Airline Raised Flight Price From $4,000 to $28,000, as War Hits Travel Budgets

Airfares are climbing worldwide as oil prices surge amid Middle East conflict.

Flight prices are soaring as oil costs skyrocket. Hong Kong-based carrier Cathay Pacific is selling a business-class round-trip ticket from Sydney to London for $25,000 in April, far exceeding its usual price of $4,000-$5,000. Meanwhile, other airlines in the Asia-Pacific region have also raised prices as the war in the Middle East continues.

This week, Air New Zealand increased prices on domestic and international routes. Travelers will now pay NZ$10 ($6) more for one-way domestic trips, NZ$20 ($11) extra for short-haul international itineraries, and NZ$90 ($54) more for long-haul flights. Australian airline Qantas, which does not operate flights to the Middle East, has also increased ticket prices on international routes because of rising oil costs. Its flights to Europe have seen a sharp increase in prices amid higher-than-usual demand as passengers scramble to find seats after cancellations. Scandinavian airline SAS has also made a “temporary price adjustment.”

No airline in the United States has announced an increase yet, but budget airlines are expected to feel the impact the most.

Prices Will Rise

Emirates, Qatar Airways, and Etihad account for one-third of passenger traffic between Europe and Asia. These flights are largely off the table for now. Passengers should be wary of booking with them even if prices initially appear cheap. Travelers will also see many routes scrapped. Airlines have halted flights to the Middle East, and with fewer options and limited capacity, travelers will likely pay much more to fly.

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Meanwhile, airlines will play Tetris to avoid the multitude of closed airspace, which will require more fuel. With airspace squeezed, airlines must run longer routes or find alternate airports. Qantas, for example, has stopped its 17½-hour nonstop flight from Perth to London. It will now stop in Singapore for refueling while bypassing closed airspace.

Airlines are also losing money on canceled and disrupted flights. They have scrapped flights to the Middle East and its connecting hubs and are offering refunds to passengers. With longer routes, airlines may need to pay overtime to crews or add additional stops. All of this adds up and could affect airlines’ bottom lines this year. These losses are often passed on to customers, so travelers should brace for higher prices.

Related: With Conflict in the Middle East, Is It Safe to Travel to Europe?

Game of Oil 

The Strait of Hormuz has effectively closed since the war began. This narrow waterway transports about 20% of the world’s oil and is one of the most critical oil chokepoints. Iran controls the strait and has warned it would attack vessels attempting to pass through it.

Predictably, oil prices rose sharply after the war began. Prices reached $120 a barrel before dropping to $80 after President Trump announced the war might soon end. Even so, prices remain much higher than before the conflict, when oil traded at about $60 a barrel. In the United States, gas prices have climbed to about $3.50 a gallon from less than $3 before the war. Drivers and fliers alike will feel the financial strain this year due to the instability.

Fuel is the second-largest cost for airlines after labor. Globally, airlines practice something called hedging, securing jet fuel at a fixed price for future use to mitigate risks from market volatility. Major airlines in the United States, however, largely abandoned this practice a decade ago because it did not save them much in the long term. Southwest was the last to scrap it last year.

According to recent estimates, these price increases will cost four U.S. airlines—American, Delta, United, and Southwest—an additional $11 billion for jet fuel. United CEO Scott Kirby said passengers will see the impact on ticket prices very quickly.

Similarly, Asian airlines are vulnerable to a volatile market without extensive hedging and could face financial losses if the war continues. European airlines—including Ryanair, Lufthansa, and British Airways—have hedged their purchases heavily and may be better positioned to absorb the shock.