Airlines get crushed by fuel costs, budget airlines try to cope
Cheap airlines in Asia are at risk of losing their price advantage as fuel prices rise and tensions in the Middle East disrupt key routes and force carriers to raise fares and cut expenses.
Low-cost carriers rely on high passenger volumes and low fares, leaving them with lower margins than full-service airlines and less room to absorb fuel price fluctuations and route disruptions.
Speaking at the Asian Aviation Festival conference in Singapore, airline executives said they were now trying to cut costs, adjust fares and change routes to prevent too much of the increase being passed on to passengers.
“[We have to] “Otherwise we wouldn’t have passengers,” AirAsia Cambodia CEO Vissoth Nam told CNBC’s Monica Pitrelli during a panel on Thursday.
India’s SpiceJet said the conflict in the Middle East has significantly affected its operations due to heavy traffic between India and the region.
“Dubai alone has 77 flights a week from India and this is definitely a huge impact for us in terms of route and revenue loss,” said Kamal Hingorani, chief customer officer of SpiceJet.
Although high fuel costs have not yet fully affected the airline, Hingorani said prices are determined on a monthly basis and may increase further in April.
Investment Information and Credit Rating Agency of India on March 26 changed The outlook for India’s aviation sector has changed from stable to negative due to the weakening of the Indian Rupee against the US dollar and rising fuel prices. Fuel prices increased by 5.4% in March compared to the previous year and are expected to increase further in April.
Hingorani said the airline “may have to consume some fuel” if fuel prices rise to an unmanageable level. [costs]“Because passing on high fuel surcharges will hurt demand.
long distance power
But not all airlines were equally affected.
Zipair Tokyo says it has performed relatively well compared with other budget airlines, in part because its routes avoid the Middle East and are not disrupted by conflict.
The airline, which operates a fleet of eight aircraft on medium- and long-haul international flights, also saw strong demand during the crisis in Japan. cherry blossom season, especially in April.
“With this crisis, some routes have strengthened while others have weakened,” said Brendan Sobie, aviation analyst at Sobie Aviation. Long-haul routes remained generally resilient.
But Zipair’s new CEO and co-founder, Yasuhiro Fukada, said fuel prices still directly impact costs. Do not charge fuel surcharge.
Although Japan has domestic oil reserves and sources crude oil from the United States, supply conditions could become even more challenging depending on how the conflict develops, Zipair said in an email to CNBC.
parent company, Japan AirlinesDue to the “unprecedented increases” in fuel prices, a fuel surcharge has been implemented on international flights as of February 27.
Fukada said Zipair plans to double its fleet to more than 20 aircraft by 2032.
Airlines are turning to technology
Low-cost carriers are also turning to technology to reduce costs.
Zipair said: 26 February He said his flights will be equipped with Starlink satellite internet free of charge to passengers.
The service allows airlines to stream entertainment to passengers’ devices rather than installing heavier in-flight entertainment systems, reducing maintenance and fuel costs.
SpiceJet said its subsidiary SpiceTech has developed in-house software for customers and operational systems, allowing the airline to cut nearly 80% of its technology suppliers and reduce expenses.
Hingorani says this is “fundamental to our survival… because [SpiceTech is] “We are not directly our own company, we are a subsidiary, but we also do a lot of work for global airlines on these issues.”
