The global aviation industry is facing a “perfect storm”: fuel prices have doubled because of the conflict in the Middle East, forcing airlines to raise fares by 20% and cut the number of flights. 2026 was supposed to be a record year for profits ($41 billion), but now airlines like United Airlines and SAS have to rethink their strategies. Low-cost carriers are going to be hit the hardest, as their passengers may switch from planes to trains or buses. The crisis is made worse by a lack of new energy-efficient planes because of problems with the supply chain. This will leave only the companies with a lot of money to survive.
Airlines all over the world have started raising ticket prices and cutting back on flights because of a big jump in fuel costs. At the same time, Reuters says that the industry’s future profitability depends on whether passengers will start canceling their trips.
Even before the conflict between the U.S., Israel, and Iran began last month, the aviation industry was expecting record profits of $41 billion in 2026. But the doubling of jet fuel prices has messed with these plans and made companies rethink their routes and strategies.
Airlines like United Airlines, Air New Zealand, and the Scandinavian carrier SAS have already announced flight cuts and fare increases, while others have introduced fuel surcharges.
“Airlines are facing a real challenge. They’ll have to lower fares to boost weak demand, but higher fuel costs will force them to raise fares. It’s a perfect storm,” said Rigas Doganis, the former head of Greece’s national airline, Olympic Airways.
Last year, the industry had record passenger traffic, with about a 9% increase over pre-pandemic levels, despite supply chain issues that delayed the delivery of new planes.
After the pandemic, people were eager to travel again, and airlines were able to keep prices high by filling more seats on planes. But with the current surge in fuel prices, we’re seeing a need for much higher fare increases, especially when you consider that consumers are already feeling the squeeze from rising gas costs.
“The only way to raise prices is to cut capacity. That’s what I expect this time, and that’s what we’ve seen in previous instances when we’ve had other crises,” said Andrew Lobenberg, head of European transport equity research at Barclays.
United Airlines CEO Scott Kirby said that fares would have to go up by 20% to cover fuel costs.
Low-cost airlines might be the ones hit hardest, since their passengers are more price-sensitive than the corporate clients and affluent travelers who are the main target for premium airlines. Analysts say that some passengers might decide to skip flights, even short ones, and go for trains, buses, or other options.
We’re thinking about upgrading the fleet to more fuel-efficient planes, which could save some money, but there are a couple of issues holding things up. The supply chain was really hit by the pandemic, and there are some kinks with the next-gen engines.
Dan Taylor, the head of the consulting division at IBA, a company that works in the aviation industry, said that the current crisis is going to make the difference between strong and weak airlines even bigger.
“Airlines with solid balance sheets, strong pricing power, and reliable access to capital are best positioned to withstand the current pressure. At the same time, airlines with low profits and limited financing options may face mounting financial pressure,” Taylor said.