European airlines are confronting their most serious test since the COVID-19 crisis, as the war in Iran drives up jet fuel costs and disrupts travel across the Middle East, threatening the summer holiday season.
Carriers have largely been riding out the crisis with hedges that have tamed costs, even as jet fuel prices have risen nearly 84% since the start of the conflict on Feb. 28, but they could face shortages if the war does not end soon.
"There is a risk that we'll see rationing of fuel supply, particularly in Asia and Europe," Willie Walsh, head of the International Air Transport Association (IATA), told Reuters on Tuesday, while adding that supply remained robust for now.
Walsh said, however, that the situation was not yet as bad as the disruption caused by the COVID-19 pandemic in 2020, which led to travel demand plummeting and hundreds of billions of dollars in losses for the aviation sector.
"I think COVID was on a completely different scale," Walsh added. "What we're seeing here is, in effect, a cost issue for the airlines. The underlying demand for aviation remains robust, and that's a positive."
The war has hit airline shares, with on-again-off-again peace talks to end the conflict and reopen the critical Strait of Hormuz to normalize global oil and gas flows in what is the worst energy crisis in decades.
Airlines are now warning about their hedges – which help lock in set prices – running out, with outlooks increasingly murky as people delay booking travel or make plans closer to home to avoid potential disruption and higher fares.
Sweden's Energy Minister Ebba Busch on Tuesday fired an "early warning" about potential jet fuel shortages despite good current supply, cautioning Swedes to think through travel plans.
Ryanair CEO Michael O'Leary, however, played down concerns. "We think the risk of a supply disruption is receding," he told Reuters, citing conversations with suppliers across Europe earlier in the week.
European budget airline Wizz Air CEO Jozsef Varadi said on Monday that summer bookings were strong. However, easyJet and tour operator TUI announced drops in forward bookings and issued profit warnings in recent weeks.
Varadi, meanwhile, cautioned that even an end to the conflict would not quickly resolve high fuel prices.
"Even if the war is stopped in Iran, I don't think this is going to put the fuel price back to what it used to be two months ago," he told reporters in London.
Air France-KLM, British Airways-owner IAG and Lufthansa are set to report first-quarter results starting this week. Between them, they have raised prices and cut flight capacity in response to the war.
Gulf airlines have been the hardest hit, with data from Cirium Ascend showing that flights operated by Middle Eastern operators dropped 50% year-on-year in March, while bookings for the second and third quarters connecting via the main Gulf hubs are down 42.5%.
Global passenger capacity, however, remains up near 2% so far in 2026 versus 2025, it said, underscoring wider resilience.
The crisis has, though, dampened margins and sharpened the gap between weaker and stronger players. Some have dodged the impact. Finland's flag carrier Finnair said the crisis had so far had a net positive impact, with more demand for its Asian flights. Budget airline Norwegian on Tuesday brushed off jet fuel supply risks.
Cirium Ascend's head of valuations, George Dimitroff, said airlines have adapted and evolved through various crises and agreed COVID-19 had been "a much bigger hit."
"They're much, much more agile now than they were in the previous decade and let alone two or three decades prior when they were pretty hopeless at it," Dimitroff said.
