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Hello, and welcome to Flight 
Global Focus, the essential 

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podcast for trusted aviation 
insight. 

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I'm Alfred Chua, the Asia 
Pacific Airlines Editor for 

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Flight Global. 
And this week we continue to 

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look at the fallout from the 
Middle East conflict on the 

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global airline sector. 
Now it's close to a month since 

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the conflict started and beyond 
the initial wave of flight 

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cancellations to and from the 
Middle East, we are now seeing a

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more far reaching impact of the 
conflict. 

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At the centre of it all is the 
volatility of fuel prices, which

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have hit new highs in recent 
days. 

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It continues to remain at 
elevated levels. 

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So the implications for the 
airline sector is clear. 

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Fuel costs make up a significant
part of an airline's operating 

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expenses, and it is without a 
doubt the single largest 

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operating expense for airlines. 
So as we speak, you know, a 

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growing number of airlines have 
imposed or raised the fuel 

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surcharges, but the question 
remains, how much can they raise

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before demand softens? 
And of course, meanwhile, others

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are mulling network cuts to 
conserve fuel and to bring costs

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down. 
Joining me to discuss this today

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is Louis Harper, Flight Globals 
head of airlines. 

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Hi, Louis. 
Hi, Alfred. 

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Thanks for joining us today. 
Now it's clear that, you know, 

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we're looking at fuel prices 
going into quite uncharted 

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territory. 
Before we get into the specifics

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of that, could you talk a little
bit broadly about, you know, 

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where we are now in this crisis?
Yeah, As you said, almost a 

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month in the last few days of 
March. 

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And I think, you know, it's fair
to say the global airline sector

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is adapting to a string of 
challenges that are likely to 

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resonate for some time, 
regardless of when this conflict

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ends. 
Obviously for carriers in and 

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around the Middle East, there 
have been immediate concerns. 

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So there has been a limited 
resumption of flights, but that 

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continues to be disrupted by 
airspace issues and attacks from

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Iran on on infrastructure in in 
their countries and kind of more

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fundamental ones regarding their
path out of the crisis. 

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And we'll we'll touch on on that
in a bit, but also including, of

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course what shape a recovery 
will take when it eventually 

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comes. 
We know that passenger demand 

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has recovered strongly from 
previous crises around the 

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world, but I don't think anyone 
is taking anything for granted 

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at this point. 
But as you say, for many 

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carriers soaring oil prices mean
that guidance they issued for 

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2026 as recently as mid to late 
February is is now obsolete in 

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some cases. 
Obviously, heavily hedged 

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airlines are more relaxed about 
the short term, so probably for 

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most of 2026. 
But we also know that even for 

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them, higher oil prices will 
cause negative ripples beyond 

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jet fuel costs, notably 
including higher inflation, 

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which will have a cost impact on
airlines themselves and on 

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consumer spending power. 
Most analysis suggests that even

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in the best case scenario in 
terms of the war ending and it's

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aftermath, it will take months 
for energy markets to normalise.

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Everyone will hope that's not 
the case, but I think that is 

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the working assumption in in 
most cases. 

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And as you touched on, Alfred, 
we know that airlines can pass 

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on higher fuel prices through 
fares, but there is obviously a 

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ceiling where that starts to 
impact demand because, you know,

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flying simply gets too 
expensive. 

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We've had a handful of 
international carriers that have

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reported their earnings since 
the crisis began and they've 

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highlighted strong demand on 
services in some cases that 

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would otherwise have been 
operated by the big Golf 

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connectors. 
That's helping to offset higher 

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costs and shows that crises also
bring opportunities alongside 

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the myriad challenges we're 
seeing at the moment. 

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But we've also, as we talked 
about in the last podcast, that 

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carriers serving markets between
Europe and Asia Pacific and vice

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versa, except those that can 
still overfly Russia, such as 

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the Chinese majors. 
The narrowing of the airspace 

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corridors is being watched 
nervously everywhere as the 

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conflict, you know, continues to
bring the very real risk of some

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destinations falling out of 
reach. 

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Carriers everywhere will also be
looking for any worsening of the

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supply chain challenges that 
have clouded the post COVID 

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period. 
And that could be because of 

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specific developments around 
logistics difficulties or more 

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broadly, you know, a worsening 
global economic outlook and 

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conditions in the global economy
clearly will not help those 

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supply chain issues. 
So a lot lot to look out for. 

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And you know for the Middle 
Eastern carriers, as you 

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mentioned earlier, these kind of
unknowns, they will be far 

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greater for them, right? 
Yes, I think it is the Gulf 

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carriers that are among those 
facing the most uncertainty. 

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I think most airlines around the
world are at differing degrees, 

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but operating as they do in 
countries that have been 

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attacked by Iran in response to 
the US and Israeli strikes and 

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obviously, as we mentioned 
before, facing quite severe 

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restrictions on what they can 
do. 

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We talked in the last podcast 
that this came just as ambition 

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in the region was at a fresh 
high. 

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I think last year's busy Dubai 
Air show reflected a commercial 

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aviation sector in the region 
that was awash with confidence 

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and growth plans. 
I think when you talk about 

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reassurance for those carriers 
that things might go back to how

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they were, they can look back to
the COVID-19 crisis. 

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So not that long ago, at the 
height of the pandemic, there 

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were plenty of predictions made 
about what would come once 

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travel restrictions ended. 
And amidst an avalanche of 

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forecasts, you know, some turned
out to be correct, notably on 

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topics such as lower business 
travel demand. 

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That's been a theme continues to
be to this day. 

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The crisis overall, which 
obviously at this point was 

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much, much bigger than what 
we're going through at the 

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moment with the Middle East. 
But there is a debate about 

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whether the industry was 
fundamentally changed by it. 

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I think it's fair to say there 
were certainly differences 

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coming out of the crisis. 
And one that stands out when 

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we're we're talking about what's
going on today was a prediction 

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that people would not be so 
willing to fly through the big 

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hub airports coming out of 
COVID. 

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I think the thinking was that 
passengers would prioritise 

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direct flights to minimise their
time in the air and in crowded 

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airports. 
I mean, Emirates gave short 

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shrift to those suggestions at 
the time. 

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I mean, President Tim Clark 
regularly argued that when 

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flying, return demand would be 
stronger than many people were 

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expecting and it would come back
more strongly. 

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And he was, you know, largely 
correct as shown by Emirates 

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topping the global ranking for 
airline profitability for the 

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last full year. 
At the same time, Qatar Airways 

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has recorded impressive results 
in the post COVID period. 

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Etihad has returned to growth 
and we all know that Saudi 

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Arabia is plotting a new 
regional powerhouse with the 

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founding of Riyadh Air among 
other steps. 

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And also in the low cost sphere,
carriers like Air Arabia Flyer 

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deal Fly Dubai, etcetera. 
They've become really important 

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and growing players in in 
regional connectivity and Qatar 

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Airways can also point to it's 
own pre COVID recovery from 

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severe airspace restrictions 
being imposed on it's flying 

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back in 2017. 
But the question is, you know, 

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are there lessons from that? 
Will it play out the same this 

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time for the Middle East 
carriers? 

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I think one thing that seems 
inevitable at this point is that

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it will take some time for 
consumer confidence to return 

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when it comes to the Golf hubs 
as final destinations for 

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travellers. 
And that will be a significant 

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loss of revenue for some 
operators. 

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The time scale on that, as I 
say, is unclear. 

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But I think when it comes to the
Gulf carrier's roles as global 

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connectors and as onward 
connectors within the Middle 

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East, there will be some 
cautious optimism still, even 

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though there are clearly huge 
challenges ahead. 

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I mean, that's partly because 
the COVID-19 crisis provided 

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some clear lessons for airline 
leaderships regarding who 

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emerged from the period on the 
front foot. 

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And I think here, one of the key
learnings is to always be ready 

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to restart and or ramp up 
operations at a moment's notice.

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And I think what we've seen in 
this crisis so far is carriers, 

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including Emirates have already 
demonstrated their abilities to 

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do that. 
And that that's encouraging for 

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when hopefully things things 
calm down more fundamentally. 

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At the same time, the Gulf 
carriers are some of the world's

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most financially successful and 
enthusiastically backed in terms

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of investors and government 
support. 

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And that means they're well 
placed to stimulate demand 

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through attractive fares when it
becomes possible for them to 

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operate as they did before, 
before the conflict. 

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Again, I think the COVID-19 
crisis showed that consumers 

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also can have quite short 
memories, I think when the the 

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price is right. 
So that could be on the side of 

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of the Middle East connectors at
least making a a pretty strong 

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comeback when they're allowed 
to. 

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So when we look at, as I've 
touched on other carriers in the

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region that are at the moment, 
you know, serving passengers who

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would otherwise have flown with 
the Middle Eastern carriers, I 

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think few will be betting on a 
fundamental shift in consumer 

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behaviour as a result of this 
crisis. 

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But as with all of these things,
the lack of clarity over the 

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severity and longevity of the 
conflict as of late March, it 

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does mean a range of potential 
outcomes remain in play at this 

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moment. 
Right, right. 

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And, you know, Lewis, you made a
good point earlier about 

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emerging from a crisis on the 
front foot. 

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And, you know, Speaking of 
which, you know, we're going to 

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move beyond the Middle East 
region. 

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We're going to look at what some
of the other airlines around the

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world are doing to address this 
challenge. 

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And one such challenge is United
Airlines, which, you know, 

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perhaps we can argue has emerged
from the COVID crisis on the 

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front foot. 
Now, United Airlines has been 

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one of the first to kind of give
some of specifics as to what 

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they're doing in response to 
both the war and its impact, 

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right? 
Yeah. 

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So I think the headline there is
United is trimming it's near 

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term capacity by as much as five
percentage points. 

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So a lot of flying because it is
anticipating A prolonged period 

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of elevated fuel prices brought 
about by the conflict. 

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So Scott Kirby, the the CEO put 
out a note to employees and 

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they're working on the 
assumption that fuel prices will

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remain elevated at around $175 a
barrel for the rest of this year

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and through 2027. 
Obviously predicting energy 

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markets is difficult at the best
of times, but that's their 

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working assumption. 
I think we've touched on in our 

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reporting on this and, and in 
the last podcast that the the 

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crack spread. 
So the difference in price 

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between jet fuel and and oil has
widened at the same time as oil 

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prices going up. 
So there's kind of been an 

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outside outsized impact on jet 
fuel prices even beyond the 

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changes we've seen with oil. 
And he gives a bit more context 

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regarding that level of fuel 
price. 

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He says that would mean an extra
$11 billion in annual fuel 

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expenses for United. 
And an important context there 

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is that United's best ever 
annual net profit was $5 

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billion. 
So you can see the problem that 

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airlines are facing, and United 
is a pretty successful airline, 

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so this is going to be more 
significant for others. 

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That much is very much true. 
In United's case, he says the 

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airline is tactically pruning 
flying and that is focused on 

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temporarily unprofitable routes 
because of the higher fuel cost.

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It's focusing that pruning on 
off peak operations where it 

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can, such as red eye flights. 
And that kind of changes 

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covering the second and third 
quarter of the year. 

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Again, reflecting the fact that 
I think most working assumptions

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is the impacts of this conflict 
will resonate for some time, 

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even if the war were to come to 
an end. 

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It will also cut its operating 
capacity at Chicago and the 

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suspended flights to Tel Aviv 
and Dubai, obviously, as many 

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carriers have. 
Kirby's view is there's no point

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in burning cash in the near term
on flying that just can't absorb

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these fuel costs. 
And that's someone, you know, 

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running an airline that that 
makes a decent amount of money, 

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which is the exception rather 
than the rule, I think in in the

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industry. 
Capacity plans for beyond 2027 

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are still intact. 
You know, Kirby is clear on that

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as well as fleet plans. 
They remain unchanged. 

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And, you know, he stresses the 
airline will not be cost cutting

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or deferring investments in the 
future. 

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Yeah, he's confident in United's
position. 

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But these these are all about 
adjustments being made for for 

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the coming periods. 
I think the key thing for US 

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carriers, and he's not alone in 
having pointed this out among 

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the CE OS of of those US 
operators, demand is really 

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strong in the US. 
In fact, Kirby says it's the 

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strongest we've ever seen in the
near term for US carriers at 

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least, the higher costs are 
being offset to an extent by 

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this strong demand environment, 
and that's presumably being 

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helped by some of the capacity 
moderation we've seen among low 

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cost carriers in recent periods.
So yeah, as you said, yeah, 

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United is the first major US 
carrier to really be specific 

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about what it's doing in 
response to to the conflict. 

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But Alfred, we're also seeing 
airlines in your region begin to

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craft their responses, too. 
Yeah, that's right, Lewis. 

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So you know, we're beginning to 
see a growing number of airlines

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in this region. 
They're cutting back on their 

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operations. 
And at the moment now and sort 

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of speaking to you in late 
March, you know, these are 

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small, but it's a significant 
shift, especially given how just

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a few months ago actually many 
operators were optimistic about 

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growth prospects. 
We'll take a look at the 

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Philippines first. 
Now, this is quite crucial 

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because the Philippines on 25th 
March declared a national energy

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emergency and that was a day 
after Philippines President Bon 

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Bon Marco said in an interview 
with Bloomberg that it is a 

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quote, distinct possibility that
the country could ground some 

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planes in order to save fuel. 
Now since then, you know, the 

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Filipino carriers have come out.
In response to this, Philippine 

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Airlines said that it has 
secured sufficient jet fuel 

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supply to support its scheduled 
operations and that includes 

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long haul flights for what it 
has called the foreseeable 

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future. 
And like United Airlines, like 

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we spoke about earlier, the 
Philippines low cost carrier 

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Cebu Pacific, they've really 
implemented flight cuts through 

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the northern summer period. 
So that's kind of all the way to

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the end of October. 
And these are primarily on a 

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small number of routes from 
secondary cities in the 

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Philippines. 
So they're sort of their main 

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domestic trunk and all that. 
It's unaffected. 

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And you know, the airline has 
said that the increase in fuel 

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costs will likely double it's 
fuel expenditure and you know, 

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have a quite a big impact on its
operating costs. 

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And of course, I'm speaking to 
you as we're recording this on 

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the 26th of March. 
And just a few minutes, in fact,

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just a few minutes before we 
recorded this podcast, Hong 

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Kong's Cathay Pacific announced 
that they would be increasing 

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their fuel surcharge across its 
network, both short, medium and 

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long haul from April. 
And it's a sort of a blanket 

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increase of about 34% in fuel 
surcharge. 

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Now, like some of the other 
airlines in the region, Cathay 

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has said that fuel accounts for 
quite a significant portion of 

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its operating expenses. 
In 2025, fuel cost itself was 

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about 30%. 
And Cathay notes that fuel is, 

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quote, critical to our 
operations. 

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And, you know, well, Cathay says
that it has fuel hedging to 

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00:15:35,400 --> 00:15:38,840
manage this volatility. 
Hedging itself does not 

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sufficiently cover against the 
scale of the recent surge in 

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00:15:42,520 --> 00:15:45,280
fuel prices. 
If we're looking elsewhere in 

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00:15:45,280 --> 00:15:48,560
the region, there are reports 
emerging that Vietnam Airlines 

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00:15:48,560 --> 00:15:52,080
is cutting back on domestic 
flying due to limited jet fuel 

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00:15:52,080 --> 00:15:54,800
supplies. 
In South Korea, local news 

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00:15:54,800 --> 00:15:57,680
reports suggest that the 
country's low cost carriers are 

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00:15:57,680 --> 00:16:02,000
looking to cut back on short and
long haul flying to save on fuel

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00:16:02,000 --> 00:16:04,240
costs. 
And Speaking of low cost 

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00:16:04,240 --> 00:16:08,720
carriers, if we move down South 
to Australia, Jet * you know, 

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00:16:08,720 --> 00:16:11,280
they cited rising fuel costs 
among the reasons that it's 

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00:16:11,280 --> 00:16:15,320
cutting back on trans testament 
flights and domestic flights in 

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00:16:15,320 --> 00:16:18,520
New Zealand. 
So I think it's quite clear that

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00:16:18,520 --> 00:16:22,480
we will see more of such network
cuts, fuel surcharge increases, 

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00:16:22,800 --> 00:16:26,200
fare increases and all that in 
the coming weeks or even days. 

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00:16:26,680 --> 00:16:30,440
And that's even if, you know, 
let's say the war ends in a few 

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00:16:30,440 --> 00:16:33,400
days, we'll still sort of see 
this lingering effect over the 

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00:16:33,400 --> 00:16:36,200
next few weeks, months, days to 
come. 

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00:16:36,800 --> 00:16:39,000
Louis, just going back to you 
again. 

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00:16:39,000 --> 00:16:42,680
What do you think you know will 
come next beyond what we're 

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00:16:42,680 --> 00:16:45,480
seeing now? 
Yeah, I think you as we've both 

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00:16:45,480 --> 00:16:48,680
touched on, there are some 
unavoidable impacts that as we 

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00:16:48,680 --> 00:16:51,800
say could resonate for months 
and beyond in the industry. 

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00:16:52,200 --> 00:16:54,360
As I mentioned the Gulf 
country's status as it's 

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00:16:54,360 --> 00:16:57,400
destinations for travellers. 
But you know, everywhere the 

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00:16:57,400 --> 00:17:00,880
cost of fuel is, is such a huge 
thing for airlines as you say 

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00:17:00,880 --> 00:17:04,280
that if that is elevated for an 
extended period, obviously 

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00:17:04,280 --> 00:17:07,560
you're tearing up all industry 
profit expectations and 

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00:17:07,560 --> 00:17:10,400
individual airline profit 
expectations for the year and 

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00:17:10,400 --> 00:17:12,200
kind of starting the 
calculations again there. 

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00:17:12,200 --> 00:17:16,680
So, so yeah, that that's really,
really significant and it's all 

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00:17:16,680 --> 00:17:20,599
about time scales and severity. 
But I think there's there's 

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00:17:20,599 --> 00:17:22,280
going to be an impact for some 
time there. 

320
00:17:22,640 --> 00:17:25,480
Geopolitically, obviously 
there's a lot to play out 

321
00:17:25,760 --> 00:17:28,200
notably around the Gulf 
countries relationships with the

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00:17:28,200 --> 00:17:31,840
USA from a security standpoint. 
That's just one of many things 

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00:17:31,840 --> 00:17:34,920
that that are likely to be 
affected by this conflict. 

324
00:17:34,920 --> 00:17:38,080
And again, the consequences of 
that is likely to emerge over 

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00:17:38,080 --> 00:17:41,400
months and years and will 
inevitably impact the airline 

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00:17:41,400 --> 00:17:45,920
industry one way or the other. 
Specifically, there's a lot to 

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00:17:45,920 --> 00:17:48,320
learn about the future of the 
Strait of Hormuz, which is 

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00:17:48,400 --> 00:17:51,960
central to a lot of the the 
energy challenges we're seeing. 

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00:17:52,320 --> 00:17:56,480
And you know, who knows how that
plays out, but clarity on that I

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00:17:56,480 --> 00:18:00,120
think will being sought by both 
sides, but remains a a huge 

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00:18:00,120 --> 00:18:02,640
sticking point clearly. 
And I think as we've both 

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00:18:02,640 --> 00:18:05,360
touched on, while it's not 
impossible that the war ends by 

333
00:18:05,360 --> 00:18:09,520
some definitions sooner rather 
than later, even the best case 

334
00:18:09,520 --> 00:18:11,720
outcomes are awash with 
uncertainty. 

335
00:18:12,080 --> 00:18:15,120
That's not a new thing for the 
airline industry, but it's not 

336
00:18:15,120 --> 00:18:19,000
ideal either, particularly when 
I think it's fair to say the 

337
00:18:19,000 --> 00:18:22,000
earnings calls recovered pre 
28th of February. 

338
00:18:22,320 --> 00:18:26,400
There were pretty high spirits 
about what was ahead in 2026. 

339
00:18:26,920 --> 00:18:30,920
And I keep hearing a lot of 
executives saying, you know, as 

340
00:18:30,920 --> 00:18:34,000
long as geopolitical 
developments and fuel prices 

341
00:18:34,320 --> 00:18:37,760
trend as we expect and 
unfortunately that clearly 

342
00:18:37,760 --> 00:18:41,640
hasn't happened. 
So yeah, a year of uncertainty, 

343
00:18:41,640 --> 00:18:45,520
I think even under under the 
best case outcomes regarding the

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00:18:45,520 --> 00:18:46,600
war. 
Yep. 

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00:18:46,600 --> 00:18:47,800
And you know, like they say, we 
can. 

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00:18:47,920 --> 00:18:49,440
Perhaps we can hope for the 
best. 

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00:18:49,640 --> 00:18:51,640
Thank you so much for your 
insight, Lewis. 

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00:18:51,800 --> 00:18:57,120
Thanks, Alfred, Good to talk. 
You've been listening to Flight 

349
00:18:57,120 --> 00:19:00,280
Global Focus, which is a 
production of Flight Global with

350
00:19:00,320 --> 00:19:04,360
audio editing by Lucy Johnson. 
If you want to get in touch with

351
00:19:04,360 --> 00:19:07,320
us or for commercial 
opportunities related to this 

352
00:19:07,320 --> 00:19:11,960
podcast, please e-mail us at 
podcast@flightglobal.com. 

353
00:19:12,520 --> 00:19:15,440
Listen, reach, review and 
subscribe wherever you get your 

354
00:19:15,440 --> 00:19:18,320
podcast. 
Join us again next week for more

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00:19:18,360 --> 00:19:21,960
in depth analysis covering the 
latest developments in airlines,

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00:19:21,960 --> 00:19:25,560
defence and aerospace. 
I'm Alfred TRA, and we'll see 

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00:19:25,560 --> 00:19:27,520
you next time for Flight Global 
Focus.