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Business News/ Global / Iran-Israel conflict: Aviation, shipping sectors brace for disruption

Iran-Israel conflict: Aviation, shipping sectors brace for disruption

The recent drone and missiles attacks on Israel by Iran sparked concerns over air and maritime security, rising fares and risks to trade.

An anti-missile system operates after Iran launched drones and missiles towards Israel, as seen from Ashkelon, Israel. (Reuters)Premium
An anti-missile system operates after Iran launched drones and missiles towards Israel, as seen from Ashkelon, Israel. (Reuters)

NEW DELHI, MUMBAI : The ongoing conflict between Iran and Israel could disrupt the aviation and shipping industries, sparking concerns over air travel safety and maritime security worldwide, besides a potential rise in airfares, increased war-risk premium for vessels operating in the area, as well as risks to agriculture trade.

Following Iran's recent attack on Israel with drones and missiles, several countries in the region, including Iran, Jordan, Iraq, Lebanon, and Israel, temporarily closed their airspaces on 12 April as a precautionary measure, before reopening on 14 April, albeit with restrictions.

The mounting tensions prompted airlines to reconsider alternative routes to avoid potential risks associated with flying over conflict zones. Flight tracking websites reported diversions of air traffic away from Iranian airspace, towards Kazakhstan, Tajikistan, Saudi Arabia and Egypt.

However, even with these changes in routes, the specter of GPS jamming and spoofing looms large, further complicating navigation safety.

The recent escalation in tensions was in response to a suspected Israeli airstrike earlier in the month on an Iranian consular building in Syria, resulting in the loss of 12 lives. In fact, the US and Israel were bracing for an attack for days after Iran vowed to retaliate.

According to Manan Bajoria, group vice-president, growth, ixigo, re-routing can result in longer routes and higher expenses for flights originating from Europe, the Middle East and Southeast Asia.

Air India, the largest group airline for international air traffic to and from India, said it is closely monitoring the evolving situation in the Middle East, and is operating its fleet on alternative flight paths. 

Tata Group airline, Vistara, too, has adjusted flight routes for destinations, such as Paris, London and Frankfurt, among others, and is using contingency routes. This may result in longer flight times on certain routes and associated delays, a Vistara spokesperson said.

IndiGo is also rerouting flights to Baku, Tblisi, and Kuwait, and has urged its codeshare partner Turkish Airlines to avoid Iranian airspace for now.

Experts anticipate higher air fares in the near term due to the volatile situation. “This will have an inflationary impact on prices due to longer flying times, fuel price increase and volatility in flying schedules. It will also lead to enhanced travel uncertainty, thereby impacting the summer holidays travel season as long as this conflict plays out," said Aashish Gupta, consulting CEO, Federation of Associations in Indian Tourism and Hospitality (FAITH).

Rajiv Mehra, President, Indian Association of Tour Operators, also echoed similar views: "Oil prices have already gone up and if airspaces close and flights have to take longer routes to cover the same distance, it will lead to flaring of air ticket prices, which will be detrimental to the travel and hospitality sector." 

Globally, some airlines may need to higher refuelling stock amid rising tensions. “All SWISS aircraft are currently avoiding the airspaces over Iran, Iraq and Israel. As a result, flights from Delhi (LX147) and Singapore (LX177) to Zurich will make a refuelling stopover in Vienna and arrive in Zurich with a delay of several hours," the Swiss flag carrier, which is a subsidiary of the Lufthansa Group, said.

On Saturday, Iranian forces seized a container vessel, MSC Aries, linked to Israel, escalating risks to trade passing through the region, and compounding challenges for exporters grappling with high freight rates amid the Israel-Palestine conflict.

“Agricultural trade will be significantly impacted if the conflict escalates. Iran is one of the largest consumers of basmati rice from India," said Raajesh Bhojwani, managing director, RSCPL (IFSC) Pvt. Ltd. “War risk-premiums of ships going through the region will also shoot up. Just six months ago we used to pay $10,000 WRP for a Supramax vessel. Now, we are paying $35,000." 

War Risk Premiums are additional charges imposed by insurance companies for coverage in conflict zones. Supramax vessels are medium-sized ships transporting bulk cargo, but not containerised goods.

Freight rates for transiting through the Red Sea and Suez Canal—a key corridor for trade between Asia and Europehave skyrocketed since the Israel-Palestine conflict erupted six to seven months ago. Shipping lines now face steep war risk premiums, or opt for the longer Cape of Good Hope route to reach Europe from Asia. 

Consequently, the average cost of shipping for a standard 20-foot container from Mumbai to Rotterdam has surged from $500-650 to over $3,000. Similarly, shipping costs to Bandar Abbas in Iran have more than doubled from $300-350 to $700-750.

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Published: 14 Apr 2024, 08:28 PM IST
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