A 900% fare hike shows why Asian airlines like SIA can weather Middle East chaos

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Hong Kong - Asian carriers such as Singapore Airlines and Cathay Pacific Airways are among the best positioned airlines to weather the war in the Middle East as travellers scramble for flights – and pay huge premiums – to escape the conflict.

Asian airlines have emerged as one of the go-to choices for people leaving the Middle East in the wake of the

US and Israeli strike on Iran

.

Extensive airspace closures mean carriers like Emirates and Qatar Airways have almost ground to a halt, creating opportunities for rivals that can fly non-stop between Europe and Asia.

Passengers in European hubs are handing over huge sums of money to secure a seat to Asia on flights that bypass the Middle East.

A one-way economy ticket flying by SIA from Heathrow to Singapore on March 5 costs HK$66,767 (S$10,900) – a 900 per cent increase on fares later in the month. The same ticket on a flight to Hong Kong is HK$26,737, compared with HK$5,670 in just a few weeks from now.

But it is unclear how long such sky-high fares, which are also helping absorb the surge in oil prices resulting from the war, will last.

While prolonged disruptions would underpin higher fares for longer, a resolution to the conflict likely comes with a swift resumption of operations for the region’s carriers given the Middle East’s critical importance to global travel and trade flows. 

“Asian airlines may see a short-term combination of higher fares, stronger cargo yields and modest market share gains,” said Mr Linus Benjamin Bauer, founder of aviation advisory firm BAA & Partners. “But this is fundamentally a redistribution of traffic, not a structural rebalancing of global aviation networks.”

Suspension of regular services by dominant Gulf carriers Emirates, Qatar Airways and Etihad since Feb 28 removed over 10 per cent of daily international flight capacity, as measured in available seat kilometres, according to consultancy OAG Aviation.

According to Cirium, more than 23,000 flights have been cancelled

through March 5. While a limited number of evacuation flights from the United Arab Emirates have been allowed, airspace across the Gulf including Qatar, Iran and Iraq remains closed to regular air traffic.

Middle Eastern hubs like Dubai, Abu Dhabi and Doha are key stopover points for long-haul travel.

The Gulf’s biggest airports handle about a third of the 125 million people who travel between Europe and Asia each year, according to Roland Berger data. That has hammered global aviation stocks, though hopes of a fast resolution to the war offered some recent relief.

The major Middle Eastern carriers are not publicly listed but British Airways’ owner IAG was down almost 9 per cent this week, Deutsche Lufthansa fell 7.7 per cent and Air France-KLM tumbled 15 per cent. Meanwhile, SIA has lost less than 7 per cent and Cathay is down just 5.5 per cent.

Chinese carriers may also be well positioned to increase passenger numbers in the absence of the Middle Eastern airlines. 

The likes of Air China and China Eastern Airlines have already been increasing flights to Europe by using Russian airspace – a route that many rivals have suspended since the invasion of Ukraine, choosing instead to fly between Asia to Europe via Azerbaijan and Georgia. 

Asia stopovers

For some travellers, the sudden attacks will kick-start a longer-term rethink of which routes they take.

Registered nurse Aiden McAleenan, 28, had his plans to relocate to Melbourne from Britain thrown into disarray when Qatar Airways cancelled his flight on March 3. 

He was able to rebook with a stopover in Kuala Lumpur on March 4 and said he is reluctant to fly via the Middle East.

“The stopovers in Asia do look more interesting. In future, I would look at the big hubs in Asia for peace of mind or not being stranded at the airport,” he said.

Association of Asia Pacific Airlines director-general Subhas Menon said: “The security situation counts for a lot.

“Clearly the Middle East airlines are under pressure. They definitely will be quite badly affected if this situation is prolonged, while Asian carriers don’t have a security situation so their hubs are in a good place.”

Overall though, industry watchers say consumers are likely to return to the Middle Eastern carriers when safe travel is ensured.

The connectivity of airlines’ home airports will continue to be a major selling point, as will their competitive pricing and high-quality service offerings. 

“Drawing on recent incidents, airspace closures following previous attacks did not meaningfully translate to a shift away from the affected country once operations normalised,” DBS Bank analysts Tabitha Foo and Jason Sum said. 

“While the scale of the current closures is broader and potentially more disruptive, history suggests that traffic flows tend to revert once airspace reopens.” BLOOMBERG