Fuel Expenses Surge Amid Middle East Tensions
Air Transat’s parent company has revealed it paid an unprecedented amount for jet fuel during its most recent quarter, with costs climbing by $105 million compared to the same period last year. The Montreal-based travel group said the spike was directly linked to the fallout from the Iran conflict, which has disrupted global energy markets and sent refined kerosene prices soaring.
Chief executive Annick Guérard confirmed the extent of the burden. Across the two most recent quarters, the airline paid an additional $175 million for the fuel that powers its fleet of 42 aircraft. That figure represents a 50 per cent jump from the extra expense logged in the preceding quarter alone.
For a company that generated just $242 million in total revenue last year—and which posted combined losses of nearly $140 million across 2023 and 2024—such a sum is staggering. The numbers underscore how vulnerable airlines remain to geopolitical upheaval halfway across the world.
Ottawa Steps In with Emergency Support
The mounting fuel bill prompted Transat A.T. Inc. to seek federal assistance. Last month, the company secured a loan facility of up to $150 million from the Canadian government, designed to help offset the soaring cost of jet fuel that has squeezed airlines worldwide.
The loan calculation will be based on the difference between fuel costs during the window from late July through October 31 and the same span a year earlier. Ottawa announced the programme as part of a broader effort to support carriers grappling with rock-bottom oil prices, slashed flight schedules, and diminished profit forecasts.
Not all Canadian airlines have embraced the lifeline. Air Canada indicated earlier this summer it would likely not draw on the support, while WestJet voiced strong opposition, arguing the measure distorts the competitive market.
Transat has acknowledged its capacity to pass higher fuel costs on to passengers remains “very limited.” The company said it is in discussions with federal officials “to explore potential solutions” as energy market volatility shows no sign of abating.
Customer Demand Cools as Fares Rise
The pressure on fares tells its own story. Guérad told analysts on a conference call in June that customers initially tolerated the higher ticket prices, which roughly offset the fuel cost surge. “But more recent increases resulted in a slowdown in the booking momentum,” she said. “The demand went down.” In response, the airline cut fares and eliminated certain fees to stimulate demand.
The International Air Transport Association confirmed that jet fuel prices in North America hovered near US$160 per barrel recently—almost 75 per cent higher than the previous year—though costs have retreated from April peaks.
Routes Scrapped as Headwinds Mount
Closer to home, additional challenges have compounded Transat’s difficulties. The airline has indefinitely suspended all flights and holiday packages to Cuba, where a severe fuel shortage—triggered by the United States oil embargo—has crippled the island’s infrastructure. Cuba represents a significant market for the carrier, particularly among Quebec vacationers. Some 861,000 Canadians visited the country last year, and Cuba accounted for nine per cent of Transat’s flights during the first half of 2025.
The airline first halted its Cuba routes in mid-February.
Transat has also pruned its United States operations following President Donald Trump’s election, which dampened demand for cross-border travel. Last month, the carrier cancelled a weekly Halifax to Fort Lauderdale service and five-day-a-week flights between Montreal and Fort Lauderdale for the upcoming winter schedule. That leaves just one remaining Canada-to-Florida route: thrice-weekly departures from Quebec City to Fort Lauderdale.
Why it Matters
The situation at Air Transat serves as a stark reminder of how profoundly geopolitics can destabilise even the most routine aspects of daily life. When conflict erupts in the Middle East, the ripples reach Canadian holidaymakers booking flights to sun destinations, employees whose jobs depend on airline profitability, and competitors navigating the same treacherous fuel market. With the company still nursing wounds from recent financial years, and demand softening as ticket prices climb, Transat faces a precarious balancing act between staying afloat and remaining accessible to the travelling public. The federal loan buys time, but it does not resolve the underlying vulnerability that leaves Canada’s aviation sector exposed to forces entirely beyond its control. Whether Ottawa’s intervention proves a lifeline or merely delays the inevitable remains to be seen.
