Airlines are facing higher fuel bills as they reroute flights to avoid airspace over Iran and Iraq due to recent heightened tension between Washington and Tehran, adding further financial pressure to an industry already contending with the prolonged grounding of Boeing’s 737 MAX jets.
Tensions in the region surged after a US drone strike killed a top Iranian military commander in Iraq last week, compounding industry challenges at a time when carriers are already reeling from stiff competition, increased regulations and fallout from the 737 MAX fleet’s global grounding.
In a piece of good news for the industry, oil futures fell nearly 4 per cent on Wednesday, retreating from an earlier four-month high, on a deescalation of rhetoric from Washington and Tehran, and a realisation that Iran’s rocket attack did not damage oil facilities.
In December, global airlines reduced their forecast for industry wide profits in 2019 under the weight of trade tensions, but were expecting a rebound in 2020.
Etihad Airlines, Qatar Airways and Emirates Airline are still using the airspace, which remains open.
“The Gulf carriers in total will have a headache, as they need to pass Iran to get to Europe,” Bernstein analyst Daniel Roeska said, adding that airlines flying from India to Europe would also suffer.
