What the Gulf conflict means for airlines

Airlines are cutting capacity, but Thai authorities are hopeful for a rebound during the high season

- MOLPASORN SHOOWONG

Airlines in Thailand plan to cut a significant number of flights from May to curb losses stemming from surging jet fuel prices.

(PHOTO: PATTARAPONG CHATPATTARASILL)

The US-Iran conflict, which erupted two months ago, has triggered an oil price shock, sharp rises in the cost of living and widespread flight cancellations worldwide.

As the jet fuel crisis deepens, airlines including those in Thailand are continuing to cut flight capacity for the coming months. The conflict is reshaping capacity planning across both airlines and airports.

Sarun Benjanirat, deputy director of the Civil Aviation Authority of Thailand (CAAT), said all airlines face similar cost pressures, even if they are not directly affected by Middle Eastern airspace closures in their flight operations.

Even during normal periods, he said airlines typically operate on thin profit margins of only 2-3%.

In Thailand, the most profitable period is concentrated in the high season, which spans parts of the first and fourth quarters of each year.

Airlines typically earn lower profits, or even incur losses, during the low season from April to October. As a consequence, the revenue and profits generated during the limited peak period are crucial to sustaining operations throughout the rest of the year.

The outlook has become more challenging as jet fuel, which typically accounts for around 30% of airline operating costs, has more than doubled since the conflict began two months ago, said Mr Sarun.

While some routes are usually profitable during this period, rising costs have pushed them into loss-making territory, he said, forcing Thai airlines to gradually trim capacity across both domestic and international services, either by cutting unprofitable routes or operating certain routes at reduced capacity through flight consolidation.