The Middle East conflict has shifted global air travel routes. As Middle East carriers like Emirates, Qatar Airways, and Etihad Airways faced airspace closures, Western airlines saw a chance to resume lucrative long-haul routes. European carriers Deutsche Lufthansa AG, British Airways (part of IAG), and Air France-KLM, along with U.S. airlines United Airlines and Delta Air Lines, increased capacity on routes to Asia and other regions. However, this opportunity comes with a significant drawback.
The main challenge for airlines, especially in Europe, is a sharp increase in jet fuel prices. Since late February, jet fuel costs have risen dramatically, doubling in some cases and climbing faster than crude oil. National average jet fuel prices rose nearly 20% in March alone. This surge affects a major operating cost for airlines.
European airlines usually hedge fuel costs more extensively than U.S. carriers, but this protection is not total. Many hedges are based on crude oil prices, not specific jet fuel, leaving airlines vulnerable to higher refining costs. Lufthansa has paused new fuel hedging but remains covered for 2026. Even well-hedged airlines like easyJet note the impact of rising prices. United Airlines, which rarely hedges, is bracing for sustained high oil prices. Delta Air Lines benefits from owning its refinery, helping to manage these costs.
These higher costs are forcing operational changes. Lufthansa is reportedly considering cutting routes and retiring aircraft early due to market uncertainty. Scandinavian Airlines has already canceled about 1,000 flights because of steep fuel price hikes. The financial pressure is visible in stock prices, with IAG’s shares falling over 16% recently. Airlines also face competition from Asian carriers such as Singapore Airlines and Cathay Pacific, who can use Russian airspace for more direct and cheaper flights to Europe.
Industry groups like IATA foresee continued demand growth but caution that geopolitical tensions present considerable risks. Analysts note that while travel demand is holding up, passengers may be choosing different destinations, favoring trips within Europe, which could affect long-haul airlines. This situation is complex: an opportunity arising from disruptions is being overshadowed by rising operational costs. Future capacity increases depend on fuel prices stabilizing and Middle East carriers returning, likely with aggressive pricing to reclaim market share. Airlines with weaker finances or less effective cost controls are most at risk.