Currently, flights to many popular Asian destinations remain significantly higher than pre-pandemic levels. For example, round-trip flights from London to Tokyo have surged from an average of £400 (~$510) pre-pandemic to over £700 (~$900) even with long layovers—a 75% increase. Similarly, flights from New York to Singapore now cost around $1,500 on average, up 67% from the previous $900. Flights from Melbourne to Bangkok have seen a dramatic jump from A$500 (~$320) to A$850 (~$550), a 70% increase.
This surge in cost can be attributed to a combination of factors impacting the airline industry. This article delves into the primary reasons behind the elevated airfares and what you can expect in the near future.
1 — Rising demand
Despite the high costs, demand for air travel remains robust. The post-pandemic travel boom has seen a dramatic surge in leisure travel. This strong demand, coupled with limited capacity, has kept airfares high. Some routes and regions, particularly long-haul international routes to popular destinations in Asia and the Pacific, are experiencing especially higher fares.
As airlines struggle to keep up with this demand, the basic economic principle of supply and demand comes into play. With no incentive to lower fares, airlines continue to price their offerings higher, especially during peak travel periods.
2 — Limited capacity and staff shortages
While demand has surged, the commercial aviation industry is still in the process of fully restoring flight capacities to pre-pandemic levels.
In 2024, airlines are still grappling with staffing shortages, supply chain disruptions, and other operational challenges. Many furloughed pilots, flight attendants, and ground staff found alternative employment or took early retirement. This has led to increased competition for skilled workers—airlines have had to offer higher wages and better benefits to attract and retain employees. Even as airlines work to increase the number of available flights, the process is gradual due to the time needed for rehiring staff, retraining, and ensuring grounded aircraft are flight-ready.
These factors limit their ability to rapidly increase flight frequencies and seat capacity on routes to and within Asia. With fewer flights, airlines charge more for the plane tickets that are available.
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3 — Strong economic recovery in Asia
Asia’s economies have rebounded strongly from the effects of the COVID-19 pandemic. Many countries, particularly economic powerhouses like China, India, Japan, and South Korea, have seen rapid economic growth and revitalization. This economic revival has translated into a surge in travel demand, both for business and leisure purposes.
As people regain confidence and disposable incomes, they are increasingly eager to travel within the region and internationally. Popular tourist destinations such as Thailand, Indonesia, and Vietnam are experiencing a flood of visitors, driving up airfares on the most crowded routes.
Airlines, competing in a rapidly growing market, are capitalizing on the economic recovery. The surge in tourism demand allows them to keep prices high, knowing travelers are willing to pay more to visit their favorite locations. They are also investing in newer, more efficient aircraft and enhancing their services. While this trend benefits travelers in the long run, it comes with high initial costs that airlines offset by maintaining higher ticket prices.
4 — High fuel prices
Fuel accounts for around 20%-30% of airline expenditures, and this proportion is larger for long-haul carriers.
The jet fuel market is notoriously volatile, influenced by various factors such as geopolitical tensions, natural disasters, and changes in global oil production. This volatile nature of fuel prices directly impacts airline operating costs and the price we pay for flight tickets. Elevated fuel costs are inevitably passed on to consumers.
The average crude oil price in 2023 remained high at around $82.5 per barrel due to oil supply restrictions caused by Russian sanctions and increasing air travel demand. The high cost of fuel is exacerbated by the crack spread (the premium paid to refine crude oil into jet fuel), which is expected to average 30% in 2024.
Long-distance flights, such as those from North America or Europe to Asia Pacific, consume significantly more fuel than short-haul flights within the APAC region. As a result, rising fuel prices have a more pronounced effect on the cost of flights Western travelers take to Asia.
To manage fuel price volatility, many airlines engage in fuel hedging, a financial strategy that locks in fuel prices for a specified period. While hedging can provide some stability, it is not foolproof. If fuel prices drop significantly after a hedging contract is in place, airlines may end up paying more than the market rate, which can still affect airfares.
Airlines are investing in newer, more fuel-efficient aircraft to reduce fuel consumption and mitigate the impact of rising fuel prices. Modern aircraft, such as the Boeing 787 Dreamliner and Airbus A350, offer improved fuel efficiency, helping airlines control operating costs and keep airfares more competitive.
5 — Airport and handling fees
While airport charges and ground handling fees contribute a relatively small portion to the overall cost of air travel (around 4%- 8% of the airline cost base), recent increases in these fees across major airports in Asia have contributed to rising flight prices.
Airports have been raising fees to recoup losses incurred during the pandemic. These fees include landing charges, parking fees, passenger service charges, and security fees. For instance, major hubs like Kuala Lumpur International Airport (KLIA), Tokyo’s Narita Airport, Singapore’s Changi Airport, and Hong Kong International Airport have implemented higher charges. Travelers departing from KLIA to other ASEAN countries now have to pay RM73 ($15.50), up from the previous RM35 ($7.50) — a significant 108% increase.
Airlines often pass on these increased costs to consumers, either directly through higher ticket prices or indirectly through additional fees and surcharges.
6 — Inflation and high interest rates
As global economies grapple with elevated inflation rates, the aviation industry has not remained immune to its effects.
Currency fluctuations usually impact airlines’ operating costs. In 2023 and 2024, Asian currencies generally depreciated against the US dollar. This depreciation, driven by higher US interest rates and investor preference for US assets, has posed significant challenges for commercial aviation. The cost of purchasing goods and services in Asia has increased for airlines, including expenses such as fuel, ground handling, and airport fees, which are often denominated in local currencies. Consequently, airlines operating routes to Asia face higher operational costs, leaving them no choice but to raise airfares on these routes.
Additionally, economic policies aimed at controlling inflation, such as interest rate adjustments, also play a role. Central banks in Western countries may raise interest rates to curb inflation, leading to higher borrowing costs for airlines. These increased financial costs can further exacerbate the overall expense burden, compelling airlines to raise ticket prices.
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6 — Inflation and high interest rates
As global economies grapple with elevated inflation rates, the aviation industry has not remained immune to its effects.
Currency fluctuations usually impact airlines’ operating costs. In 2023 and 2024, Asian currencies generally depreciated against the US dollar. This depreciation, driven by higher US interest rates and investor preference for US assets, has posed significant challenges for commercial aviation. The cost of purchasing goods and services in Asia has increased for airlines, including expenses such as fuel, ground handling, and airport fees, which are often denominated in local currencies. Consequently, airlines operating routes to Asia face higher operational costs, leaving them no choice but to raise airfares on these routes.
Additionally, economic policies aimed at controlling inflation, such as interest rate adjustments, also play a role. Central banks in Western countries may raise interest rates to curb inflation, leading to higher borrowing costs for airlines. These increased financial costs can further exacerbate the overall expense burden, compelling airlines to raise ticket prices.
7 — Closed airspace
The ongoing geopolitical conflicts and resulting airspace closures have significantly impacted flight routes and costs for travel between the West and Asia in 2024.
The obvious example here is the Russian invasion of Ukraine. Since February 2022, most Western airlines have been barred from using Russian airspace for overflights to Asian destinations. This has forced carriers to take longer routes, adding substantial flight times and fuel burn on routes between Europe/North America and North Asia.
For example, flights from Europe to North Asia now have to circumvent Russian airspace by flying further south, increasing flight times by 30-40%, according to some estimates. The airspace closure has resulted in higher fuel costs for affected airlines—then passed on to consumers through higher fares. Some carriers, like Finnair, have had to drastically reduce capacity on Asia routes due to inefficient routings.
At the same time, major Asian airlines from China, India, UAE, and Qatar continue to use Russian airspace (their home countries have not imposed airspace restrictions), which gives them a significant competitive advantage on these routes.
8 — Push for greener aviation
In 2024, the aviation industry faced increasing pressure to reduce its environmental impact, leading to significant changes in operations and increased expenses.
Airlines are now investing heavily in sustainable technologies to reduce carbon emissions. This includes purchasing newer, more fuel-efficient aircraft, developing sustainable aviation fuels (SAFs), and implementing carbon offset programs. These investments come with substantial upfront costs. For instance, Boeing and Airbus have both introduced new models with improved fuel efficiency, but these aircraft come at a premium.
Additionally, sustainable aviation fuels are currently more expensive than traditional jet fuels due to limited production and higher manufacturing costs. Airlines incorporating SAFs into their fuel mix face higher fuel bills, adding an extra $2.4 billion to the industry’s expenses in 2024.
These green initiatives, while essential for long-term sustainability, have immediate financial implications for airlines. The associated costs are inevitably reflected in the pricing of tickets. For long-haul flights from the West to Asia, which consume more fuel, the impact is particularly pronounced. A report by the International Council on Clean Transportation (ICCT) noted that the cost of implementing sustainable practices could increase airfares by up to 10-20% on certain routes in the coming years.
9 — Consolidation within the airline industry
The wave of consolidation within the airline industry, particularly in the Asia-Pacific region, is a significant factor contributing to high flight prices to Asia. As airlines merge and acquire competitors, reduced competition has allowed them to raise fares and fees with fewer constraints.
One of the most notable consolidations impacting flights to Asia is the proposed merger between Korean Air and Asiana Airlines. After facing regulatory hurdles, this merger is expected to be finalized in 2024, creating a dominant player in the South Korean market. With fewer competitors on routes between the West and major Asian hubs like Seoul, the combined entity will have greater pricing power, potentially leading to higher fares for travelers.
Similarly, India’s Tata Group’s ongoing efforts to merge its airline brands (Air India, Vistara, AirAsia India, Air India Express) will give Tata a significant market share on domestic and international routes to and from India. This reduced competition will likely drive up prices.
As the industry continues to consolidate, travelers may face higher prices unless regulatory authorities intervene to promote competition on these vital international routes.
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Will flight prices keep rising?
In the short term, the factors driving high prices are likely to persist. High travel demand, especially post-pandemic, shows no signs of abating. This demand, coupled with limited capacity due to staffing shortages and operational challenges, will continue to pressure airlines to keep prices high.
Additionally, as economic recoveries in Asia remain robust, the strong demand for both leisure and business travel will sustain elevated airfares.
Fuel prices, a significant component of airline costs, are expected to remain volatile. Geopolitical tensions and global supply issues suggest that fuel prices will not see a significant drop in the near future. The overall high cost of fuel will likely keep airfares elevated.
While flight prices to Asia are likely to remain high in the short term due to persistent demand, limited capacity, and high fuel costs, there is potential for stabilization in the medium to long term. Increased capacity, technological advancements, regulatory interventions, and geopolitical resolutions could all contribute to moderating flight prices. However, these changes will take time, and we should expect gradual rather than immediate relief.
