Virgin Atlantic founder Sir Richard Branson has blamed rising air fares on foolish leaders starting wars, and he is pointing, thinly veiled according to the BBC, at the US-Israel conflict with Iran. The framing invited ridicule on contact, billionaire explain economics. But the arithmetic underneath it is hard to argue with, and the airlines’ own price lists have been confessing it since May.
Middle East tensions have squeezed the production and transport of millions of barrels of oil, and jet fuel, like petrol, comes out of that barrel. In May, Virgin Atlantic added a fuel surcharge to ticket prices in response, one of several carriers doing the same. On Saturday, Branson told the BBC the Iran conflict was completely unnecessary, citing the nuclear agreement negotiated under President Obama and much of Europe as evidence that an alternative existed. The US administration has defended the conflict as necessary for long-term peace and security. Both things can be true at once, which is why the argument has lasted this long.
What belongs in the story alongside the quote is the fuel market itself. Brent crude moved sharply when the conflict escalated, and jet fuel prices track crude with a lag and a markup. UK petrol passed 163p a litre in early September, the highest since the conflict began, per BBC reporting, and US diesel hit an all-time high around the same time. Aviation fuel is typically a quarter or more of an airline’s cost base on long-haul routes, so surcharges are not a marketing choice. They are a tax, collected at booking and remitted to refineries.
Airlines have been losing the PR war on this for months because the surcharge is visible and the hedging is invisible. Carriers hedge fuel forward, meaning today’s ticket price reflects what the fuel will cost, not what it costs now; the pain arrives in fares two or three months later than spot prices suggest. When passengers rail at airlines for profiteering, the executives get irritated precisely because their own forward contracts usually locked in the bad price before anyone noticed.
The political edge of Branson’s remark should not be smoothed over either. He is a major donor and a loud one, and blaming governments for war-driven inflation is convenient for a founder whose airline needs cheap fuel and open Gulf routes more than it needs a debate. Still, the causation chain does not depend on his motives: conflict, oil, kerosene, fare, complaint. It ran exactly as advertised all summer. The only genuinely news element is that a very famous man said the quiet part into a BBC microphone, and the quiet part is that this year’s summer fares will stay elevated long after the wars either end or get boring.