Foreign airlines are already cancelling flights and reducing schedules to Australia, raising the prospect of more disruption if the fuel shock from the US-Israel war on Iran is not resolved by May.
Fiji Airways said last week it would pause some services to Australia and the US because of high fuel prices and market uncertainty.
AirAsia has cut flights from Adelaide, Sydney and Melbourne and swapped out narrow-body planes for wide-body aircraft on its Perth-Kuala Lumpur route.
The Malaysia-based airline began reducing Australian services from last Thursday by trimming weekly flights out of Sydney and Melbourne from nine to eight, with more adjustments to start in May.
Mark Trim, founder of the Adelaide-based Complex Travel Group, said in the current climate, if a route’s profitability was 50-50, “it’s easy for it to become a sacrificial lamb”.
Airlines were trimming capacity and raising prices to maintain revenue, he said.
Ellis Taylor, the Asia editor of aviation analytics firm Cirium, said that if there was no end to the war by June, inflation might hit a level where it smashed discretionary leisure and business travel.
“If that’s the case then that’s when [airlines] might start to make bigger moves,” Taylor said, referring to cuts to jobs and larger routes and capacities.
For now, the spike in fuel prices were not reshaping the market, experts said. Instead, the airlines have brought forward decisions they had probably “already made”.
“What we’re seeing at the moment is the low-hanging fruit is being picked,” Taylor said. “The industry is trying to take a bit of a wait-and-see approach.”
Cirium’s data shows global capacity for May reduced by about 3 percentage points. However, “overall international capacity to Australia on a net basis continues to grow”, Taylor said. In May, seat capacity is expected to grow by 2.8 per cent after a 1.3 per cent drop in April.
“Nobody is saying that the sky is falling in yet,” Taylor said. “[Airlines] are saying demand is stable and so they feel that those capacity cuts and those fare rises will be accepted by the market.”
Korean Airlines is still flying direct, year-round services between Seoul and Sydney, and Seoul and Brisbane. But its fuel surcharge has jumped threefold: up by $74 in March, then rising to $260 in April for a Seoul-Sydney flight.
Melbourne Airport said China Eastern’s Melbourne-Nanjing service has been reduced from three times a week to two for a short period.Cathay Pacific will cost-cut about 2 per cent of flights from May to June, including some to Australia.
Fiji Airways will “temporarily suspend” a Brisbane-Fiji flight from April 25. The following month, it will pause Tuesday flights to Dallas-Fort Worth for seven weeks but continue to run two weekly services.
Oil prices, as well as the price of jet fuel, have soared since the US and Israel launched attacks on Iran on February 28. The Strait of Hormuz – through which one-fifth of the world’s oil is transported – has also been closed.
Last week, International Energy Agency executive director Fatih Birol said more flight cancellations were possible if supplies remained blocked in the Middle East. “In Europe, we have maybe six weeks or so [of] jet fuel left,” he said.
Qantas and Virgin Australia have flagged up to $800 million and $40 million in extra fuel costs, respectively, but both said they expected revenue per available seat per kilometre to increase.
“A lot of people are currently booking back-up flights – and that will have an effect,” Trim said. He also suspected the uncertainty about being able to fly abroad would plant the seeds of a round of COVID-like “revenge travel” – where people are determined to travel after a period of being unable to.
For now, airlines, particularly premium Asian airlines, might be overpricing flights with conditions that were too restrictive, he said.
If travellers have to cancel one of two bookings, they will probably chop the more expensive option, which could leave those airlines flying planes with unused capacity. “Will they price pent-up demand right so people participate? Or will it be too high?” Trim said.
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Chris Zappone is a senior reporter covering aviation and business. He is former digital foreign editor.Connect via X, Facebook or email.
