‘Cash is king’: Asian airlines hoard liquidity to survive worst oil shock since 1980s

[SINGAPORE] Asian airlines are shifting their focus from capacity growth to liquidity preservation as an infrastructure-led oil shock weighs heavily on industry margins, according to Thai Airways chief executive Chai Eamsiri.

Carriers are now in survival mode after the destruction of Middle East oil infrastructure and the effective closure of the Strait of Hormuz, with aviation leaders noting that it will take months for the global jet fuel supply to stabilise.

“No one should think about the profitability at the current stage,” Eamsiri said during a panel at the International Air Transport Association (Iata) World Data Symposium on Wednesday (Apr 8) in Singapore.

“Airline(s) (are) a cash burn business. We need a lot of cash to operate… but the cost is overshooting the revenue. Cash is the king.”

To manage the financial impact, carriers are reducing non-essential capital and operational expenditures to maintain liquidity. Thai Airways, for instance, has postponed all but two critical digital foundation investments.

Still, Iata director-general Willie Walsh told Bloomberg that the two-week ceasefire between the US and Iran will likely be a tangible boost to the aviation industry, even as fuel and ticket prices remain elevated for months to come.

Crude oil prices dropped as much as 19 per cent to US$91.70 per barrel, after US President Donald Trump announced a pause on hostilities with Iran. The Strait of Hormuz, through which about 20 per cent of global oil is transported, is set to reopen as part of the deal.

Sleepless nights and US$100 spreads

Malaysia Airlines president and CEO Nasaruddin Bakar noted in the panel that jet fuel prices have increased by about 140 per cent in one month.

The crack spread – the premium airlines pay for refined jet fuel over raw crude oil – has exceeded US$100 a barrel, well above the historical norm of US$20 to US$30.

“Most of the airline CEOs are not able to sleep,” said Nasaruddin, echoing earlier comments from his Singapore Airlines peer, Goh Choon Phong.

While the Malaysia flag carrier is relatively insulated after hedging 36 per cent of its fuel for the entirety of 2026, Nasaruddin noted that the broader industry faces a significant challenge with the expected months-long wait for jet fuel prices to stabilise.

Thai Airways’ Eamsiri characterised the current situation as the worst he has seen across three or four cycles dating back to the 1980s, noting that the underlying cause for the crisis now is the physical destruction of refineries instead of a more traditional supply demand imbalance.

Some relief expected

Still, the market anticipates some relief on the horizon. Iata’s Walsh pointed out that the forward curve has crude oil dropping below US$80 a barrel by the end of the year.

“The market doesn’t expect this to continue for very long,” he said, while also noting that his forecasts could end up being inaccurate depending on external factors.

For consumers, the industry’s higher cost base has translated into an immediate increase in airfares. Walsh, who will be joining Indian low-cost carrier IndiGo in August, noted that carriers have little choice but to pass the elevated costs onto travellers.

“Ticket prices will have to go up, it’s just inevitable given the margins the industry operates on,” he said, pointing to an industry average pre-war margin of just 4 per cent.

Budget carriers face particular pressure from the fuel price increases.

Scoot CEO Leslie Thng said the elevated costs will have a “large impact on our bottom line”, as low-cost carrier margins in the region are typically lower than those of their full-service peers.

While Walsh remained optimistic that underlying travel demand will continue to grow, airline executives are actively monitoring the risk of demand destruction as fares increase.

Malaysia Airlines’ Nasaruddin said: “We are still continuing the growth of the airline and to ensure that we have got a continuous demand from customers.

“But… because everybody is increasing the fares… how long can the demand sustain is another issue that we have to ask ourselves.”