With the fuel surcharge for a round-trip ticket to New York exceeding 1.12 million won, airline engines are carrying heavier costs than ever before.
Driven by Middle Eastern geopolitical risks, the international route fuel surcharge for 2026 has surged to the 33rd tier, the highest level in history since the current system was introduced in 2016, leading to a rapid contraction in overseas travel demand among South Koreans. While reservations for long-haul routes to the Americas and Europe have dropped by 40% year-on-year, domestic resorts in Gyeongju, Jeju, and Gangwon are experiencing an unprecedented streak of fully booked rooms. Rising airfares are going beyond mere seasonal fluctuations, triggering a structural reorganization of travel consumption.
Ⅰ. What and How Much Has Risen: Fuel Surcharge Structure and Increase Magnitude
The fuel surcharge is an additional fee charged separately from the base fare by airlines to share the fuel cost burden caused by fluctuations in international oil prices with passengers. The Ministry of Land, Infrastructure and Transport manages international route fuel surcharges through a 33-tier system based on the spot price of Singapore Jet Kerosene (MOPS), adjusting the tier monthly by reflecting the average MOPS price from the 16th of the month before last to the 15th of the previous month.
Because the fuel surcharge is applied based on the ticket 'issuance date' rather than the boarding date, tickets issued on or after April 1 are subject to the 18th tier, and phenomena such as reservations concentrating around the price hike timing or being abruptly put on hold are periodically repeated.
The problem is that the recent pace of increase is unprecedentedly steep. An unprecedented situation occurred where the international route fuel surcharge jumped vertically from the 6th tier just a month ago to the 18th tier for tickets issued in April 2026. The primary cause is cited as the Singapore Jet Kerosene (MOPS) spot price soaring to 511.21 cents per gallon ($214.71 per barrel), based on the Ministry of Land, Infrastructure and Transport's April 2026 announcement triggered by the conflict between Iran and the U.S., surpassing the 33rd-tier threshold of 470 cents per gallon. Dominant analyses indicate this is the combined result of the expanded burden of fuel surcharges in Korean won due to a strong dollar and jet fuel prices rising by more than 30% compared to the same period last year.
The scale of increase by route makes the shock tangible through specific figures. Short-haul routes departing from Incheon such as Fukuoka and Qingdao rose from 13,500 won in March to 42,000 won in April; the Bangkok, Singapore, and Guam sections jumped from 39,000 won to 123,000 won; mid-to-long-haul routes such as Dubai, Honolulu, and Istanbul surged from 64,500 won to 199,500 won; and European routes and some American routes soared up to 276,000 won one-way, concentrating the burden on long-haul travelers.
In May, the situation deteriorated further. Starting May 1, 2026, the international route fuel surcharge was raised to the 33rd tier, the highest level in history since the current system was introduced in 2016. Korean Air's maximum one-way fuel surcharge was finalized at 564,000 won and Asiana Airlines' at 476,200 won. The fuel surcharge for a round trip to New York reaches 1,128,000 won, double the 564,000 won one-way fee.
Because fuel surcharges operate under a 'distance-proportional tiered system,' even if the tier increases by the same amount, the absolute monetary increase for short-haul routes is significantly smaller than for long-haul routes. However, the structure itself acts as a virtually insurmountable cost barrier for long-haul travelers heading to the Americas, Europe, and the Middle East.
Ⅱ. The Reality of Shrinking Overseas Travel Demand: The 'U-turn' Phenomenon Confirmed by Numbers
How the surge in fuel surcharges is actually altering consumer behavior is clearly evident in travel platform data. According to travel and accommodation platform Yanolja/Goodchoice (Here Here), overseas accommodation reservation counts for April 1–23, 2026, stood at only 75% compared to February of this year, widening the decline from the same period last year (82%). Conversely, domestic accommodation reservations recorded 107% compared to February, showing a clearer upward trend than the previous year (103%).
According to figures compiled by multiple major travel agencies, reservations for long-haul products such as the Americas and Europe decreased by about 40% year-on-year, which aligns directionally with platform data showing overseas accommodation reservations at 75%. For long-haul routes, fuel surcharges surged more than 5 times in two months, directly striking travel sentiment. A representative from Here Here explained, "While overseas accommodations typically show a decline in March followed by a recovery in April, this year showed weakness compared to last year, whereas domestic accommodations stayed slightly higher than last year." This is an exceptionally steep reversal in the overseas travel market, which had been on a recovery trajectory following COVID-19.
Changes in consumer sentiment are also confirmed in online communities. Responses such as "With the money to go to Europe, I'd rather live for a week in a 5-star hotel on Jeju Island" are pouring into travel-related communities, drawing attention to a new consumption pattern dubbed 'value-conscious luxury travel,' which saves on airfare to enhance the quality of domestic lodging.
A travel industry insider stated, "As the fuel surcharge hike is reflected starting in April, overall overseas travel reservation trends are showing a somewhat sluggish pattern," adding, "With uncertainties in the international political situation heightening volatility in oil prices and exchange rates, overseas travel demand is faltering."
Ⅲ. The Domestic Tourism Industry's 'Involuntary Boom': Simultaneous Rises in Gyeongju, Haeundae, and Jeju
The domestic tourism industry is quickly filling the space left by shrinking overseas travel demand.
Hanwha Resort's average occupancy rate in April 2026 rose by 8 percentage points compared to the same month last year. By region, Gyeongju recorded 82.5% as of April (a 21 percentage point increase year-on-year) and approached 96% by the end of April, effectively transitioning to fully booked status. Haeundae recorded 87.9% in April (an 8.8 percentage point increase). Jeju rose by 16.2 percentage points and Daecheon by 13.5 percentage points, showing a clear pattern of demand concentration across regional hubs.
Kensington Resort Gyeongju and Seogwipo, and Kent Hotel Gwangalli by Kensington, operated by Eland Park, also saw their April reservation rates increase by 30 to 40% year-on-year, and during next month's golden holiday period, the average reservation rate across all Kensington Resort branches is expected to exceed 90%, leading to sell-outs at major hotels and resorts.
Gangwon-region resorts are seeing an increase in stay-over travelers due to improved accessibility and a growing preference for natural environments; weekend reservation rates for May and June at Seorak Valley and Seorak Beach have already reached around 80%, and summer peak season reservations are closing faster than last year.
Downtown hotels are no exception. Lotte Hotel Busan and Haeundae saw April occupancy rates increase by about 10 percentage points year-on-year, and Jeju rose by 5 percentage points. Grand Hyatt Jeju within the Jeju Dream Tower complex resort operated by Lotte Tour Development recorded an April reservation rate of around 89%, bringing it close to full occupancy.
Hotel Shilla also showed a slight upward trend in Jeju, and Shilla Stay near tourist destinations saw occupancy rates increase in some regions. The industry is paying close attention to the possibility that the trend of traveling domestically instead of overseas will continue for the time being.
Ⅳ. Realignment Toward Short-Haul Routes: Japan and Taiwan as New Alternatives
Even when long-haul travel is blocked, demand to travel abroad is pivoting toward short-haul routes. Due to the characteristics of the distance-proportional tiered system, major cities in Japan, Taiwan, Hong Kong, and China are grouped into the lowest pricing zone. Even if the fuel surcharge tier rises, the absolute monetary increase remains relatively small, and a pattern of search volumes for short-haul packages to destinations like Japan and Taiwan surging significantly with each fuel surcharge hike is repeatedly observed.
Travel agencies are also responding swiftly to this trend. Here Here has set out to absorb short-haul travel demand by introducing discounts on short-distance routes such as Japan, China, Taiwan, and Indonesia, alongside flight-linked accommodations in Osaka and Fukuoka, and Phu Quoc semi-package products. Yanolja plans to secure price competitiveness through airline partnerships and strengthen discount rates on linked products combining flights, accommodations, tours, and activities.
Hana Tour and Mode Tour have introduced strategies to minimize consumer resistance by offering 'price lock' products that fix the fuel surcharge at the time of ticketing.
The realignment of short-haul route demand could also affect airline route operation strategies. If the decline in load factors on relatively profitable long-haul routes persists, airlines will have an incentive to reduce supply or lower prices, whereas competition for short-haul routes is likely to intensify further. While this will bring price competition benefits to consumers on short-haul routes in the short term, it could act as a factor accelerating the restructuring of the airline industry's overall profit structure in the long term.
Ⅴ. The Double Whammy for Airlines and OTAs: Decreased Demand and Chinese Competition
For airlines and online travel agencies (OTAs), the recent surge in fuel surcharges raises concerns that go beyond mere demand reduction, potentially leading to a structural crisis.
Airline industry insiders agree that amid the 'twin bads' of rising oil prices and exchange rates, fuel surcharge hikes alone are insufficient to prevent operating losses.
In the LCC industry, including T'way Air, operating losses for 2025 are estimated by the industry to have increased more twentyfold compared to the previous year, with dominant analyses attributing this to the simultaneous effects of high oil prices and high exchange rates.
The dilemmas facing the OTA industry are even more complex. While Chinese OTA Trip.com's domestic monthly active users (MAU) exploded from about 1.2 million in April 2025 to about 2.57 million in March 2026, domestic players like Yanolja (3.43 million as of March 2026) and Here Here (3.26 million) stagnated in the 3 million range, closely allowing Chinese OTAs to catch up.
An industry insider lamented the reality of simultaneously bearing the two tasks of defending overseas travel demand and attracting domestic travel, stating, "In a situation where overseas travel businesses are more advantageous for profit structures than domestic travel, the fuel surcharge increase is at a disastrous level."
Given that uncertainties in the Middle East situation are likely to persist for some time, expecting a resolution to this adverse factor in the short term is difficult. According to the International Air Transport Association (IATA), the average April fuel surcharge rose by an additional 8 to 12% compared to March, with the growth rate being highest for U.S. and European routes. It is estimated that about 20 to 25% of airfare increases stem from fuel surcharge hikes, deepening a structural distortion where the surcharge rises faster than the base fare.
Ⅵ. Outlook: Structural Change or Temporary Adjustment?
Whether the current contraction in overseas travel demand ends as a temporary shock due to shifting Middle Eastern conditions or leads to a more lasting reorganization of consumption patterns depends on the trajectory of oil prices.
If the high oil price regime persists for several months or longer, a structural transition where middle-class consumers who previously favored long-haul travel change their travel patterns to domestic or short-haul overseas destinations is likely to take root. Conversely, if Middle Eastern tensions ease and oil prices return to previous levels, a phase where pent-up long-haul travel demand rebounds rapidly cannot be ruled out.
Policy-level discussions are also beginning to take shape. The necessity for government-level temporary cuts to fuel taxes to prepare for a prolonged high oil price regime and policy-level financial support for the airline industry is being raised inside and outside the industry. In particular, voices demanding separate support measures for regional routes and Jeju routes are growing louder.
This is because round-trip airfares between Jeju and Seoul have risen from the previous level of around 150,000 won to over 400,000 won (a 250,000 won increase), imposing a direct burden on Jeju residents traveling for medical, educational, and business purposes.
At the individual consumer level, ticketing timing strategies are becoming increasingly critical. Because fuel surcharges are charged based on the ticketing date rather than the boarding date, completing payment before the end of the month following an increase announcement is the surest way to cut costs. Utilizing travel agencies' 'price lock' products can also fix the current tier's fuel surcharge even if departure is months away.
It is also worth noting that due to the distance-proportional tiered system, short-haul routes such as Japan and Taiwan impose a significantly lower burden compared to long-haul routes even with the same tier increase. When booking airfares, one needs to develop the habit of checking not only the base fare but also the month the fuel surcharge changes and the ticketing timing.