Fuel costs had risen from 40% of operating expenses to 50%, while the group hedged 36% of fuel needs in the first quarter and 50% in the second.
PETALING JAYA: Lufthansa’s move to shut its regional unit CityLine on April 19 is raising questions over whether rising costs could also pressure airlines in Malaysia.
Aviation experts told theSun that the shutdown is less a sign of imminent collapse here than a warning that prolonged cost pressure could push up fares and cut flights.
Aviation consultancy Endau Analytics founder Shukor Yusof said such closures generally point to a basic commercial problem.
“It usually indicates the airline is unable to make money. One recent example is Jetstar Asia which exited Singapore in 2025 as it couldn’t sustain its business.
“Continuously rising jet fuel leads to two things: raised fares, reduction in flights, staff suspension without pay and finally complete shutdown if working capital is exhausted,” he said.
Shukor added that the cost squeeze would not affect all Malaysian carriers equally, as some are better positioned than others to absorb the impact.
In a Bernama report on April 5, Malaysia Aviation Group (MAG) group chief executive officer Captain Nasaruddin A. Bakar said fuel costs had risen from 40% of operating expenses to 50%, while the group hedged 36% of fuel needs in the first quarter and 50% in the second.
Fuel hedging refers to airlines locking in part of their fuel costs in advance to cushion against sudden price spikes.
Against that backdrop, Shukor pointed to Firefly as a weak point within MAG that needed urgent attention, even as he said MAS itself was in its strongest financial position in the past 25 years.
He added that AirAsia remained important to tourism and domestic connectivity, but its financial position was still under strain.
“AirAsia is privately run and key to Malaysia’s tourism. Its balance sheet is currently weak. It needs help, because the country is divided by water so air connectivity is vital.
“Petronas, MAHB and others have to do their parts to strengthen domestic aviation.”
On April 6 at a media briefing, AirAsia X group CEO Bo Lingam said the group had not hedged fuel, saying that it lacked the financial flexibility to do so and that fuel prices had effectively doubled, with fares had been raised by between 30% and 40% as jet fuel prices climbed.
Universiti Kuala Lumpur Malaysian Institute of Aviation Technology economist Assoc Prof Major Dr Mohd Harridon Mohamed Suffian said Malaysia was not insulated from the same geopolitical and cost pressures affecting the global industry.
He said the likelier impact here would come through pricing and network adjustments rather than an overnight shutdown.
“There would be simultaneous negative repercussions upon airlines. Fares would be increased in accordance with the degree of increase of the risk premium attached to crude oil.”
He said airlines were also likely to cut unprofitable routes and reduce frequencies where load factors no longer justified the cost.
“Load factor plays an important role to the financial sustainability of the airlines. Low load value upon certain flights would render these flights unprofitable and it is sensible to eradicate these routes before the majority of the operational costs overwhelms the revenues.”
