Middle East conflict drives up costs, force route changes for Malaysian Aviation Group despite strong demand
KUALA LUMPUR, Apr 2 — Tensions in the Middle East have driven up fuel costs, extended flight times and disrupted routes for Malaysian Aviation Group (MAG), underscoring the challenges facing airlines despite strong demand growth across the Asia-Pacific (Apac) region.
President and group chief executive officer Captain Nasaruddin A Bakar said the aviation industry continues to see strong expansion, particularly in the Apac region, where both passenger and cargo traffic are growing at a rapid pace.
“This industry is one of the fastest growing industries, especially in the Apac region, where we see high growth year on year in both passenger and cargo traffic,” he said.
However, he noted that profitability remains extremely thin despite this growth.
“Even with this growth, margins remain very minimal, averaging about 1.4 per cent,” Nasaruddin told a media briefing here today.
Nasaruddin said recent geopolitical developments have sharply increased fuel prices, which remain one of the group’s biggest cost drivers.
“In the last one month, fuel prices have increased significantly, to about US$100 (RM403.56),” he said, adding that the impact on MAG is substantial.
“For our scale of business, every US$1 (RM4.03) increase in fuel has an impact of approximately RM50 million on our bottom line.”
He also noted that currency movements are adding to cost pressures, with changes in the ringgit against the US dollar affecting financial performance.
“Every 10 sen movement in the ringgit against the US dollar can impact our bottom line by about RM200 million,” he said.
Explaining further, he said airspace disruptions linked to the Middle East conflict have forced longer flight routes, particularly for services between Malaysia and Europe.
“For flights to London and Paris, routing has increased by about one hour, which adds approximately 18,000kg of fuel burn daily and about RM115,000 in additional costs per day,” Nasaruddin said.
Operations in the Middle East have also been affected, with certain routes temporarily suspended.
“Flights to Doha have been suspended until around mid-April due to airspace closures, which has impacted our top line revenue,” he said.
However, he said services to Jeddah and Medina, which were briefly disrupted at the start of the conflict, have since resumed.
Beyond fuel costs and routing, Nasaruddin said fuel supply risks are also emerging in some markets.
