AIRASIA X Bhd’s decision to raise airfares and increase fuel surcharges represents a necessary step to protect profit margins amid surging operating costs driven by escalating jet fuel prices, according to industry analysts.
The airline’s pricing adjustments come as prolonged geopolitical tensions in the Middle East continue to exert upward pressure on global fuel markets, forcing carriers to rapidly recalibrate fare structures in order to absorb rising input costs.
Public Investment Bank Bhd analyst Denny Oh said AirAsia X is particularly exposed to fuel price volatility as it does not have a hedging programme in place, leaving it vulnerable to sharp increases in jet fuel costs linked to the ongoing conflict.
He said the airline has responded by combining higher fuel surcharges with increased ticket prices across its network.
“Depending on the economics of each route and destination, fuel surcharges have increased by around 20 per cent, while overall fares have risen by between 30 per cent and 40 per cent.
“With fuel accounting for approximately 20 per cent to 40 per cent of operating expenses, this measure is important to protect profit margins,” he said in a research note.
Oh said jet fuel prices had surged to historic levels following the outbreak of the US-Israel-Iran conflict on 28 February, with crude oil spiking to as high as US$118 per barrel.
He noted that this had pushed jet fuel prices sharply higher, from around US$90 per barrel prior to the conflict to approximately US$200 per barrel currently.
He added that the situation had been further aggravated by a steep rise in refining margins, or crack spreads, which have increased by more than 350 per cent year-on-year due to supply disruptions and structural constraints in refining and storage capacity for jet fuel.
According to Oh, AirAsia X has implemented a range of cost mitigation measures to maintain operational stability, including capacity reductions, network optimisation, fleet efficiency improvements, and leveraging natural currency hedges.
He said the airline has cut capacity by around 10 per cent, mainly through reduced frequencies on lower-performing routes and flight consolidation, with some adjustments influenced by the end of the Hari Raya travel peak and broader cost management efforts.
The airline has also reallocated capacity towards stronger-performing routes while improving fleet utilisation and accelerating the retirement of older, less fuel-efficient aircraft.
“In terms of network optimisation, AAX is reallocating capacity to stronger-performing routes. The company is also taking this opportunity to optimise fleet usage and accelerate the replacement of older aircraft with more fuel-efficient models.
“Additionally, AAX is leveraging Fly-Thru connectivity via Kuala Lumpur and Bangkok to maximise passenger volumes and operational efficiency.
“At the same time, the company is benefiting from the strengthening of ASEAN currencies as a natural hedge against US dollar-denominated fuel costs,” he said.
Despite near-term cost pressures, Oh said AirAsia X’s outlook remains relatively resilient, supported by sustained travel demand even after the introduction of higher surcharges aimed at offsetting rising fuel costs linked to geopolitical tensions.
However, he cautioned that earnings forecasts for financial years 2026 to 2028 have been revised downward by an average of 46.8 per cent, reflecting weaker expectations for passenger growth and revenue amid ongoing uncertainty from global conflict dynamics. - April 10, 2026
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