00:00I know that you've been here since April, a very eventful time for you to be overseeing the airline industry
00:06in this part of the world.
00:07Indeed, indeed. I think joining in April and since, you know, stepping into this role, every airline has been, you
00:15know, facing big challenges insofar as having to deal with the fuel prices.
00:21This has set back many carriers, I think, in the last three to four months.
00:25Although what we're seeing now is, you know, prices have come off. I think jet fuel prices are now a
00:31lot less than $200 and above.
00:33They're still pretty high, I would say, in the range of around $150, $170.
00:39So, you know, that's a massive hit as far as allies are concerned.
00:42And going forward, there continues to be some degree of uncertainty as to how much fuel prices would be able
00:48to come off.
00:49Well, that's it. And even as you say, even though it's come off, we're still sort of roughly double from
00:52the start of the year or prior to the war, give or take.
00:55Correct.
00:56Some amount. So how are you seeing individual carriers weather that and how's that passing through to traveler demand?
01:04Yes. Well, you see fuel surges charges applying and fares have generally have gone up.
01:09But by and large, I would say most carriers are quite glad to see actually demand still being holding off
01:16pretty well, holding out pretty well.
01:18We just, you know, come off the summer period right now and I think bookings are still holding up quite
01:25well, which is a good relief.
01:27But still, nonetheless, all these fare increases, fuel surges that we're seeing, they're really not sufficient to offset the increase
01:34in costs.
01:35Which is why you see from the April to June set of results that are coming out from various carriers
01:40reporting, many of them, you know, would reflect that cost.
01:44On the top line side, revenues are still holding, which is a reflection, of course, of the, you know, strength
01:49in bookings.
01:50But as far as costs are concerned, that's still a headwind.
01:54Does the strength in bookings tell you that the average traveler is actually quite resilient to higher prices?
02:01Does that mean prices might stay high?
02:03It may hold at these levels, I would say, but I think airlines are very sensitive, of course, to, you
02:11know, how bookings are coming through.
02:13And coming off this particular summer, I think what's important is looking ahead into towards the end of the year
02:18and see how bookings are actually coming through.
02:21The other potential risk, of course, is, you know, whether customers are going to get used to these levels or
02:26are they going to come off.
02:27And then the other ugly risk that, you know, people are concerned about is whether there's inflation also going to
02:33be kicking in.
02:34And that might impact, obviously, the degree of bookings.
02:37The flip side of that resilience is I do wonder if you're seeing any indications of unfair pricing or price
02:44gouging over the past six months.
02:45I wouldn't say so.
02:46I think if you would see, if you see that happening, I think prices obviously, you know, are very, very
02:51sensitive and they would adjust very quickly.
02:55At this point, you know, from what are my observations around the region, that hasn't really been the case.
03:02The recent half-year traffic stats actually show a dip in passages overall of just over 1% year on
03:07year.
03:08For the next six months, rest of the year, what's your outlook?
03:11I would say we are a little bit tentative, meaning to say, I mean, the first two to three months,
03:18July, August being the summer,
03:19I think we're going to have a decent set of top-line revenues coming through.
03:24But I think the risk is obviously coming off that from the final quarter of the year.
03:30I suspect that might be some headwinds that we would see as far as demand also.
03:34Costs, I suspect, it's really hard to tell, you know, given the changes in condition.
03:40But of course, we all want to see a better relief coming out from the Strait of Hormuz, where fuel
03:45prices maybe can ease off.
03:47I mean, it is still high. I think, nonetheless, airlines are pretty much prepared.
03:51Some airlines are hedging, and even if they're hedging, I think their prices have already gone up.
03:56And those that are not, you know, are just completely exposed.
03:58That continues to be a risk for airlines operating into the end of the year.
04:02So they have done some adjustments.
04:04Some airlines have started to rationalize some capacity, maybe, you know, cutting some flights from six flights a day to,
04:11you know,
04:11two or three flights a day as far as short-haul frequencies are concerned.
04:17Some have cut back on some capacity to some degree, but I think it's a different strategy for a different
04:22carrier.
04:22That's interesting because you're saying even the ones that have secured hedges, they are starting to expire as this drags
04:29on?
04:29Yes, yes, indeed, indeed.
04:32Usually when airlines, when the hedges expire, they would renew these hedges, but at different levels, right?
04:37So these prices have clearly gone up and, you know, it will be a, you know, a higher cost that
04:42the airlines would have to bear reflecting the more current level of pricing.
04:47What do you think the summer season for earnings will look like then?
04:50Profitable still? Strong? Or do you think you'll start seeing some of the weakness?
04:53Yeah, I think it's a bit hard to say simply because I think when I'm talking to my member airlines
05:00and what I'm sensing is that the demand is still pretty good,
05:03which means I think the top nine revenues are going to still hold on with some growth.
05:07However, are they enough to offset, you know, the costs that are being, you know, that they have to carry?
05:13I think that will still be a certainly a big risk for them.
05:20What do you think are the broader risks?
05:22If we kind of try and look beyond the impact of the war and of costs, what's the biggest risk
05:28that certainly your members are concerned about in the long run?
05:33Well, there's some of the other issues that the airlines have been facing hasn't really gone away.
05:38Things like supply chain, the delays and backlog are still there.
05:42I mean, these have emerged post-COVID.
05:46So the last two to three years, airlines have been facing, you know, these backlogs, both from the manufacturer standpoint
05:52as well as from the engine supplier.
05:54So these combine to, you know, actually produce or actually cause an effect delay in terms of the aircraft that's
06:04been delivered.
06:05And then that translates obviously to other consequential risks.
06:09Airlines now hold on to the older planes, but that's also a reflection because there are still, you know, decent
06:16demand that's coming through.
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