Airline CEOs See Strong Demand Despite Fuel Pressure

FARNBOROUGH—The recent rise in oil prices is unlikely to derail passenger demand but will challenge airlines to offset higher fuel costs through network adjustments, pricing and operational efficiency.

Speaking at the Farnborough Airshow, the CEOs of British Airways (BA), Malaysia Aviation Group and Riyadh Air said the industry was again having to adapt as conflict in the Middle East drives volatility in oil markets.

“We're waking up every morning, looking at the oil price, looking at the headlines and trying to figure out what the implications are,” BA CEO Sean Doyle said. “But we've got to get up every day and run a good airline ... be agile, creative and flexible.”

Rather than viewing higher fuel prices as an existential threat, Doyle said airlines were already adjusting networks and pricing to reflect changing demand patterns. He said that BA had shifted capacity toward stronger-performing markets, adding flights to India and Nairobi, while new services to Melbourne and Colombo will launch during the winter 2026-27 season.

Malaysia Aviation Group president and group CEO Nasaruddin Baker warned that Asian carriers faced a particularly difficult environment because of their relatively thin profit margins. Fuel accounts for about 30% of Malaysia Airlines’ operating costs, while Asia-Pacific airline margins average around 1.5%, compared with about 4% globally, he said.

Although the airline has hedged around half of its 2026 fuel requirements, Baker estimated that every $1 increase in fuel prices adds more than MYR50 million ($12.2 million) to annual costs.

“It's going to be very challenging this year,” he said.

Demand initially strengthened following the Middle East crisis, with some Malaysia Airlines services operating close to full capacity, but Baker said bookings appear to be slowing after fare increases were introduced to offset higher operating costs. However, the airline plans to continue expanding, adding frequencies to China and Japan while reallocating aircraft to stronger-performing markets.

Riyadh Air CEO Tony Douglas argued that geopolitical shocks have always been part of aviation and should not alter strategic fleet or network planning. “We know you have to play the long game,” Douglas said. “There will always be these challenges.”

The Saudi startup carrier announced additional Boeing 787 and Airbus A350 orders at the airshow despite the uncertain operating environment, reflecting what Douglas described as a focus on long-term growth rather than the short-term market uncertainty.

From a financing perspective, BOC Aviation Chief Commercial Officer Paul Kent said the industry entered the latest crisis in far stronger financial health than during previous downturns, leaving most airlines well positioned to absorb higher fuel costs.

“The industry at the beginning of the year was in a state of rude health,” Kent said, adding that many airlines reported record first-quarter performance and strong liquidity.

“The amount of ticket price increase that's been passed through has been really positive for the industry,” he said. “I think it has taught the industry something in that it has a little bit more pricing power than maybe it thought.”

In June, IATA reported that air passenger demand was down 2.2% year over year in May on the impact of war in the Middle East. The decline centered on carriers in the Middle East, which saw a 28.4% fall from May 2025.