Airfares are set to rise: how the war in Iran is affecting prices

19 March 23:28

Europe’s largest airlines are warning of potential increases in airfare due to rising fuel prices amid the escalating situation in the Middle East. Due to military risks and problems with oil transportation, carriers’ costs are rising, and these costs may be passed on to passengers. This is reported by Bloomberg, citing executives from leading European airlines, according to "Komersant Ukrainian"

Why airfare prices may rise

The main reason for the potential rise in ticket prices is the increase in oil prices due to the war in the region of Iran and problems with the transportation of energy resources through the Strait of Hormuz.

Fuel is one of the largest expense items for airlines. After the price of Brent crude oil exceeded $119 per barrel, some carriers have already begun introducing additional fees or cutting back on flights.

Ryanair CEO Michael O’Leary stated that even in an optimistic scenario, ticket prices could rise by about 4% if the conflict ends by summer. If the war drags on, the price increase will be significantly higher.

Airlines cannot cover costs on their own

Lufthansa CEO Carsten Spohr noted that airlines’ profit per passenger remains relatively small.

“The average profit at my company is about 10 euros per passenger. We simply cannot cover the additional costs on our own,” he said.

Passengers have begun buying tickets in advance en masse

Faced with the risk of rising ticket prices, passengers have started actively booking flights in advance to lock in lower prices.

According to airlines:

demand for tourist destinations has increased
business travel bookings have increased
passengers are actively buying tickets for the summer.

Ryanair reported a significant increase in bookings to Spain, Italy, Greece, and Morocco.

Lufthansa, in turn, added 40 extra flights to Asia after cutting back on flights to the Middle East, and those flights were fully booked within a few days.

How the war is affecting the aviation market

Due to the escalating situation in the Middle East, airlines are forced to reroute and cut back on flights.

According to industry organizations:

more than 50,000 flights to and from the Middle East have been canceled
some carriers are reducing their presence in the region
the load on alternative routes is increasing.

At the same time, experts believe that once the conflict ends, airlines from the Persian Gulf countries may return to the market with aggressive price competition.