For Australia and New Zealand, ultra-longhaul aviation has always been a hostage to geography. The Hormuz crisis has just called in the debt and the cheap end of the market may not survive it.
Starting with a number that should alarm anyone running an airline. Jet fuel has more than doubled against the planning assumptions that carriers locked in at the end of 2025. IATA’s December base case assumed US$88 a barrel. By mid-April 2026, the global average was US$197.83. That is not a fluctuation. That is a structural repricing of the cost of distance and for Australia and New Zealand at the geographic edge of the world, distance is the only product aviation sells.
The standard framing of this crisis as been a temporary jolt, a Middle East flare-up, a Hormuz pressure point, a disruption that will eventually normalise. That framing is probably wrong, or at least dangerously incomplete. The Hormuz crisis has accelerated a structural reckoning that was already coming for ultra-longhaul aviation at the cheap end. What this crisis has done is compressed the timeline from years into months.
Geography as liability
Australia and New Zealand occupy an unusual and exposed position in global aviation. Both countries are large generators of long-haul demand, principally to Europe, North America and the wider Asia-Pacific but neither has the hub infrastructure, the domestic market scale or the fuel supply security of a major aviation economy. Sydney Airport consumes roughly 40% of Australia’s aviation fuel and depends heavily on imported product. New Zealand holds approximately 50 days of jet fuel cover on current data but is merely a price-taker in global refined product markets.
But this exposure is not just about fuel cost. It is about the architecture of connectivity itself. Gulf carriers principally Emirates, Qatar Airways and Etihad are the primary infrastructure through which Australasian passengers reach Europe. When that system fractures, as it has, the rerouting options through East Asia or the United States are less frequent, often longer, and structurally more expensive to operate at scale. Heathrow’s March 2026 data illustrates the shock – Middle East traffic fell 51%, Asia-Pacific traffic rose 31%.
IATA’s analysis distinguishes clearly between high fuel prices and sudden fuel shocks. High prices are painful but manageable. Airlines adjust fares, redeploy assets and rebuild hedging positions over time. Sudden shocks are different in kind, not just degree. Airlines cannot reprice a ticket sold six months ago. They cannot reconfigure a network in a fortnight. They cannot renegotiate supply contracts midway through a crisis. The damage lands faster than the adjustment can happen. Hedging protects against the crude oil price move and is far less effective against the refining margin shock, which has pushed jet fuel up faster than crude. Airlines with robust hedges are still raising fares, cutting services and warning investors. That tells something about the limits of the cushion that hedging provides.
The bifurcation that was already happening
The fuel shock has not created a problem for ultra-longhaul aviation so much as it has made visible a bifurcation that was already underway between two fundamentally different models of long-haul flying.
The first model is premium-led, yield-focused and built around the value of non-stop convenience and schedule reliability. Qantas has been explicit that its long-haul, point-to-point 787-9 markets are delivering portfolio-leading returns. Its Perth-London direct service carries a 22% revenue per available seat kilometre premium over indirect competitors. Project Sunrise, a proposed ultra-long-haul A350-1000 service linking Sydney to London non-stop is built entirely around this logic. High-value, premium-heavy passengers for whom the non-stop proposition justifies a materially higher fare. Air New Zealand’s own 2026 interim results show premium cabin revenue on North America up 10%.
The second model is volume-led and built around low through-fares via hub connections. This is the model that is under the most acute stress. It depends on carriers maintaining competitive pricing, operational reliability and passenger confidence through a region that is currently neither reliable nor confidence-inspiring. Travellers from both Australia and New Zealand have been rerouting through Asia and the United States precisely because they are willing to pay more to avoid transit uncertainty. That is a direct revealed-preference signal about where the value in long-haul travel actually lies.
Why a Gulf discount cycle would not solve the problem
Emirates, Qatar Airways and Etihad have cost advantages. State capital, domestic fuel arrangements, hub infrastructure that could theoretically sustain below-cost pricing for extended periods. If they chose to do this, the pressure on long-haul yields would be real and significant.
But a discount cycle would not actually fix the underlying problem, for two reasons. First, the traffic most sensitive to price are leisure and VFR traffic. They are also the traffic least likely to sustain premium long-haul economics. Winning it back on discounts while operating costs remain elevated produces negative-margin flying, not recovery. Second, and more importantly, corporate and premium demand is not primarily price-sensitive in the current environment. It is certainty-sensitive. Businesses will not reroute away from Gulf connections because Gulf carriers are too expensive. They will reroute because the transit risk is too high. Discounted fares cannot buy back certainty. Insurance policies and air tickets are two separate instruments.
What a realistic 2026 endpoint looks like
The most probable outcome for the remainder of 2026 is a long-haul market that is more polarised, more expensive at the thin-margin end, and more explicitly stratified by product than it was entering the year. Non-stop and reliable one-stop itineraries that avoid disrupted transit hubs will continue to command a meaningful premium. Gulf routings will likely stabilise at some point and recover on network breadth. The Gulf carriers have too much infrastructure and too much strategic interest in Australasian connectivity for the long-term picture to look like March 2026. But recovery is not the same as restoration to the discount pricing architecture.
Ultra long-haul flying is not dying. It is sorting itself. The premium-led, non-stop, schedule-certain model has a future and a cheap through-fare model might have a serious problem. For two countries at the bottom of the world, that sorting process matters because there is no cheap alternative to the distance.