Asia-Pacific low-cost carriers (LCCs) grew at an average of 22.5 per cent between 2000 and 2025 and now account for one-third of all capacity – “with significant sub-regional variations”. They are now grappling with the fallout from the war in Iran, in particular a “fuel cost shock”.

According to OAG in its March 2026 Supplementary: The Middle East Conflict – a New Aviation Crisis, released alongside its March 25 regional report, “the fuel cost shock is the defining financial threat”.

“Aviation turbine fuel, which averaged US$85 to US$90 per barrel in early 2026, surged to US$173.91 by March 9, nearly doubling within weeks.

“For Asia-Pacific carriers, where fuel accounts for 30 to 40 per cent of operating costs, and net margins were already projected at just 2.3 per cent for 2026, this is a potentially catastrophic shock.”

OAG added that most airlines entered the year with limited fuel hedging.

At an LCC panel discussion at the recent Aviation Festival Asia in Singapore, speakers noted varying degrees of demand slowdown, with fare adjustments already taking effect. Refuelling bans in China, Thailand and Vietnam have also emerged as a challenge.

AirAsia Cambodia, which started operations in May 2024, is currently operating only flights to Kuala Lumpur, according to CEO Vissoth Nam.

In India, where aviation is heavily regulated, Kamal Hingorani, chief customer officer at SpiceJet, said there were “no foreseeable shifts in fuel prices”, and as of end-March, operations to South-east Asia have yet to be affected.

While bookings for Japanese longhaul LCC Zipair during the Sakura season are “sold out” until mid-April, the situation is changing daily, CEO Yasuhiro Fukada shared.

Fuel procurement is handled by parent company Japan Airlines, and hedging policies may need to be reviewed if fuel costs continue to rise.

Staff, he added, are studying options in what he described as a “slow-demand market” and acknowledged ongoing challenges. “If left with no choice, Zipair may have to suspend operations to be accountable to our customers.”

Expansion plans through to 2030, however, remain in place.

Nam said AirAsia Cambodia – the leading carrier in the country and part of AirAsia Group’s growth strategy – plans to increase its fleet from two to 15 aircraft and expand to Europe via Bahrain.

SpiceJet, according to Hingorani, expects to operate 50 aircraft by the end of 2026 and is targeting 20 per cent “responsible growth” alongside network expansion.

Zipair is targeting a fleet of more than 20 aircraft, up from 11, to stimulate demand among younger travellers seeking lower-cost options.

For LCCs, the use of technology is becoming central, from data analysis and order fulfilment via WhatsApp to AI tools that optimise pricing, manage disruptions, and provide real-time information to crew and ground staff.

Hingorani also called for greater collaboration with governments on policy to enable profitable growth across tier one, two and three cities, supported by India’s US$2.5 billion infrastructure investment planned over the next 10 years.

Nam aims to accelerate the use of AI to support profitability and safety decisions, while Fukada is focused on advancing Zipair’s “reasonable price approach”.