The price of oil approached $100 a barrel on Monday before lowering slightly to $91.11 at the market's close on Tuesday, a reprieve based on vague (and already conflicted) assurances from the Trump administration that the military action in the Middle East, initiated by the United States and Israel at the very end of February, might be past its peak.
What we know right now is that oil reserves, production facilities and refineries – as well as the routes by which oil is exported from the Middle East to the rest of the globe – have been targeted in the violence.
Whether prices will level beneath the $100-mark or shoot well above that level is a guess right now. But the world is watching, and that includes airlines whose fortunes historically have been tied to crude prices. Will the travel industry see airfares spike? Is oil the only contributing factor?
The Argus US Jet Fuel Index, available on the Airlines for America's website, shows that the average jet-fuel price for Chicago, Houston, Los Angeles and New York has increased to $3.67 a gallon on 10 March from $2.50 a gallon on 27 February, the day before the US-Israel incursion into Iran.
But the industry has seen $100 a barrel oil prices before, most recently in March 2022 after Russia invaded Ukraine. It also exceeded that level in September 2013 thanks to tensions in Syria, in February 2012 over Iran's nuclear programme and European Union sanctions and threats to block the Strait of Hormuz, during the Arab Spring of April 2011 coupled with Libya's civil war, and in July 2008, when oil exceeded $145 a barrel due to increasing demand from developing countries, including China and India.
Looking at historical inflation data, US airfares did increase about 30 per cent year over year in 2022, but the Ukraine invasion and subsequent rise in oil prices coincided with the phenomenon known as "revenge travel" following the pandemic. Demand was exceptionally high, which likely would have increased prices even without oil spiking.
Airfares rose about 2.5 per cent year over year in 2013 and 0.3 per cent in 2012, so there's not much correlation between oil prices and airfares for those periods. Average ticket prices did, however, increase about 9.3 per cent in 2011 compared with 2010, and were up about 12 per cent in 2008 compared with a year prior.
Still, jet fuel accounts for anywhere on average from 20 per cent to 30 per cent, sometimes more, of an airline's total operating costs – second only to labour – and that percentage can go up when oil prices rise, and down when they decline.
And now some carriers have had to reconfigure flight routes to avoid Middle East air space, which adds time and fuel costs to each flight. The same issue has affected routes that used to fly over Russian air space for the past four years.
The portion of airline costs attributed to jet fuel is "significant since the airlines run on quite thin margins," GoldSpring Consulting partner Neil Hammond told BTN. When asked if higher airfares were around the corner as a result, he replied that "the big question is going to be, how long does this [Iranian situation] last? It really depends on the duration and the outcome."
One of the outcomes could be much more stability around the Strait of Hormuz, "which would have a good impact on oil prices longer term," Hammond said.
Fuel surcharges
Before the stability, though, there is the risk of fuel surcharges.
On Tuesday, Air India announced a "phased expansion of a fuel surcharge" on tickets because of the steep rise in jet fuel prices. As a sample, for Africa routes, the new surcharge will be $90, up from $60. For Europe, it will be $125, up from $100. And for North America and Australia, it will be $200, up from $150, according to the carrier.
Airline fuel surcharges are not new. They first were implemented in 2004 to offset increased oil prices and were supposed to be temporary, "but it never went away, did it?" Hammond said.
"Some airlines renamed it a carrier surcharge, and despite how low oil prices have been or how stable they've been for good parts of the last two decades, they never took that surcharge away."
Flat-fee surcharges insulate airlines from corporate percentage discounts, Hammond said. If the fee were a percentage, the value of it would decrease as airfares decrease, but if it's a flat fee, the corporate discount doesn't apply to it, he said.
Where an airline is based also is a factor on surcharges as currency exchanges come into play. Most carriers purchase their aircraft in US dollars or euros. The price of fuel is based on the US dollar. But carriers outside of the US and Europe have most of their revenue in currencies other than the dollar or euro.
Hammond gave Turkish Airlines as an example. "They're going to have some revenue based in dollars because they fly to the US, but most of their revenue is going to be in Turkish lira," he said. "The Turkish lira has been weakening ... for many years, so their revenue base goes down, but their cost base goes up. So that's impacted them. Japan's another one. Brazil is another one. Some of those airlines have suffered due to currency fluctuations, and this will just compound that."
Case in point, Air New Zealand has suspended its fiscal year 2026 guidance, issued just weeks ago, and announced increases to its ticket prices, citing fluctuating jet-fuel prices, according to multiple reports. Qantas is raising fares on international routes due to fuel spikes, and Scandinavian carrier SAS also has implemented a "temporary" fuel-related price increase.
Carrier response
While there haven't been any reports yet of US carriers raising prices or increasing fuel surcharges, United Airlines CEO Scott Kirby on 6 March said that the recent increase in fuel prices "will have a 'meaningful' impact on the carrier's financial results this quarter," according to CNBC, but that "demand has been resilient."
Lufthansa Group CEO and chairman Carsten Spohr during an earnings presentation last week said prolonged airspace closures over the Middle East and Russia will lead to longer travel distances, “which means higher prices, but the market determines the price and this goes for fuel prices as well”.
Lufthansa financial chief Till Streichert added that the group’s “solid” fuel hedging strategy will “give us a competitive advantage in an environment of rising oil prices”. The airline group’s hedging ratio for 2026 and into 2027 is 81 per cent.
“What’s decisive at the end of the day is how we compare to our competitors,” Streichert said. “Even if we’re in for a higher fuel bill, I believe we are in a good position.”
European rival IAG, which owns British Airways, also has a fuel hedging policy, which operates on a three-year rolling basis. According to its latest earnings report, published on 27 February, the group has hedged 62 per cent of its expected fuel costs for 2026.
Some US carriers used to engage in fuel hedges, but Southwest Airlines was the last major US carrier to do so, and it announced in 2025 that it had discontinued that practice. On a 24 July, 2025, earnings call, Southwest CFO Tom Doxey said that "we recently terminated our remaining hedge portfolio for cash proceeds of $40 million, which reduced our future premium expense through 2027."
As of June 30, 2025, "the company had no fuel hedging contracts outstanding," according to the carrier.
Delta Air Lines, though, owns a refinery, located in Pennsylvania, which works like a hedge for the carrier. The facility can refine about 200,000 barrels of crude oil per day, "or approximately 75 per cent of our consumption, for use in our airline operations through the production of jet fuel and through exchanges and sales of gasoline and diesel fuel produced by the refinery," according to a Securities and Exchange Commission filing from 11 February, 2026.
Still, it remains to be seen whether the Middle East situation and oil price increases will lead to higher airfares. The increased costs likely will negatively affect airlines' bottom lines for the first quarter, and possibly the second quarter if the war in Iran persists.
But there isn't anything a travel manager can do at the moment. "It's really out of their hands," Hammond said. "For the most part, they don't control the travel budget. That's local managers and cost-centre owners. So, if there's a spike in prices and people take trips during this time, then what's going to probably happen is that instead of some department having 10 travel trips planned before the end of the year, they're only going to do nine. They'll have to spread [the budget] out over fewer trips."
And if there is an increase in airfares?
"I think anything we see is going to be very, very short term," Hammond said. "Ultimately, [the airlines] can raise prices, but it has to be on the supply and demand model. If they start just raising prices on a cost-plus basis and the demand isn't there, then they're just going to end up with a bunch of unsold seats."
With additional reporting by Lauren Arena.