Southeast Asia ought to bail out private budget airlines as fuel costs surge—here's why

Subscribe to enjoy similar stories.The global jet-fuel crunch is hitting Asia’s low-cost airlines harder than their full-service counterparts. Governments should prepare financial or operational support to avoid further flight cancellations during the busy summer travel season—as well as outright shutdowns like the collapse of America’s Spirit Airlines.Discount carriers like Malaysia’s AirAsia, Indonesia’s Lion Air and Cebu Air of the Philippines are already bearing the brunt of the energy shock. Policymakers must consider targeted measures in the form of loans, grants or fuel price relief.

The packages should differ by country and reflect conditions on the ground, but pandemic-era policies offer a sound starting point. The advantage this time around is that there is no shortage of demand. In fact, Asia is expected to hold onto the top position in terms of traffic growth this year.Asia is most exposed to the conflict in the Strait of Hormuz as it uses more than 80% of West Asia’s oil and gas.

The countries are divided between those poised to weather a scarcity of jet fuel and those that are not. Wealthier economies like China, Japan and South Korea are using their financial resources to procure fuel.They have also employed strategies like cutting exports or fuel hedging—using contracts to lock in prices in advance—to maintain supply. Beijing even went so far as to tell its firms over the weekend to disregard US sanctions on private Chinese refiners tied to Iranian oil in a bid to maintain its energy security.Southeast Asia has fewer options.