AirAsia X raises fares by up to 40% as Iran war drives fuel costs higher

AirAsia X is raising fares by as much as 40% and adding about 20% to its fuel surcharge as the Iran war drives jet fuel prices sharply higher, putting fresh pressure on the Malaysian low-cost carrier.

Bloomberg reported that Bo Lingam, chief executive of AirAsia X, said on Monday (April 6) that jet fuel prices had jumped to an average of US$200 per barrel from around US$90, creating a major challenge for the airline. The surge is hitting the carrier particularly hard because its business model depends on low fares, while also exposing the fragile state of its finances.

The airline group is also facing the risk of jet fuel shortages in parts of the region, including Vietnam, the Philippines and Malaysia. Speaking at a briefing at the company’s headquarters in Selangor, co-founder and strategic adviser Tony Fernandes said the group had weathered difficult periods before, and would rely on that experience again as it responds to the latest geopolitical shock.

He said the airline was prepared to cut flights or reduce costs further if necessary, even though there was still no clear answer to the wider geopolitical conflict. So far, the group has already reduced its flight operations by about 10% after the Hari Raya Aidilfitri holiday period, while unprofitable routes have been scrapped and some other services could be suspended either temporarily or permanently.

AirAsia X is also planning to adjust aircraft deployment and delay maintenance schedules as part of its cost management efforts. At present, the airline has no fuel hedging in place, leaving it exposed to further price swings as it waits for a clearer picture of fuel supply in the coming months.

That uncertainty has deepened after Malaysian Prime Minister Anwar Ibrahim signalled that the country could face oil supply uncertainty from June, highlighting Malaysia’s vulnerability to a wider global energy crisis, even though short-term supply remains adequate.

The turbulence is also threatening to complicate AirAsia X’s ambitious expansion into the Middle East. Lingam said the group still planned to open a hub in Bahrain and launch its Kuala Lumpur-Bahrain-London service on June 26, provided the situation improves.

At the same time, the airline says demand from Europe and other regions into Asia is still growing. Amanda Woo, chief commercial officer of AirAsia X Group, said bookings were rising and the company was exploring ways to increase frequencies to Central Asia and Istanbul, while also seeking partnerships with other airlines as travel demand patterns shift.

AirAsia X shares rose on Monday (April 6), but the stock is still down about 4% overall since the outbreak of the US-Iran war, leaving the company as the worst performer on Bloomberg’s airline index over that period.