Shorter trips, destinations closer to home and, in Europe, a growing shift towards rail travel may define this year’s holiday season. Local and regional tourism could benefit, although probably less than expected, as consumers remain cautious about spending.
Airlines are also adapting. They are not only raising fares but increasingly seeking to fill aircraft earlier, protecting margins through stricter capacity management. For travellers, the conclusion is clear: genuine last-minute flight bargains may be scarce this year. Booking during promotions several weeks in advance may be the safer option.
The crisis in the Middle East has disrupted supplies of aviation fuel for airlines. According to Allianz Trade, unlike previous oil crises, the main bottleneck is not only crude oil availability but refinery capacity and the logistics of refined-product deliveries.
The Strait of Hormuz accounts for around 25% of global seaborne aviation-fuel trade, making it a critical route for aviation markets. Disruptions at regional refineries have caused jet-fuel prices to double since the beginning of the conflict, while refining margins have exceeded USD 100 per barrel.
Fuel is the largest single cost item for airlines, typically accounting for around 30–35% of operating costs. As a result, fuel-price volatility can quickly translate into higher ticket prices, reduced capacity or lower profitability.
Europe’s structural exposure
Europe is among the regions most structurally exposed to jet-fuel shortages. Allianz Trade estimates that Europe covers only around half of its kerosene demand through local production, with the remaining volume supplied through imports.
Producers in the Gulf region previously accounted for around 70% of imported volumes. This leaves markets such as the United Kingdom, Germany, France and Italy particularly vulnerable, as all continue to face structural refinery deficits.
In March, kerosene flows from the Middle East to north-western Europe fell by 90% month on month. In April and May, they were virtually absent. Deliveries from the United States increased sharply, rising by 782% month on month in April, while West African suppliers, including Nigeria, also expanded shipments.
Despite these alternative supplies, market conditions remain tight. Even if the Strait of Hormuz reopens soon, a rapid return to pre-conflict stability in supply and pricing is unlikely. Restoring refinery output and regional production capacity could take between three and six months.
Airlines raise fares and limit capacity
Airlines have already responded with higher ticket prices. Initial increases on international routes ranged from 5% to 15%, with further rises of 10–15% possible in coming quarters.
Fuel surcharges have also returned on many routes. They currently range from USD 20 to USD 60 for short- and medium-haul services, and from USD 80 to USD 150 for long-haul tickets.
Should jet-fuel availability deteriorate further, airlines may introduce another round of fare increases, particularly on long-distance and fuel-intensive routes. Once higher fare levels are accepted by the market, they are rarely fully reversed, even when cost pressures later ease.
Airlines are also tightening capacity. In Europe, announced reductions currently amount to around 2–5% of sector capacity. These are targeted cuts rather than a broad contraction, focusing mainly on lower-margin short-haul routes and secondary airports.
Instead of widespread cancellations, carriers are increasingly optimising their networks by cutting frequencies, deploying smaller aircraft or reallocating capacity to more profitable routes. Many airlines may keep capacity constrained even after fuel supply stabilises in order to rebuild margins.
Low-cost airlines face the greatest pressure
Low-cost carriers are particularly exposed. Their business model relies on low margins, intensive short-haul operations and highly price-sensitive customers. They also face stronger competition from high-speed rail on many European routes.
A 10% increase in jet-fuel prices typically reduces airline EBIT margins by around 0.3 to 0.8 percentage points, depending on hedging practices and pricing power. A doubling of fuel prices could therefore reduce sector-wide EBIT margins by roughly three to eight percentage points over a 12-month period.
European low-cost airlines generally operate with EBIT margins of around 5–10%. Their dependence on affordable fares means there is limited room to pass higher costs on to passengers without affecting demand.
Low-cost carriers account for around 45% of intra-European flights and more than half of short-haul capacity on many routes. Their exposure is particularly high in countries such as Spain, Italy, France and Germany, where dense low-cost networks overlap with extensive high-speed rail corridors.
Rail may become the alternative for European holidays
Travel to European summer destinations is not necessarily under threat. Rail remains the dominant form of mass passenger transport in Europe, carrying far more passengers annually than aviation.
Between 2014 and 2024, railways transported around 81.2 billion passengers in Europe, compared with 8.9 billion carried by airlines over the same period. Dense networks, frequent services and direct access to city centres make rail a practical substitute for flights on short and medium distances.
The growing role of rail means that the impact of reduced air capacity may be partially absorbed by train operators. Rail is not merely complementary to aviation. In many parts of Europe, it serves as a structural safeguard for mobility, helping to keep tourism flows moving during periods of airline disruption.
For many households, however, the main question may not be which form of transport to choose, but how much they are willing to spend on leisure this summer.
Tourism may benefit, but consumers remain cautious
Southern European tourism markets may see some substitution effects as travellers choose closer and more predictable destinations. Hotel companies in the western Mediterranean have benefited from this trend, with their share prices rising by 36% since the beginning of the conflict.
Booking data also point to stronger demand. Spain has recorded a 32% year-on-year increase in bookings, while Italy, Greece and Portugal have seen growth of around 20%.
However, weaker consumer confidence in both the United States and the euro area may limit the upside. Rather than replacing cancelled long-haul trips with domestic holidays, many households may simply reduce their overall travel spending.
Tourism is highly sensitive to disposable income, employment expectations and consumer confidence. When uncertainty rises, travellers often shorten trips, choose cheaper accommodation, postpone bookings or cancel non-essential travel altogether.
Domestic trips also tend to generate lower spending per traveller than long-haul holidays involving flights, premium hotels and longer stays. This means regional tourism could gain visitors without fully offsetting the lost value of international travel.
The Middle East remains a critical aviation hub
The direct exposure of global aviation capacity to the conflict zone is estimated at only around 10%. However, the Middle East is one of the world’s most important aviation hubs, meaning disruptions can have much wider consequences.
Airports such as Dubai International, Hamad International in Doha and Abu Dhabi International connect Europe with Asia, Australia and many island destinations. Dubai International alone handled nearly 90 million passengers in 2025, underlining the region’s role as a major bridge for international air travel.
Disruptions to airspace or airport operations in the Gulf can therefore create a domino effect across long-haul networks, particularly on routes linking Europe with Asia.
Destinations including the Maldives, Seychelles, Mauritius, Thailand, Indonesia, Australia, Singapore and the Philippines rely heavily on long-haul air connections routed through Gulf hubs. For some markets, Middle Eastern airlines provide the most efficient or even the only realistic one-stop connection to Europe and North America.
This creates a structural vulnerability for tourism-dependent economies, particularly island states. Even modest increases in fuel costs or reductions in route capacity can directly affect visitor flows.
Fuel hedging offers limited protection
The current crisis also exposes the limitations of traditional airline fuel hedging. Many hedging programmes are linked to crude-oil benchmarks rather than the price of refined aviation fuel actually used by airlines.
When refinery margins rise sharply, jet-fuel prices can become disconnected from crude oil prices. This reduces the effectiveness of hedging strategies precisely when airlines need protection most.
Regional approaches differ. US airlines have largely moved away from systematic fuel hedging over the past decade, relying more heavily on pricing flexibility and capacity management. European airlines have historically maintained more extensive hedging programmes, often covering a significant share of fuel demand for 12 to 24 months.
However, some European carriers have recently reduced or abandoned hedging activity, reflecting a less favourable risk-return profile and a greater preference for market exposure combined with more dynamic fare adjustments.
Asian airlines generally take a middle approach, often spreading hedges over six to 12 months, although strategies vary significantly between carriers and jurisdictions.
A more expensive summer for air travel
The aviation industry is entering the peak summer season under pressure from fuel shortages, high refining margins and disrupted logistics. Even if crude-oil flows normalise, the recovery of refinery output and jet-fuel availability may take months.
For airlines, the immediate response is likely to remain focused on higher fares, fuel surcharges, ancillary revenue and disciplined capacity management.
For travellers, the message is increasingly clear. This may not be the summer of spontaneous last-minute flight deals. Booking earlier, monitoring promotional fares and considering rail or closer destinations could prove more cost-effective than waiting for prices to fall.
The shift may support local and regional tourism, especially in southern Europe. Yet it is unlikely to fully compensate for weaker consumer confidence and rising travel costs. The biggest change may be behavioural: shorter holidays, destinations closer to home and a growing willingness to replace flights with trains where possible.
