The Asia-Pacific aviation sector has demonstrated resilience over the past six months despite ongoing challenges stemming from the conflict between the United States and Israel and Iran, which began on February 28. Sustained demand during the summer travel season has helped carriers navigate a turbulent environment marked by persistently high fuel costs, though uncertainty about the duration of these elevated prices is prompting difficult operational decisions across the industry.

Fuel expenses have placed considerable pressure on airlines’ operating costs. According to Wong Hong, director general of the Kuala Lumpur-based Association of Asia Pacific Airlines (AAPA), fuel now accounts for approximately 38 percent of operating costs in the region, up from an average of around 30 percent. Although global jet fuel prices have fallen from a peak near $250 per barrel, they remain significantly above pre-conflict levels near $90 per barrel. Data from the International Air Transport Association shows prices at $158.91 per barrel for the week ending August 14, reflecting an 8.2 percent increase from the previous week.

This rise in fuel costs has compressed profit margins, which typically range between 7 and 8 percent during stable periods, to roughly 2 percent for some carriers. Preliminary figures released by AAPA on August 5 indicate that Asia-Pacific airlines carried 30.5 million international passengers in June, marking a slight 1.1 percent decrease compared to the same period last year. However, the region saw a 1.1 percent growth in revenue passenger kilometers, signaling ongoing strength in long-haul travel. The average international passenger load factor for June also increased by 0.7 percentage points to 82.6 percent. Overall, international passenger traffic in the first half of 2026 rose 3.2 percent year-on-year to 192.5 million.

Airlines have responded to cost pressures by adjusting flight schedules, raising airfares, and receiving government assistance to alleviate some financial burdens. Wong emphasized that the outlook remains uncertain, with potential volatility expected in the coming months. “The next three months will be challenging as demand could become more uncertain,” he said.

Experts caution that the high load factors currently observed are influenced by capacity reductions rather than increased demand. Mohd Harridon bin Mohamed Suffian, associate professor of finance and economy at Universiti Kuala Lumpur Business School, noted that airlines have cut flights and compressed seat offerings to reduce costs. While such measures reduce short-term expenses, they risk driving away customers and undermining long-term sustainability. “Airlines must balance cutting flight frequency with maintaining customer satisfaction,” he said.

Malaysia’s AirAsia, a major low-cost carrier in the region, reported a net loss of 527.16 million ringgit ($130.34 million) in the second quarter, primarily due to a 58 percent year-on-year increase in fuel costs. The airline has significantly reduced flights and suspended some underperforming long-haul routes but plans to restore capacity in the fourth quarter, coinciding with peak travel season.

Wong highlighted the importance of government support during this period, suggesting that temporary relief measures, such as deferred payments or reduced taxes and charges, could provide vital assistance. He also underscored aviation’s broader economic role, noting its impact on tourism, trade, and connectivity. Low-cost carriers, which generally do not hedge fuel prices, face greater financial risks compared to full-service airlines.