Aviation hammered by war in Iran

Global aviation continues to be hammered by the US-Israel war on Iran with airline shares falling Monday and oil prices rising. Hong Kong’s Cathay Pacific, Australia’s Qantas Airways, Singapore Airlines and Japan Airlines fell more than 5% after the U.S. and Israel launched weekend strikes on Iran. Some analysts claim the industry could be hit almost as hard as it was during the COVID pandemic if the war drags on for an extended period. Oil prices surged 7% to their highest in months as Iran and Israel stepped up attacks in the Middle East, damaging tankers and disrupting shipments from the key producing region. In reaction, shares in Qantas fell 10.4% to the lowest level in 10 months when the market opened in Australia, before paring some losses to trade down about 6%. Shares in other Asian carriers, including Japan’s ANA Holdings, Air China, China Southern Airlines, China Eastern Airlines, Malaysia’s AirAsia X, Taiwan’s China Airlines and EVA Airways all fell at least 4%, according to Reuters. Qantas said its flights were not affected because it did not operate aircraft in Middle Eastern airports, according to media reports. Cathay Pacific said it had cancelled all of its flights to the Middle East, which include passenger services to Dubai and Riyadh, until further notice. Singapore Airlines cancelled flights to and from Dubai through March 7, while Japan Airlines suspended its Tokyo-Doha flights for the time being. Brendan Sobie Aviation analyst Brandan Sobie told Asian Aviation: “Of course the Gulf carriers are most impacted as several suspended operations entirely and it’s unclear when airspace can be safely reopened. Dubai, Abu Dhabi, Sharjah, Doha, Kuwait and Bahrain combined have about 230 million annual passengers which represents over 5% of the global international total so the impact is massive particularly given a majority of this traffic is transit. Several Asian destinations such as the Maldives rely heavily on the mega Gulf hubs so the current suspension will impact their tourism sectors and overall economies. “For East Asian carriers the number of flights they have to the airports that have been shut are rather limited, excluding India and South Asia. But of course, you have the potential impact of higher oil prices and the overall political/economic instability globally. For those Asian airlines operating to Europe you also have longer flights in some cases due to airspace closures. While this will result in higher costs, load factors and revenues on these flights will likely increase as Asian carriers take on some of the impacted passengers that typically fly between Asia and Europe via the Gulf, (but) not all of the impacted passengers obviously as that would be impossible given the volumes,” Sobie said. Meanwhile, Bloomberg reported that Chinese airlines were making it easier for passengers to get refunds for Middle East flights with Air China, China Eastern Airlines and China Southern Airlines offering changes or refunds for travellers who bought tickets before 8 p.m. on Feb. 28 for flights scheduled between Feb. 28 and March 15 for routes including Dubai, Abu Dhabi and Riyadh, with one free change permitted. Other carriers including Hainan Airlines Holding, Shenzhen Airlines and Sichuan Airlines followed with similar measures, extending coverage to Middle East destinations as carriers seek to limit disruptions and financial losses for customers. AAPA Director General Subhas Menon. (PHOTO: Matt Driskill) Subhas Menon, the outgoing director general of the Association of Asia Pacific Airlines, said in a statement to Asian Aviation that “as I said at AAPA Assembly of Presidents last November, the biggest threats to a well performing aviation industry are supply chain disruption and air space closures. The Iran war has caused instability to the whole region. Add to that the ongoing closure of Russian/Ukranian airspace means slim pickings for Asia Pacific airlines on European routes. “The very few alternatives carry high operating cost in terms of longer flying and deploying crew resources,” Menon said. “Right now the whole of the Middle East is out of bounds, which is a high price for some airlines. If then Europe can only be served at a high cost, airline profitability will be undermined. At the end of the day the price to pay is connectivity. The prospects for a turnaround depend on how long the war will last, bearing in mind that the Ukraine war has been waging for four years.” For Editorial Inquiries Contact: Editor Matt Driskill at [email protected] For Advertising Inquiries Contact: Head of Sales Sally Passey at [email protected]