Maybe there’s a ceasefire in the Middle East, and then again, maybe there isn’t. The whole situation might’ve changed in the time it took me to type that sentence. Either way, you shouldn’t expect airfare to come back down to earth based on any ceasefire announcements, at least not for another few months. That’s according to Willie Walsh, the director general of the International Air Transport Association, who notes that the war hasn’t just closed the Strait of Hormuz, but damaged oil refining infrastructure. So even if peace were to settle across the land, it will still take time to get jet fuel supplies back to normal. Until then, airlines will have to keep dealing with the fallout.
As an example, Delta Air Lines has laid out its present and future situation, as reported by Reuters. Delta expects jet fuel prices to continue to increase, more than doubling the pre-war cost at $4.30 per gallon. That will mean $2 billion in additional expenses to the airline just for the second quarter of the year. That’s on top of the extra $400 million it’s already had to pay for fuel, per PBS News.
What is a company to do when faced with higher costs? Pass them off to you, of course. Delta announced that it will be raising its baggage fees, a step that United Airlines and JetBlue have already taken. Airfares are surging and will probably keep doing so. But the real long-term hit is to the actual flights themselves: Delta will be cutting 3.5% of its flights in the next quarter, effectively reversing the company’s growth plans for the year, per the New York Times. That means there will be less total capacity for passengers to choose from, which affects the entire travel industry. It’s bad.
Flying through the turbulence
Don’t cry too hard for Delta, though: despite it all, the airline is still expecting to earn a cool $1 billion in profit in the second quarter. If you annualize that to $4 billion for the year and compare it against Delta’s $5 billion in 2025, that represents a significant, though not crushing, downturn caused by the war. But Delta was already the most profitable airline in the U.S. The airline is also unique in that it owns its own oil refinery in Pennsylvania. Other carriers may not be able to absorb the blow so well.
It’s even worse for Asian carriers, which are more dependent on oil from the Middle East. The BBC reports that surging airfares in the region are coming alongside across-the-board flight cuts. Korean Air has gone into full “emergency management mode” to try to slash costs enough to survive. Even if the ceasefire holds, things are likely to get worse before they get better.
