Market News

(Bloomberg) -- Airlines in Asia are raising ticket prices and mapping out contingency plans that include grounding planes as the escalating Middle East conflict threatens to trigger the worst oil shock since the 1970s.

Indian carriers have hiked prices on long-haul routes by 15% and are considering further increases, people familiar with the matter said. In Vietnam, state media warned airfares could increase as much as 70% given the country’s reliance on imported jet fuel.

Meanwhile, Hong Kong Airlines said Tuesday it will raise fuel charges from March 12 across a range of routes. That includes a HK$5 increase in the surcharge on mainland China flights and HK$150 for long-haul trips to places like North America.

Airlines in the region aren’t as well hedged against high oil prices as rivals in Europe or the US, making them more vulnerable to sudden surges in jet fuel prices. That’s prompted low-cost Southeast Asian carriers to start gaming out scenarios where they would ground planes if jet fuel becomes unaffordable or inaccessible, according to people familiar with the matter.

“Does it make sense to keep flying planes when every plane you fly loses you money?” Chairman Ajay Singh, chairman of the no-frills carrier SpiceJet Ltd. said on Bloomberg TV, adding other airlines may also need to consider grounding planes. “Airlines in India will have no choice but to impose a fuel surcharge,” he added, as they won’t be able to absorb all the costs.

After surging toward $120 a barrel on Monday, oil then tumbled after President Donald Trump signaled the war will end soon. Trump also said that he plans to waive oil-related sanctions and have the US Navy escort tankers through the Strait of Hormuz, a vital shipping lane that typically handles a fifth of global crude flows.

‘Panic Buttons’

“Panic buttons have been set off everywhere,” said June Goh, senior oil market analyst at Sparta Commodities SA. “Airlines in Asia who have a weak hedging program are very vulnerable with the current jet-fuel pricing if they sold tickets at earlier price points than where we are now.”

Some budget airlines with low profit margins may go bust if the current environment lasts for more than three months, one of the people said. Airlines worldwide could be forced to ground thousands of planes because of the war, with the weakest carriers halting operations, Michael Linenberg, an analyst at Deutsche Bank AG, wrote in a note.