Escalating conflict in the Middle East risks directly affecting the operations of the global aviation industry. Many airlines in the Asia-Pacific region are under cost pressure, while international passenger flows are also changing as transit flights over the Middle East are disrupted.
Due to fewer oil price hedge contracts compared to airlines in Europe or the US, many Asian airlines are vulnerable to sudden fuel price increases. Therefore, some low-cost airlines in Southeast Asia have begun to consider the scenario of suspending aircraft operations if flight fuel becomes too expensive or difficult to access.
This impact is also spreading to airlines in the Oceania region. Airlines such as Cathay Pacific, AirAsia and Thai Airways have announced airfare increases. In India, airlines have increased long-haul ticket prices by about 15% and are considering further increases, according to sources familiar with the issue.
Meanwhile, Qantas and Air New Zealand have increased ticket prices since the beginning of the week. Air New Zealand also announced that it will cancel thousands of flights from March 16 to May 3, affecting about 44,000 passengers.
Flight cancellations and disruptions over the Middle East also caused ticket prices to increase in the short term, as international passengers had to switch to alternative routes, causing demand to increase sharply.
According to the aviation data company Cirium, long-haul routes with few operators will suffer the largest price increases, especially routes previously operated by Emirates, Etihad Airways and Qatar Airways. Flights from Australia to Europe, North America and North Asia may see ticket prices increase faster and stronger.
According to forecasts, flights booked in the next two weeks may be significantly more expensive, while the number of flights offered on the market seems to decrease, even for long-haul flights to July, this continues to put pressure to increase ticket prices.
Alarm bells have rang everywhere," said June Goh, senior oil market analyst at Sparta Commodities SA. According to her, Asian airlines with weak risk hedging programs will be very vulnerable to rising flight fuel prices, especially if they have already sold tickets at lower prices than currently.
Some low-cost airlines with low profit margins may even go bankrupt if this situation lasts for more than 3 months, according to an industry source.
Analyst Michael Linenberg of Deutsche Bank AG believes that the war could force airlines around the world to stop operating thousands of aircraft, in which the weakest airlines may have to completely stop operating.
Flight operations have been seriously disrupted as many airlines and major airports in the Middle East are almost paralyzed, while the risk of fuel supply disruption is causing the global aviation industry to fall into a state of prolonged instability.
Mr. John Plueger, CEO of Air Lease Corp., said that this situation may only last for a short time. "The world is not stopping. Things may just temporarily stagnate," he said.
Meanwhile, Mr. Carsten Spohr, CEO of Deutsche Lufthansa AG, said that the German airline group may benefit relatively when competitors are forced to increase fares, because the airline has taken measures to prevent fuel price fluctuations.
Lufthansa is also increasing the frequency of flights to Asia and Africa, as Middle Eastern airlines are still unable to operate normally.
In Vietnam, according to Vietnamese airlines, the most worrying thing is not simply the price increase but whether there is still enough fuel from April to maintain operations or not. If delivery continues to be slow, businesses are forced to consider operating adjustment scenarios.
Vietnam is still heavily dependent on aviation fuel imports, with about 70% of demand coming from external sources. Meanwhile, major suppliers in Singapore, Thailand, and China are delaying delivery, even possibly citing force majeure clauses to terminate contracts.
The Civil Aviation Authority of Vietnam has proposed a series of urgent support solutions such as 100% exemption of environmental protection tax on aviation fuel until the end of May 2026, reduction of value-added tax (VAT) on aviation fuel, and 50% reduction of some types of fees in the aviation sector such as during the COVID-19 epidemic.
