Australia's Qantas Airways , Scandinavia's SAS, and Air New Zealand announced airfare hikes on Tuesday, blaming an abrupt spike in the cost of fuel caused by the Middle East conflict that is rattling global aviation.
Jet fuel prices, which were around $85 to $90 per barrel before U.S.-Israeli strikes on Iran, have soared to between $150 and $200, New Zealand's flag carrier said as it suspended its financial outlook for 2026 due to uncertainty over the conflict.
The war has disrupted a key oil-export corridor, driving up airline costs, pushing fares higher on some routes, and deepening concern about a broader hit to global travel.
"Increases of this magnitude make it necessary to react in order to maintain stable and reliable operations," an SAS spokesperson said, adding it had implemented a "temporary price adjustment."
The largest Scandinavian airline last year temporarily adjusted its fuel hedging policy due to uncertain market conditions and said that it had no fuel consumption hedged for the following 12 months.
Several Asian and European airlines, including Lufthansa and Ryanair, have oil hedging in place, securing a part of their fuel supplies at fixed prices.
Finnair, which had hedged over 80% of its first-quarter fuel purchases, warned that even the availability of fuel could be at risk if the conflict dragged on.
"A prolonged crisis could affect not only the price of fuel but also its availability, at least temporarily," a Finnair spokesperson said, adding that this was not happening yet.
Kuwait, a major jet fuel exporter to north-west Europe, has faced output cuts.
Highlighting the airspace chaos in the Middle East, planes arriving in Dubai were briefly placed in a holding pattern on Tuesday due to a potential missile attack, flight tracking service Flightradar24 said on X. The planes eventually landed.
Airlines are already adjusting networks and prices in response. Qantas said it was exploring redeploying capacity to Europe as airlines and passengers seek to evade disruptions in the Middle East, while 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.
Air New Zealand said it has raised fares across domestic, short-haul and long-haul routes, warning that further price or schedule changes may follow if jet-fuel costs remain elevated. Hong Kong Airlines also announced it will increase fuel surcharges by up to 35.2% starting Thursday.
Air India said on Tuesday it would begin a phased increase of fuel surcharges on its domestic and international routes, citing rising jet-fuel prices.
Some European carriers said they saw no immediate need to raise prices. IAG, the owner of British Airways, said it was well hedged for the near term and had no plans to adjust fares. British Airways, however, said it had brought forward the end of its winter-season flights to Abu Dhabi because of the "continuing uncertainty."
Some airline stocks rose as oil prices fell to around $90 a barrel on Tuesday from a high of $119 on Monday after President Donald Trump said on Monday the war could be over soon.
In Europe, airline shares were up between 4% and 7%. Shares of major U.S. carriers Delta Air Lines, United Airlines, and American Airlines were down between 1% and 2% in afternoon trade.
Most major U.S. airlines no longer hedge their fuel costs, unlike European and Asian carriers that continue to maintain active hedging programs. Fuel is typically their second-largest expense after labor.
Without the protection of fuel hedges, airlines have little choice but to lean on higher fares to offset rising costs. Deutsche Bank's latest data shows U.S. airfares climbing quickly, with both last-minute tickets and advance-purchase fares surging over the past week.
With passenger traffic continuing to outpace the growth in airline seat capacity, and some carriers forecasting record spring break demand, analysts say the backdrop should help the market absorb higher fares.
Rising fuel costs are also expected to push airlines to slow their growth plans, effectively boosting their pricing power. Still, it remains unclear whether these steps will be enough to fully protect profit margins.
Major U.S. carriers are widely expected to update their outlooks ahead of an industry conference next week, but some analysts have already trimmed their profit and capacity forecasts for the current quarter and the full year. Analysts at Melius, for example, have cut their net-income estimates by 10%.
In addition to high fuel costs, tightening airspace also threatens to derail the global travel industry, as pilots reroute to avoid the Middle East conflict and capacity on popular routes fills up.
Emirates, Qatar Airways and Etihad typically jointly account for about one-third of the passenger traffic between Europe and Asia and fly more than half of all passengers from Europe to Australia, New Zealand, and Pacific Islands, according to Cirium.
European airlines have already struggled with the shortage of available airspace created by the war in Ukraine, with many avoiding Russian airspace and flying longer international routes. Now, with even less available airspace, they say their business has become even more challenging.
($1 = 7.8236 Hong Kong dollars)
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