Air New Zealand confirmed on Tuesday that it has lifted fares across domestic and international routes as airlines seek to shift higher fuel costs to passengers amid the Middle East conflict. The carrier said jet fuel, which had traded around $85 to $90 per barrel before the outbreak of hostilities, has recently climbed sharply to a range of $150 to $200 per barrel. Given that spike, the airline also said it was suspending its financial outlook for 2026 because of the uncertainty created by the conflict.
In details provided to Reuters by email, Air New Zealand outlined specific fare changes: one-way economy fares on domestic routes have been increased by NZ$10 ($5.92), short-haul international fares were raised by NZ$20, and long-haul fares were increased by NZ$90. The carrier noted that if the conflict causes jet fuel costs to remain at elevated levels, it may be required to take "further pricing action and adjust our network and schedule as required." The airline added that, at present, there is no disruption to jet fuel supplies in New Zealand and that it is working closely with suppliers and the government to monitor developments.
The escalation in fuel prices and the disruption to normal flight paths have affected carriers beyond New Zealand. Vietnam Airlines has formally requested that local authorities remove an environment tax on jet fuel to help sustain operations. The Vietnamese government reported that airlines in the country are facing a 60% to 70% rise in operating costs due to higher jet fuel prices, and that fuel suppliers were struggling to meet airlines' demand.
Across the region, airlines and travel companies are responding to constrained capacity and route changes. Airspace closures that have followed the conflict, combined with the prospect of prolonged high fuel costs, have pushed fares on some Asia-Europe routes substantially higher and prompted passengers to reconsider travel plans as the peak summer season approaches.
Market reactions to the crisis have been volatile. U.S. President Donald Trump said on Monday the war could be over soon, a comment that sent markets on a roller coaster and helped push oil prices lower - retreating to around $90 a barrel on Tuesday from a Monday peak of $119. The swings in commodity markets contributed to a partial rebound in airline shares in Asia after a steep selloff earlier in the week.
Stock moves included Air New Zealand, which rose about 2% after tumbling nearly 8% the previous day. Korean Air Lines climbed 6% following an 8.6% drop a day earlier. Australia’s Qantas Airways gained just over 1% after a 4.5% fall on Monday, while Japan Airlines advanced more than 2%.
Fuel remains the second-largest cost item for airlines after labour, typically accounting for between one-fifth and one-quarter of operating expenses. Some major Asian and European carriers have hedging in place to mitigate the impact of volatile oil prices, while most U.S. carriers largely stopped hedging fuel costs over the past two decades. The combination of high oil prices and airspace closures is constraining capacity on key routes and pushing tickets on some itineraries to very high levels.
Beyond airlines and ticket prices, the travel industry more broadly is feeling the strain. Cirium data cited in industry reporting shows that Emirates, Qatar Airways and Etihad together normally carry about one-third of passengers from Europe to Asia and more than half of all passengers traveling from Europe to Australia, New Zealand and nearby Pacific Islands. With those Gulf carriers operating on altered schedules or with restricted airspace, capacity that normally flows via the Middle East has been disrupted.
Tour operators and national tourism agencies are already reacting. South Korea’s HanaTour Service said it was cancelling group tours that include flights to or transiting through Dubai, and it is waiving cancellation fees for affected customers. The tour operator said all Middle East-related tours for March will be suspended.
Thailand’s Ministry of Tourism provided a projection tied to the duration of the conflict: if the situation persists for more than eight weeks, the country could lose an estimated 595,974 tourists and about 40.9 billion baht ($1.29 billion) in tourism revenue. These figures underscore the broader economic exposure of travel-reliant economies to prolonged disruptions in aviation and higher fuel costs.
Industry participants are also weighing operational responses. Airlines have the options of adjusting networks and schedules to manage the twin pressures of limited airspace and mounting fuel bills, or passing more of the cost to customers through higher ticket prices. The extent to which carriers can protect margins while maintaining demand will vary by region, cost structure, and the degree of hedging in place.
For now, carriers and travel firms are monitoring the situation closely. The compounding effects of higher fuel prices, constrained routing options, and shifting consumer plans present an uncertain near-term outlook for the sector.
Key points
- Air New Zealand has increased fares - NZ$10 domestic, NZ$20 short-haul international and NZ$90 long-haul - and suspended its 2026 financial outlook amid a sharp rise in jet fuel prices.
- Jet fuel costs climbed from about $85-$90 per barrel pre-conflict to $150-$200 per barrel in recent days, while broader oil prices fell back to around $90 a barrel on Tuesday from a $119 intraday high on Monday.
- Travel and airline sectors are facing capacity constraints, higher operating costs, and route disruptions that are prompting cancellations, tax relief requests, and forecasts of significant tourist and revenue losses in affected markets.
Risks and uncertainties
- Prolonged elevated jet fuel prices could force additional fare increases or network and schedule adjustments - affecting airline profitability and consumer demand.
- Airspace closures and constrained routing reduce capacity on critical long-haul corridors, increasing ticket prices and complicating operational planning for carriers and tour operators.
- Extended conflict duration could materially depress tourism in vulnerable markets - for example, Thailand could lose up to 595,974 tourists and 40.9 billion baht in revenue if the conflict lasts more than eight weeks.