Planning to Fly? War, Pricey Fuel and a Shutdown Are Making It Harder

SPEAKER_1 (0:00)

Balance your trading strategy by adding futures. CME Group helps you manage risk and capture opportunities in all market environments. Capitalize on around-the-clock access to highly liquid global futures and options markets across all major asset classes. Visit your online broker to get started. See what adding futures can do for you at cmegroup.com/podcast. Derivatives are not suitable for all investors and involve risk of losing more than the amount originally deposited in any profit you may have made. This is not a recommendation or offer to buy, sell, or retain any specific investment or service.

Luke Vargas (0:31)

Hey What's News listeners, it's Sunday, March 22nd. I'm Luke Vargas for the Wall Street Journal and this is What's News Sunday, the show where we tackle the big questions about the biggest stories in the news by reaching out to our colleagues across the newsroom to help explain what's happening in our world. And this week, it's quickly getting more expensive to fly thanks to rising fuel prices, the DHS shutdown in the US is making it more inconvenient to fly, and the war in Iran seems to be making it more risky as international flights try to steer clear of the conflict. And with millions of travelers locking in their summer travel plans, it's enough to make some wonder if it's worth it or safe enough to take to the skies. We'll ask a pair of our aviation reporters. Let's get right to it. I want to introduce Journal Aviation Reporters Ben Katz and Ali Sider. Ali, welcome back from parental leave and we've gifted you a hectic travel landscape, so you're welcome for that.

Alison Sider (1:30)

Great time to be jumping back into work.

Luke Vargas (1:32)

Ben, your desk, my desk, they're pretty close. We talk about aviation disruptions pretty much on a daily basis. And the US and Israeli war against Iran is rapidly reordering the world of aviation. We are three weeks into this. But in many ways, it seems as if the situation is actually sort of getting worse than it was at the very beginning when the fighting was at its peak.

Benjamin Katz (1:54)

If we go back to the very start, so February 28th, in the Middle East, aircraft flying or things being pretty much normal, suddenly you have the beginning of the strikes, the US and Israeli strikes towards Iran. And immediately we start seeing just airspace across the region shut off, right? So now what we're seeing kind of a couple of few weeks down is a bit of a divide. There's still a lot of airlines in the region, the likes of Qatar Airways, one of the biggest, which is really operating only a handful of flights a day. Others like Emirates, Etihad, they've started to really recover a significant part of their schedule. Last I looked, Emirates was flying over 50% of its daily flights compared to before the war. British Airways, for example, they've started scrapping flights all the way into May, June in terms of flights into Tel Aviv, in Israel. Cathay Pacific has announced something similar. But not just that, we're also seeing airlines shift capacity. So making not, you can't really make a permanent decision in aviation, but a long-term decision. Lufthansa deciding that it will start flying or increasing its routes to Asia. So you're starting to see the shift in the flow of aircraft, the flow of flights, the European Airlines, the Australian Airlines, looking how can they take advantage of the fact that those massive Gulf airlines are for the most part grounded or at least severely restricted.

Luke Vargas (3:09)

I want to just talk about safety for a moment because again, look at some of the charts of number of daily attacks incoming to some of these Gulf countries from Iran. It's down compared to the very beginning of the war and yet you're reporting, Ben, is sort of peeling back the lid and frankly, a lot of people are seeing the footage of some of these massive explosions at sites of energy infrastructure the last few days and it seems as if the awareness of how dangerous the situation has been and may continue to be is actually increasing with time. So tell us a little bit about what you've been uncovering.

Benjamin Katz (3:40)

I think in terms of the actual threat at play here, you know, the threat of a missile or drone strike interfering or leading to a catastrophic disaster, that has pretty much remained the same since the start of the conflict. The change here is that there is a lot of eagerness from a number of the big airlines to get back into the skies. Now, there's a calculus there, right? There's a risk analysis that they do to decide, is it safe enough to fly? Now, the interesting thing that, you know, we've kind of discovered is there isn't an international standard. There isn't a rule at a United Nations level or even at a global regulatory level that says, do this calculation, that is an appropriate level of risk that enables you to fly. That doesn't exist in terms of security and conflict zones. So what we're seeing is really individual operators, individual airlines, individual governments making their own decisions. What factors are at play? There's definitely an economic factor. Airlines are losing huge amounts of money by simply not flying. There's also a political component to this. You know, we've seen places like the UAE really trying to project this image that things are quite normal and stable. You know, how all of these dynamics feed into that really affects that risk assessment.