Malaysia Airlines Chief Executive Idris Jala told an international aviation forum here that speculation in the oil futures market drove prices to its peak of US$147 a barrel in Jul.
It fell to a 13-month low of US$77.70 on Friday as the global financial meltdown dried up liquidity. On Monday, crude rose again to US$80 a barrel.
Mr Idris predicted the price will continue to rise over the next 12 months and trading will be in a band of between US$80 and US$120 a barrel.
He said Malaysia Airline's financial position is 'still very fragile' despite being profitable in the first half this year. It has indefinitely delayed its plan to purchase more than 50 wide-body aircraft, given the market turmoil.
'If we just continue to do business as usual, hard as we play the game, it is untenable in a world where oil prices are staying at US$100 a barrel,' he said.
Other experts also said US$100-120 a barrel was too expensive for airlines to operate profitably. Aviation fuel, which accounts for about half the operating expenses of a flight, is more expensive than crude.
Mr Vijay Poonosamy, Etihad Airways' vice president of international affairs, said there was still upward pressure on oil prices with Opec likely to adjust supply to boost prices.
'Average price of US$100 a barrel with spikes up to US$125 would be my estimate,' he told the forum.
Etihad, the state carrier of the United Arab Emirates, hasn't felt the brunt of high fuel prices, thanks to the efficiency of its fleet of new aircraft, cost management and hedging policies, he said.
The five-year-old airline, which in Jul ordered 100 new planes worth US$20 billion at list prices, is still on track to break even by 2010, he said. It has only 43 planes now, but aims to grow its fleet to 150 by 2020, he added.
Mr Justin Symonds, global head of transportation at ABN AMRO, said he expects crude oil prices to shoot up to US$107 a barrel by the middle of next year.
Mr Symonds and Mr Idris said high oil prices will provide momentum for consolidation in the airline industry and help create better capitalised and stronger companies.
But the industry's biggest concern is the fall in travel because of the financial crisis, which is forcing companies as well as individuals to tighten belts and forgo unnecessary trips.
Mr Andrew Herdman, director-general of the Association of Asia-Pacific Airlines, said he expects travel to improve over the next 5-10 years. -- AP