The riots in Middle East have served as an unwelcome reminder that the region is not only crucial to global oil and gas supplies, but also a vital conduit for air travelers around the world. Over the past two decades, major Gulf airlines—Emirates, Etihad and Qatar Airways— have facilitated long-distance travel between Europe, Asia and Africa. Amid the conflict, tens of thousands of those passengers have been stranded in the last two weeks. Efforts to resume services, although limited, have been disrupted. On March 16, Emirates was forced to cancel flights and divert some planes mid-flight following a drone attack on the airport. Dubai. The impact on the global airline industry could last long after the war ends.
Middle East has acquired a central role in aviation. Before the conflict, the IATAa trade organization, had forecast that the region would contribute 17% of the $41 billion in net profits it expected for the global airline industry in 2026. Emirates It is the largest international airline in the world, and also the most profitable. Together with its short-haul partner, FlyDubaiplaced important orders for aircraft in the Dubai Airshow in November, just like Etihadbetting on greater growth.
Now that situation appears to be in danger. Dubai’s development as a tourism and business hub has seen it become the destination for approximately half of Emirates passengers. Connecting travelers, who only have to spend a few hours at Gulf airports, could return once the war ends, perhaps attracted by deep discounts. However, the recovery of the tourism sector will be more difficult.
Gulf airlines are not the only ones affected by the conflict. Other airlines flying over the area must now change their routes. The airlines European that fly south of Asia have had to avoid Russian airspace since the start of the war in Ukraine in 2022; Transiting through the Middle East became a popular alternative. Circling another combat zone means more travel time and greater fuel consumption.
And that fuel is becoming considerably more expensive. The price of crude oil is now around $100 a barrel, compared to about $70 before the fighting began. But the impact is even more severe for airlines. The price difference between jet fuel and crude oil, known as the “refining spread,” has skyrocketed. This is partly because 20% of the world’s jet fuel passes through the Strait of Hormuzwhere maritime transport is practically paralyzed, points out James Noel-Beswick of Sparta Commoditiesa data provider. Prices have more than doubled since the fighting began, to average around $190 a barrel.
The impact will be uneven. For low-cost airlines, fuel typically accounts for about 35% of costs, compared to 20% for traditional airlines. Airlines also vary in their level of protection. Some, like Ryanair, IAG and Qantasare well protected against short-term price increases, which cushions the blow. However, large US airlines are often left unprotected, finding coverage unnecessarily complicated and expensive (although Delta Air Lines owns a refinery, which will help). If fuel prices remain high all year, it could cost them tens of billions of dollars, according to Deutsche Bank. In response to skyrocketing fuel costs, some airlines are starting to ground planes. Air New Zealand will cancel around 1,100 flights between now and early May.
All this, then, represents an opportunity for some airlines. With Gulf airlines out of service and others suspending flights, fares have soared. British Airwayspart of IAGhas already added additional flights to Singapore and bangkok. The German Lufthansa has reported a 60% increase in flight bookings to Asia in March. Demand for air travel will be affected in the short term, especially if rising energy prices slow economic growth. But in the past, it tends to recover quickly after interruptions. Meanwhile, Gulf airline rivals will take the opportunity to win back some of their customers.
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