Asia-Pacific airlines weather storm of uncertainty

The Asia-Pacific aviation industry has been resilient over the past six months since the United States and Israel-led war on Iran began on Feb 28, with sustained demand shown in the summer travel season.
However, experts said uncertainty over how long the high fuel cost will persist is forcing carriers to make difficult decisions and even pushing some of the more vulnerable ones to the brink.
“Traditionally, the operating cost for an airline, on average in Asia-Pacific, is about 30 percent … today it has gone up to 38 percent simply because of the fuel,” said Wong Hong, director general of the Kuala Lumpur-based Association of Asia Pacific Airlines.
Though global jet fuel prices have moderated from their peak of nearly $250 per barrel, prices remain above the pre-war level of around $90 per barrel, rising 8.2 percent week-on-week to $158.91 per barrel in the week ending on Aug 14, according to International Air Transport Association data.
The rising cost has squeezed some airlines’ net profit margin — which can be about 7-8 percent in good times — to only 2 percent, Wong said.
Preliminary traffic figures released by AAPA on Aug 5 showed Asia-Pacific airlines carried 30.5 million international passengers in June.
While this marks a 1.1 percent decline from the same period last year, the region’s airlines flew farther, with the revenue passenger kilometers rising 1.1 percent year-on-year, underscoring continued resilience in longer-haul travel.
The average international passenger load factor increased by 0.7 percentage points to 82.6 percent in June.
This also brings the total number of international passengers carried by Asia-Pacific airlines during the first half of 2026 to 192.5 million, a year-on-year increase of 3.2 percent.
Noting that airlines have adapted by adjusting flight schedules, increasing airfares, and receiving government support to mitigate the financial strain, Wong said the key question is how long the situation will continue.
He said the next three months will be challenging as demand could become more uncertain.
“One can observe that the flight load is tremendously high, but do not be fooled by this fallacy,” said Mohd Harridon bin Mohamed Suffian, associate professor of finance and economy at the Universiti Kuala Lumpur Business School.
Noting that high passenger load factor was only a result of airlines cutting flights and compressing seat allocations to reduce operational costs, Mohd Harridon said reducing flight frequencies or canceling routes reduces short-term costs but drives away passengers, which will eventually threaten long-term financial sustainability.
Airlines must find a balance between cutting flight frequency and maintaining customer satisfaction, he said.
Malaysia’s AirAsia, one of the region’s largest low-cost airlines, recorded a net loss of 527.16 million ringgit ($130.34 million) in the second quarter this year, mainly due to a 58 percent year-on-year surge in fuel expenses, financial news outlet The Edge Malaysia reported.
AirAsia has significantly cut its flights and suspended underperforming long-haul routes but said it plans to restore capacity in the fourth quarter, the year-end travel season.
Noting that the airline also has expansion plans to be carried out in parallel, Mohd Harridon said such a strategy could allow AirAsia to capture future market demand.
“I think the government will play a very important role because … this is not a normal situation,” said Wong of the AAPA, adding that temporary relief such as deferring payments, or reducing taxes and other charges, can be helpful to airlines.
The support is also important to the whole economy because airlines provide a critical economic multiplier, with aviation driving tourism, trade, and connectivity, he said, noting low-cost carriers, which do not hedge fuel, are more financially at risk than full-service carriers.
“I hope this one will be something that we can get past sooner,” Wong said.

kelly@chinadailyapac.com