The global travel industry, already weighed down by ongoing tensions between the United States, Israel and Iran, faces further headwinds after US President Donald Trump declared that the ceasefire with Iran is over and further attacks on the country are imminent.
What was supposed to be a typical busy travel season is expected to be further disrupted by the recent outbreak, with fuel costs likely to rise again and benchmark crude oil prices rising 4.84% on Wednesday.
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Even before that, the slowdown was clear.
More than 7.3 million people passed through security checkpoints at airports across the United States during the recent three-day Fourth of July holiday, down 2.3% from the same period last year, according to data from the US Transportation Security Administration (TSA).
A recent joint NPR, PBS News, and Marist College poll found that about 45% of Americans are choosing not to take a vacation during the typically busy summer travel season, down 2% from the same time last year, amid rising fuel costs for air and car travel.
This is despite an expected surge in travel to and within the United States, Canada and Mexico due to the FIFA World Cup. Market analysis firm Sojourn predicted that the majority of travelers who fly to watch games will be domestic travelers.
Pressure on the airline industry has been mounting in recent months. The US and Israel first attacked Iran, and subsequent retaliation led to skyrocketing airline ticket prices for US consumers. Airfare prices have increased 8.2% since February, according to inflation data released by the U.S. Department of Labor.
Major airline companies are warning of rising prices. United Airlines announced in April that it would have to raise prices by up to 20% due to rising fuel costs. American Airlines cut some routes in August and September due to rising fuel costs.
At least one airline couldn’t survive the jump in jet fuel prices. Low-cost carrier Spirit Airlines ceased operations in May after nearly 30 years in the skies. In a bankruptcy court filing, the airline blamed “geopolitical conflicts” as fuel costs began to rise.
The summer travel slump could continue to strain the U.S. airline industry for months to come.
“Typically, there is a statistically significant increase in the number of scheduled flights during the summer months, but the war has had a significant impact on airlines’ ability to plan and predict what the summer months will be like,” said John Diehl, managing director of capital markets at investment bank Post Oak Group.
“Forty percent of their revenue comes from summer travel. Jet fuel’s downstream impact on the market is in many ways even stronger than gasoline because there isn’t as much supply capacity.”
This comes as the path to an end to the war between the US and Iran narrows, further increasing pressure on global oil markets.
“The ceasefire between the United States and Iran has always been fragile, and some flare-ups were unfortunately inevitable. The question is whether this signals a difficult road ahead or whether we are emerging from the eye of the storm,” Ryan Sweet, chief global economist at Oxford Economics, said in a note Wednesday.
European airlines are also not performing well. Lufthansa grounded 200,000 short-haul flights in April as it came under pressure to cut costs due to rising fuel prices. The airline said the move was part of a broader effort to reduce fuel consumption by 40,000 tonnes.
British Airways said in May that it needed to raise prices to offset rising fuel costs across its parent company, International Airlines Group (IAG), which also owns Spain’s Iberia and Ireland’s Aer Lingus. The group said that because British Airways is a more premium airline, it will bear a larger share of the group’s overall cost burden of around $2.2 billion, and has increased fares by up to 8%.
John Grant, chief analyst at travel data provider OAG, told Al Jazeera: “It makes sense that average airfares have gone up because fuel prices have gone up.”
“That was communicated directly from the airline to the traveler.”
For European airlines, the pressure extends beyond jet fuel prices. With airspace over Russia restricted as a result of the war with Ukraine, and now airspace over Iran, Iraq and Lebanon, European airlines already have a narrower geographical window for air travel and are increasingly taking long-haul routes, which require more fuel.
“The global travel outlook has been revised downward since the outbreak of the Iran war,” Bank of America analysts said in a note last month.
“Higher oil prices have increased general inflation and increased airfares. Consumers around the world are feeling the effects of higher prices across the economy.”
airspace becomes narrower
The European Union Aviation Safety Agency (EASA) has warned airlines to avoid airspace over Russia and the Middle East.
Asian airlines, on the other hand, have few airspace restrictions.
This is influencing the choices of consumers like Rich Preece, who runs an AI and logistics company called Finmile in London. He is normally a loyal British Airways customer, but for this trip he chose to fly with a Chinese airline that allows him to fly through Russian airspace.
“I am planning a trip to China later this month and will be using a Chinese airline via Russia,” Preece told Al Jazeera.
Aircraft carriers in the Middle East were not limited by the Russian war, but the situation changed with the US and Israel’s war against Iran.
Airlines such as Emirates, Qatar Airways and Etihad Airways initially suffered from poor performance due to closures of airports in the Gulf region (often connecting Europe to destinations in Oceania, Southeast Asia and East Asia) and travel restrictions.
But Asian airlines such as Singapore and Korean Air benefited. Singapore Airlines announced that the seat occupancy rate for its European flights jumped to 93.5% in March.
Although some Middle East flights have resumed as a fragile ceasefire takes hold, there remains uncertainty about the reliability of these routes, both for transit and destination travel.
Mr Preece, whose work frequently takes him between London and Saudi Arabia, Qatar and the United Arab Emirates, has had to reconsider these decisions in the short term.
“I had plans to travel to Qatar, Saudi Arabia and Dubai, but they were all cancelled. I have a wife and two young daughters at home, so the possibility of being stranded somewhere has changed the way I think about traveling.”
Traveling by car remains expensive, but Americans, who unlike Europeans have much more limited access to rail transportation, are choosing to take the road instead of flying, especially during the recent July 4th holiday, when air prices soar.
The American Automobile Association (AAA) predicts that 61.4 million people will use the roads over the weekend, up from 61.3 million last year. The agency has not yet released data confirming or revising that prediction.
pricing pressure
Gasoline prices remain high in the United States. The average price is $3.79 per gallon, according to AAA, which tracks daily gas prices. This is down from its high of $4.48 in mid-May, but is still well above the $2.98 it hit on February 28, the day the US and Israel first attacked Iran.
In other countries, prices are measured in liters rather than gallons. Consumers in Canada pay CAD 1.87 ($1.32), EUR 2.20 ($2.52) in the Netherlands and GBP 1.49 ($2.00) in the UK. In China, it costs 7.71 yuan (about $1.13) and in India, it costs 108.71 Indian rupees (about $1.14).
India and China have been hit harder by the closure of the Strait of Hormuz than Western countries. World oil supplies are limited, but most of the oil that passes directly through the strait, which carries one-fifth of the world’s oil supply, is destined for Asian markets.
