Asian airlines trim flights as fuel supplies tighten

SINGAPORE — Airlines across Asia are cutting flights, carrying extra fuel from home airports and adding refueling stops as the Middle East conflict squeezes jet fuel supply in some countries, adding to pressure on an industry already hit by a sharp jump in fuel costs.

European carriers are bracing for similar disruption after Iran's closure of the Strait of Hormuz cut off nearly 21 percent of the global seaborne jet fuel supply, according to trade data platform Kpler.

Iran, the United States and Israel reached a tentative, two-week ceasefire on Wednesday in the war that tore across the Middle East and disrupted the global energy market.

But questions emerged over what appeared to be dueling proposals to halt the fighting and reopen the vital Strait of Hormuz, with Iran insisting it would control and charge ships passing through the strait and continue to enrich uranium.

Previous oil shocks mainly drove up prices, but this one is also constraining physical supply, forcing governments, airlines and airports to consider rationing.

"In my conversations with airlines, they are very concerned about what the future looks like, because we do not know when the war will end and we don't know when the supply chain, the feedstock, will come from the Gulf area," said Shukor Yusof, founder of aviation consultancy Endau Analytics.

Most exposed regions

Asia, Europe and Africa are most exposed, analysts say.

Within Asia, the pain has so far been sharpest in lower-income, import-dependent markets such as Vietnam, Myanmar and Pakistan.

Budget airline AirAsia X is now loading extra fuel in Malaysia before flying to Vietnamese airports, CEO Bo Lingam told reporters on Monday.

"Not to say that they are not giving us fuel, but they limit the amount of fuel," he said of Vietnam.

Past temporary jet fuel shortages at airports due to shipment disruptions or contamination have usually led to rationing rather than complete outages.

Airlines have typically responded by loading extra fuel at home airports, adding refueling stops on longer routes or carrying less cargo.

For a prolonged crisis, another solution is cutting flights, Ryanair CEO Michael O'Leary said last week, expressing concerns that the Middle East conflict may not end this month.

Asia, which has a thinner supply cushion than Europe and is more dependent on Hormuz flows, has been hit more quickly.

Vietnam Airlines has cut 23 domestic flights per week to conserve fuel, according to the country's aviation authority.

Airlines based in Myanmar suspended domestic flights for part of March due to jet fuel shortages, its transport ministry said, and some of its carriers have also cut capacity in April, according to aviation data provider Cirium.

Air India is making a refueling stop in Kolkata on its return from Yangon to Delhi due to fuel shortages at Yangon airport, according to a source familiar with the matter.

That practice, known as "tankering", is costly because carrying extra fuel increases fuel burn.

"Some countries are in better shape than others," said Brendan Sobie, a Singapore-based independent aviation analyst. "Some may be limiting (fuel for) foreign airlines, which then leads to tankering. This could be proactive as some countries fear they could run out."

A more-than-doubling of jet fuel prices since the start of the war has pushed some airlines to cut capacity, while others have increased fares and imposed fuel surcharges.

In one of the starkest examples, Batik Air Malaysia has slashed domestic capacity by 36 percent, with CEO Chandran Rama Muthy describing the cuts as a necessary and proactive response to a "crisis-mode" environment.

"If we were to continue operating without making adjustments, it could further expose the company to operational and financial risk," he said.

Agencies via Xinhua