WASHINGTON, D.C.: Airlines are scrambling to adjust fares and flight schedules as a sharp rise in fuel costs threatens profitability and risks dampening travel demand.

Global airlines have begun hiking fares and cutting capacity to cope with the sudden surge in oil prices, but the industry's ability to remain profitable may depend on whether consumers pull back on flying as gasoline costs strain household budgets.

Before the U.S.-Israeli conflict with Iran began last month, the airline industry had forecast record profits of US$41 billion in 2026. A doubling in jet fuel prices has now put that outlook at risk and forced carriers to rethink their networks and strategies.

Carriers ranging from United Airlines to Air New Zealand and Scandinavia's SAS have announced capacity cuts and fare hikes, while others have imposed fuel surcharges.

"Airlines face an existential challenge," said Rigas Doganis, who once headed Greece's former national carrier, Olympic Airways, and served as a director of Britain's easyJet.

"They will need to cut fares to stimulate weakening demand, while higher fuel costs will be pushing them to increase fares. A perfect storm," said Doganis, who now chairs London-based consultancy firm Airline Management Group.

Last year, the industry reported record global passenger traffic, rebounding to about 9 percent above pre-pandemic levels despite persistent supply-chain challenges that affected deliveries of new planes.

Strong post-pandemic demand and constrained capacity had given airlines pricing power, allowing them to fill more seats on each flight. But the scale of fare increases now required to offset higher fuel costs comes at a time when consumers are already under pressure from rising gasoline prices.

"The only way to get prices up is to reduce capacity," said Barclays' head of European transport equity research, Andrew Lobbenberg. "That is what I would expect to see happen this time, and it's what we saw in the previous occasions when we had other crises; people just have to start trimming capacity."

United Airlines CEO Scott Kirby told ABC News last week that fares would need to rise 20 percent for the airline to cover higher fuel costs.

Hong Kong's Cathay Pacific Airways has lifted fuel surcharges twice in the past month, and from April 1, a return trip from Sydney to London will attract an $800 surcharge. Before the Iran conflict, a typical round-trip economy fare on the route was about A$2,000 ($1,369.60).

Low-cost carriers could be hit hardest, analysts say, as their more price-sensitive customers may cut back or switch to alternatives.

"I think for the more price-sensitive travellers, even the short-haul flying trip gets downgraded, potentially to rail or to bus or other alternatives," said Nathan Gee, Bank of America's head of Asia-Pacific transport research.

The Middle East conflict marks the fourth oil shock for the airline industry this century, though the first in which some carriers have raised concerns about securing fuel supplies due to the Strait of Hormuz closure.

Previous shocks came before the global financial crisis in 2007-2008, after the Arab Spring around 2011, and following the Russia-Ukraine war in 2022.

A wave of mergers between 2008 and 2014 led to tighter capacity control among major U.S. airlines, while low-cost carriers such as Ryanair and India's IndiGo focused on keeping costs low through streamlined operations.

Airlines have also sought to cut fuel use by replacing older aircraft with more efficient models, but supply-chain shortages and engine issues have delayed deliveries.

Dan Taylor, head of consulting at aviation advisory firm IBA, said the latest oil shock is likely to widen the gap between stronger and weaker carriers.

"Carriers with robust balance sheets, strong pricing power, and reliable access to capital are better positioned to absorb ongoing pressures," he said. "In contrast, airlines with low profitability and limited funding options may face increasing financial stress."