Airlines in Crisis: Balancing Cost and Demand Amid Rising Fuel Prices
Global airlines are navigating a critical challenge as they strive to balance growing costs and passenger demand in the wake of the U.S.-Israel–Iran conflict.
It has been a month since the outbreak of the U.S.-Israel–Iran conflict. Prior to this, the aviation industry had projected a record profit of USD 41 billion for 2026. Now, with jet fuel prices doubling, that outlook is under threat, forcing airlines to reassess their networks and operating strategies.
Under mounting cost pressure, Spring Airlines announced that it will increase fuel surcharges on domestic flights starting April 5. Industry observers expect that major carriers such as Air China, China Southern, and China Eastern will follow suit.
In international markets, airlines ranging from United Airlines to Air New Zealand and Scandinavian Airlines have already announced capacity cuts and ticket price increases, while others are imposing additional fuel surcharges.
Rigas Doganis, a former head of Olympic Air in Greece and a former board member of EasyJet in the U.K., said that airlines face an existential challenge. On one hand, carriers need to lower fares to stimulate weak demand; on the other hand, rising fuel costs force them to raise prices.
Scott Kirby, CEO of United Airlines, informed ABC News last week that fares would need to increase by around 20% to cover the higher fuel costs. Analysts point out that low-cost carriers may feel greater pressure because their customer base is more price-sensitive, while legacy airlines such as Delta and United are increasingly targeting corporate clients and premium travelers.
Nathan Gee, head of Asia-Pacific transportation research at Bank of America, commented that for more price-sensitive passengers, even short-haul flights could be substituted by trains or long-distance buses.
