Airlines will have to spend an extra $100 billion on jet fuel this year, with fares “inevitably” rising to cover the bill after oil supplies are cut off following the war with Iran.
With jet fuel prices expected to rise by 70 per cent in 2026, airlines body Iata said worldwide collective industry profits would halve to $23bn. It said some carriers would struggle to survive the fuel price shock caused by the closure of the Strait of Hormuz in March.
“Higher oil prices will inevitably mean higher ticket prices,” said IATA Director General Willie Walsh. “There’s no way to avoid it.”
Walsh said industry polling showed passengers were now willing to pay higher fares and willing to spend more, but added: “The big unknown is how long passengers and ships can afford the higher costs of connectivity.”
Speaking at the Iata summit in Rio de Janeiro, Walsh said it was a “challenging and unpredictable time”, with “wafer-thin margins”.
“It’s going to be very difficult and fuel bill increases are likely for many airlines.”
But Walsh said despite the price hike, fears of potential fuel shortages were now over and it was less of a crisis than Covid.
“You’re looking at an industry that’s still profitable and still predicting growth,” Walsh said. “Traffic is up 2%. It’s a pretty positive environment if you consider the impact the Middle East has on the rest of the world.”
According to the chief executive of British Airways, long-haul and business travelers are likely to face the biggest increase in fares. Speaking on the sidelines of the conference, Sean Doyle said “there’s no getting away from it – if fuel goes up, fares have to go up”.
However, Doyle suggested that the more price-sensitive short-haul holiday flights would be the last to grow: “A brand like BA, which is very long-haul, very corporate, very premium; we would expect to probably have higher prices than a carrier competing purely for leisure short-haul.”
According to the Iata research, about half of passengers were willing to spend significantly more on fares if they tracked the price of oil, which Walsh said bodes “well” for the industry with strong northern summer weather.
Industry figures suggest more British and European travelers will be flying within the continent than usual, with fewer venturing further afield given continued uncertainty around Gulf hubs.
But Iata warned that the EU’s entry-exit system (EES) could cause problems for those travelers this summer and beyond. The airlines body called on Europe to rewrite the legislation to ensure flexibility to prevent border controls could continue, beyond the current absolute deadline of September 7 for the full and final introduction of biometric checks on all applicable passengers.
Iata Vice President Europe Raphael Schwartzman said: “I think Europe needs to be a lot more honest. [about] Where are we?”
Under the new system, most non-EU citizens will be fingerprinted and photographed by border staff, with details uploaded to a central database.
Schvartsman said: “Typically, we process a passenger in 20 to 25 seconds, and you’re already betting that it’s going to take 90 seconds, and then you have the unreliability of the systems, the possibility of people standing in lines for a long time.”
EU travelers face potential long waits at passport control under the new system, he added: “For most of the Mediterranean, Brits are the number 1 tourist arrivals – that’s a big concern.”
Greece has already unilaterally announced that it will not carry out EES checks on UK citizens. But Schvartsman said it’s a problem for many airports and can’t be solved by exempting one nationality: “We also have high demand from US carriers who are already adding additional flights to European destinations during the summer. You will also have an influx of US citizens.
