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Biman Mukherji

Asian travellers could see some relief from high airfares in the coming weeks as jet fuel prices ease following signs of cooling US-Iran tensions, But analysts predict cheaper tickets will emerge unevenly, with budget carriers likely to move faster than full-service airlines.
More Asian low-cost carriers are expected to follow AirAsia Group’s lead after it announced fare reductions on Monday, though the response is expected to be gradual.
The reductions came after global jet fuel prices fell from a March peak of US$242 per barrel to around US$112 following the announcement of an interim US-Iran peace deal, stirring hopes that shipping traffic would gradually resume through the Strait of Hormuz, a key conduit for Asia’s oil imports.
Aviation fuel, one of the costliest items on an airline’s balance sheet, surged in the wake of the Iran war, forcing carriers to raise fares, impose fuel surcharges, suspend routes or trim capacity.
Malaysia-based AirAsia had cut 10 per cent of its flight capacity and suspended underperforming routes because of soaring fuel costs, but now expects to fully restore capacity by the end of August.

“AirAsia’s move is a significant signal to the market, but I would expect the pricing response to be asymmetric and gradual rather than a broad industry-wide reset,” said Mayur Patel, regional commercial and industry affairs leader for Asia-Pacific, Middle East and Africa at OAG, a travel data and aviation analytics firm.
“Budget carriers will lead and lead quickly,” he said.
Other low-cost carriers in the region with similarly high fuel-cost exposure, such as Cebu Pacific, Scoot and IndiGo, will face competitive pressure to follow, according to Patel.
AirAsia’s fare reduction reflected the direct structural link between fuel-cost movements and ticket pricing, he said. The airline has said it will now review fares on a weekly basis.
Price sensitive
Singapore jet fuel prices have retreated but remain materially above the pre-conflict level of around US$80 per barrel, according to Patel.
“Until fuel stabilises closer to historical norms, full-service carriers are unlikely to move aggressively on base fares,” he said.
Full-service carriers such as Cathay Pacific, Singapore Airlines, ANA, Korean Air and Japan Airlines would remain focused on maintaining critical international connectivity rather than rolling out discounts, Patel said.
“What we are more likely to see from network carriers is a quiet rollback of fuel surcharges imposed during the peak crisis period, which achieves a similar effect for consumers without the optics of a formal fare cut.”
Hong Kong-based Cathay Pacific said on Tuesday it would lower fuel surcharges on most passenger flights for the second time in less than two months.


From July 1, passengers departing from Hong Kong for destinations in North America, Europe, the Middle East, Africa and the southwest Pacific will pay HK$1,164 (US$148.50) per sector, down 14.5 per cent from HK$1,362.
Gary Bowerman, an Asia travel, tourism and consumer analyst, said Southeast Asian markets were “very alert” to the potentially damaging consequences of elevated airfares.
“Airlines in Southeast Asia are nervous that continued higher air fares could cause travellers to delay trips on a ‘wait-and-see’ basis until prices are lowered or, worse, that they could trigger a regional demand slowdown,” he said.
While the premium and luxury segments were likely to be more insulated, Bowerman said mass market travellers – the engine of tourism arrival volumes – were highly price-conscious across Southeast Asia.
“All eyes will be on the outcome from the Chinese summer school holidays and whether visitor volumes from China across Southeast Asia have held up. If not, you may start to see a panic across the travel and tourism value chain as we move into the third quarter,” he said.
Chinese summer school holidays generally run from early July to the end of August.
“Intra-Asian travel has been a powerful force of the region’s recovery since Covid, but that recovery remained more fragile in some countries than others,” Bowerman said.
Gradual return
Shukor Yusof, founder of Singapore-based aviation consultancy Endau Analytics, said he would not be surprised if low-cost carriers delayed action until there was more clarity on the Middle East situation.
“Not all Asian carriers will be quick to re-establish flights suspended or disrupted during the Iran conflict as many remain cautious about the situation. It will take time to repair the loss of confidence,” he said.
AirAsia, which endured a difficult first half of the year, was responding to the gradual realignment of jet fuel prices and passenger demand, he said.
The group missed payments to some suppliers and sought to defer rental payments on more than 16 aircraft after higher fuel costs strained its finances, Bloomberg reported on Wednesday.

In terms of restoring flight capacity, Patel said AirAsia was being selective and would not automatically reinstate unprofitable routes cut during the fuel crisis.
Passenger flights across the Middle East are slowly resuming after months of disruption caused by the Iran conflict, which particularly affected Asia-Europe connections given the Gulf’s role as a connecting hub.
“Gulf carriers are recovering faster than their Asian counterparts on these routes,” Patel said.
Asian carriers treating the Gulf as a transit corridor rather than a destination market would be slower to normalise, he said, as routing decisions continued to be shaped by safety protocols and insurance requirements.
“We are seeing a scaling up of flights returning to the Middle East by Asian carriers,” said Hannah Pearson, director of tourism consulting firm Pear Anderson, noting that Singapore Airlines’ low-cost subsidiary Scoot resumed flights between Singapore and Jeddah on Monday after a four-month suspension.
Airlines would prioritise well-performing routes, while newer ones would take longer to be reinstated, she said.
“Connectivity and affordability will continue to be the main factors keeping travellers at home – and both will take a while to stabilise,” Pearson said.


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This Week in Asia

Economics

Budget carriers will lead the charge but the pace is likely to be gradual as airlines wait for more clarity on the Iran war, experts say


Budget carriers will lead the charge but the pace is likely to be gradual as airlines wait for more clarity on the Iran war, experts say.


Asian airfares look set to fall as jet fuel prices ease on US-Iran deal

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Budget carriers will lead the charge but the pace is likely to be gradual as airlines wait for more clarity on the Iran war, experts say

Budget carriers will lead the charge but the pace is likely to be gradual as airlines wait for more clarity on the Iran war, experts say