Airlines are preparing to slash their winter flight schedules, with the potential for planes to be grounded and tens of thousands of flights cancelled if jet fuel prices remain elevated, according to the Financial Times.
The Iran war is causing sleepless nights for senior corporate executives across industries and sectors, as the conflict’s ripple effect outside of the Middle East continues.
Largest Political Violence and Terror Loss?
The Middle East conflict is shaping up as the largest loss event in PVT market history, but legal disputes, limited loss visibility and business interruption complexities leave the ultimate claims bill highly uncertain.
While current estimates sit around $2bn-$3bn, coverage battles over sabotage and terrorism policies, delayed reporting and potential BI inflation could materially expand losses, testing policy wordings and market resilience, reports Insurance Insider.
However, the global airline industry is fretting over the long terms implications of the conflict if the strait remains closes or blocked for too much longer analysts warn an economic squeeze could combine with rising prices to put people off flying during what are already the industry’s leanest months – October to April (despite the Christmas and New busy period).
This week, industry body IATA slashed its forecasts for the year, saying global profits would halve from $43bn to $23bn. Many airlines will adapt — but they were already businesses with “wafer-thin margins”, IATA director-general Willie Walsh warned at its annual gathering of industry executives, held this year in Rio de Janeiro.
Direct and Indirect Impacts on the Aviation Sector
IATA has also warned airlines that they face an additional $100bn fuel bill, even if prices began to drop towards the end of 2026 as is currently forecast.
The cost living pressures from higher oil prices means that consumers have less cash to spend. At the same time, the cost of travel to events is higher due to higher air fares.Cost of accommodation in locations is also leading to higher operating costs.
This was one of the themes that came out of a recent Russell webinar on the Iran war on the global entertainment industry. In the session, we revealed that nearly 4 in 10 Americans are cutting entertainment spending and 43% are going to movies less. 39% are reducing live events attendance whilst 46% are cancelling streaming subscriptions.
View from Russell
Chris Don, Head of Communications and External Affairs at Russell said: “The Iran war is having a few direct and indirect impacts on the aviation sector, which need to be monitored. The direct impact is quite simple: a surge in jet fuel costs cannot always be absorbed by airlines accepting thinner margins, so the cost will be passed on to travellers.
The indirect impact is that the uncertainty in the Middle East is affecting financial markets and investors and is causing Central Banks to consider keeping interest rates high to counteract inflation and this evolving cocktail of risk eventually feeds into the sector. Underwriters in the insurance sector and risk managers in the corporate world need to stay tuned into the global ripple effects of the war, as these ultimately feedinto their business continuity and risk management planning.”
