Thai budget airlines squeezed as jet fuel jumps 7.4% to US$194.90 a barrel

AirAsia and other budget airlines serving Thailand are facing renewed pressure on costs and cash flow after the global average jet fuel price rose 7.4% to US$194.90 a barrel in the week ending September 18, 2026. The increase is particularly difficult for carriers that sold tickets before fuel costs surged. The latest price was 116.5% above its level a year earlier, according to the International Air Transport Association (IATA). Europe and the Commonwealth of Independent States recorded the highest regional average, at US$207.56 a barrel.

Domestic fuel taxes add to budget airlines’ cost pressure

The Civil Aviation Authority of Thailand (CAAT) found in an August 10 assessment that fuel had risen from a normal 25–30% of airline operating costs to as much as 60% for low-cost carriers. Domestic services were particularly exposed because Thailand’s tax structure made their fuel more expensive than fuel used for international flights.

At the end of July, Jet A-1 fuel in Thailand averaged US$175.88 a barrel for domestic flights, compared with US$141.53 for international services, according to the CAAT assessment.

Higher fuel bills have squeezed margins, cash flow and airlines’ ability to sustain operations in the short term, the CAAT said. Carriers have tightened cost controls and suspended more routes as operating expenses have risen.

The CAAT’s August assessment cautioned that any easing of the Middle East conflict might be temporary. Although fuel prices had fallen from their earlier peak, they remained above IATA’s original forecast and sensitive to geopolitical developments, requiring airlines to monitor prices and revise operating plans.

The CAAT said it would continue tracking prices and their effects on aviation while supporting suitable measures to manage future volatility. Its assessment found that Thai passenger numbers and flights were hit particularly hard between March and June, before recovering in July, and could approach 2019 levels if fighting did not flare up again.

AirAsia cannot recover higher costs from tickets already sold

AirAsia co-founder Tony Fernandes, an adviser to AirAsia Group Berhad, said advance ticket sales had left the airline carrying fuel costs it could not pass on to existing customers. Tickets had been sold when fuel was about US$85 a barrel, before the outbreak of war on February 28 sent the price to about US$200.

Illustrating why AirAsia could not recover the difference, Fernandes said: “I can’t go back and ask you for more money. I can’t say, ‘Sorry, you paid 200 baht, but because of Donald Trump, you have to pay me another 200 baht.’”

Fernandes described AirAsia’s second quarter as its worst, with tickets priced on the basis of US$85-a-barrel fuel but costs being booked at almost US$190. The business was now recovering, he said.

“We have to pay cash for fuel, and we are now working to replenish our cash reserves,” Fernandes said. “We are still the airline with the lowest costs in the world, so we still have the lowest fares.”

AirAsia also faced additional costs associated with cargo operations and was restructuring its costs, Fernandes said. Fares for new bookings were being adjusted to reflect expensive fuel, with increases of 20–25% or more from previous levels.

Fernandes said the fuel crisis differed from the three to four years of disruption caused by Covid-19 because there was no reliable timetable for the war to end.

“I’m not a political scientist or a politician, but I can see how the situation might develop,” Fernandes said. “If it goes on much longer, it will be good for nobody, especially businesses. It looks likely to drag on, so this is a time when AirAsia must adapt seriously.”

Vietjet Thailand expects higher fares to persist

Vietjet Thailand chief executive Woranate Laprabang said airfares were 20–25% higher than before the Middle East war, but domestic flights were still achieving average load factors of 87–88% during the low season. The proportion of seats filled suggested that passengers were accepting, or becoming accustomed to, the higher prices, he said.

Woranate did not expect a fare war in the fourth quarter of 2026. Aircraft availability had yet to recover fully following production cuts during the pandemic, while expensive fuel continued to limit airlines’ room to compete on price.

“With fuel prices this high, the revenue-management option for airlines is to raise fares,” Woranate said. “There will be no price competition in the fourth quarter, as ticket prices need to reflect higher costs.”

Woranate expected Thailand to avoid the jet fuel shortages affecting Europe. However, reports of liquidity problems at some budget airlines suggested that the current conditions were becoming a test of how long carriers could hold out, with profitability likely to remain weak as fuel costs kept fares elevated.

Thai Airways hedges fuel and assesses gaps left by rivals

Thai Airways International chief executive Chai Eamsiri said the airline had hedged 40–50% of the fuel it expected to use during the remainder of 2026. The arrangements were helping it manage the impact of rising prices and other uncertainties.

 

“It is not that we are unconcerned, but this is something we have to manage,” Chai said. “Thai Airways has already hedged part of its fuel-price exposure for the rest of 2026 and will gradually continue managing that risk into 2027.”

Chai said cost pressures were prompting airlines to reduce flights or withdraw from certain routes. Thai Airways was adapting to the changing conditions and remained able to manage the effects, he said.

Thai Airways saw potential openings where low-cost competitors had suspended services, particularly in Asian markets with continuing travel demand. Chai said any expansion would depend on an assessment of each route’s exposure to risks and commercial viability.

Jet fuel rebound sends Europe further afield for supplies

Global jet fuel prices have risen again after retreating from their early-April peak. The CAAT’s August report put that peak at US$209 a barrel, against IATA’s pre-war forecast of an annual average of US$88 for 2026, and recorded an end-July average of US$158.77, up 16.26% from June as tensions intensified.

The subsequent global price readings are:

The IATA monitor showed the following regional averages for the week ending September 18. The percentages are regional weights in the global price index.

Europe faces jet fuel shortages heading into the fourth quarter after more than six months of war disrupted Middle Eastern supplies, Bangkok Biznews reported. The Middle East previously provided about half of Europe’s jet fuel imports.

European buyers have turned to Nigeria, the United States, Canada and South Korea to replace the lost supplies. South Korean jet fuel shipments to Europe have reached their highest level in almost four years.

Thailand exports surplus fuel as airlines face higher bills

Thailand increased crude imports in 2026 to strengthen energy security and prepare for potential disruption from the Middle East conflict, Customs Department director-general Phantong Loykulnanta told Bangkok Biznews. Refining that crude produces petrol, diesel and jet fuel, and output exceeding domestic needs or storage capacity has to be exported because storage carries a cost, he said.

Bangkok Biznews quoted Phantong as putting jet fuel export value for fiscal 2026 at 784.944 billion baht, compared with 359.213 billion baht in fiscal 2025. The reported increase was 425.731 billion baht, taking the total to more than twice the previous figure; the article did not specify the fiscal 2026 reporting cut-off.

The following figures show Thai jet fuel supply and use:

Asked whether Thailand should curb jet fuel exports to help domestic airlines reduce costs if geopolitical tensions worsened, the Customs Department said that was a policy question for the Department of Energy Business, which oversees the issue.

Source: Bangkokbiznews