Outgoing IATA Director General Willie Walsh welcomed the news of a ceasefire between Iran and the US after weeks of conflict shut down regional airspace and upended global fuel markets. Oil prices have dropped below US$100 a barrel for the first time since the outbreak of hostilities as Iran promises to reopen the strategically critical Strait of Hormuz.
However, while crude prices might drop Walsh warned that jet fuel will remain expensive for the foreseeable future. The conflict has damaged critical refining infrastructure in the Middle East, including Al-Ma’ameer refinery in Bahrain and the Ruwais refinery in the UAE. Additionally, the ceasefire lasts only two weeks: a tentative peace that no airline can take as a firm guarantee that operations can resume as normal.
Before the ceasefire announcement, many carriers announced measures to cover rising costs. Asian countries dependent on Middle Eastern fuel imports have been hardest hit, with regional low-cost carrier (LCC) Air Asia X announcing tickets would go up by 30-40% alongside additional fuel surcharges. Korean Air said they were entering ’emergency mode’ to manage the fallout from the crisis, while over in the US, United Airlines has increased its baggage fees to help cover cost discrepancies.
In Europe, carriers are less reliant on imports but Air France-KLM and SAS are among those to raise fares. IAG and easyJet have managed to avoid hiking ticket prices for now as they bought their fuel for the year at fixed prices before the conflict began. Ryanair Group CEO Michael O’Leary did warn that if the conflict continued, in May ticket prices would have to be reassessed.
Yesterday’s ceasefire announcement will provide airlines around the world with a moment of respite. But travel around the Middle East remains disrupted, with revenue management issues compounded by unexpected cancellations in Bahrain, Kuwait, Qatar, and the UAE, which boast some of aviation’s busiest airports. It could take months or even years for oil refineries in the region to operate at pre-conflict levels. Smaller airlines will struggle the most as the industry gets to grips with more expensive jet fuel and reduced customer demand.
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