The global airline industry faces a complex and uncertain landscape in 2025, making it difficult to definitively say whether flight prices will rise or fall. Several factors are at play, pulling prices in different directions. The recent Air India crash and escalating tensions in the Middle East introduce further volatility into the equation.

Impact of the Air India Crash

The crash of Air India Flight AI171 in Ahmedabad on June 12, 2025, is expected to have significant financial repercussions for the aviation industry. Preliminary estimates suggest insurance claims could reach record levels for Indian aviation, potentially exceeding $475 million. While the immediate impact is on the involved airline and its insurers, such a catastrophic event can have ripple effects:

• Increased Insurance Premiums: Aviation insurance rates, particularly in India, are likely to rise as a result of the crash. This increase in operating costs could be passed on to consumers through higher ticket prices.
• Stock Market Volatility: The accident led to a decline in the stock values of several airlines, including Air India, IndiGo and SpiceJet. Boeing's shares also experienced a downturn. While these market reactions may be temporary, they reflect investor uncertainty and could influence airline decision-making.
• Reduced Travel Demand: Plane crashes can erode traveler confidence, leading to a decrease in demand, at least temporarily. Airlines might respond by lowering prices to stimulate demand or by reducing capacity, which could then lead to higher prices on remaining flights.

Middle East Escalation

Geopolitical instability in the Middle East is another critical factor influencing airfares. Escalating tensions can lead to:

• Airspace Closures and Rerouting: Conflicts often result in airspace closures, forcing airlines to take longer, more circuitous routes. This adds to fuel costs and extends flight times, directly impacting ticket prices. For example, recent tensions involving Iran and Israel have led to airspace restrictions, causing some airfares to increase by 12-15%.
• Increased Fuel Costs: Geopolitical instability can disrupt the global oil market, driving up jet fuel prices, which already account for a significant portion of airline operating expenses. Airlines are likely to pass these increased fuel costs on to passengers.
• Reduced Travel Demand: Safety concerns stemming from regional conflicts can deter travelers, especially to the affected areas and surrounding regions. This can lead to airlines reducing flights, which would likely increase the price of the remaining flights.

Other Factors Influencing Airfares

Beyond these specific events, several other factors contribute to the overall uncertainty in airfare pricing:

• Supply Chain Disruptions: Ongoing supply chain issues, particularly affecting aircraft manufacturers like Boeing and Airbus, can constrain the supply of new aircraft. This limited capacity, combined with rising demand, puts upward pressure on ticket prices.
• Demand Fluctuations: While overall travel demand is expected to grow, economic uncertainty and geopolitical tensions can cause fluctuations. Softer demand from business and government travel, as well as declining inbound international tourists from specific regions, can lead airlines to readjust their outlooks and potentially lower fares to stimulate demand.
• Airline Strategies: Airlines are employing various strategies to optimize revenue, including dynamic pricing models, ancillary fees, and new distribution capability (NDC) technologies. These strategies can lead to more price points and airfares adjusted based on factors like supply and demand, competitor pricing, and willingness to pay.
• Sustainability Costs: The industry's push for sustainable aviation fuels (SAF) also impacts fares. SAF is currently significantly more expensive than traditional jet fuel, and airlines may pass these costs on to consumers.
• Economic Factors: Broader economic conditions, such as inflation, exchange rates, and labor costs, also play a role in airfare pricing.

Conflicting Predictions

Given these complex and often contradictory factors, experts offer varied predictions for airfares in 2025. Some anticipate a decrease in airfares due to softer demand and falling oil prices. Others foresee rising fares due to limited capacity, increased operational costs, and geopolitical instability.

Conclusion

It is difficult to definitively predict whether flight prices will increase following the Air India crash and Middle East escalations. The confluence of these events introduces uncertainty and volatility in the market. While the accident and regional tensions could push prices up, other factors like softening demand could exert downward pressure. Travelers should closely monitor airfare trends, remain flexible with their travel plans, and book flights in advance when possible to secure better deals.