The ripple effects of the ongoing Iran war, which has entered its sixth week, are now being felt far beyond energy markets. One of the hardest-hit sectors is aviation, where rising fuel costs and supply
disruptions are beginning to reshape how airlines operate and how people travel.
With the crude oil prices surging and supplies tightening, airlines are feeling the impact almost immediately.
Fatih Birol, Executive Director of the International Energy Agency, has warned of flight cancellations if oil supplies from the Middle East are not restored within the coming weeks.
“I can tell you that soon we will hear the news that some of the flights from city A to city B might be cancelled as a result of a lack of jet fuel,” Birol told the Associated Press.
What makes the current situation more worrying is that it is not just a price shock; it is also a supply squeeze, raising concerns about how long airlines can sustain normal operations.
Why Airlines Can’t Escape The Jet Fuel Cost
Fuel is one of the largest expenses for airlines, often accounting for a significant portion of their operating costs. When oil prices spike, airlines have little room to manoeuvre. Unlike other industries, they cannot easily switch to alternatives or delay consumption because jet fuel is a specialised, non-substitutable, and massive operational expense. Infrastructure, safety regulations, and long-term fuel hedging prevent rapid changes to daily consumption or alternative energy sources.
Historically, sharp rises in oil prices have hit airline profitability hard. During past energy shocks, many carriers have struggled to cope with sudden spikes in fuel costs, according to Global Aerospace News.
In response, airlines have typically scaled back operations — cutting flights, trimming capacity, or raising fares—often with mixed results.
The current surge in crude prices has pushed jet fuel costs sharply higher, putting pressure on airline finances. For carriers already operating on thin margins, this is not just a challenge; it is a potential threat to profitability.
This is why even short-term disruptions in oil supply can quickly translate into stress across the aviation sector.
Does This Mean Flight Cuts?
Airlines across regions are beginning to adjust their operations in response to fuel pressures.
KLM, part of the Air France-KLM group, has announced it will cancel around 160 flights next month as soaring jet fuel prices begin to bite. While this accounts for less than 1% of its overall schedule, the move highlights the mounting financial strain on airlines.
The carrier clarified that the cuts are limited to certain European routes that are no longer economically viable due to rising fuel costs, stressing that there is no shortage of kerosene. Despite the adjustments, KLM said it is preparing for a busy holiday season in May and aims to ensure that most passengers can still reach their destinations as planned.
Lufthansa has announced that it will retire the entire 27-aircraft fleet of its CityLine subsidiary this weekend, accelerating a decision that was originally planned for 2024. The airline said the current crisis has forced it to fast-track the move.
Beyond this, Lufthansa will also phase out its remaining four Airbus A340-600s and two Boeing 747-400s from its long-haul fleet by October. It has further indicated additional capacity cuts for the winter 2026-27 schedule, including the withdrawal of more aircraft from its core operations.
The airline described these steps as unavoidable, citing sharply rising fuel costs and ongoing geopolitical uncertainty as key pressures driving the decision.
Why Rising Jet Fuel Prices Are A Major Problem
Lufthansa said it has managed to cushion some of the impact by hedging around 80% of its fuel needs at pre-agreed crude oil prices. However, the remaining 20% still has to be bought at sharply higher market rates, significantly raising costs. To manage this, the airline plans to cut that expensive portion of fuel usage by about 10%, as mentioned in a Politico report.
The pressure is being felt across the industry. Budget carrier easyJet reported that its fuel bill jumped by nearly €29 million in March alone. It now expects its pre-tax losses for the six months to March to widen to between €620 million and €640 million, compared with €450 million a year ago.
Latvia’s airBaltic is facing an even more precarious situation and is seeking financial support to stay afloat. The issue has spilled into politics, with the country’s prime minister warning of potential coalition tensions over a proposed €30 million loan for the airline. While airBaltic’s financial troubles began before the current crisis, rising fuel prices have further strained its position, particularly as it has hedged only a small portion of its future fuel requirements.
At a broader level, the disruption is being driven by a sharp fall in global oil supply, with an estimated 10 to 15 million barrels a day affected by the closure of key routes like the Strait of Hormuz. This is beginning to create a real supply challenge. Even though refineries across Asia and Europe remain operational, a shortage of crude oil means they cannot run at full capacity, leading to bottlenecks in fuel production.
Efforts to stabilise the situation, including the release of oil from emergency reserves, may offer some relief but are unlikely to address immediate supply constraints. For now, the imbalance between demand and available fuel continues to keep pressure on both energy markets and the aviation industry.
How The Global Jet Fuel Supply Chain Works
The global jet fuel supply chain is complex and highly interconnected. It transforms crude oil into kerosene-grade fuel, transporting it from refineries to airports via pipelines, ships, and trucks. Refineries (e.g., in the US, Middle East, Asia) produce fuel, which is stored, transported to airport terminals, and finally, pumped directly into aircraft via hydrant systems or refueler trucks.
Disruptions at any stage, whether due to conflict, blockades or logistical bottlenecks, can slow down the entire system.
In some regions, fuel reserves are already under pressure. If disruptions continue, airlines could face shortages that go beyond pricing issues. This raises the possibility of grounded flights—not because airlines cannot afford fuel, but because they cannot access it in time.
Major refining hubs include the US Gulf Coast, Singapore, South Korea, India, and the Middle East (UAE, Saudi Arabia, Kuwait). It is often considered a “refinery allocation problem” because not all refineries can produce aviation-grade kerosene efficiently, with jet fuel being a lower priority than gasoline.
Is Hedging The Solution?
Airlines are scrambling to manage the crisis using a mix of short-term and structural measures. Some rely on fuel hedging strategies to cushion the immediate impact of price spikes.
Fuel hedging is a widely used strategy in the airline industry, allowing carriers to lock in future fuel prices and protect themselves from sudden market swings. Through financial contracts agreed with suppliers or financial institutions, airlines fix the price they will pay for a portion of their fuel over a defined period, often a year or more, based on current market conditions and forecasts.
If fuel prices rise above the agreed rate, the airline is shielded from the increase and benefits from the lower locked-in price. However, if market prices fall below the contract rate, the airline can end up paying more than competitors buying fuel at spot prices.
Each airline manages its own fuel procurement and reserves, which means a shortage in one region does not automatically ground all flights. Some carriers may have sufficient stockpiles, while others could face tighter constraints.
In Europe, however, the situation is becoming increasingly fragile. Several countries now have less than 20 days’ worth of jet fuel reserves, a sharp drop compared to recent years when levels stayed well above that threshold.
If reserves fall below roughly three weeks of supply, the risk of physical shortages rises. This could lead to flight cancellations at certain airports and a potential drop in overall travel demand.
What This Means For Travellers
The impact is now extending beyond fuel costs into how airlines plan and operate their networks. Rising fuel prices are only part of the challenge, longer flight routes, reduced scheduling flexibility, and growing uncertainty around travel demand are also beginning to reshape airline operations.
There is also a growing element of uncertainty. Schedules are becoming more fluid, with airlines adjusting routes and timings based on fuel availability and cost conditions. This can lead to last-minute changes, longer travel times, and reduced convenience.
For frequent flyers, the experience is subtly shifting — from predictable and flexible to cautious and constrained. Travellers may need to brace for more than just higher ticket prices as the crisis unfolds.
Is The Indian Market Under Pressure?
India depends heavily on imported crude oil, making it vulnerable to global price swings. At the same time, its aviation sector has been expanding rapidly, driven by rising demand for both domestic and international travel.
Jet fuel prices have surged sharply in recent weeks, with international flight costs rising significantly. While the government has stepped in to moderate price increases for domestic routes, airlines continue to grapple with escalating expenses.
Carriers may respond by raising ticket prices, trimming routes, or reducing service frequency, particularly on less-profitable sectors.
To cope, carriers have started passing on some of the burden to passengers through fuel surcharges and higher fares, especially on long-haul routes.
“Longer routes increase costs across the board, from higher fuel burn and aircraft maintenance to additional crew requirements and longer layovers needed to meet duty time regulations,” a pilot for one of India’s leading airlines, who asked to remain anonymous, told Deutsche Welle.
If supply stabilises and prices ease, the industry could absorb the shock with limited long-term damage. But if disruptions persist, airlines and travellers may need to adapt to a more expensive and less predictable travel environment.
