Airlines Raise Fares Amid Jet Fuel Price Surge

Airlines worldwide are raising fares and adjusting operations in response to a surge in jet fuel prices driven by the ongoing U.S.-Israeli conflict with Iran. Jet fuel prices have doubled from $85–$90 per barrel to $150–$200, significantly impacting operating costs for airlines, where fuel accounts for up to a quarter of expenses.

Air New Zealand has announced broad increases in ticket prices and suspended its fiscal 2026 earnings forecast due to the unprecedented volatility in global jet fuel markets. The airline has raised one-way economy fares by NZ$10 ($6) on domestic routes, NZ$20 on short-haul international services, and NZ$90 on long-haul flights. Further price adjustments are possible if jet fuel costs remain elevated.

Qantas Airways in Australia is also hiking fares on its international routes and considering adding capacity to existing Europe routes. Cathay Pacific Airways in Hong Kong has implemented additional flights to London and Zurich while adjusting fuel surcharges by up to 35.2% from March 12, with the sharpest increases on flights between Hong Kong and the Maldives, Bangladesh, and Nepal.

Vietnam Airlines has requested government assistance to remove an environmental tax on jet fuel as operating costs for Vietnamese airlines have surged by around 70%. Meanwhile, IAG, the owner of British Airways, stated it is not planning immediate fare hikes due to hedging much of its fuel for the short- to mid-term.

The surge in oil prices has disrupted global travel and sparked fears of a deep travel slump. Airlines are navigating tight airspace as pilots reroute to avoid disruptions caused by drone and missile fire in the Middle East. The conflict has also led to cancellations of group tours involving flights to the Middle East, with South Korea’s HanaTour Service waiving cancellation fees for affected customers.

Several Asian and European airlines, including Lufthansa and Ryanair, have hedging in place, securing part of their fuel needs at fixed prices. Finnair has warned that a prolonged crisis could affect not only the price of fuel but also its availability, as Kuwait, a major jet fuel exporter to north-west Europe, faces output cuts.

Planes arriving in Dubai were briefly placed in a holding pattern due to a potential missile attack, underscoring the region's airspace disruption. Airlines are adjusting networks and prices in response. Qantas is exploring redeploying capacity to Europe, while Cathay Pacific will add flights to London and Zurich as airspace closures drive up fares on Asia-Europe routes.

Energy market expert Amrita Sen told MPs that the market for jet fuel had gone 'crazy', with a surge in prices likely to feed through into higher ticket prices immediately. She noted that while attention has focused on the price of crude oil, the impact on jet fuel has been much more severe, with prices doubling or even trebling from a previous level of around $90 a barrel.

The Office for Budget Responsibility (OBR) said UK inflation could be one percentage point higher this year if oil prices stay as they are, leaving the UK with price rises of three per cent rather than the target of two per cent. Professor David Miles, a member of the watchdog's budget responsibility committee, said the impact of the conflict on UK prices could be 'significant' and 'completely unwelcome'.