Airlines face bankruptcy risk as fuel costs soar amid Middle East conflict

Friday 03 April 2026 - 09:20

By: Dakir Madiha

Airlines face bankruptcy risk as fuel costs soar amid Middle East conflict

A billionaire aviation executive based in Dubai has warned that airlines around the world could begin filing for bankruptcy within weeks if the war in Iran continues to drive jet fuel prices higher, even as the shipping industry posts record profits fueled by the same geopolitical upheaval.

Gediminas Ziemelis, chairman of Avia Solutions Group, the world's largest aircraft leasing and outsourced operations company, told Bloomberg on Tuesday that "if the war in Iran lasts more than one more month, we could see the first bankruptcy among airlines worldwide." He compared the current crisis to the early days of the COVID-19 pandemic, noting that the closure of Middle Eastern airspace has significantly extended flight times on routes between Europe and Asia, while fuel costs — which account for roughly 25 percent of airline operating expenses — have surged by approximately 50 percent.

Jet fuel prices in the United States climbed from around $2.17 per gallon to $4.57 per gallon by late March, according to the Argus U.S. Jet Fuel index. Airlines for America, citing Argus data, reported that jet fuel prices have risen 85 percent since the conflict began in February.

United Airlines CEO Scott Kirby said the carrier plans to cut scheduled flights by about 5 percent in the second and third quarters of 2026 to offset what could amount to $11 billion in additional annual fuel costs. JetBlue raised its baggage fees on Monday, citing "rising operating expenses," while the average airfare reached $465 last week — the highest for this period since at least 2019, according to flight data firm OAG.

Ziemelis said he is redeploying a large portion of Avia Solutions' 145-aircraft fleet from Europe to Asia and Brazil. War risk insurance premiums are compounding costs further, with surcharges reaching up to $50,000 per flight near conflict zones. "The insurance market is going crazy," he said. Fitch Ratings revised Avia Solutions' credit outlook to "negative" last month, warning that the conflict could weigh on revenues and liquidity through 2026.

Malaysia Aviation Group, the parent company of Malaysia Airlines, reported Thursday that its net profit more than doubled to 137 million ringgit ($34 million) in 2025, up from 54 million ringgit the previous year, with revenue rising 6 percent to 14.5 billion ringgit. But CEO Nasaruddin A. Bakar warned that geopolitical uncertainty and rising fuel prices could pressure 2026 performance. The group said it has hedged roughly 36 percent of its fuel needs for the first quarter and 50 percent for the second quarter.

The disruption is proving lucrative for the shipping sector. South Korean shipbuilder DH Shipbuilding recorded a quarterly operating margin of 27.2 percent in the fourth quarter of 2025 — the highest in its history — with annual operating profit of 294.1 billion won on revenue of 1.23 trillion won. The company secured 12 Suezmax tanker orders in the first quarter of 2026 alone, surpassing its full-year target, as demand for crude carriers surges due to longer maritime routes imposed by the Middle East conflict.