KUALA LUMPUR: Air travel in Asia Pacific could become less affordable as airlines face pressure to raise fares and cut capacity to cope with soaring jet fuel prices, according to the Association of Asia Pacific Airlines (AAPA).
AAPA director general Wong Hong said continued increases in airfares could eventually discourage passengers from travelling, while airlines have limited options to manage their rising operating costs.
“There has to be a breaking point where passengers will say no,” he told reporters during a media roundtable held in conjunction with AAPA’s 70th Assembly of Presidents here today.
Wong said the region’s passenger traffic had already shown signs of weakness with AAPA’s monthly traffic figures recording negative growth in passenger numbers on an aggregate basis from April to August this year.
He said passenger traffic returned to marginally positive growth in September, although the overall performance for the year remains weak.
Wong said it is difficult to predict passenger demand over the next three to six months, particularly if jet fuel prices remain at current levels.
He said airlines will have to consider a combination of higher airfares and capacity reductions to manage their costs.
Jet fuel prices are hovering around US$185-US$186 per barrel, compared with levels of around US$80 before the current fuel crisis.
Wong warned that such high prices would be difficult for the industry to sustain over an extended period.
“If that’s the norm, we’re in trouble,” he said, adding that the current fuel price levels are not sustainable for airlines.
He said airlines are unable to control jet fuel prices and have little choice but to absorb the higher costs or pass some of them on to passengers.
Wong urged governments and aviation authorities to monitor the financial health of their airlines and examine possible measures to help them manage the cost pressures.
“It’s very critical and very key for, I would say, even governments to pay close attention and say, ‘Are our airlines okay? Can they get through (the current situation)?”
He said the duration of the fuel crisis remains uncertain, making it difficult for airlines to plan their operations and financial commitments.
The challenges facing airlines have also been compounded by long-standing aircraft supply chain problems, which have continued despite some improvements in aircraft production and maintenance capacity.
Wong said the aircraft order backlog remained at about 16,000 units, only slightly below the previously reported level of 17,000.
He said some AAPA member airline chief executives told him that aircraft deliveries are taking as long as six years, affecting their fleet renewal and expansion plans.
The delays mean airlines are unable to introduce newer and more fuel-efficient aircraft according to their original schedules, he added.
Airlines also have to continue spending on the maintenance of older aircraft to retain capacity, while those unable to do so risk sacrificing opportunities for growth.
Wong said aircraft manufacturers have indicated plans to increase deliveries, while some improvements are also being made in maintenance, repair and overhaul capacity across Asia Pacific.
“There is some progress being made by the original equipment manufacturers. They promised higher deliveries,” he said.
However, he said the industry is still facing serious supply chain constraints despite the improvements.
Meanwhile, Wong said airlines are also facing increasing difficulties in meeting their sustainability commitments because of the high cost and limited availability of sustainable aviation fuel (SAF).
He said SAF remains about three to four times more expensive than conventional jet fuel, making its wider adoption economically challenging for airlines.
He added that the industry is at risk of falling short of its sustainability goals without greater support from governments and other stakeholders.
Wong said some governments have introduced policies and incentives to encourage SAF production, but more needs to be done to expand supply and make the fuel commercially viable.
He said competition for feedstock from other industries, including renewable diesel production, also complicates efforts to increase SAF availability.
“We’re not getting a lot of help. We’re not getting enough help that we think that we should,” he said, adding that governments need to take a greater leadership role in encouraging SAF production, as airlines have limited influence over fuel production and pricing.