KUALA LUMPUR, Jun 10 — The ongoing conflict in West Asia is putting pressure on the global aviation industry as airlines face rising jet fuel prices, changes to flight routes and higher operating costs, says an analyst.
Endau Analytics founder Shukor Yusof said that so far the airline has been successful in handling the situation.
However, he said, the prolonged uncertainty has begun to affect business operations, especially for airlines that have weaker financial positions.
“The current situation is still uncertain, but the aviation market can handle it well.”
“We are dealing with a shortage of jet fuel coming out of the Strait of Hormuz. The situation is still tense, and airlines in particular, are being hit hard because jet fuel has risen to levels not seen in many years.”
“Airlines are facing significant challenges due to several factors. They are having to raise fares, manage shortages, and most importantly, deal with continued price increases.
“Jet fuel, which can contribute up to 40 percent of an airline’s operating costs, is a major contributor to this issue,” he said in Bernama TV’s current affairs and talk show, Bernama World, titled “West Asian Conflict: Impact on the Aviation Industry”, today.
Shukor said many airlines have adjusted their business models to accommodate passengers who booked tickets before the conflict began, while some international routes, particularly those involving Europe, have diverted their routes to avoid Iranian airspace.
He said Southeast Asian airlines, including Malaysia Airlines, are assessing and realigning their operations in Europe in response to ever-changing geopolitical risks.
Meanwhile, full-service airlines with stronger financial backing are in a much better position to weather prolonged disruptions than low-cost carriers.
“The aviation industry often faces the greatest challenges, and the stronger your finances are, the better chance you have of surviving longer than your competitors,” said Shukor.
Elaborating further, he said airlines backed by shareholders or sovereign wealth funds were more likely to survive prolonged instability in the Gulf region, while smaller airlines with weaker cash flows faced greater risk.
Despite concerns about disruptions in the Strait of Hormuz, Shukor stressed that the global market is not facing a shortage of jet fuel, but rather a price crisis driven by logistical challenges and geopolitical uncertainties.
He said jet fuel prices had soared as high as US$200 per barrel before falling to around US$145 to US$150, but were still almost double the levels before the conflict escalated.
“There is no shortage of jet fuel or crude oil. The problem is the price and logistics of transporting supplies around the world,” he said.
— BERNAMA
