Global airlines hike fares, cut routes as fuel costs balloon

LONDON: Global airlines sounded the alarm on Tuesday over soaring jet fuel prices triggered by the US-Israeli war against Iran, warning of hundreds of millions of extra costs, higher fares and cuts to some routes.

Delta Air Lines Chief Executive Ed Bastian said the dramatic run-up in jet fuel prices had increased the airline’s costs by as much as USD400 million in March alone. The industry is moving quickly to pass on higher expenses through fare hikes, he told a J.P. Morgan industrials conference.

American Airlines said it expects a USD400 million increase in first-quarter expenses due to fuel costs.

Among the first to act, Scandinavia’s biggest airline SAS AB said it is cutting a limited number of flights because of the “sharp and sudden increase” in fuel prices.

“The entire European aviation system is now feeling the pressure from a sudden fuel shock,” it said in an email.

The war, now in its third week, has thrown global aviation into turmoil, with flights cancelled, rescheduled or rerouted as most Middle East airspace remains closed amid fears of missile and drone attacks.

Jet fuel prices have emerged as a major challenge, pushing up operating costs, with European prices doubling and Asian prices up almost 80 percent since the start of US and Israeli strikes on Iran in late February.

Fuel is the industry’s second-largest expense after labour, typically accounting for a fifth to a quarter of operating costs. US airlines largely stopped hedging fuel in the past two decades, and SAS said last year it had not hedged any of its fuel consumption for the following 12 months.

Vietnamese authorities have warned the country’s aviation industry to prepare for potential flight reductions from April after China and Thailand halted jet fuel exports due to the war, heightening the risk of shortages.

The United Arab Emirates briefly closed its airspace on Tuesday in response to incoming missile and drone threats from Iran, the second straight day of disruption after a drone caused a fire near Dubai airport on Monday.