Trump’s new tariffs: Will UAE-US flight ticket prices, travel costs rise?

Dubai: US President Donald Trump shocked the world on Wednesday by laying out a sweeping set of tariffs that would hit products from many countries.

However, Trump’s sweeping new tariffs, including a baseline of 10 per cent and 25 per cent on imported cars, are unlikely to tax UAE-US travel directly. According to travel and aviation experts, indirect cost increases are possible.

While airlines may initially absorb costs to maintain demand due to existing contracts, fuel prices are a significant concern, according to Saj Ahmad, Chief Analyst at StrategicAero Research.

 “In the short to medium term, it is unlikely that airlines will hike fares so as not to damage travel demand. As with most airlines, expenses like fuel and MRO parts/spares are usually procured over a defined period depending on the procurement contracts already in place,” he explained.

However, Ahmad said the biggest issue would almost certainly be fuel. “With enough regional volatility and the threats towards Iran, oil prices could rise if supply or OPEC opts to rein in production on the back of reduced demand,” he explained.

Any surge in oil prices or decisions by OPEC to adjust production in response to anticipated reduced global demand could add to airlines' operating expenses.

It is still early for that to happen, said Ahmed. “This depends on just how much impact on demand between the UAE and USA flights. For now, it does not look likely that airlines will elect to hike fares, thereby suppressing demand even more,” he said.

“If anything, airlines could opt to hike fares on busier routes to offset any negative changes to UAE-USA flight demand to prevent those flights from being unattractive – but from what's visible right now, any fare changes upwards look to be a tad premature,” he explained.

Despite these potential headwinds, current data from online travel agency Musafir.com indicates a degree of resilience in the UAE-US travel market. According to COO Raheesh Babu, demand has remained stable since the tariff announcements, showing no significant decline or substantial growth in the recent quarter.

He added that current average fares to the US East Coast are approximately Dh2,445 (New York), while West Coast flights range from Dh2,645 (Los Angeles) to Dh3,297 (Seattle). The demand for business travel has also been strong in recent months. Travellers to the US also include VFR traffic from India, for example. “Travellers have also adopted a wait-and-watch policy,” said Babu.

Moreover, acquiring US visit visas is still a time-consuming process. “People still have to wait 8-9 months to get a visa appointment. This itself has deterred first-time fliers,” Babu added.  

In Europe, however, demand is already waning. French hotel group Accor SA has warned that forward bookings from Europe to the US are down 25 per cent this summer. The company is seeing a “pretty strong deceleration” across the Atlantic, Chief Executive Officer Sébastien Bazin said on Tuesday in a Bloomberg TV interview.

He said the drop is an acceleration from an 18-20 per cent decline in the first 90 days of the year. Bazin said that travellers are deciding to visit places like Canada, South America, or Egypt instead of the US.

Abhishek Dadlani, Founder of Lushescapes, commented on the potential for increased operating costs for airlines. He explained that tariffs on US-sourced aircraft components, maintenance services, and fuel could lead to significant financial burdens for carriers relying on American technology and expertise.

“For carriers that rely on American-made engines, avionics, or maintenance expertise, these additional expenses could ripple through their entire operational structure. While large international airlines may have diversified supply chains, any fuel or essential aviation materials increase will inevitably impact their bottom line,” said Dadlani.

He also said that while airlines often pass increased costs onto consumers through higher fares, the degree of this pass-through is influenced by the competition on specific routes and the overall travel demand.

“For commercial airlines, higher operating costs almost always translate to increased fares, as they operate on tight margins. The extent of this pass-through depends on competition and demand. Airlines may absorb some costs to retain customers on highly competitive routes, whereas ticket prices are more likely to rise on less competitive routes,” explained Dadlani.

So far, the impact on the travel industry is indirect. But the knock-on effects could be significant. Tariffs can lead to higher prices, making America a more expensive destination. Will tourists still be eager to visit the US?