KUALA LUMPUR - The ongoing West Asia conflict is putting pressure on the global aviation industry as airlines face rising jet fuel prices, flight rerouting and higher operating costs, said an analyst.
Endau Analytics founder Shukor Yusof said airlines have managed to cope with the situation so far. Still, the prolonged uncertainty is beginning to affect business operations, especially for carriers with weaker financial positions.
"The situation right now is still in the clouds, but the aviation market is coping well. We are dealing with the shortfall in jet fuel coming out from the Strait of Hormuz. The situation remains tense, and airlines, especially, are feeling the brunt of it because jet fuel has risen to levels not seen in many, many years.
"Airlines are facing significant challenges due to a combination of factors. They have had to raise fares, manage shortages, and, most importantly, cope with continually rising prices. Jet fuel, which can account for up to 40 per cent of an airline’s operating costs, is a major contributor to these issues,” he said today on Bernama TV’s current affairs and talk programme called Bernama World, titled "West Asia Conflict: Impact on Aviation Industry”.
Shukor said many airlines have adjusted their business models to accommodate passengers who had booked flights before the conflict began, while several international routes, especially those involving Europe, have been rerouted to avoid Iranian airspace.
He said Southeast Asian carriers, including Malaysia Airlines, are reassessing and realigning their European operations in response to the evolving geopolitical risks.
Meanwhile, full-service carriers with stronger financial backing are in a far better position to weather prolonged disruptions compared with low-cost carriers.
"The airline industry has always been a survival of the fittest, and the deeper your pockets are, then you stand a better chance of lasting longer than your competitors,” said Shukor.
He elaborated that airlines backed by shareholders or sovereign wealth funds are more likely to withstand prolonged instability in the Gulf region, while smaller airlines with weaker cash flows face greater risks.
Despite concerns over disruptions in the Strait of Hormuz, Shukor stressed that the global market is not facing a jet fuel shortage, but rather a pricing crisis driven by logistical challenges and geopolitical uncertainty.
He said jet fuel prices had surged to as high as US$200 per barrel before easing to around US$145 to US$150, still nearly double the levels seen before the conflict intensified.
"There is no shortage of jet fuel or crude oil. The problem is the price and the logistics of moving supplies across the world,” he said. - BERNAMA