The conflict in the Middle East has reached the ticket counter. Qantas Airways said on Tuesday it would hike fares on its international routes this week in response to the surge in jet fuel costs due to the conflict in the Middle East. The Australian carrier joins a growing list of airlines worldwide scrambling to protect margins as fuel expenses spiral beyond what most were expecting when they opened the books in December.
Jet fuel prices, which were around $85 to $90 per barrel before the attack on Iran, have soared to between $150 and $200, according to reporting from New Zealand's Air New Zealand as it suspended its full-year earnings guidance. That represents a jump of between 75 and 125 per cent in just weeks. For airlines operating on wafer-thin margins, this is not a manageable cost shock.
The scale of disruption is staggering. More than 43,000 flights scheduled to operate in and out of the Middle East were cancelled between February 28 and March 10, leaving entire regions of global aviation airspace closed to commercial traffic. The direct impact hits the three Gulf-based carriers that typically handle a third of all passenger traffic between Europe and Asia. But the ripples extend far beyond.
For Australian carriers, the immediate damage is concentrated on long-haul routes to the United Kingdom and Europe. The immediate impact will be felt most acutely by Australians planning trips to Europe and North America, where Qantas operates some of its longest and most fuel-intensive routes. The airline has signalled that fares on services from Australia to the United Kingdom, continental Europe and the United States will increase this week, with tickets for travel in the April to June period particularly affected.
What strikes you first is the contradiction in the numbers. Qantas is raising prices into the teeth of what airlines fear most: a travel slump. Yet the airline's own data suggests demand remains robust. Qantas reported that demand for long-haul travel remains strong despite rising fares, and that its European routes were operating more than 90 per cent full in March. This figure sits roughly 15 percentage points above typical seasonal averages for the month.
The paradox reveals something important about airline economics. Fuel is not the only cost climbing. Capacity reductions and longer routings around closed or restricted airspace are compounding the cost surge. Flights between Europe, the Middle East and Asia are being forced onto detours that add time, burn more fuel and reduce the number of daily rotations aircraft can complete, further tightening global supply. With fewer seats available on profitable routes, airlines can push prices higher precisely when passengers have no alternative.
Not all carriers face equal pain. Some airlines locked in fuel hedges months ago and are better insulated from spot price volatility. Qantas historically hedges 70 to 90 per cent of near-term fuel requirements and reduces coverage for periods further out. The airline has confirmed it will not be flying through Middle East airspace, with Perth to London flights bypassing the region entirely via the south polar route, so routing cost is unaffected. By contrast, airlines without hedges are naked to the market.
Still, the risk of this crisis extending beyond early April is real. Airlines that are not hedged are exposed by this war's effects on oil costs and there's no sure way to know when or if prices will go down. One structural risk is even more troubling: Finnair, which had hedged over 80 per cent of its first-quarter fuel purchases, warned that even the availability of fuel could be at risk if the conflict dragged on, noting that a prolonged crisis could affect not only the price of fuel but also its availability, at least temporarily.
The Australian flag carrier also said in a statement that it was considering adding capacity on its existing Europe routes in the coming months. This response is logical only because demand remains strong. For other carriers without that demand cushion, the choice is less attractive: either absorb losses or cut capacity. Across the industry, that tightening of supply will likely mean higher prices persist even if crude oil prices eventually retreat.
The lesson from previous fuel shocks is that airlines rarely give back fare gains. Once passengers become accustomed to higher prices, or once supply has shrunk enough to sustain them, fares typically stick. That makes the next month critical. The conflict's duration will determine whether this remains a sharp shock or the start of a structurally reshaped aviation market.