Challenges and difficulties

VHO - Soaring jet fuel prices are pushing Thailand's aviation industry into its most difficult period since the pandemic. The impact of geopolitical conflicts and global energy market volatility is causing airlines' operating costs to escalate rapidly, forcing many businesses to cut capacity and adjust their operational strategies.

While fuel previously accounted for only about 30-35% of total operating costs, this figure has now risen to 60%. Under this pressure, many Thai airlines have been forced to scale back low-profit routes to limit losses. Bangkok Airways, for example, has reduced the number of flights and switched to smaller aircraft to save fuel and optimize operational efficiency.

Airlines are also stepping up fuel price hedging strategies to reduce risk. Bangkok Airways insured approximately 25-26% of its fuel needs at $80 per barrel. However, when market prices surged to $160-170 per barrel, this measure only helped to alleviate pressure and could not fully offset the increased costs.

Meanwhile, Thai AirAsia has been forced to significantly increase fares to ease financial pressure, with the average booking price for new flights rising to around 2,700 baht, considerably higher than at the beginning of the year. However, the pace of fare increases has not kept up with the escalating cost of fuel, amid a slow recovery in travel demand and a volatile tourism market.

The airline also cut its seat capacity by approximately 12% in the second quarter and left open the possibility of further flight reductions. This move reflects the growing caution within the aviation industry amid the risk of continued global economic instability.

The current fuel crisis creates a double whammy for airlines. Rising fuel prices lead to higher airfares, while high travel costs discourage passengers from taking unnecessary trips, further increasing revenue pressure for businesses.

Despite still harboring hopes for the year-end tourist season and the potential recovery of international visitors, the Thai aviation industry is currently walking a tightrope under immense pressure. With global energy prices showing no signs of cooling down, the top priority for airlines is no longer expanding market share, but maintaining operations and preserving cash flow.

Source: https://baovanhoa.vn/the-gioi/thach-thuc-va-kho-khan-231287.html