Airlines are bracing for years of pain as executives warn that soaring fuel costs following the war in Iran will force further fare hikes and scaled-back growth plans. Industry leaders describe the situation as a 'new normal,' with fuel prices expected to remain high for longer, squeezing carriers from both sides if consumer demand weakens. TAP Air Portugal CEO Luís Rodrigues predicted a tough three to five years, noting that while demand remains strong, there is a limit to what the industry can absorb.
Data from OAG shows 2.3 billion bookings in the first half of 2026, up 1% year-on-year, despite double-digit fare increases. Delta Air Lines reported nearly no drop in demand despite raising prices by an average of 20%. However, many carriers are preparing for further hikes as hedging contracts expire.
Italy’s ITA Airways, which hedged 80% of its fuel pre-crisis, has not taken out new hedges, leaving it exposed to volatile prices. Latam Airlines CEO Roberto Alvo stated the industry faces a cost problem, not a demand one, but warned that sustained high energy prices could eventually hurt the economy and dampen travel. Executives fear 'demand destruction' as inflation erodes household budgets.
Adrian Neuhauser of Abra noted that growth plans are being affected, and the industry is returning to cost discipline. As carriers cut costs, they face tough choices between investing in new aircraft and other expenditures.
Source: Financial Times Companies · Summarized by HeadlinesBriefing