Airlines Face Higher Fuel Costs And Failures

Surging jet fuel prices caused by the conflict involving Iran, the United States and Israel could push more airlines into bankruptcy and accelerate consolidation across the aviation sector, according to International Air Transport Association (IATA) Director General Willie Walsh.

Speaking at IATA’s annual summit in Rio de Janeiro, Walsh said “airlines are facing mounting pressure from higher fuel costs”, disrupted flight routes and aircraft delivery delays. The warning comes weeks after the collapse of U.S. budget carrier Spirit Airlines, which Walsh described as unlikely to be the last airline failure if fuel prices remain elevated.

The industry is also confronting supply-chain constraints that IATA estimates cost airlines about $11 billion last year, limiting carriers’ ability to expand fleets and improve fuel efficiency at a time when operating costs are rising.

Middle East Conflict Drives Higher Fuel Costs

The sharp increase in aviation fuel prices has been linked to disruptions in Middle Eastern energy supplies and air traffic routes following the war involving Iran.

Jet fuel prices have risen from about $85-$90 per barrel before the conflict to roughly $150 per barrel, according to industry data cited by the International Air Transport Association, as the conflict disrupted fuel flows through the Gulf, one of the world’s most important energy-exporting regions.

The Strait of Hormuz remains particularly significant because roughly 20% of global oil consumption passes through the waterway, according to the U.S. Energy Information Administration. Any threat to traffic through the strait raises concerns about global crude supplies and tends to push energy prices higher.

Airlines have also been forced to reroute flights to avoid conflict zones, increasing fuel consumption and operating costs. Longer flight paths require additional fuel, crew time and maintenance expenditure, adding further pressure to already thin industry margins.

Industry Faces Bankruptcy Risks and Consolidation

Walsh said “low-cost carriers are among the most vulnerable because they rely heavily on ticket sales and generally lack high-margin revenue streams such as premium cabins, corporate travel contracts and large loyalty-program businesses”.

The strain is already visible in the United States. Spirit Airlines ceased operations last month after struggling with rising costs and intense competition from larger rivals. Walsh stated some carriers may not survive prolonged fuel price pressures, while others could become acquisition targets for stronger competitors.

Airlines are also expected to reduce or eliminate less profitable routes to preserve margins. Walsh said ticket prices, which have risen since the outbreak of the Iran conflict, are unlikely to decline significantly in the near term as carriers seek to offset higher operating expenses.

Gulf Carriers and Supply Chain Delays Add to Challenges

The conflict has disrupted traffic flows through major aviation hubs including Dubai, Doha and Abu Dhabi, creating operational challenges for Gulf carriers such as Emirates, Qatar Airways and Etihad. Together, airlines based in the Gulf account for approximately 14% of global airline capacity, according to IATA.

Walsh added that he “does not expect permanent damage to the region’s aviation industry because of its strategic location linking Asia, Europe and Africa”. He mentioned Gulf carriers are likely to regain market share once regional conditions stabilize.

At the same time, airlines continue to face delays in aircraft deliveries from Boeing and Airbus as well as engine shortages involving GE Aerospace and Pratt & Whitney. IATA estimates these supply-chain disruptions cost airlines approximately $11 billion in 2025 by limiting capacity growth and forcing carriers to keep older, less fuel-efficient aircraft in service longer.

Despite the challenges, the director went onto say the industry remains committed to its goal of achieving net-zero carbon emissions by 2050. While progress on sustainable aviation fuels has been slower than expected, he said airlines continue to view long-term modernization and efficiency improvements as critical to future growth and profitability.