This low-cost airline has reduced fares by 5%
What's the story
Malaysian budget airline, AirAsia X, has announced a 5% fare reduction. The company's CEO Bo Lingam said this is part of their strategy to review pricing weekly and increase capacity as jet fuel prices fall. This comes after the US-Iran peace deal eased tensions in the Middle East and brought relief to the aviation industry with declining fuel costs.
Operational challenges
Lingam's comments on rising fuel prices impact
Lingam noted that the aviation industry has been greatly impacted by rising fuel prices. He expressed hope that the current situation in the Middle East remains stable, as it has already resulted in a spike in bookings over the weekend. Singapore jet fuel was trading at around $112 per barrel on Friday, down from its March high of $242 but still higher than pre-conflict levels of about $80 per barrel.
Strategic adjustments
Response to spike in jet fuel prices
In response to the spike in jet fuel prices, AirAsia X posted a first-quarter loss. The airline had to cut 10% of its flights and increase fuel surcharges to cope with the rising costs. Lingam said some routes were suspended entirely as high fuel costs made them unviable even at full capacity.
Growth strategy
Plans to restore capacity by August
AirAsia X plans to restore its capacity by August, but Lingam said loss-making routes with no demand won't be reinstated. The airline is also streamlining its fleet, returning around 12 older aircraft this year as more fuel-efficient jets come online. Next year, AirAsia X will receive seven Airbus A321LR jets for medium-haul routes including China.