring redeploying capacity to Europe. Asian carrier Cathay Pacific said it would add flights to London and Zurich in March as airspace closures and capacity constraints drive up fares on Asia-Europe routes.
Airfares soaring
Qantas has already said that it is raising airfares in response to the cost of fuel, with an additional 5 per cent expected to be added to ticket prices which are already up since the outbreak of the war on 28 February.
“European flight prices for the northern summer and beyond had already started rising even before the conflict", Angus Kidman, travel expert at Finder, told SBS News.
"Right now you'll definitely be paying a premium".
'Euro Summer' flights from Australia have always been somewhat elevated due to increased demand, particularly during the school holiday period.
"That's peak season, so you need to book close to 12 months in advance to get cheap fares, especially with top-tier carriers, even without the added chaos of warfare", Kidman added.
Roughly one third of Australia-to-Europe travel transits through the Middle East and disruptions have removed millions of seats from the market, leading to extreme demand for remaining flights.
"There hasn't been a lot of slack in the market for airlines to be able to put on additional flights to deal with demand. Demand and supply imbalance inevitably pushes prices up", Taylor said.
"We're going to see a lot of impacts there. We'll definitely see it in the premium end of the market, with business class, first class, and to a lesser extent, probably Premium Economy travel".
"But that does also flow through to economy cabins, where, if they're getting more full, we will see those prices start to go up, or we'll see airlines close off the cheaper seats a lot earlier".
Hedging bets
Many major European and Asian airlines "hedge" their fuel, buying in advance at a fixed price in order to protect themselves against price fluctuations. Qantas, for example, hedges 83 per cent of its fuel, leaving just 17 per cent of their costs exposed to the market.
Gui Lohmann, professor of aviation at Edith Cowan University, told SBS News, that trying to predict flight prices was like looking into a crystal ball, but there are factors beyond fuel prices causing airlines to raise prices.
"Aviation kerosene is about 30 per cent to 35 per cent of the operational costs of an airline ... which the airlines do not have control on".
"If fuel costs haven't increased that much because of hedging, why are they increasing the prices? They are having other additional costs that they have to pay and they have to pass the cost onto someone otherwise the airline will go broke".
Lohmann describes the closure of three of the world's largest aviation hubs — Dubai, Doha, and Abu Dhabi — as "unprecedented". Approximately 20,000 flights in and out of the Middle East were cancelled in the first week of the conflict.
Rerouting costs, cancellations, and the need for additional fuel in some cases to ensure safe operating capacity if delays occur are all factored into rising ticket costs, even if some airlines are protected from the fuel market.
In the US, where most airlines do not hedge their fuel, Deutsche Bank data shows American airfares have climbed rapidly as the carriers have no buffer between themselves and the global turmoil.
By contrast, IAG, the owners of British Airways, have said that they are well hedged and have no plans to adjust their fares in the short term.
Therefore, even though aviation fuel has increased 150 per cent in the past 10 days alone, those prices are yet to be factored into tickets — though they will be eventually.
"Fuel price impacts are likely to be further down the track", Kidman said.
"Chinese carriers remain one of the cheaper options for getting to Europe, but you might be looking at multiple stops and long transit times."
— With additional reporting from Reuters.
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