Fuel shock — Thai aviation recovery faces cost test

Thailand’s aviation industry began 2026 with stronger passenger traffic, more flights and renewed demand from key Asian markets, but the recovery is now facing a fresh test from Middle East disruption, volatile jet fuel prices and rising operating costs.

The Civil Aviation Authority of Thailand (CAAT) reported 42.07 million air passengers in the first quarter of 2026, up 6.82% from the previous quarter. The total comprised 19.22 million domestic passengers and 22.86 million international passengers, supported by New Year travel, Lunar New Year demand and the recovery of Chinese and Indian tourists.

Flight movements also rose to 256,306, up 3.77% quarter on quarter, with 131,417 domestic flights and 124,889 international flights. CAAT said the increase was driven mainly by activity in January, before traffic began to soften from February to March as the Middle East conflict affected travel confidence and international operations.

Air cargo presented a more mixed picture. Total air freight stood at 416,309.77 tonnes in the first quarter, down 5.13% from the previous quarter. Domestic cargo accounted for 8,151.90 tonnes, while international cargo totalled 408,157.87 tonnes. CAAT noted that cargo volumes improved in March as exporters accelerated shipments amid uncertainty over the Middle East situation.

Asian demand keeps recovery alive

The strongest support for Thailand’s aviation market came from regional travel demand. Compared with the same period last year, passengers on Thailand-China routes rose by 497,000, or 14.12%, while Thailand-India routes increased by 213,000 passengers, or 14.76%.

Tourism figures moved in the same direction. CAAT, citing Tourism and Sports Ministry data, said Chinese arrivals reached 1.33 million in the first quarter, up 11.81% year on year, while Indian arrivals reached 620,000, up 15.05%.

Thai airlines also expanded their networks to capture rising demand. Thai Lion Air launched Don Mueang-Seoul flights, while Thai Vietjet opened new services from Suvarnabhumi to Tokyo Narita, Kolkata and Nha Trang, reflecting stronger international travel demand in Asian markets.

Government and industry support measures also helped stimulate travel. During the New Year period, the Transport Ministry and CAAT worked with airlines to add 66 special flights, or about 11,300 seats, on major routes from Bangkok to Krabi, Chiang Mai, Chiang Rai, Khon Kaen, Trang and Samui.

Thai airlines also joined fare-discount measures of 15-30% from ceiling fares on 11 routes from Bangkok to Chiang Mai, Chiang Rai, Khon Kaen, Samui, Phuket, Hat Yai, Krabi, Nakhon Si Thammarat, Surat Thani, Chumphon and Trang. The programme covered 191 flights and 29,685 seats.

Middle East disruption hits routes and capacity

The recovery, however, has become more fragile since late February. CAAT said the Middle East conflict, which escalated from February 28, had severely affected global aviation and Thailand’s aviation sector, particularly airlines operating routes linked to the Middle East and parts of Europe.

Several airlines had to adjust flight paths to avoid conflict-affected areas, increasing flight time and operating costs. Middle East-based carriers were especially affected, with cancellations on routes connected to the region reducing capacity to and from Thailand.

Between February 28 and March 31, CAAT recorded 1,944 cancelled flights on affected routes, equivalent to around 601,451 seats. Qatar Airways recorded the highest number of cancellations at 588 flights, or 30.25% of the total, followed by Etihad Airways with 468 flights, or 24.07%, and Air Arabia with 326 flights, or 16.77%.

Emirates had a larger seat impact than Air Arabia despite fewer cancelled flights because many of its services are operated with Airbus A380 aircraft, which carry more passengers.

Jet fuel becomes the biggest pressure point

Fuel has become the central risk for airlines. CAAT, citing International Air Transport Association (IATA) data, said Jet A-1 prices rose from US$99.40 per barrel on February 27 to US$209 per barrel on April 3. The sharpest weekly jump came in early March, when prices rose 58.4%.

CAAT said the conflict had involved attacks on energy infrastructure and oil production facilities, as well as the closure of the Strait of Hormuz, a key route for global oil transport. The report said the strait accounts for around 25-30% of global crude oil shipments, meaning disruption can quickly feed into crude and aviation fuel prices.

Fuel normally accounts for around 20-25% of airline expenses. CAAT warned that the sudden rise in Jet A-1 prices, combined with rerouting away from conflict zones, was increasing fuel costs and other operating expenses, creating pressure on both Thai and global airlines, especially those serving long-haul routes.

IATA has also warned that fuel supply, not only fuel price, is becoming a key risk. In April, IATA director general Willie Walsh said parts of Asia were already seeing fuel-related disruption, while Europe could see cancellations by the end of May if shortages worsened.

IATA’s March 2026 passenger data also showed how strongly the Middle East disruption weighed on global traffic. Total passenger demand rose 2.1% year on year, but international demand fell 0.6% as Middle Eastern carriers recorded a 60.8% drop in international traffic. Outside the Middle East, demand still grew 8%.

The cargo market showed a similar divide. IATA said global air cargo demand fell 4.8% in March from a year earlier, largely because of severe disruption at major Gulf hubs, while underlying trade demand remained resilient. Walsh said air cargo networks were still supporting supply chains, but fuel supply and prices would test the industry’s resilience in the months ahead.

Fare pressure likely to rise

CAAT said continued volatility in Jet A-1 prices could force airlines to adjust their operating plans, including reducing frequencies or suspending routes that are no longer commercially viable.

The report also warned that airline operating costs could rise by more than 30% as higher fuel prices combine with longer flight paths, war-risk insurance, increased fuel burn and longer crew working hours. Airlines may therefore consider raising fuel surcharges to absorb part of the burden.

Long-haul fares are likely to face the greatest pressure because fuel consumption rises with distance and rerouting has a larger cost impact on longer services. CAAT said routes between Asia and Europe are particularly exposed, as flights avoiding conflict zones need more fuel and incur additional operating expenses.

Even if the conflict eases, CAAT said fares may remain high for some time because damaged energy infrastructure and oil production facilities would take time to restore. A prolonged conflict could become a longer-term obstacle to tourism and aviation growth.

Some countries have already begun managing aviation fuel availability. CAAT said Italy had limited aviation fuel use at some airports, while the Philippines had restricted refuelling at major airports and asked airlines to carry enough fuel from their departure point for return flights. Vietnam had also suspended some domestic routes.

Thai airlines enter the shock from different positions

The fuel shock comes after several major Thai aviation players posted stronger first-quarter earnings. Thai Airways International, Bangkok Airways, Thai AirAsia and Airports of Thailand recorded combined profits of more than 18.7 billion baht in the quarter, although the impact varied by company.

Thai Airways posted a net profit of 10.107 billion baht, supported by cost management, fuel hedging and lower financial costs. The airline also benefited in some areas from passengers shifting towards non-stop flights as Middle East transit routes were disrupted.

Bangkok Airways reported a net profit of 2.099 billion baht, up 24.5%, helped by lower fuel consumption and reduced aircraft lease costs, although passenger numbers and ticket revenue declined.

Thai AirAsia saw net profit fall 39% to 840.6 million baht as higher operating costs, international route cuts and foreign-exchange losses weighed on earnings.

The Airlines Association of Thailand had earlier urged the government to cut the jet fuel excise tax from 4.726 baht per litre to 0.20 baht per litre, arguing that the measure would reduce airline operating costs, lower average domestic ticket prices by about 100 baht per flight and expand domestic seat capacity.

Recovery now faces a cost test

Thailand’s first-quarter aviation data show that passenger demand remains resilient, especially on Asian routes. The sector is still benefiting from tourism recovery, airline network expansion and holiday travel stimulus.

But the next phase of recovery may depend less on demand and more on cost control. If Jet A-1 prices stay above US$200 per barrel, or if fuel shortages spread across Asia and Europe, airlines may have to choose between absorbing higher costs, cutting capacity or passing more of the burden on to passengers.

For Thailand, the risk is that an aviation recovery built on returning passengers could be slowed by forces outside the country’s control: conflict-related airspace disruption, fuel volatility and the fragile economics of long-haul flying.

CAAT: Aviation Industry Overview