2026.10.09 | GP | Airlines | APAC Airlines Under High Jet Fuel

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Viewpoint:

Industry Consultant

Moderator: Ankeet Shah (AS)

James Doyle (JD), CEO - Boston Warwick

SUMMARY

Overview

The discussion assessed how sustained jet fuel prices near $200–$225 per barrel could affect APAC airline profitability, capacity, fares, networks, and fleet deployment. The expert expects elevated prices through the first half of 2027, followed by possible easing, with roughly $159 per barrel becoming a longer-term baseline.

At $200–$225, industry profitability would largely disappear. Airlines would need to raise fares, reduce capacity, retire inefficient aircraft, protect premium routes, and potentially accept short-term losses. Full-service carriers appear better positioned than low- cost carriers because premium cabins, cargo, connecting traffic, and diversified networks provide greater pricing flexibility.

Key Insights

APAC carriers have little capacity to absorb further fuel inflation without operating at a loss. Airlines should preserve capacity discipline and restore seats only when demand supports profitable pricing. Full-service groups combining premium and low-cost operations have a structural advantage because they can allocate demand across brands and cabins. Low-cost carriers face the greatest risk because their customers are highly price sensitive and competitors may capture routes when capacity is withdrawn. Hub airlines should protect profitable trunk frequencies and Europe–Asia connectivity while cutting thin regional links and weak connecting flows. Domestic Japanese routes are especially vulnerable due to high-speed rail alternatives, aging demographics, and short-haul operating inefficiency. Governments and regulators were strongly criticized for maintaining taxes, slot requirements, and other rules that compound airline financial pressure. Maintenance should not be deferred. Cost reductions should instead emphasize efficient aircraft, engine durability improvements, scheduling, ground operations, baggage enforcement, and reduced product frills.

Competitive Landscape

10/11/2026 at 11:37 AM UTC

Positioning

Advantages

Pressures and likely actions

Diversified full-service group

Premium pricing, hub connectivity, and low-cost subsidiary

Protect premium inventory and shift capacity between brands

Large regional low-cost carrier

Strong utilization, rapid schedule changes, and cost discipline

Park older aircraft, increase fares, and risk losing market share

Japanese network carriers

Strong international premium operations

Thin domestic routes and potentially retire inefficient aircraft

Middle Eastern hub carriers

Flexible wide-body fleets and strong connecting networks

Can capture Europe–Asia traffic abandoned by APAC carriers

Domestic-heavy carriers

Strong local relevance

Greater exposure to alternative transport and limited fare elasticity

Quantitative Insights

Metric

Significance

Jet fuel near $195 per barrel

Broadly consistent with the expert’s expectations

$200–$225 per barrel

Stress range likely to eliminate most industry profit

$159 per barrel

Estimated sustainable longer-term level where profitability may be possible

78% fuel-cost increase

Reported by a major full-service carrier despite hedging gains

70% fuel-cost recovery

Reported by a regional low-cost carrier through pricing and cost actions

Approximately 20% fare increase

Used by the low-cost carrier to offset fuel pressure

10%–15% customer-base impact

Potential exposure if travelers reduce annual trip frequency

70% aircraft load

Example of a long-range narrow-body operating constraint

More than 500 versus roughly 300 seats

Illustrates potential down-gauging from a large wide-body to a more efficient aircraft

AS: Good morning, everybody. My name is Ankeet Shah. I'm a Senior Analyst and Moderator at Guidepoint Insights. Our call topic for today is on Airlines: What Could Break First for APAC Carriers at $200-$225 Jet Fuel? Over the next 60 minutes, we will try to understand the economics around the current jet fuel prices where we stress test them for the $200-$225 range. We'll have a conversation around what does that mean for network triage, how would capacity change, and how would hub strategy change for a lot of carriers in APAC. We'll also have a

10/11/2026 at 11:37 AM UTC

conversation around the fare pass-through, if at all that's possible. What does that mean for yield and the demand elasticity around some routes? And in the end, we'll touch base upon fleet deployment and the operational levers available for airlines today. In order to help us understand all of this, it's my pleasure to introduce to you Mr. James Doyle. He has over 2 decades of experience in the aviation space, currently runs his own consultancy firm called Boston Warwick, and is also a fellow at the Royal Aeronautical Society. So a lot of those experiences will help us today. Okay, but before we begin, I would like to pass it to James and see if he'd like to add specific details around this professional experience and then we can start.

JD: Ankeet, thank you so much. What a year. Thank you for the introduction. This is a very interesting time when it comes to jet fuel. Just on the experience, we've been publishing the situation, not just on the fuel pricing, but also on what's happening with refineries and also the availability of jet fuel at airports when that became tight earlier in the year. And as it has been a very interesting year, we're very focused now on this sustained approaching $200 a barrel for jet fuel, so we're in a good place to try and help you out and explain it today.

AS: So let's jump start directly into that topic. I noticed jet fuel touching almost $195 per barrel. Does that take you by surprise? Is the run through 195 too steep, too quick? JD: No, to be honest, this point in the year is where we thought it might be. You'll see that we recently published what I'm calling the $159 a barrel series. I think, you know, this $159 is the median that we'll settle at, but for the rest of this year, the price is going to remain high. Personally, you know, seeing it about $195 is not too much of a surprise, and I do think that we've got a little bit of a way to go up before it will come back down again. We've had some easing a little bit, so we seem to climb on the price and come back down a bit. But realistically, we are going to go into next year with this $200-$225 bracket. The underlying reason for that is that the obvious factors are, of course, the constraints that we've had with the disruption due to the war in the Strait of Hormuz, but also, that doesn't make up the whole price. You've seen and we've published quite a lot of research on this that there are other factors that affect that as well. So I don't see this really as too much of a surprise. And also, you know, when we look at fuel derivatives as well, if you look at like diesel and the situation that's happening in Europe with the Europeans having to release fuel and other countries now beginning to realize that they have to bring their refining capacity offline for planned maintenance, that pinch continues. But what this does show, under everything, is a continued sustained demand for oil derivative products which will carry on well into 2027. So at the moment, that's not a surprise. And really, I think, you know, to probably start and end the call here, this $159 a barrel number which I keep throwing around is where I think we'll end up. So, you know, gone are the days where it'll be lower than that; this is pretty much going to be the new world order.

AS: This around 200 or 225 range, how long do you see it dragging? How do airlines then plan? Is it just one quarter or two quarters? Can they do anything around this?

JD: So really, the wisest thing to do would be to look at the seasons and plan accordingly for that coming season, but then also to scale back in if you can. So if you are cutting flights, know that you can step back up. But in terms of how long this will last, I smile when I say this because who knows? Who knows? But I think we are moving into a more stable period. We simply have to, you know, everything that can happen probably has happened. I say that touching wood and really hope that I'm wrong. But, you know, we've had COVID, war, civil disputes, you name it, we've experienced it. So I think the outlook is certainly a hopeful one of a more stable 2027, but that still means that we have this strong demand as we go into the beginning of the year. And even as supply may begin to catch up, the underlying demand will still remain. So I think truthfully, it's going to last into the first half of the new year and then hopefully toward the second half we'll see some easing of that. But again, I think there's many different views and many different analysts. Some share that view with me, others have

10/11/2026 at 11:37 AM UTC

completely different views. And I think it's difficult to know who's who, who will put the hat on to what really. If we look at how the airlines can plan for this, it's a really tricky time for them. So the obvious thing is to continue with their major routes, you know, the hub routes. Plan to operate those. Of course, it's put as many fuel efficient aircraft on wherever you can, but really we've got to be looking at the seasons with the ability to actually adapt within those. So the season being typically April through September. So we've seen schedules come out for next year with some new routes as well. You know, we've seen British Airways will be returning to a second destination now in Australia. We've just seen Finnair as well announce a fifth freedom flight from Bangkok to Melbourne as well. So we've seen some interesting new routes appear, none more so than United Airlines, by the way, in the US who seem to be opening fantastic new routes everywhere. But there's also this plan. Even though there's a plan for next year, these have to be high yield routes. If they don't work out, then they're either going to have to drop the aircraft to something more fuel efficient or cancel the route altogether. What I do think we're seeing from the airlines already, where they're able to do so is trimming schedules. European regulations certainly don't help with that. You've probably heard me talk about this before, but the use it or lose it slot management continues to create a lot of friction for airlines that are trying to operate profitably. But then there are some other clever levers that the other airlines can pull. For example, dropping the size of the aircraft so if you look at Emirates is a great example where you know routes that they would previously had a monster 500-plus seat A380 on, they can switch that for a smaller, very fuel efficient A350. So now they've, you know, with 300 odd seats on it. So the load factors for them can still stay relatively high. They can still attract a good price because they limit the capacity and manage to control their cost and available seat kilometers accordingly. There's a whole bunch of levers that the airlines can pull. But right now, really, to give you the simple answer, how can airlines plan for this? I think with lots of science and lots of analytics and lots of deep data searching, but ultimately they've got to be prepared to make some tough decisions very, very quickly.

AS: Assuming a $200 per barrel range, where do you see the break-even thresholds moving for a full-service carrier versus a LCC, especially in the APAC region? Which business models have enough RASK, load factor, or non-fuel CASK flexibility to preserve contribution?

JD: If we can give two examples here, if we look at the LCC, let's look at AirAsia. And if we look at the FSC, let's look at Singapore Airlines, who've also got the LCC buckled in. For the FSC - full-service carriers - there's actually a bit more that they can play with because there's other types of revenue that they get. So the good thing for a full-service carrier ultimately is that there is price elasticity on premium products so as we see the economy cabins thin out we still see healthy payloads coming into the premium cabins and when we talk about price elasticity of course that means you can charge more. And again with those bigger network carriers as well there is that opportunity to continue operating out of region, long-haul flying or the major hubs within the region. But if we look at the low-cost carrier model, really the only thing they can do is stand down aircraft and hope their competition also stand down aircraft because if they don't, when we look at AirAsia, there's a good example, you know, cut back on that capacity, park the aircraft off, especially the older ones, the fuel inefficient ones, or the ones that are due maintenance pretty soon to try and push as much cost back as you can. But potentially, if your competition don't do that you're handing them the market. So in terms of cost management, it's actually easier and in my view right now to be a full-service carrier than it would be to be a low-cost carrier. But the reason why I pick on Singapore is probably the, you know, best example here is that they also have the LCC in the group with Scoot and that means that they can actually, where there's still super high density and that demand for economy passenger travel, they can still put those Scoot routes on it and then still transfer through to their premium network as well. But can they recover the cost and what's the break-even point? Ultimately, the customer is going to decide that because the airlines at a cost, they will do everything they can, they'll fight tooth and nail to keep their costs low, they'll hedge as much as they can. You know, we aren't going to approach D-Day, a big reckoning here on hedging because of course all those hedges that we all saw signed at the beginning of the year are dropping away now and that means that the playing field is beginning to level for those carriers that are unhedged.

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So to try and get a hedge going into the new year, it's obviously going to be a lot more expensive. So the airlines have really only two choices: they either pass on that additional cost by lifting ticket prices and cargo prices accordingly or decide if they're going to lose money and how much are they prepared to lose and for how long. So the break-even point. I think sitting at $2-$225 a barrel, there'll be very little money made in the industry. I can't see much at all. And there's certainly that's a price point that most passengers won't take. It would pretty much decimate the industry.

There has to be an absolute break-even point, probably a little bit under that, where airlines already know that there's going to be losses incoming. I mean, but those losses will be short term. It is cyclical. I think personally, we're going to see with where the pricing pressure goes, you could probably make profit at 159 a barrel. But we've got to take a little bit of time to train the customer to get there.

AS: For Singapore Airlines, they saw net fuel cost rise by close to 78% in FY27, and this is despite hedging gains. So let's say at $200 a barrel, what levers can still protect group economics? To your earlier point, does the premium network plus the whole Scoot portfolio offer them an edge versus other peers?

JD: So what can we do to protect? The first thing we saw was an increase in ticket pricing and yield. A lot of the tickets that were already sold at the beginning of the crisis, let's not forget that they were already sold at a fixed price for fuel already at a fixed price. So the aircraft really just had to operate. So it's really now the fresh tickets and the fresh fuel that we're having to think about. Before the first missile was thrown back in the beginning of the year, we already had an industry that was desperately unable to actually meet the capacity demands, moving into those high yield brackets. So the airlines can still move into those higher yield routes and space. You know, there is still demand for capacity to increase, we see that coming. I think it's obviously it's a bit softer now and it will get softer as the pricing increases. But the other things they can do, there's only so much an airline can do, by the way. So we've seen the obvious things, which is, first of all, fly the more fuel-efficient aircraft, take the older fleet out. We are in this unusual piece at the moment where we're holding aircraft for longer on fleets because new aircraft haven't been delivered. But we are seeing an uptick now, you know, Airbus are beginning to deliver more; they've had a record month or a very good month. So, that there is something the airlines can do there about fleet optimization. The one thing I don't think they should be doing, and we're not really seeing much of this, would be deferring maintenance. So, for the MROs, it's very unlikely, in my view, to see a slowdown in activity. It's just the blend of work would change; they're going to focus very much more on fuel efficiency. You know, get those engines, particularly things like the GTFs working, Trent 1000 durability kits, get those back up and flying. But if they've got an aircraft that they can park off that's fuel inefficient and then just leave it left somewhere, then they'll do that. You know, we've had this with Etihad and Qantas did this with the A380 for years and only brought them back when the demand really was there. But the airlines need more support from that; I think governments are really the only thing that can step in to really begin to help the airlines here. Very disappointingly, the world over, these are still seen as cash cows and still have a lot of pressure placed upon them, particularly on developing new technologies around SAF. But I would quite viciously be looking at APAC, but the rules that are made in Europe certainly don't help the connectivity from APAC into Europe, which is essential, you know. So, there can be some very simple things that would help, such as relief on air passenger duty, some easing on the use-it-or-lose-it rules on slots. You know, at the moment, the governments, and particularly in Europe, are very, very hard on sticking with those rules and saying this isn't an operational thing, it's a commercial thing, as the airlines, have to go and figure it out. And ultimately, in doing that, they could be killing airlines and certainly harming them as well. So, I think there's only so much the airlines can do, and everything they can do, they're already thinking about it and doing it. AirAsia, Tony and his team are doing a great job down there, all things considered. But I think after that, we do get to this point where it costs what it costs. And if people want to fly, you know, an airline is entitled to cover its costs and make a little bit of money. It's a huge capital outlay. So, realistically, if these are global infrastructure, we are going to need some more coordinated support if these fuel prices don't come down.

10/11/2026 at 11:37 AM UTC

AS: On the AirAsia bit, I was also reading that they recovered roughly 70% of their second quarter fuel increase while cutting capacity and non-fuel CASK. So how repeatable is that playbook, especially across the APAC market? Where does further cost control then start damaging reliability, product, or growth?

JD: Absolutely. So again, I think Tony and the team there have done a great job. I don't want to say it's completely replicable elsewhere, but certainly it's a playbook that can inspire. Everyone's got a slightly different operating model. But if you look at their fleet, it's a good hodgepodge of fleet, narrow and wide body. And they've been very efficient in how they've actually placed certain aircraft on key routes. They've been very quick to take aircraft out. There's about 20% increase on the ticket price, which is disappointing for the customers, again, very price sensitive market as well, having to pay more, but ultimately that's what the airlines had to do. And it's provided that essential, if you look at them, it is essential intra-Asia connectivity. And they work their aircraft hard. I should point that out. They really force some of their machines to fly and they sweat those assets. So that's really good operational discipline for a relatively well-performing low-cost carrier. Replicable elsewhere to a degree, you look at some of the others around the region, I'm thinking about Lion out of Indonesia, similar situation, but really to make it replicable and work, you've got to be coming out of the domestic market. So it's not so replicable for the intra-Australia, intra-Indonesia, intra-Japan, that would be difficult mainly because you just don't have that price elasticity. People can defer, they've got alternative modes of transport, they can take bus, rail, etc. So, albeit taking much longer, if it's truly price sensitive, people will do it. So it's really only replicable where you're covering a much broader distance between countries. To a degree, Australia, yet coast to coast, you're still going to have to fly or else it's a week of driving. But I think for AirAsia X, yes, it's just an example of very good schedule maintenance and cost discipline across the board. There's lessons there that could come into European carriers, but again, we're already seeing in Europe some pretty worrying signs of what this is doing to Sun Airlines. We've already got one in Chapter 11 and we have severe questions over another two, and one of those, actually fly North, is directly affected from the cancellation of flights out of India. So if we come back to these lessons that we see in Asia, AirAsia X, yes, good, good discipline should be inspiring, replicable for some, but not everyone.

AS: Moving to the other part of the region, which is Japan, both Japan Airlines and ANA have used almost everything, like you were also hinting. If the fuel stays or touches 200 to 10, which combination would matter most going forward, and how quickly would weaker balance sheets or thinner domestic economics become a strategic constraint, which could be the case for Japan?

JD: They've done what they can. Domestic flying, I think, we really have to split them out into two: the domestic market versus their international. International, even with a weaker balance sheet, there's, I hate saying this word, but survive. So there's scope to survive. On the domestic markets, Japan operates very high-density aircraft on short routes. And what we have in Japan as well, demographically, is a very old population that's aging, and we have phenomenally good and high-speed ground infrastructure as well, so there are alternatives.

Yes, so I think if we were to separate them out on the domestic operation, there needs to be a thinning of the routes. It's as simple as that. And we add to that as well, but obviously there's a whole bunch of issues for them as well which are mainly around the cost of living and etc., and what's happening with the yen there as well. On their international, though, the thinning of the balance sheet would be painful, yet they would survive. First of all, they've got very good international crews. So JAL and ANA employ from all over the world, and pretty much to go anywhere is a long-haul flight. So, you know, they're dotting around Australia and Asia, but also they're relatively close to the US, for example; long, long way from Europe, it's a 14-hour flight. But that balance sheet is, you know, these are premium tickets still, so it would be a thinning and it would be a hit on the margin, but I think that side of the business can survive. But their domestic operation, if things don't ease, then I think, you know, they've got to be very, very realistic and start parking those aircraft off. In fact, actually, knowing their fleet, that might be the time to start considering not just parking them

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off temporarily, but maybe beginning to dismantle and do something with the spares on those aircraft.

AS: How much of the incremental fuel bill can APAC carriers realistically absorb before margin protection requires structural action?

JD: From this point, none. I think if they continue to absorb it, they're not really absorbing it, they're actually accepting that they're operating at a loss. I think for Asian carriers as well, all across the world, if we look at low-cost carriers, if we look at the economy tickets, it is the most price-sensitive section of the flight, you know, and this is typically made up of leisure travelers or those that are visiting friends and relatives. Less so the business traveler, although we are seeing a lot of bigger firms change their travel policy now. I mean, Amazon famously won't allow their people to fly in anything other than economy, so it's very small on the business, but it is higher on the leisure and the visiting friends and relatives, which is really the discretionary spend. Given the most travelers fly in economy, the region is a lot more price sensitive than others. So therefore, you know, the airlines really are facing that decision: can we absorb this or can we pass it on? And I think it's been a bit of both. Definitely in AirAsia's case, if you look at it, you know, they've absorbed everything they possibly can and they've tried to find ways to be as efficient as they can while still having to raise ticket prices. So they've done both, you know, and I think this is going to be the situation if we move into the new year. Is there still some opportunity to be efficient? I believe actually there are some airlines there that have to do that and not do the silly thing, which is defer essential parts of their service, maybe cut back on product, maybe begin to be a bit more efficient on how they run their ground operations. I think actually in some cases, scheduling and some of this, there are some frills around the edge on product which they're going to have to look at going into next year. And particularly when it comes to things like weight over pack and over bags and that, you know, there are areas there that they need to go into. So there's still a little bit of a way that they can go in terms of cutting costs. But this is really going to be now more on things that passengers notice rather than good operational discipline. But passing the cost on, they don't really have a choice. It's either they're prepared to ride a loss or it's how much of a loss, are they all prepared to sit there and go, "Okay, in 2027, we know we're going to have a loss, but we're banking on, you know, good bookings in '27 into '28," and we'll get the numbers back. And we've seen many airlines do that before in the past, and we've also seen many airlines go to the wall and disappear because of that strategy. That's the choice they've got. Pass it on and hope the passengers pay for it, which we know in many cases they're going to lose passengers, so they're going to have to be very clear about where they're going to cut flights and really begin to manage that CASK and that RASK. And I don't think that this is not a possibility. I would imagine some of the smaller ones may well go the way of Spirit in the US, and that may be we throw in the towel before it gets too bad. I mean, certainly the investors are not going to want to keep throwing cash at them. They may well be, you know, we're going to step back and go, which would be, by the way, good news for those carriers that remain, because if you're trimming capacity in the market, then it has to go somewhere else. But I think that's really, as we look at '27, can we increase the ticket price? They've got to, but do we see a potential and quite significant slowdown in demand in Asia? From economy travelers, yes, I think we will see that if the prices continue to go up. If the prices hold and the airlines choose to take a loss, they'll keep demand. But I don't think there's a situation where the prices could be as they are now with fuel moving the way that it's moving, the concept of making profit is going to be acceptable.

AS: Moving our conversation toward network and the whole hub strategy, assuming fuel at $225 per barrel, how would a response for hub carriers like Singapore, Hong Kong, or Tokyo be different compared to domestic-heavy airlines like Australia, India, and Indonesia, given the connecting traffic, airport cost, and pricing power differ drastically?

JD: Yes, sure. I actually quite like this question. So if you look at the hub carriers, which are based out of in the region, Singapore, Hong Kong, Tokyo, Seoul, etc., they can easily defend their position with the connectivity and the slots that

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they have available than the domestic heavy carriers. So if you actually look at Australia, Indonesia, and India to a degree as well because they have this connecting traffic and stronger pricing power. Actually, I'll leave India out because I think we've got some interesting things happening there, particularly with IndiGo and Willie Walsh. But the way that they can protect themselves and triage this is really number 1; they can firstly cut as quickly as they can so they can cut out the thin regional links and the lower yield connecting flows that don't support the core network right? So a lot of these are typically seen as public service obligation. And that's really a copy of what we saw in Europe this year. Lufthansa cutting 20,000 flights, which sounds like a horrible number, but actually it was a relatively small number of aircraft and two of their big hubs and all it was, they were really cutting the lunchtime flight which flew 30% full, and so you had the morning and the evening flight flying nearly full. So there is that, cut those that don't support the core network and then protect the frequencies is the second thing they can do on the trunk routes that feed the hubs. So this is that nice wide body traffic that comes in. I mean, the other thing they can do within the hubs as well is I'm going to call it the AirAsia style deep cut, and then restore it into peak. But that only works if the fuel falls and the competitors also cut capacity. If they don't, then you've handed the market over. But if we look at the hardest routes for those networks, it is the short haul with poor fuel efficiency and those thin regional links and potentially some of the ultra long haul routes, which are okay if they're full of premium traffic, but if they're full of connecting leisure and economy traffic, then probably not so much. But the one thing that the hubs will have to do and should be prioritizing is they've really got to defend that European to Asia connectivity where the carrier has a real advantage. So this is a problem that the airports, the regulators and the airlines need to work on together. They've got some really good advantages on the timing of slots here in Asia, and where you put actually a fairly good feed of passengers with a relatively good product there, then that will carry them through. But withdrawing that basically means that route will no longer provide the cash, which is a real problem, and will almost certainly be picked up by another hub carrier, probably one of the Middle Eastern carriers will come and get it. And so that's the things that we don't want to see them do. So I think overall, it's a cut quickly, protect the frequencies on the premium traffic coming in, be mindful of the ultra-long haul and do not step away from an essential service, because if you do, you guarantee Qatar, Emirates, Turkish, Etihad or someone will come in and take that off one of the local carriers.

AS: To your point around airports, regulators, and airlines working together, easier said than done, right? Because if it was that simple, at least in Asia, we would have already seen some of that happening, which I don't. So what's the roadblock? Why are they not working together to resolve such a situation?

JD: Absolutely. And do you know what? I don't mind saying this because the wonderful thing about aviation, Ankeet, and for all the listeners as well, is that we are pretty much apolitical. We don't really get involved in which party's in power or some of the reasons that are there. But what we can say, and I say it with some vehemence, is that for the most part, and again, I'll pick on Europe, but I think it's not great around the world. The regulators seem to be grossly disconnected from the reality that the airports and the airlines, ground handlers and all the supporting infrastructure work in.

What I think we're seeing, which is to the point of why are they not working together? I think honestly it's because these are good revenue generators for certain departments in government and actually it's become very commercial with them because really the airlines can't and the airports can't do anything about it. You know, they can lobby, they can push, they can complain, but ultimately if they fly, they still have to pay. It's as simple as that. And there's fees for registering aircraft and screening crew and landing fees and overflight permits and so on. So particularly within region, and probably would be safer for me to say this about Europe than it is, but it's the same principle. ReFuelEU and the use it or lose it slot rules, EU 261, are basically designed to stop airlines from doing bad things when times are good. And we understand that. But financially, times are bad and we're going to lose the airlines. Why would government still force them to do that if it's not about increasing or maintaining the tax revenue? It's as simple as that. And in doing so, they may maintain a thin bit of revenue for a period of time, but actually add - and it's that

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phrase, it's another straw on the camel's back and eventually one straw too many breaks the back - and that's exactly what they're doing. So I would love to sort of say why, and I think it's ultimately it's tax revenue, but really the collaboration I'm seeing is more within the airports and the airlines. And to be fair, some of the people who are in the civil aviation authorities really advocate and push for this. I think across the region, the CAAs are doing the best that they can, but I think the governments are disconnected. I'm sorry if that's a hot topic, but that's the reality we're facing.

AS: I was reading about AirAsia that they plan to trim capacity before restoring seats into peak demand. If fuel costs keep increasing, should carriers typically add back capacity or hold discipline to preserve yields even at the cost of passenger and market share growth?

JD: Great question. Should they hold capacity back? Yes, they should, unless they're guaranteed the right price for the seats that they can sell. It's as simple as that. So only put the capacity back on if you know that the ticket price can support it. The question really becomes about timing. When do you do that? Because if you've pulled out and you've got the airplane sitting there and you can see the demand growing. If you put an aircraft back in, you suddenly increase the supply. So, of course, if the supply matches demand, prices will stay. What you've got to be doing is really only put the capacity back in where you know the demand is outstripping the supply to really give you the right seat price. So with AirAsia, I think, look, they've got to be clever on this, because if the fuel price keeps going up then the chances are very likely that they're going to have to hold the aircraft off and not add the capacity back in. What would be worse is if the passengers find another way to fly on those key routes. So that's the question, do they mind someone else eating that market share? And it may well be someone else has come along and offered it at that price and is going to make a loss, and then they step back in when that carrier goes. So I would say it's not wise to put it back in if you're not going to at least break even or you have a very good business case for protecting the margin. But if you think about it like this, well over a decade ago, flying out of Europe, we had some business class only airlines. These were like Silverjet, MAXjet, I think it was one called Eos Airlines. And these were trying to do the premium routes to Kennedy and Vegas and LA from second airfields in the UK. And they went bankrupt pretty quickly and everyone thought that they were just going to eat into the legacy carriers like business traffic. And it turned out they were running at a loss; it was really expensive, they didn't survive. So of course when they went, there's this vacuum in the market, there's this demand because people still need to fly and now there's not enough seats. So of course there was a little bit of a flurry where, well we'll match their price for your first flight and then you're paying the normal price thereafter and that's happened many times in the past and we're going to see that again if AirAsia has. Basically, it decides to withdraw and it holds and it doesn't want to go back and pick up that market. Those flights may operate with another carrier. That carrier may charge lower than the air or they might even be charging the price they were going to charge, but knowing that they're going to make a loss. AirAsia potentially has lost the market or waits for that airline to collapse, or it can't operate the route, so it withdraws from the route altogether and then steps back in. Now, I don't want any airline to collapse, but there is this big game of cat and mouse and I wouldn't bet against AirAsia because they've got more aircraft, and it's an exceptionally well-run airline, even if it's a bit mix and match when you look at the fleet and the approach. Actually, it's adaptive. So I think, to answer the question clearly, yes, hold. Don't just throw capacity back in, but when you do, be very, very careful. You're either doing it to keep the market or retain the market if someone else has devalued it.

AS: With us entering the fourth quarter of the calendar year, which generally is a busy flying season, should that help airlines where they may not have to think about holding back capacity because demand will naturally flow in?

JD: I think it's going to be a really tricky winter. So, yes, it is typically busy. I would be surprised if we see some very late bookings and some real demand come in unexpectedly later in the day. I mean, particularly as we're going through the fourth quarter, obviously we've got the heavy volume that transits between Europe and Asia as people return for the Christmas season. And we're only a few weeks away from that actually happening now. So yes, I think

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there might be some spikes in demand on key routes and I wouldn't be surprised if there's some extra flights laid on to support that. I think for Asia, we look in this fourth quarter. It will be, and I think it could be the Middle Eastern carriers' opportunity to plug that gap because again, they've placed a lot of smaller aircraft on some routes to control capacity and they've got the benefit of being able to switch those up to much bigger aircraft if demand increases. So they're not going to have to go off and apply for a new route; they can just upgrade the aircraft on that route temporarily. So I think this fourth quarter will be an interesting one in Asia. I think a lot of the bookings are going to come much later in the day. I think we may see a couple of carriers lose their cool. They may lose their nerve and suddenly discount. I would be surprised if we see a bit of that. I personally, as you can tell by losing the cool, I think ultimately it's not a good thing to go off and offer something at a loss. The cost should be the cost. You know, they've got a lot of other variables as well, such as service disruption that they have to account for. But this fourth quarter, I think, is going to be tricky. But what I'm fairly convinced of is that they will all do as much as they possibly can to get as many passengers in the seats because come January, I would imagine that we're going to be looking at a very quiet January with some pretty high fuel pricing. So that's going to be the point where the airlines are going to really want to think about: Are we obligated to fly, or should we actually really trim the schedule in January and maybe a bit of February and then bring it back at some point between Chinese New Year and that first kind of school half-term? Should we do something around about then? I think that's probably what they're going to be thinking about: fourth quarter, fill the planes as much as we can, hopefully don't discount too much, but I could see it happening for some. Get as much cash in through the door and then go into 2027 knowing the first month and a half we're going to have to trim the fat.

AS: How should network planners weigh frequency against gauge when fuel is above 200, especially on APAC routes where fewer larger aircraft lower the unit fuel cost, but may weaken schedule utility, feed quality, and the whole revenue premium of frequency?

JD: Yes, I think for the network planners, the key thing is going to be to actually, I mean, the obvious thing is to drop out the fuel-inefficient aircraft, but I think it might be the time to actually get brave with the longer-range narrowbodies or even begin to think about adding in some tech stops along the way. So, while not in the middle of APAC, if we look at the decision from India, they're taking an A321 for 11 hours to Amsterdam and they're basically terminating the agreement with flydubai which operates the 787 on the route. Now, the thing with that aircraft, they're going to have to fly that only 70% full to make the journey. So, even though we've got these super long-range narrowbodies now, we still have to trim that back. For the network planners, there are narrowbodies in all of the fleets there that have some pretty good range, and maybe that's one of the things that they have to start doing is thinking, "Right, do we actually drop some of these wide-body routes and put the narrowbodies on? Do we maybe connect some of the other routes as well?" But I think for the network carriers, it is very much about what is feeding us, and does that need to be a wide-body to feed it in? Now, there are some obvious exceptions to that. Like, when we talk about ETOPS, you know, you can't fly too long over water with some narrowbodies that are not rated, so they have to make sure they're doing that. But I think this is the moment to sort of say to all network planners, and they'll already be thinking about this, and I would hope anyway, you know, if you've got an A321XLR in your fleet, or if you've got some 737 MAXs with the longer range with the really good fuel burn and those engines, you might be trying to preserve them because of the maintenance issues. But it is okay to fly them on longer routes. And remember that there is this one thing that's happening with some of those more fuel-efficient narrowbodies, and it's about cycles. So, the GTF engines in particular, if you keep taking them off and landing them, that puts more wear and tear on the engine. But if you fly a lower number of cycles in a day, which means you're flying longer routes, that's actually less stress on the engine. So, maybe this is the time to start matching off those premium, or, you know, when you can, you might not have the product on board, but you certainly might be able to get some better revenue relative to your CASK and fly a trunk route of sorts with a longer-range narrowbody. This is the moment to be brave. Apart from that, though, the other thing I think they do need to do is - and again, I still advocate for this - don't defer

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on maintenance. Prioritize the durability kits and remedial work on GTF Trent 1000 engines and use anything that's fuel efficient. That's the way forward. Only put your fuel inefficient aircraft up if you absolutely have to.

AS: I'll come around to fleet deployment in a bit. But before that, I also want to touch upon the whole yield and revenue management. How should APAC carriers now change revenue management at this fuel level? Should they typically raise fare ladders, protect premium inventory, reduce low fare buckets, or use surcharges, which we are seeing in India actually today? What's the best approach according to you?

JD: I think the surcharge mechanism is the best one. So realistically pass through across the board doesn't really work. So we need to be starting to look at surcharging. The surcharge design does matter because making this slower does create booking volatility and it can create some revenue leakage and missed opportunity, right? So but if you're faster in terms of how you design those surcharges so it's more relevant you can protect the economics, but you can risk that that customer may fly with you, but you may sort of damage a little bit of their loyalty. So realistically, I'm a fan for the surcharge design, but the reason why I'm a fan for the surcharge design is because while we're not there yet and I certainly don't think this can happen right now, it will take a little while, but we do see the tools out there to get more hyper-personal on the pricing. And by that, what I mean is I think we've seen now apparently restaurants are going to start charging a bit like Uber surge pricing with AI and I'm not for that. What we do like is real AI revenue management that looks at the passenger, looks at their profile. I was meant to fly to Houston this week and obviously haven't gone. But it would be very good to have been with the AI to look at me and go, "Well, look, James wants to fly on Wednesday, but hey, if you flew on Thursday, we could do you an upgrade for X hundred dollars." That'd be great. I might go a day later because I know I can get a business upgrade or first class upgrade for a few hundred dollars more. So, the surcharge is kind of the step toward that at the moment. But away from that, the practical revenue management movements that we've got available right now is, yes, there is something about raising fare ladders, and I think we've got to be clear on that. Definitely protect the premium inventory, and that means keep the number of seats that you've got available, but when we protect it, also be very, very clever and detailed and focused on the price elasticity there, right? Get as much as you can, but at the same time as well, don't alienate your customer. Definitely reduce the deep discount buckets. That's got to go. So, I think the fly cheap thing has to pretty much disappear for now, and that's got to go. And it could be, to be honest with you, an honest campaign, like, "Hey, we'd love to offer a great big discount, but at the minute, our fuel cost is nearly double what it was at the beginning of the year. So, sorry, that's out of our control." I think there is a thing about repricing the connections very carefully. So you do get this trunk and this feeder traffic, but there is a cost attached to that onward connectivity. And actually with the maintenance costs as well, that's a bit of an issue. But where you're able to, I'm always going to come back in, use the surcharges where a competitive set allows. And that really means, right now, I don't think it's fair to trick a passenger. I have never agreed with that, and I don't like it. But I do think it's fair to sort of say, "Look, that grace that we have when you're normally 2 kilograms over on your bag? We might, okay, it's fine." They've got to start charging for that because I think as much as people want to hate on Ryanair in Europe, what they've actually managed to do is train their passengers and their people to be very, very clear on there is no grace. At the end of the day, there is no grace. It's cheap for a reason. So if you want it cheap, get it cheap. If you're showing up with more than you told us, if you're showing up late, all these things, we've got to charge you because the airline has to pay that, and there's so many other things the airline has to pay for that are not within the passenger's control or even the airline's control. So yes, I think, really, what I'm saying is surcharging isn't bad because the customer is not always right, but the customer is the customer. The customer still has an obligation here, and that means show up with the right bags at the right time in the right condition for the price that you get. Anything that changes, right now, the airlines have got to be like, "Sorry, got to charge you for it." AS: In your view, where is the fair pass-through most likely to fail at $200? Is it around price-sensitive domestic markets? Would it be leisure-heavy international routes or competitive long-haul corridors?

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JD: Long-haul corridors, I think, will remain. I think the leisure routes to some degree are protected, probably more so than the others, even across all cabins, mainly because people want to get their vacation. It's as simple as that, you know. And really, if you're not doing the staycation, so if you're not staying at home for a couple of weeks, you want to travel, you're going to travel, right? The flight is the flight, and you may not stay in the Four Seasons. You're now actually going to stay in a tent on the beach, but you know what? You're definitely going to have that vacation. So I think leisure travel is relatively safe. I think the real exposure comes from the visiting friends and relatives in economy cabins, and that's the real exposure in Asia because, ultimately, some of that is considered to be essential travel. But really what I have seen in Asia, and we've sort of seen this, you know, we actually saw this when the war began, there's this push to fly, but then the frequency drops. So if it's expensive, rather than go and see your relative twice a year, you'll go once but stay a little bit longer. So that's where I think we'll probably see it. So we'll still see the airline won't lose the passenger. They'll just lose them flying 2 or 3 times in a year. They'll maybe fly once. So I think that's the real exposure. And that's actually pretty heavy when you think about it, because ultimately, if you even have just a small percentage of your passengers now fly one round trip flight less per year, you know, that could be up to 10%-15% of your client base. So you're pushing your price up 20% and potentially losing 15% just from those guys before other people that, you know, the ad hoc bookers don't want to come along and use you as well. It's a really tricky thing to do. But I think it's, yes, I think that's the real exposure is again, which is why I say like the low-cost carriers are the ones that are at risk. And if we look at Singapore Airlines they've got Scoot. The Scoot business would be fine, but the Scoot business will just be trimmed to wherever they can jam pack for the flight with moderate revenue and connect through Singapore. That's the whole thing. But Singapore Airlines themselves, I mean, I can see them pretty much like some of the flights I've seen recently, you know, I've done some long hauls and it's been pretty much all bar 1 flight, it's been the same thing all year. The premium cabins have been full to the brim, maybe one or two seats empty, but then when we go to an economy cabin of 150 seats, there's 60 or 70 seats empty. So, you know, we see that in Europe. I think we can really see that being a big problem in Asia.

AS: From a fleet management perspective, how should airlines decide whether to up-gauge, down-gauge, or switch aircraft families by route, especially when fuel starts exceeding 200, where typically gauge improves seat economics but also risks lower load factor?

JD: No, absolutely. I think, so you've got two very good aircraft that we can talk about that work here. So you've got some airlines receiving 787s and A350s. You know, if we look at Air India, IndiGo have got their first A350s on the way. So you know, that's a great aircraft to send somewhere, and the same with the 787, particularly the Dash 9 as well. When you upgrade, you've really got this next gen of aircraft which are pretty fuel efficient. Compare that to something like an A330-300, you know, which we've got some of those dotted around Asia doing their thing at the moment. Not as fuel efficient. It's still not a bad aircraft, but it's not as fuel efficient. So when they're upgrading those routes, it's really got to be, first of all, about fuel efficiency. But I think there's two other factors to consider there. Number 1 being the range of the flight. So if you're upgrading, go for something that has a better fuel burn over a longer distance. You know, so it's not a great idea to use an A350 or 787 on short-haul hops. You know, we see airlines doing that with like 1-2 hours with the

1. You see this in Japan as well with some wide bodies that are just, you know, making a 45-minute hop. That's hard

on the engines, hard on the landing gear. You know, that's expensive, so you're going to keep wearing out those components. So put it on a cheap airframe that's old and just accept that you're going to be paying a lot of money for engines and landing gear. So really, you know, when you do upgrade, it has to be one of the newer aircraft, is definitely what I would say. But again, the second thing after that newer aircraft is make sure that the front of the plane is full. If it's not carrying premium traffic, then question whether you even need that upgrading at all, because if it's just pure economy, then I never want to sound like I'm being mean here, but we have to look at economics. If the back of the plane is full and the front of the plane is empty, then don't upgrade it. Keep a narrow body on it, maybe put a tech stop in along the

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way as well, because you've got to keep those seats scarce to keep the price high. Again, I sound like the bad guy here, but ultimately, this is business. Because the moment you put more seats on, let's just say you've got, you know, all that premium cabin, premium economy, business, first up front, and if that's empty but the back of the plane is full of people in the economy, then realistically, you've probably taken 150 people that you could have put onto a smaller aircraft, an A321 or a 737. You may not have been able to fly it as far non-stop, but you could have landed it along the way and probably use a similar crew as well. So yes, I would be looking, and I think this is an unusual period in time as well where those decisions have to be made now. You look at a carrier like Emirates, they've only got two aircraft, or it's three now, and they're all wide-body. So to do a 25-minute cruise to Muscat, they've got no choice. You know, it's a 777 or an A380, it's a wide-body. Whereas, that's really what they've been stuck with.

Now we have to apply some of that thinking, I think, to some of these routes in Asia. So if you've got, I wouldn't say a thin route, but a route that is an essential route and passengers will pay, then you've got to keep the seat count on that tight to keep the load factor high to keep the ticket price at a point that you can make profit. But ultimately, this is. It sounds awful because, of course, the public would complain that the airlines, it's almost like they don't want us to fly. No, the airlines need the people that can afford to fly at the price that allows the airline to break even and not lose money. That's what they've got to do.

AS: James, as always, there is so much to talk, but we only have an hour to discuss, so we'll have to pause the conversation here. But as always, you know, great chatting with you, and thank you for doing this at a time where you're not at the best of your health, so appreciate that.

JD: Oh, it's always a pleasure. Look, and thank you very much, and like I say, thank you for reading the reports as well. I really appreciate that.

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