Vietnam Airlines Faces 60-70% Surge in Operating Costs as Middle East Conflict Triples Jet Fuel Prices

The Middle East conflict has created significant ripple effects on global aviation, with Vietnam’s airlines feeling the strain as jet fuel prices have tripled in the wake of the ongoing unrest. This spike in fuel prices, coupled with the disruption of major transit routes, has led to a steep rise in operational costs for Vietnam Airlines and other carriers in the region. The Civil Aviation Authority of Vietnam (CAAV) reported a 60-70% increase in operating costs due to the surge in Jet A1 fuel prices, marking a challenging period for the country’s aviation industry.

Fuel Price Surge and Its Impact on Vietnamese Airlines

The rise in fuel costs, driven by the U.S.-Israeli strikes on Iran and the subsequent instability in the Middle East, has seen the price of Jet A1 aviation fuel escalate from approximately $60 per barrel to near $200 per barrel by March 9, 2026. Fuel typically constitutes around 30% of an airline’s operating expenses, so this dramatic price increase has caused a significant financial strain on Vietnamese carriers.

The CAAV has noted that this price surge has pushed airline operating costs up by as much as 60-70%. This increase in fuel costs has been further compounded by rising diesel prices, which have raised the cost of running ground equipment at airports, adding to the pressure faced by both airlines and airport operators.

In response to these challenges, Vietnam Airlines has drawn on its fuel reserves for March and implemented fuel-saving measures to partially offset the increased costs and ensure continued operations through April 2026. However, with prices still fluctuating, the airline faces uncertainty if fuel prices remain high.

Flight Cancellations and Adjustments Due to Middle East Conflict

The conflict has disrupted major air transit routes that connect Europe and Asia through the Gulf. Qatar Airways, Emirates, and Etihad Airways have had to cancel or adjust 98 flights to and from Vietnam between February 28 and March 10, impacting approximately 20,000 passengers. Several countries in the Middle East have closed or restricted their airspace since the beginning of the conflict, making it increasingly difficult for airlines to maintain regular schedules.

In response to these disruptions, Vietnam Airlines has added about 30 extra flights on European routes to help clear the backlog of stranded passengers. The airline sees this as an opportunity to expand its presence in the region, as Gulf carriers continue to face challenges. With the potential for a slow recovery, Vietnamese airlines are well-positioned to capture additional transit traffic, advancing the country’s ambition to become a regional aviation hub.

Fuel Supply Challenges and Strategic Measures

On the supply side, fuel suppliers in Vietnam are managing the situation by securing short-term supply contracts. Skypec, the country’s largest aviation fuel supplier, has assured that it will be able to supply fuel through March 31, with orders already placed for April 2026. However, Tran Minh Tuan, Skypec’s general director, stated that the outlook beyond that date depends on the ongoing developments in the Middle East. Similarly, Petrolimex Aviation, the second-largest fuel supplier, confirmed that it had secured supply through the end of March but acknowledged that there could be disruptions in April if suppliers invoke force majeure clauses.

In light of these challenges, suppliers are urging airlines to submit accurate fuel consumption estimates for March through May 2026 to help manage procurement more effectively. The CAAV has been called upon to coordinate with fuel supplier countries to ensure that contracted shipments are delivered on time and to avoid any additional delays.

Potential Solutions and Requests for Policy Support

To mitigate the impact of the rising fuel costs, Vietnam Airlines has proposed a waiver for the environmental protection tax on jet fuel. The airline has also urged the CAAV to negotiate flexible regulatory measures with international aviation authorities, similar to the adjustments made during the COVID-19 pandemic.

CAAV Director General Uong Viet Dung has urged the industry to work together in response to the current crisis. He called on fuel suppliers to maintain production and on airlines to optimize their costs while continuing to serve key routes. The CAAV has also recommended that airlines explore new routes to markets such as the Americas, Africa, Australia, Eastern Europe, India, Japan, and South Korea. While expanding route networks, the CAAV has emphasized that airlines must maintain service quality.

On the policy front, the CAAV has requested support from various government bodies. It has recommended that the Ministry of Construction seek government assistance for the aviation industry and has asked for expanded credit limits for fuel importers and airlines. The Ministry of Industry and Trade has also been urged to diversify fuel supply sources, and the Ministry of Finance has been called upon to consider tax relief for airlines struggling with rising operational costs.

Outlook and Long-Term Implications for Vietnam’s Aviation Industry

The current situation highlights the vulnerabilities of the aviation sector in Vietnam and other regions affected by the Middle East conflict. With fuel costs likely to remain volatile, Vietnam Airlines and other carriers will need to adapt by enhancing fuel efficiency, exploring new partnerships, and adjusting their operating strategies to ensure continued growth.

The ability of Vietnam Airlines to navigate this crisis could further establish the country as a regional aviation hub. However, achieving this will require effective coordination between the government, airlines, and fuel suppliers. If successful, this shift could strengthen Vietnam’s standing in the global aviation market and attract more international traffic, particularly from North America and Europe.

As airlines globally face similar challenges, the situation in Vietnam serves as a reminder of the complex interplay between geopolitical instability, fuel prices, and aviation economics. The industry’s resilience will be tested in the coming months, with the long-term success of Vietnam’s aviation sector largely dependent on how it navigates these challenging times.