Airfares take off as Middle East war sends jet fuel soaring

Australia’s Qantas Airways and Air New Zealand said on Tuesday they are hiking fares due to the Middle East conflict, underscoring how global airlines are struggling to cope with the sudden and soaring costs of fuel.

Jet fuel prices, which were around $85 to $90 per barrel prior to the conflict, have increased sharply to between $150 and $200 per barrel in recent days, New Zealand’s flag carrier said as it suspended its financial outlook for 2026 due to uncertainty over the conflict.

The U.S.-Israeli war on Iran has sent oil prices surging, upending global travel, pushing airline tickets on some routes sky-high, sparking fears of a deep travel slump and the potential for the widespread grounding of planes.

Highlighting the chaos around Middle Eastern airspace, planes arriving into Dubai were briefly placed in a holding pattern on Tuesday morning due to a potential missile attack, flight tracking service Flightradar24 said on X. The planes eventually landed.

Qantas said that in addition to increasing international fares, it was exploring options to redeploy capacity to Europe as airlines and passengers seek to evade disruptions in the Middle East, where drone and missile fire have curtailed flights.

Airlines cost breakdown

Jet fuel: 20%-30%

Labour: 25%-30%

Aircraft ownership: 10%-15%

Maintenance: 10%-15%

Airport 7 air navigation fees: 10%

The Australian airline said its flights to Europe are more than 90% full in March, compared to the usual 75% at this time of year.

Airfares have soared on Asia-Europe routes due to airspace closures and capacity constraints, and Hong Kong’s Cathay Pacific Airways said on Tuesday it was adding extra flights to London and Zurich in March.

Air New Zealand said it had raised one-way economy fares by NZ$10 (€5) on domestic routes, NZ$20 (€17) on short-haul international services and NZ$90 (€77) on long-haul flights, with further price, network and schedule changes possible if jet fuel costs remain elevated.

Hong Kong Airlines said on its website it would raise its fuel surcharges by up to 35.2% from Thursday, with the sharpest increase on flights between Hong Kong and the Maldives, Bangladesh and Nepal where charges will rise to HK$384 ($49) from HK$284.

Cathay Pacific said it reviewed its fuel surcharges on a monthly basis. It kept them flat last month at $72.90 each way on flights between Hong Kong and Europe and North America before the conflict began.

Vietnam AirlinesHVN.HM has asked local authorities to remove an environmental tax on jet fuel to help it maintain operations. The Southeast Asian nation’s government said Vietnamese airlines’ operating costs have risen 60% to 70% due to the rise in jet fuel prices and fuel suppliers were facing difficulties in meeting airline demand.

AIRLINE SHARES STABILISE AFTER SELLOFF

In a move that lifted some airline stocks, U.S. President Donald Trump said on Monday the war could be over soon, sending oil prices down to around $90 a barrel on Tuesday from a high of $119 on Monday.

In Asia, airline shares showed signs of stabilising, with Qantas up 0.5%, Korean Air Lines 003490.KS rising nearly 9% and Cathay Pacific 0293.HK up more than 4%. All had recorded sharp drops on Monday.

Fuel is the second-largest expense for air carriers after labour, typically accounting for a fifth to a quarter of operating expenses. Some major Asian and European airlines have oil hedging in place, but U.S. airlines largely stopped the practice over the last two decades.

CONFLICT TAKES TOLL ON TRAVEL INDUSTRY

High fuel prices could have severe implications for the global travel industry, with airlines already navigating tight airspace as pilots reroute to avoid the Middle East conflict and capacity on popular routes fills up.

Combined, Emirates, Qatar Airways and Etihad normally fly about one-third of the passengers from Europe to Asia and more than half of all passengers from Europe to Australia, New Zealand and nearby Pacific Islands, according to Cirium.

South Korea’s HanaTour Service 039130.KS said it has been cancelling group tours that include flights to the Middle East and it is waiving cancellation fees for affected customers. All Middle East-related tours for March will be suspended, it added.

In Thailand, the Ministry of Tourism forecast that if the conflict drags on for more than eight weeks, the country will lose a total of 595,974 tourists and 40.9 billion baht ($1.29 billion) in tourism revenue.