Airlines facing challenging times; skies were a lot rosier a year ago: AAPA DG

Kuala Lumpur: High fuel prices, supply chain issues and sustainability are the main challenges for the airline industry, where the skies were a lot rosier a year ago, Association of Asia Pacific Airlines (AAPA) Director General Wong Hong said on Thursday.

At a media roundtable in the city ahead of the industry association's 70th Assembly of Presidents, he also mentioned that it is difficult to suggest a "magic pill" and each carrier has to look at its own cost structure.

Remarks from the DG came against the backdrop of a surge in jet fuel prices, mainly due to the West Asia crisis, which has pushed operational expenses higher for airlines.


Generally, Aviation Turbine Fuel (ATF) accounts for around 33 per cent of an airline's operational costs.

Currently, AAPA represents 18 airlines in the region, including Air India.

Noting that it was a challenging time for the airline industry, Wong said the supply chain was a serious problem.

"We are not out of the woods," he said and cited that the aircraft backlog is estimated to be over 16,000.

On high ATF prices, he said the jet fuel crack spread is the highest seen in many years, and governments need to pay more attention to the situation, the AAPA DG said.

Broadly, crack spread refers to the margin charged for refining crude oil and converting it into jet fuel.

To a query from PTI on whether AAPA has any specific suggestions to governments with respect to the high fuel prices, Wong said the association cannot be prescriptive in mentioning that something should be done and something should not be done.

"If all governments could do benchmarking, that will be a very good start to begin with. That means... countries compare themselves with other countries around and (see) how competitive we are," he said.

Further, Wong said governments can look at airlines as an opportunity to grow their economies and as an enabler for the broader benefit of their countries.

"Then, it changes the perspective altogether," rather than viewing airlines' business just as a source of income.

Sustainable Aviation Fuel (SAF) is key to the decarbonisation efforts of the aviation industry. However, limited production capacity, availability constraints and high costs pose challenges in using SAF.

It is not easy for airlines to dictate terms on fuel prices and SAF, Wong said.

Responding to queries, he said high fuel prices, supply chain issues and sustainability are challenges for the airlines' industry, and that "one year ago, the skies were a lot rosier".

In response to a PTI question on the Indian aviation market and Air India, Wong said India is obviously a very important market.

"It is in our interest for sure that we would love Indian carriers, Air India being a member, to be in a much healthier position to improve their position going forward," he said.

India is one of the world's fastest-growing civil aviation markets, and domestic carriers have more than 1,600 planes on order that are to be delivered in the coming years.

Meanwhile, chief executives and senior leaders of AAPA are meeting in the city on November 12 and 13 for the association's 70th Assembly of Presidents.