The Iran War’s Impact on Aviation
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How Did This Start?
I’m not going to get into the full geopolitical history of tensions with Iran, but some context is important to understand what’s happening in the aviation world. On February 28th, a joint United States and Israeli operation kicked off the war in Iran with a massive barrage of bombings that killed, among others, Ayatollah Ruhollah Khomeini. Iran retaliated swiftly, thus kicking off a full scale war in the Middle East.
Regional Impact
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The Middle East also happens to be one of aviation’s most important corridors. Some of the world’s busiest airports, like Doha and Dubai ground to a complete halt as rocket fire rained down on the cities. Dozens of flights were diverted away, stranding thousands of passengers around the globe. According to the New York Times, since the onset of the war, 52,000 flights have been cancelled. This is absolutely economically devastating for Gulf carriers like Emirates, Etihad, and Qatar, with the Times calling it “their biggest test since the Covid-19 pandemic.” Luckily, many of the region’s carriers are owned at least in part by their national governments which offers some padding financially, but it’s still quite problematic.
It’s been stop-and-start operationally at these airports. Some flights are allowed to resume, but then a new barrage of missiles shuts things down again. For a number of airlines, it’s not worth the risk. KLM, Delta, United, Lufthansa, British Airways, Cathay Pacific, and Air India, among others, have completely cancelled flights to regional cities like Dubai, Doha, Kuwait, Tel Aviv, Beirut, and Riyadh.
Not only is this obviously an incredible cost to the carriers, it also leaves thousands of people stranded with no way out. Since the onset of the fighting, the US State Department has organized over fifty flights to bring Americans stuck abroad home. They’ve also facilitated discounted fares on El Al flights for US citizens leaving Israel.
Fuel Crisis
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The biggest impact globally, however, has been fuel. Geopolitically, Iran holds something extremely important to international trade - the Strait of Hormuz. The Strait is a thin waterway between the Persian Gulf and Gulf of Oman. Iran lines the North side of the strait and the United Arab Emirates has the Southern side. This is a vital thoroughfare for shipping, particularly for liquid natural gas, oil, and phosphorus. About a quarter of the world’s oil supply goes through the Strait of Hormuz, and Iran has effectively sealed access off. Shortly after the start of the war, Iran began to place mines in the Strait to prevent passage. Any ship that dares traverse the waters could be blown up, so it’s clearly not safe.
One of the headline stories in the news has been the spike in gas prices because of the dramatic cuts in oil supplies. This extends beyond cars and into aviation. Since the war began, jet fuel prices have surged more than 60%, from an average of $2.11USD a gallon to $3.93 and climbing. For airlines, fuel is their second largest cost after paying crew, so this is potentially catastrophic financially. According to Delta CEO Ed Bastian, the airline has spent roughly $400 million more than expected on gas just since February 28th.
Airfare will rise as a result of this suddenly increased cost. According to reporting by Forbes, this increase has so far been in the range of 2% - 16% for US carriers, with far more dramatic price changes being seen in the obviously hard-hit Middle Eastern markets.
The timing is particularly ugly as the European and North American peak summer travel seasons approach fast. Airlines like Delta and United will take a hit but not nearly as badly as the more price-sensitive low-cost and ultra-low cost carriers like Frontier and Spirit.
What Does the Future Hold?
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The Middle East and Central Asia will see the most suffering long term. Besides the airspace closures and flight cancellations, travelers are going to be less likely to book a trip to or connection through Middle Eastern cities. I can speak to this anecdotally - I have family who was planning a trip to Israel this Summer and have since cancelled due to the risk. Region-wide, the tourism industry is losing $600 million per day of war. Additionally, as conflict drags on, it’s increasingly likely that crucial airport infrastructure will be critically wounded. There’s already been a drone strike at Dubai’s International Airport, which inflicted only minor damage. But a large attack could compromise the entire airport long-term, rendering it out of commission for potentially years while they rebuild.
It’s really hard - impossible - to predict how long the impacts will drag on. Investment banking firm Goldman Sachs believes high prices for oil (and thus fuel) will persist into 2027, but it all depends on how things play out politically. We’re seeing a tit-for-tat escalation in Iran right now. The United States strikes Iranian oil infrastructure, and the Iranian military goes after Saudi infrastructure. As of now, there’s no peace deal in sight, but that doesn’t mean it’s not happening behind the scenes. With regard to the Strait of Hormuz, it depends on how aggressive American, Israeli, and allied militaries want to be. They could deploy flotillas to escort oil ships, which makes attack less likely but the risk is absolutely still there. Most oil companies don’t want to put their multi-billion dollar assets and dozens of lives at risk like that. If escorts don’t happen, it’s up to a diplomatic solution.
I personally feel that the airspace closures are going to be the most sporadic. Things will flow smoothly for a while (like they are mostly now), but they can grind to a halt at a moment’s notice for an undefined period of time.
This is not the space to be holding political, theological, or other debates about the Iran War. You can absolutely discuss how it relates to aviation, but keep it civil.
by the hair of my chin.
