Airlines raise fares as Middle East conflict lifts fuel costs, disrupts flights

Some airlines in Asia and Europe raised fares, added fuel surcharges or adjusted schedules on Tuesday as the Middle East conflict drove jet fuel costs sharply higher and disrupted key air routes.

Australia’s Qantas Airways, Scandinavia’s SAS and Air New Zealand were among the carriers that announced price increases, while others warned the crisis could threaten fuel supplies or force further schedule changes.

Jet fuel prices, which were around $85 to $90 per barrel before US-Israeli strikes on Iran, have soared to between $150 and $200, Air New Zealand said, as it suspended its 2026 financial outlook because of uncertainty over the conflict.

The tensions have disrupted a key oil export corridor, driving up airline costs, pushing fares higher on some routes and deepening concern about a broader hit to travel demand.

“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.”

SAS last year temporarily adjusted its fuel hedging policy because of uncertain market conditions and said it had no fuel consumption hedged for the following 12 months.

Several Asian and European airlines, including Lufthansa and Ryanair, have hedging in place, securing part of their fuel needs at fixed prices.

Finnair, which had hedged more than 80 per cent of its first-quarter fuel purchases, warned fuel availability could also come under pressure 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.

Kuwait, a major jet fuel exporter to northwest Europe, has faced output cuts.

Airspace chaos in the Middle East

Planes arriving in Dubai were briefly placed in a holding pattern on Tuesday because of a potential missile attack, flight tracking service Flightradar24 said on X, underscoring the region’s airspace disruption. The planes eventually landed.

Airlines are adjusting networks and prices in response

Qantas said it was exploring redeploying capacity to Europe, 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 had raised fares across routes and warned further price or schedule changes could follow if jet fuel costs remained elevated.

Hong Kong Airlines said it would raise fuel surcharges by up to 35.2 per cent from Thursday. Air India​ said it would begin a phased increase in fuel surcharges on domestic and international routes.

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.”

Airline shares stabilise after selloff

Some airline stocks rose as oil prices fell to around $90 a barrel on Tuesday from a high of $119 on Monday after US President Donald Trump said on Monday the war could be over soon.

In Europe, shares of major airlines closed higher, rising between 3 per cent and 8 per cent. Shares of major US carriers Delta Air Lines, United Airlines, Alaska Air and American Airlines closed down between 2 per cent and 4 per cent .

Most major US 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 US 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 US 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 per cent.

Conflicts shrinking available airspace

In addition to high fuel costs, tightening airspace threatens to further disrupt the global travel industry as pilots reroute around the Middle East conflict and capacity on key routes fills up.

Emirates, Qatar Airways and Etihad together account for about one-third of passenger traffic between Europe and Asia and carry more than half of all passengers flying from Europe to Australia, New Zealand and Pacific islands, according to Cirium.

European airlines have already been dealing with reduced airspace because of the war in Ukraine, with many avoiding Russian airspace and flying longer routes. With even less airspace now available, they say operating conditions have become more challenging.

Air India announces phased fuel surcharge amid soaring jet fuel costs

The Air India group hereby announces a phased expansion of the fuel surcharge on its domestic and international routes. This measure is necessitated by the substantial escalation in jet fuel prices arising from the ongoing geopolitical developments in the Gulf region.

Since early March 2026, aviation turbine fuel (ATF), constituting approximately 40% of an airline’s operating costs—has experienced significant price increases due to supply disruptions. In India, the impact is further amplified by elevated Excise Duty and VAT on ATF in major metropolitan areas, including Delhi and Mumbai, thereby imposing considerable pressure on airline operating economics.

In order to mitigate these pressures and ensure the continued operational sustainability of its services, Air India has instituted the fuel surcharge in three phased implementations, applicable to all flights, including those operated by Air India Express, as outlined below:

Phase 1 (for all new bookings made from 0001 hours India Standard Time on 12 March 2026):

²Fuel surcharge is currently not applied on flights to/from Singapore but shall apply from Phase 1

Phase 2 (for all new bookings made from 0001 hours India Standard Time on 18 March 2026):

Phase 3 will encompass the Far East markets, namely Hong Kong, Japan, and South Korea, with specific implementation details to be communicated in due course.

For the avoidance of doubt, bookings confirmed prior to the aforementioned times will not be subject to the new surcharge, unless customers request date or itinerary modifications necessitating a recalculation of the applicable fare.

Air India regrets the necessity of implementing these fuel surcharges; however, this action is compelled by external factors beyond the airline’s control. In the absence of such surcharges, certain flights may be unable to cover operating costs and could require cancellation.

Air India will continuously review its surcharge policy and make appropriate adjustments in response to evolving market conditions.