WRAPUP 2-Airline, travel industries scramble with fallout from Middle East conflict

Adds Delta decision on Tel Aviv flights, share moves, paragraphs 8 and 15

By Byron Kaye, Joanna Plucinska and Rajesh Kumar Singh

SYDNEY/LONDON/CHICAGO, March 3 (Reuters) - The airline and tourism industries scrambled to deal with the fallout from the escalating U.S. and Israeli air war against Iran, while governments rushed to bring stranded travelers home from the Middle East following the cancellation of more than 20,000 flights in recent days.

Major Gulf hubs including Dubai, the world's busiest international airport, remained closed or severely restricted for a fourth day, leaving tens of thousands of passengers stranded. According to Flightradar24, some 21,300 flights have been cancelled at seven major airports including Dubai, Doha and Abu Dhabi since the strikes started.

The attacks have upended travel across a growing region with several thriving business hubs that are trying to diversify away from oil-dominated economies. The turmoil also narrows an already-slim flight corridor for long-haul flights between Europe and Asia, complicating operations for global air carriers.

Stranded travelers across the Gulf rushed to secure seats on a limited number of repatriation flights as governments moved to bring passengers home even as explosions tore through Tehran and Beirut. Emirates, flydubai and Etihad have been operating a limited number of flights since Monday, mostly to repatriate stranded passengers.

"It's pretty well the biggest shutdown we've seen certainly since the COVID pandemic," said Paul Charles, CEO of luxury travel consultancy PC Agency, adding that beyond passenger disruption the cargo impact would run to "billions of dollars."

EMERGENCY EVACUATIONS

The UAE government said 60 flights had taken off, operating in dedicated emergency air corridors. The next phase will be operating more than 80 flights.

The United States is securing military and charter flights to evacuate Americans from the Middle East, a U.S. State Department official said on X on Tuesday, adding that it was in contact with nearly 3,000 U.S. citizens. The department was under fire from U.S. lawmakers who said the Trump administration should have advised people to leave before the attacks started.

Delta Air Lines DAL.N said on Tuesday it has paused New York-Tel Aviv flights through March 22 because of the conflict and is offering rebooking options and a travel waiver for affected customers through March 31.

Demand for alternatives to Gulf airlines has surged, with bookings and ticket prices jumping on routes like Hong Kong-London, Reuters checks showed on Tuesday. Should the conflict drag on, it could cost the Middle East billions in tourism dollars, analysts estimate.

"We can't get home, we can't go back to work, we can't get the kids back to school," said Tatiana Leclerc, a French tourist stuck in Thailand, whose flight had been set to go via the Middle East hubs that are a key link between Asia and Europe.

In an early sign of a thaw, Virgin Atlantic said on Tuesday it would resume services as scheduled between London's Heathrow Airport and Dubai or Riyadh.

AIRLINE STOCKS SLIP

Shares of air carriers worldwide fell on Tuesday. The operational and financial effect varies significantly among airlines, said Karen Li, J.P. Morgan's head of Asia infrastructure, industrials and transport research.

"There are important differences across carriers in terms of hedging strategy, air cargo exposure, and network rerouting capabilities that will shape the actual impact from the Middle East situation," Li said.

Oil prices have surged amid the widening conflict. Benchmark crude is up roughly 30% so far this year, threatening to lift jet fuel costs and squeeze airline profits. Most U.S. airlines long ago gave up on hedging their fuel purchase, their second-largest operating cost behind labor.

In its latest annual filing, Delta said every one-cent increase in the price of jet fuel per gallon added about $40 million to its yearly fuel bill. A 10% increase would add $1 billion to Delta's 2026 fuel bill, Third Bridge analyst Peter McNally said.

Shares of most U.S. carriers ended lower, with Southwest LUV.N down about 1% and Alaska Air ALK.N off roughly 2%.

In Europe, shares of Wizz Air WIZZ.L, British Airways owner IAG ICAG.L, Lufthansa LHAG.DE and Air France KLM AIRF.PA ended down 5% to 8%.

Ryanair CEO Michael O'Leary told Reuters the airline was hedged for the next 12 months at about $67 a barrel and that the recent fluctuations would not impact the business. Its stock fell 2.2% on Tuesday.

Qantas Airways QAN.AX CEO Vanessa Hudson said the airline has "pretty good" fuel hedging but the spike in oil prices was significant for the industry. The Australian airline's shares fell 1.8%.

Shares of Japan Airlines closed down 6.4%, while Korean Air Lines 003490.KS dropped 10.3%, its biggest drop since March 2020.

Shares of major Chinese carriers including Air China 0753.HK 601111.SS and China Southern Airlines 600029.SS, 1055.HK lost between 2% and 4% in Hong Kong and Shanghai.

(Reporting by Byron Kaye in Sydney, Hina Suzuki in Tokyo, Julie Zhu in Hong Kong, Sophie Yu in Beijing, Samuel Shen and Winnie Zhou in Shanghai, Ben Blanchard in Taipei, Roushni Nair in Bangalore and Joanna Plucinska in London, Ilona Wissenbach in Berlin, Anna Wlodarczak-Semczuk and Alan Charlish in Warsaw, Rajesh Kumar Singh in Chicago, Shivansh Tiwary, Reuters TV, and Simon Lewis and Daphne Psaledakis in Washington; Editing by David Gaffen)

((david.gaffen@thomsonreuters.com; 646-301-4216;))