Rising Costs and Iran Conflict Put U.S. Travel Industry Under Growing Pressure

Escalating tensions involving the United States, Israel and Iran are creating fresh uncertainty for the global travel industry, which was already facing mounting pressure. Concerns have intensified after U.S. President Donald Trump declared that the ceasefire with Iran had ended and warned of further military action.

Industry analysts fear the latest escalation could disrupt the peak summer travel season while pushing travel costs even higher through rising fuel prices.

Global benchmark crude oil prices climbed 4.84 percent on Wednesday, adding to concerns that higher energy costs could weaken travel demand. A joint survey by NPR, PBS News and Marist College found that about 45 percent of Americans do not plan to travel this summer, citing rising airfare and fuel costs. That figure is two percentage points higher than during the same period last year.

The slowdown comes despite expectations that the FIFA World Cup would boost domestic and cross-border travel across the United States, Canada and Mexico. Travel analytics firm Sojern said most airline passengers attending World Cup matches are expected to be domestic travelers within the United States.

The U.S. aviation industry has been under growing pressure for several months, with airfares rising sharply since the outbreak of the U.S.-Israeli military campaign against Iran. According to data from the U.S. Department of Labor, airline ticket prices have increased by 8.2 percent since February.

Budget carrier Spirit Airlines ceased operations in May after nearly three decades in business. In its bankruptcy filing, the airline cited soaring jet fuel prices driven by geopolitical conflicts as one of the key factors behind its financial collapse.

Analysts say the weaker summer travel season is likely to prolong financial challenges for the U.S. airline industry. In a recent research note, Bank of America analysts said global travel forecasts have deteriorated since the conflict involving Iran intensified. They noted that higher oil prices have fueled broader inflation and increased airfares, leaving consumers worldwide feeling the effects of rising costs.

European airlines are also facing significant challenges. Airspace restrictions over Russia, Iran, Iraq and Lebanon have forced carriers onto longer flight routes, increasing fuel consumption and operating expenses.

In April, Lufthansa canceled around 200,000 short-haul flights as part of a cost-cutting strategy aimed at reducing fuel consumption by approximately 40,000 tonnes. In May, British Airways said it had raised fares by as much as 8 percent to offset part of the estimated US$220 million in additional fuel costs incurred by its parent company, International Airlines Group, which also owns Iberia and Aer Lingus.

Middle Eastern carriers, including Emirates, Qatar Airways and Etihad Airways, have also experienced operational disruptions due to airport closures and restrictions across the Gulf region. At the same time, the European Union Aviation Safety Agency (EASA) has advised airlines to avoid flying through parts of Russian and Middle Eastern airspace.

Asian airlines, however, have faced relatively fewer airspace-related disruptions. Singapore Airlines reported that seat occupancy on its Europe-bound flights reached 93.5 percent in March.

With airfares continuing to rise, many Americans—particularly during the recent Fourth of July holiday period—opted to travel by road instead of flying, reflecting growing consumer sensitivity to higher travel costs.