Southeast Asia’s low-cost airlines are expecting some relief from the fuel shock triggered by the Middle East conflict but continue to face a difficult second half of 2026 as high costs squeeze margins and household financial pressures weigh on travel demand.

Recent quarterly results from Malaysia’s AirAsia, Singapore Airlines’ low-cost subsidiary Scoot and the Philippines’ Cebu Pacific highlighted the challenge. Efforts to offset higher fuel expenses through increased fares were insufficient, with AirAsia and Cebu Pacific reporting net losses and Scoot’s operating loss nearly doubling from a year earlier.

The results underline a key vulnerability in the low-cost airline model. Fuel represents a larger portion of expenses for budget carriers than for many full-service airlines, while their price-sensitive customers limit how much fares can be increased without risking weaker demand.

Currency movements have added to the strain. The Malaysian ringgit, Thai baht, Indonesian rupiah and Philippine peso all weakened against the US dollar, raising the cost of fuel and aircraft leases, which are generally denominated in dollars.

“The second quarter was the most challenging operating environment Cebu Pacific has faced post-pandemic,” CEO Mike Szucs said during an earnings call this month.

Cebu Pacific’s fuel costs more than doubled from a year earlier, another company executive said, with the impact intensified by an 8% depreciation in the peso. The airline has hedged about 30% of its third-quarter fuel requirements at less than $120 per barrel to provide some protection against further price volatility.

Full-service carriers have been in a stronger position because of continued demand from premium travellers following the pandemic, according to Nathan Gee, head of Asia-Pacific transportation research at BofA Global Research. Budget airlines have benefited less from that trend because of their simpler service offerings and smaller loyalty programmes, he said.

AirAsia is preparing for a challenging third quarter, traditionally the weakest period for regional travel. The airline plans to reduce seat capacity by 20% to 25% year on year, return 25 older aircraft to lessors during 2026 and suspend its Sydney-Kuala Lumpur service from October as part of a wider network adjustment.

CEO Bo Lingam said AirAsia was taking a “deliberate, tactical approach” to protect profitability after average jet fuel prices reached $183 per barrel in the second quarter. The airline also recorded a net foreign exchange loss of approximately $82 million.

Lingam said AirAsia expects to restore capacity to pre-war levels during the fourth quarter, with forward bookings broadly tracking last year’s levels.

Scoot, meanwhile, has continued expanding capacity as passenger demand remains strong. However, its passenger unit costs increased 21.7% in the three months to June. As a result, the airline’s operating loss widened to S$32 million ($25.2 million), from S$17 million a year earlier, despite higher fares and fuel-hedging protection through parent company Singapore Airlines.

The higher costs pushed Scoot’s break-even load factor to 100%. That means the carrier would have needed every seat occupied to cover passenger operating expenses, compared with an actual load factor of 90.6%.

Scoot Chief Commercial Officer Calvin Chan said the airline’s fare increases had not fully compensated for higher fuel prices, while continued conflict in the Middle East was adding uncertainty to the outlook.

Lower fuel prices could provide immediate relief to airlines, but they could also encourage carriers to restore capacity and compete more aggressively on fares, Gee said.

He added that intra-Asian routes could face particular pressure because supplies of narrowbody aircraft are recovering faster than those of widebody aircraft. Additional capacity could therefore emerge at a time when passenger demand is weakening.

Independent aviation analyst Brendan Sobie also warned that tighter household budgets could reduce travel among Southeast Asia’s middle class during the remainder of the year, including the crucial peak travel season.

“The short-term outlook is rather bleak,” Sobie said, adding that although there is potential for improvement in the fourth quarter, it remains too early to assess the strength or timing of any recovery.

Source: QCAA

Saudi Arabia’s Air Connectivity Programme (ACP) has signed a cooperation agreement with Delta Air Lines aimed at expanding direct air links between the Kingdom and the United States.

The agreement, signed during WTM Spotlight Riyadh, supports plans for Delta to introduce direct flights between Riyadh and Atlanta. The new connection is expected to give US travellers greater access to Saudi Arabia while providing additional travel options between the two countries.

The planned service is expected to provide more than 85,000 round-trip seats each year and will be operated with Airbus A350 aircraft.

ACP CEO Ahmed Albrahim said the partnership represents an important step in strengthening direct connectivity between Saudi Arabia and the US.

According to Albrahim, the Riyadh-Atlanta route will also connect travellers to Delta’s broader North American network, improving access to Saudi Arabia from key international markets.

He said partnerships with major global airlines support ACP’s strategy of developing routes with significant strategic and economic value. Such connections, he added, can provide passengers with access to wider international networks rather than serving only as direct links between two cities.

Albrahim said ACP will continue working with aviation and tourism partners to attract more international airlines and increase seat capacity from priority markets.

The agreement is part of Saudi Arabia’s broader efforts to expand international air connectivity, establish direct links with key markets and advance the Kingdom’s tourism and aviation objectives under Vision 2030.

Source: ZAWYA

Dubai Airports expects Dubai International Airport (DXB) to handle about 70 million passengers in 2026, a significant reduction from its earlier forecast of nearly 100 million, CEO Paul Griffiths said on Thursday.

The revision follows the Iran war and temporary closures of Gulf airspace, which disrupted flight operations across the region and forced the airport operator to abandon its previous passenger target.

DXB recorded 31.5 million passengers during the first half of 2026, compared with 46 million in the same period a year earlier. Griffiths said airport capacity has since recovered to 84% of pre-war levels, while passenger volumes have reached 78%.

The expected return of several European airlines that suspended regional services because of the conflict has helped underpin the revised outlook. Griffiths said he expects operations to be "pretty much back" to normal by the end of the year.

He added that both transfer and point-to-point travel markets remain strong, while business travel continues to perform well.

India, Saudi Arabia and the United Kingdom continue to be Dubai's leading passenger markets, according to Griffiths.

Looking beyond 2026, he said advances in smaller, longer-range aircraft could enable DXB to expand its network further. The airport currently has direct connections to around 240 cities, a figure that could rise by mid-2027.

Griffiths said Dubai Airports is already in discussions with airlines about launching routes between Dubai and cities in Europe and Africa that currently have no direct services.

The disruption caused by the conflict could also influence the design of Dubai's planned new airport, he said, with possible changes aimed at making the facility more resilient to future disruptions.

Source: ZAWYA

Prince Mohammad bin Abdulaziz International Airport in Madinah has secured Level 2 Airport Customer Experience Accreditation from Airports Council International (ACI World), highlighting ongoing efforts to enhance services and improve the passenger journey.

The accreditation was granted under ACI World’s Airport Customer Experience Accreditation programme, which promotes best practices in understanding passenger needs, measuring satisfaction and improving service quality.

The recognition reflects the airport’s efforts to strengthen customer experience across its facilities and improve the quality of services provided to travellers.

The initiative also supports the development of Saudi Arabia’s air transport sector and aims to enhance services for visitors to Madinah, including pilgrims and Umrah performers, in line with the objectives of the Aviation Programme and Saudi Vision 2030.

Source: SPA

Oman’s airports handled a total of 7,689,967 passengers, including arrivals, departures and transit travellers, during the first seven months of 2026, according to data from the National Centre for Statistics and Information (NCSI).

The figure was 8.1% lower than the 8,366,273 passengers recorded during the same period in 2025.

International flights arriving at and departing from Muscat, Salalah and Sohar airports totalled 45,904 by the end of July, down 9.5% from 50,747 flights a year earlier.

Muscat International Airport

Muscat International Airport handled 49,315 international and domestic flights through July 2026, representing a 7.3% decline from 53,170 flights during the corresponding period of 2025.

Passenger traffic fell 8% to 6,855,942, compared with 7,453,204 passengers a year earlier.

International flight movements decreased 8.4% to 43,970 from 47,986, while international passenger traffic declined 9% to 6,164,584.

Domestic operations, however, recorded growth. Domestic flights increased 3.1% to 5,345 from 5,184, while domestic passenger traffic rose 2% to 691,358 from 677,837.

During July 2026, Omani nationals accounted for the largest share of incoming and outgoing passenger traffic at Muscat International Airport, with 204,591 travellers, including 95,111 arrivals and 109,480 departures.

Indian nationals ranked second with 169,751 passengers, comprising 99,958 arrivals and 69,793 departures. Bangladeshi nationals followed with 46,665 passengers, including 23,171 arrivals and 23,494 departures.

Salalah Airport

Salalah Airport recorded 5,569 international and domestic flights through July, down 5.3% from 5,881 flights during the same period last year.

Passenger traffic declined 8.4% to 797,620 from 870,616.

International flight movements dropped 30.8% to 1,864 from 2,693, while international passenger numbers fell 32.9% to 246,257 from 367,168.

Domestic operations moved in the opposite direction. Domestic flights increased 16.2% to 3,705, while domestic passenger traffic grew 9.5% to 551,363 from 503,448.

Sohar and Duqm Airports

Sohar Airport handled 122 international and domestic flights through July, down 6.2% from 130 flights in the same period of 2025.

Passenger traffic decreased 24.6% to 5,150 from 6,831. International flights rose 2.9% to 70 from 68, although international passenger traffic dropped 33.2% to 199.

Domestic flights declined 16.1% to 52, with domestic passenger traffic falling 24.2% to 4,951.

At Duqm Airport, domestic flight movements decreased 9.4% to 326 from 360. Passenger traffic also declined 12.3% to 31,255 from 35,622 during the corresponding period of 2025.

Source: QCAA