High airfares may become new norm as jet fuel costs soar, says Asia-Pacific airline industry chief

KUALA LUMPUR, Malaysia (AP) — Airfares could become the new standard as airlines grapple with the rising costs of jet fuel and operating expenses, according to the Asia-Pacific Airlines Association's chief. Wong Hong, the association's director-general, representing 18 airlines in the region, explained that carriers are attempting to control ticket prices while preserving their finances and preventing fare hikes that might alienate passengers.

However, the industry now operates in a starkly different cost landscape compared to a year ago when jet fuel cost around $80 per barrel, as opposed to the current average of $180. Fuel constitutes a third of airline operating costs, making additional price hikes a significant threat to the financial health of the carriers. When asked if high airfares would become a lasting trend instead of a temporary adjustment, Wong stated during a post-conference press conference, "We are operating in entirely different market conditions and a completely different cost environment ... and it appears these high prices will continue to prevail."

He added that it is unclear if airlines would impose another round of fare increases if fuel prices remain elevated, as passenger price sensitivity varies across markets. Major airlines across Asia-Pacific, Europe, and North America have raised base fares, increased fuel surcharges, and added extra fees since the start of the Iran war in late February.

Passenger traffic across the Asia-Pacific region declined for five consecutive months from April to August, before showing a slight rebound in September. Over the first nine months of the year, overall passenger traffic in the region still increased by 1.9%. Wong emphasized that airlines will strive to maintain their current fares without sacrificing passengers, but it's a challenging dilemma.

Airlines face a disparity between ticket sales and fuel purchases, complicating their ability to manage the soaring costs. Moreover, passengers often book flights months in advance, locking in fares prior to airlines purchasing the needed fuel for those flights. Beyond fuel costs, Wong highlighted ongoing supply side challenges, such as aircraft delivery delays and the high cost of maintaining older aircraft.

Despite these hurdles, airlines have demonstrated resilience, and travel demand remains robust. Wong concluded by stating that airlines are doing their best to determine the optimal levels in different markets to strike a balance between absorbing higher costs and preventing passengers from being priced out of the market.