KUALA LUMPUR, Malaysia (AP) — High airfares could become the new norm as airlines contend with soaring jet fuel prices and mounting operating costs, the Association of Asia Pacific Airlines' chief said Friday.
Wong Hong, director-general of the association grouping 18 airlines in the region, said carriers were trying to contain ticket prices while protecting their finances and avoiding fare increases that could drive passengers away.
But the industry
is operating in a substantially different cost environment from a year ago when jet fuel was about $80 a barrel, compared with around $180 currently, he said. Fuel accounts for a third of airline operating costs, making further price increases a threat to carriers' financial performance, he said.
“I believe so,” Wong said after an AAPA conference when asked whether high airfares would become a lasting feature rather than a temporary adjustment. “We are living in completely different market conditions and a completely different cost environment ... and it looks like these high prices will continue to prevail.”
On whether airlines could implement another round of fare increases if fuel prices remain high, Wong said there was no clear answer as passenger price sensitivity varies across markets.
Major airlines across the Asia-Pacific, Europe and North America have raised base fares, hiked fuel surcharges or added extra fees since the Iran war began in late February.
The AAPA's data showed that passenger traffic across Asia-Pacific slumped for five consecutive months from April to August, before rebounding marginally in September. For the first nine months this year, overall passenger traffic in the region still grew by 1.9%.
“Airlines will try their best to hold on to the fares that they can charge without trying to lose passengers, but it is a tricky dilemma,” Wong said.
Airlines face a mismatch between ticket sales and fuel purchases, complicating their ability to manage rising costs, he said. Passengers often book flights months in advance, locking in fares before airlines purchase the fuel needed to operate those flights.
Beyond fuel costs, Wong said airlines continued to face supply side challenges including aircraft delivery delays and the high cost of maintaining older aircraft. But he said carriers had shown resilience and travel demand remained strong.
Airlines are doing their best to find the right levels in different markets to strike a balance between absorbing higher costs and pricing passengers out of the market, he added.
