Middle East conflict could raise travel costs by 80 per cent
Travel experts say short-term travel costs could rise as much as 80 percent as rising fuel prices and a significant capacity shortage resulting from the Iran war squeeze the aviation market.
Some Australians have already moved to cancel flight bookings, although travel corridors outside the Middle East remain largely unaffected. Those pushing their travel plans are rerouting their trips to Europe via Asian or North American hubs.
“We encountered some people rerouting via the USA, via Canada [to Europe]”And of course through Asia, and those flights are absolutely fine,” said Cinzia Burnes, chief operating officer of Helloworld Travel. “They don’t come anywhere near the conflict zone.”
Airlines have canceled more than 20,000 flights to and from the Middle East since the military conflict began on Saturday, according to aviation data group Cirium.
Airspace across the Gulf, including Qatar, Iran and Iraq, remains closed to normal air traffic, although a limited number of evacuation flights can operate from the United Arab Emirates.
The sweeping closure of airspace means airlines such as Emirates and Qatar Airways have essentially ground to a halt, according to Bloomberg.
Middle Eastern airports such as Dubai, Abu Dhabi and Doha are important transit hubs for long-distance travel. The Gulf’s largest airports serve nearly a third of the 125 million people traveling between Europe and Asia each year, according to consultancy Roland Berger.
The severity of the long-term impact on tourism will depend on the duration of the war, the extent of infrastructure damage and how quickly the aviation industry can adapt.
Changing travel patterns
As the conflict drags on, travel agencies are seeing mixed reactions, even though nearly half of consumers have kept their reservations for now.
Burnes said an ongoing survey of Helloworld’s franchise members found that 49 percent of customers had made no changes to reservations since the conflict began. About 34 percent made minor adjustments, while 17 percent opted for major changes or cancellations.
“If you’re trying to leave this week, prices have clearly gone up,” he said, noting that the immediate pressure was felt most by corporate travelers looking to reschedule on short notice.
With an estimated 4.4 million airline seats removed from the market since Saturday, higher fares seem inevitable. Dean Long, chief executive of the Australian Travel Industry Association (ATIA), said his organisation’s modeling predicted airfares to Europe in the next two weeks would increase by 20 to 80 per cent from pre-war levels due to high demand and limited capacity.
However, price changes vary significantly by route. According to flight comparison site Skyscanner, a Malaysia Airlines flight from Melbourne to London in late March cost about $3800, while a flight from Melbourne to New York at the same time cost $1650.
As the industry moves from the “emergency response” phase to the strategic phase, airlines are redeploying aircraft to avoid disputed airspace.
Qantas added an extra A380 flight between Sydney and London last Saturday. British Airways suspended several Gulf routes but added daily flights between London and Muscat, Oman.
Budget carrier IndiGo has started flights to Muscat and Saudi Arabia’s Jeddah and Medina, it said in a social media post.
According to Bloomberg, Malaysia Airlines is flying from Kuala Lumpur to Jeddah and Medina, while Virgin Atlantic is resuming flights from London to Dubai and Riyadh after being suspended.
Fuel factor
The outlook for ticket pricing in the medium to long term is highly dependent on the price of fuel, which accounts for roughly 25 percent of an airline’s operating expenses.
Oil prices approached 84 dollars per barrel, from 70 dollars before the war.
Major carriers are still protected by hedging strategies designed to protect themselves from such short-term price fluctuations. Qantas, for example, has hedged 81 per cent of its fuel for the remainder of the financial year to 30 June. Virgin Australia retained 85 per cent for the same period.
If the conflict ends quickly, these protections could prevent fuel-related price increases from eventually being passed on to consumers.
Qantas boss Vanessa Hudson this week warned that even with hedging, spikes in oil prices were “having quite significant impacts on aviation”, translating into “quite significant costs for airlines”.
Meanwhile, dealing with flight cancellations remains a challenge for affected passengers.
Flight Center in question It will waive its change and cancellation fees for customers affected by Middle East airspace restrictions through March 8 (for bookings through March 31). However, customers still need to pay fees imposed by airlines or third-party suppliers.
Some travelers reported significant delays in getting their money back.
A reader named David said he had to cancel a flight from Sydney to London via Doha and was told by his online travel agent Aunty Betty it would take up to four months to get his money back.
A spokesperson for Flight Center, which owns Aunt Betty’s, stated that when a customer “books with Aunt Betty, we have to pay the airline – in this case Qatar – and the payment goes to them.”
“Equally, when a customer requests a refund, we have to submit a claim to the airline and wait for them to authorize it before we get the money back, which can take up to 12 weeks, sometimes longer.”
Consumer Champion Adam Glezer said airlines should adjust their offers based on the impact of the war and stop charging more for flexible tickets.
“Consumers should not have to pay extra for refundable flights at this time, given the current level of uncertainty, as things change daily.”
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