Philippines, Thailand most exposed to aviation slump — think tank

  Asia News Network   By Ian Nicolas P. Cigaral, Philippine Daily Inquirer

Oxford Economics cites the outsized role international arrivals play in both countries’ growth and employment. 

MANILA – Oxford Economics said the Philippines and Thailand appear especially vulnerable to an aviation downturn driven by higher jet fuel costs, citing the outsized role international arrivals play in both countries’ growth and employment. In a note to clients, Sheana Yue, senior economist at Oxford Economics, said the nature of aviation risk varies across Asia. “Higher oil prices typically dampen travel demand through higher airfares, but refined aviation fuel shortages could limit capacity even where demand is still resilient,” Yue said. “Flight capacity might be rationalized due to fuel constraints,” she added. Last month, President Marcos told Bloomberg news that grounding planes is a “distinct possibility” due to a jet fuel shortage triggered by the war in the Middle East. Marcos also warned that long-haul flights could become “a much more serious problem” due to the restrictions.

Sufficient supply

Energy Secretary Sharon Garin previously said airlines had assured her they have sufficient fuel orders. Flag carrier Philippine Airlines (PAL) said it has secured enough jet fuel “for the foreseeable future,” including the requirements for long-haul flights. Meanwhile, budget carrier Cebu Pacific secured fuel stocks sufficient to last until end-April and was working to build additional reserves for May and beyond. Yue said that although long-haul routes are more fuel-intensive, airlines appear to be prioritizing these routes given their higher yields, greater contribution to network connectivity and importance for maintaining market share. Instead, short-haul and domestic routes, where demand is more price- sensitive and substitution options are greater, have been cut first, she added.

Labor-intensive

“However, if fuel constraints persist, even long-haul capacity could eventually come under pressure, particularly for leisure-heavy routes linking Southeast Asia to Europe and the US,” Yue said. “Given the labor-intensive nature of tourism supply chains, these constraints could rapidly spill over into broader services activity, such as accommodation, retail, and domestic transport,” she added. INQ