Jet fuel at $180 a barrel, more than double the level of a year ago
Wong Hong spoke Friday after an AAPA conference in Kuala Lumpur, where he was asked whether high airfares would become a lasting feature rather than a temporary adjustment.
“I believe so,” Wong said. “We are living in completely different market conditions and a completely different cost environment … and it looks like these high prices will continue to prevail.”
The industry is operating in a substantially different cost environment from a year ago, when jet fuel was about $80 a barrel, compared with around $180 currently, Wong said. Fuel accounts for a third of airline operating costs, making further price increases a threat to carriers’ financial performance, he said.
On whether airlines could implement another round of fare increases if fuel prices remain high, Wong said there was no clear answer, because passenger price sensitivity varies across markets.
“Airlines will try their best to hold on to the fares that they can charge without trying to lose passengers, but it is a tricky dilemma,” Wong said. Airlines are doing their best to find the right levels in different markets to strike a balance between absorbing higher costs and pricing passengers out of the market, he added.
The AAPA’s data showed that passenger traffic across Asia-Pacific slumped for five consecutive months from April to August, before rebounding marginally in September. For the first nine months of this year, overall passenger traffic in the region still grew by 1.9%.
Wong said airlines face a mismatch between ticket sales and fuel purchases that complicates their ability to manage rising costs: passengers often book flights months in advance, locking in fares before airlines purchase the fuel needed to operate those flights.
Beyond fuel costs, Wong said airlines continued to face supply-side challenges including aircraft delivery delays and the high cost of maintaining older aircraft. But he said carriers had shown resilience and travel demand remained strong.