Should We Be Afraid Of War In The Gulf?

The impact of the Gulf conflict on aviation is not simple, and the constant reversals of the actors make it impossible to make predictions about the end of the crisis. The complexity is all the more important for air transport as this conflict comes on top of the war between Russia and Ukraine, which has entered its fifth year. We never end. It is nevertheless curious that the belligerents have so much difficulty in sitting around a table to find an agreement since, in the end, they will be forced to do so. The consequences for airlines are not trivial.

First of all, there is the recurrent problem of fuel supply. A very good article in Air Journal sheds light on the European situation. 70% of the jet fuel consumed in Europe comes from the Middle East and, in particular, from the Al Zour complex in Kuwait. It is clear that this source of supply of Jet A or Jet A1 will be significantly reduced as long as the Strait of Hormuz is not reopened to navigation, and this may take several months after the end of hostilities, which is not for tomorrow. But the Persian Gulf is not the only potential supplier. The United States has come to the rescue and, while only 3% of European supplies came from this country before the conflict, the amount is now 40%. And it is possible to find new sources. However, it is quite possible that the price will remain at a very high level while transporters had become accustomed to a reasonable rate, around $65 per barrel, while it is around $100, and this may be for a long time. So the companies will have to redo their cost price calculations and therefore their public tariffs.

And here is another parameter. If, as one might think, prices will increase by around 10% to 15% to compensate for both fuel costs and longer flight times, especially between Europe and Asia, it is possible that this will slow down travel enthusiasm and that trips scheduled for leisure will simply be postponed, as air consumers are content with ground travel. On the other hand, we have the experience of coming out of Covid. The carriers did not hesitate to increase fares by around 30%, and in the end this was rather well accepted by customers, proof, if ever there was one, that the race for the lowest fares is and remains a stupidity that air transport will have to get rid of.

But there is something more diffuse, and that is fear. It is known that 50% of passengers have a more or less diffuse fear of planes. Some even have anxiety attacks, and it is not the obstacle course they have to endure in airports that will reassure them. So if we add to this form of anxiety the fear of being attacked by a drone or a lost missile, this can greatly influence consumer behavior. This is all the more pernicious because, even if the possibilities of hitting a civilian aircraft in the event of war are extremely rare, the examples are very real, between the Malaysian Airlines aircraft shot down over Ukraine by pro-Russian partisans, the Azerbaijan Airlines Embraer 190 hit by a Russian air defense error again, or even when an Iranian Airbus A300 was hit by an American missile strike, but that was in 1988. In short, we must not play with the nerves of the soldiers in charge of anti-aircraft defense.

However, should air transport fear for its future, even in the short term? I am not convinced of that. Even if there could be a certain restriction of flights here and there, it would be surprising if it took on large proportions. On the other hand, carriers may be tempted to group together flights that are not well filled, especially when the services are very dense, such as the transatlantic axis. And let’s keep in mind that passengers for tourist reasons don’t just travel by plane; they have also bought their stays and booked their hotels and other tourist activities a long time ago to benefit from the lowest rates. They will have a hard time cancelling their holidays. It would therefore be surprising if air transport were to sink significantly. On the other hand, it is likely that the Middle Eastern destinations that were becoming very popular, I am thinking in particular of the Emirates, will be largely abandoned as long as the conflict lasts, even if the starting prices are such that they can compensate for the fear of going to these destinations. This could benefit certain Asian, African, and Caribbean countries.

However, let us rely on the imagination of hard-hit countries to find solutions. They have shown their resilience in the past.