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This Week in AsiaEconomics

Asian airfares look set to fall as jet fuel prices ease on US-Iran deal

Budget carriers will lead the charge but the pace is likely to be gradual as airlines wait for more clarity on the Iran war, experts say

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AirAsia planes stand on the tarmac at Kuala Lumpur International Airport Terminal 2 on January 21. Photo: Reuters
Biman Mukherji
Asian travellers could see some relief from high airfares in the coming weeks as jet fuel prices ease following signs of cooling US-Iran tensions, But analysts predict cheaper tickets will emerge unevenly, with budget carriers likely to move faster than full-service airlines.
More Asian low-cost carriers are expected to follow AirAsia Group’s lead after it announced fare reductions on Monday, though the response is expected to be gradual.

The reductions came after global jet fuel prices fell from a March peak of US$242 per barrel to around US$112 following the announcement of an interim US-Iran peace deal, stirring hopes that shipping traffic would gradually resume through the Strait of Hormuz, a key conduit for Asia’s oil imports.

Aviation fuel, one of the costliest items on an airline’s balance sheet, surged in the wake of the Iran war, forcing carriers to raise fares, impose fuel surcharges, suspend routes or trim capacity.
Malaysia-based AirAsia had cut 10 per cent of its flight capacity and suspended underperforming routes because of soaring fuel costs, but now expects to fully restore capacity by the end of August.
AirAsia, Cathay Pacific and HK Express aircraft line the taxiways of Hong Kong International Airport in July 2024. Photo: May Tse
AirAsia, Cathay Pacific and HK Express aircraft line the taxiways of Hong Kong International Airport in July 2024. Photo: May Tse

“AirAsia’s move is a significant signal to the market, but I would expect the pricing response to be asymmetric and gradual rather than a broad industry-wide reset,” said Mayur Patel, regional commercial and industry affairs leader for Asia-Pacific, Middle East and Africa at OAG, a travel data and aviation analytics firm.

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