Flare-up in Costs, Customer Reluctance: Six Weeks into War, Airline Sector Faces Double Blow
Paris – Nearly six weeks after the outbreak of war in the Middle East at the end of February, and the announcement of a two-week truce between Iran and the United States, the airline industry is experiencing a double blow: soaring costs and customer reluctance. – The surge in kerosene prices “The airline sector is facing two simultaneous shocks: the surge in fuel prices – which represents the first or second largest expense item for an airline company – and a demand shock, with passengers being cautious,” summarizes Paul Chiambaretto, a professor at Montpellier Business School and an industry expert. Following the initial strikes by the United States and Israel in Iran on February 28, Tehran paralyzed the Strait of Hormuz, through which one-fifth of the world’s oil production and around 20% of aviation fuel transit. Kerosene prices have skyrocketed much more than crude oil. Kerosene has risen from $831 per tonne to over $1,800 at the beginning of April (and $1,786 on Wednesday). “Absolutely colossal,” expressed Pascal de Izaguirre, president of the National Aviation and Aerospace Federation (Fnam), in an interview with La Tribune on Tuesday. Fuel accounts for 25 to 30% of the operating costs of most companies. With this surge in prices, it has risen to 45%, according to Pascal de Izaguirre. – Price hikes, suspended flights On all continents, many airlines have raised their fares. And suspended flights, for security or profitability reasons. Air France and KLM have raised prices on long-haul flights since March 11. The Lufthansa Group (Lufthansa, SWISS, Austrian Airlines, ITA Airways, etc.) has extended the suspension of all its flights to the Middle East until the end of April, or even until the end of October for certain airlines. There have also been price increases for Chinese airlines Air China and China Southern, as well as Hong Kong’s Cathay Pacific. Vietnam Airlines has suspended around twenty domestic flights per week from April, due to fuel shortages. According to the Fnam president, the increase is “insufficient to offset the rise in costs,” but “companies fear a negative impact if the increases become excessive.” The surge in oil prices also affects household purchasing power (as they spend more on gasoline), fuels inflation fears, and ultimately encourages the limitation of business or personal travel, notes Paul Chiambaretto. Ryanair’s CEO, Michael O’Leary, notes changes in destinations. “People who previously wanted to either travel to the Middle East or fly over the region during the holidays are changing their minds and returning to Portugal, Spain, southern France, Italy, or Greece,” he told AFP in mid-March. – What about the “hubs” in the Middle East? Attacked Iran retaliated by targeting Gulf countries, including civilian infrastructure such as airports, forcing these states to close their airspace. Some have reopened since then, but major airport hubs in petro-monarchies, such as Dubai and Doha, are still operating at reduced capacity. These “hubs” have built their economic model on transit passengers from Gulf airlines, benefiting from their position as the crossroads of connections to and from the Americas, Europe, Asia, and Oceania. Before the war, Dubai was the second busiest airport in the world in terms of passenger traffic (after Atlanta), while Doha competed in traffic with Hong Kong and Frankfurt. The near-paralysis in the region has caused chaos in global air travel, with passengers getting stranded in Asia, in particular. European and Asian airlines with long-haul aircraft have announced strengthened direct connections between the two continents. Gulf carriers (Emirates, Qatar Airways, Etihad, Oman Air, etc.) accounted for 9.5% of global airline seat capacity in 2025, compared to 26.5% for European carriers, according to IATA. – Towards normalization? While airports in the region have reopened, Gulf carriers remain far from their full capacity. IATA CEO Willie Walsh also warned on Wednesday, a few hours after the ceasefire, that the return to normal kerosene supply and a drop in oil prices would take “several months,” even in case of a lasting re-opening of the Strait of Hormuz, “given the disruptions to refining capacities.” Frédérique PRIS © Agence France-Presse
