Rising fuel costs disrupt flight plans, squeeze airline earnings

Rising fuel costs disrupt flight plans, squeeze airline earnings

Airlines are scaling back routes to offset surging fuel costs, as rising expenses begin to erode profitability despite solid passenger growth, reflected in mixed Q1/2026 financial results across the sector.

From April 1, Vietnam Airlines – the national flag carrier – announced the temporary suspension of seven routes, including Ho Chi Minh City-Van Don, Ho Chi Minh City-Rach Gia, Ho Chi Minh City-Dien Bien, Haiphong-Can Tho, Haihong-Buon Ma Thuot, Haiphong-Cam Ranh, and Haiphong-Phu Quoc.

Vietravel Airlines has also cancelled charter flights between Hanoi and Lanzhou Zhongchuan International Airport in May.

Meanwhile, budget carrier Vietjet Air announced the cancellation of multiple flights between Vietnam and Japan during the peak period.

On the Narita-Hanoi route, all flights numbered VJ934 and VJ935 will be suspended from April 7 to April 30. Similarly, all Kansai-Hanoi flights (VJ930 and VJ931) will be cancelled from April 8 through the end of the month.

Average Jet A-1 fuel prices in the Singapore market in March 2026 hovered around $190-200 per barrel, peaking at $234.34 per barrel on March 24.

In addition, physical premiums exceeded $30 per barrel, at times reaching $39.60 per barrel, pushing total fuel costs to exceptionally high levels.

Fuel expenses are currently influenced by crude oil prices, refining costs, war risk insurance, and supply disruptions, placing significant pressure on airlines’ operating costs.

Regarding business performance, Vietnam Airlines (ticker HVN) noted that the aviation sector has entered 2026 facing numerous challenges. However, the airline maintained growth momentum in the first quarter of 2026 despite mounting cost pressures.

Data for Q1, 2026 show that international passenger traffic reached an estimated 13.5 million, up 16 per cent on-year and exceeding forecasts, while the domestic market handled approximately 9.95 million passengers, up 9.6 per cent.

In terms of operations, the airline operated nearly 43,000 flights in Q1, up 11 per cent on-year, carrying close to 6.9 million passengers, an increase of nearly 12 per cent, in line with market demand trends.

Amid rising fuel cost pressures driven by ongoing Middle East tensions, from Q2, Vietnam Airlines has developed flexible operating scenarios, focusing on optimising its network across key domestic and international routes, tightening cost controls, and improving fleet efficiency.

According to projections by MB Securities, Vietnam Airlines is expected to post a Q1 profit of approximately $105 million, down 23 per cent on-year.

Parent company net profit declined despite an estimated 15 per cent increase in passenger volume during the peak season, primarily due to a 32 per cent surge in jet fuel prices, which significantly eroded gross margins.

At Airports Corporation of Vietnam, MBS estimates Q1 profit rose slightly by 4 per cent to about $113 million. Total passenger traffic increased by 14 per cent on-year, including an 18 per cent rise in international passengers and a 9 per cent hike in domestic travellers. Financial income declined as the company allocated resources to the ongoing Long Thanh International Airport project.

Vietjet Air has yet to release its Q1 business results. This year, the airline plans to continue expanding its international network, particularly long-haul routes, while enhancing wide-body fleet efficiency, accelerating digital transformation, and optimising costs.

VIR