A sharp rise in crude oil prices linked to the ongoing tension in the Middle East is expected to drive up jet fuel costs, potentially pushing airfares higher worldwide.
Fuel was one of the biggest costs for airlines, making up between a quarter and a third of their operating expenses, said Franz von Wielligh, XL Travel Head of Innovation & Member Support. “Earlier guidance from IATA assumed an oil price of around US$88 (R1 435) per barrel for 2026, but with the escalation in the Middle East, Brent Crude recently surged to around US$106 (R1 727) per barrel at the time of writing,” said Von Wielligh.
In Southern Africa, jet fuel is already priced at a 15-20% premium, with prices now expected to surge. “Since 2022 we have lost most of the refining capacity in South Africa, which means we rely almost entirely on imports. These incur additional transport, distribution and storage costs as well as import duties,” said Linden Birns, MD of PlaneTalking.
Airfares to increase
Airlines are expected to increase fares to mitigate the cost of jet fuel.
“There is no doubt we will see increases in airfares. The only question is how gradual the increases will be, especially on long-haul routes. Considering almost everything is long haul from South Africa, we are likely to be impacted almost immediately,” said Aadil Esack, XL Travel GM of Product & Marketing.
Airlines having to re-route in the Middle East will add to fuel costs. “Re-routing means more mileage, which means more fuel, which means higher pricing. Pricing will become even more dynamic in the current climate,” added Esack.
As of March 10, several international and regional carriers have increased their fuel taxes, according to Euan McNeil, MD, Flight Centre Travel Group South Africa. “These creeping tax hikes mean the overall cost of a ticket is already on the move. While we anticipate total fare increases of 10-15% on long-haul routes, we are currently still seeing relatively competitive pricing in the market.”
Hedging
Some airlines mitigate their exposure to significant fuel price fluctuations through hedging strategies.
“Hedges lock in a portion of future fuel purchases at specific prices. It’s a good way to protect airlines against price increases, but it can also be a hindrance when fuel prices fall,” said Birns.
Airlines that do not implement hedging strategies are more exposed to the daily market price of fuel. “This often puts pressure on airline margins before we see a direct reaction in ticket prices, but if higher fuel prices persist, those costs usually find their way into fares, fuel surcharges, or fewer discounted tickets,” said Von Wielligh.
Capacity drives up prices
Capacity constraints are the main factor driving up airfares at the moment. “The geopolitical forces are limiting Middle Eastern airlines’ ability to operate normally. This reduction in capacity is currently one of the key factors putting upward pressure on airfares,” said Stefan van der Merwe, CEO of Sure Travel.
“In the world of dynamic pricing, when supply drops and demand remains steady, prices spike – irrespective of the oil price. We are also seeing the ripple effect of increased operational costs, such as war-risk insurance premiums for airlines operating near conflict zones. These costs are often passed on as surcharges,” added McNeil.
According to Van der Merwe, demand will determine whether fuel costs translate into higher airfares. “When demand is strong, airlines are able to pass higher fuel costs on to travellers through fare increases or fuel surcharges. If demand softens, airlines may absorb some of the cost increases to remain competitive and keep load factors high.”
Impact on travel patterns
Travellers should expect higher average fares, fewer promotional deals and more volatility on certain routes. Von Wielligh believes this will influence travel behaviour in fairly predictable ways. “Leisure travellers often become more price sensitive, shortening trips, choosing alternative destinations, or delaying travel plans. Corporate travel is more resilient, but companies may tighten travel policies,” said Von Wielligh.
According to McNeil, South Africans will shift how and where they travel. “If long-haul fares to Europe or Asia climb, we expect to see a surge in high-value regional travel – destinations without the exposure to long-haul fuel surcharges.”
