AirAsia CEO warns jet fuel crisis worse than Covid, pushing airlines toward collapse

Quick summary

AirAsia CEO Tony Fernandes has declared the Iran war-driven jet fuel crisis worse than Covid-19 for airlines, warning that tripling fuel costs are pushing carriers toward collapse. Jet fuel supplies have fallen to their lowest level since records began. Reports indicate airlines have cancelled thousands of flights in May, eliminating around 2 million seats globally, with Thai AirAsia X already suspending Bangkok-Shanghai and Bangkok-Riyadh routes through June 30, 2026.

Major carriers like Lufthansa are reported to be cutting tens of thousands of short-haul flights, and Aer Lingus has pulled hundreds of summer trips. Travelers with Asia-Europe bookings face cancellations, rerouting, and sharply higher fares — with limited compensation rights under fuel-shortage exemptions.

The Iran war has done what Covid couldn’t quite manage: it has broken the cost model that kept budget aviation alive. Speaking to the Financial Times on May 7, 2026, AirAsia CEO Tony Fernandes said jet fuel has risen “almost three times” since the conflict began — a cost shock he called worse than the pandemic that grounded the global fleet in 2020. “You wake up one day and your major cost has tripled,” Fernandes said. “It was quite a new experience for me and I’ve been through a lot in my life.”

The numbers behind that statement are already reshaping Asia-Pacific aviation. Jet fuel supplies have hit their lowest recorded level. Thai AirAsia X has suspended its Don Mueang–Shanghai route from April 17 and its Don Mueang–Riyadh service through June 30. Reports indicate thousands of flights have been cancelled in May alone, wiping roughly 2 million seats from global schedules — with Istanbul and Munich airports absorbing the steepest traffic drops.

Spirit Airlines collapsed earlier this week. Fernandes warned it won’t be the last.

For travelers with May through August bookings on Asia-Europe corridors, Gulf-connecting routes, or intra-Europe legs, the situation is not a forecast. It is happening now, and the compensation framework most travelers assume will protect them largely does not apply here.

What the fuel crisis has already cut — and where the gaps are

The route suspensions are not isolated. Thai AirAsia X has also reduced frequencies on Don Mueang–Tokyo Narita, Don Mueang–Osaka Kansai, Don Mueang–Almaty, and Don Mueang–Delhi corridors, with the airline notifying affected passengers 10 to 30 days before departure. Major carriers like Lufthansa are reported to be cutting tens of thousands of short-haul flights, while Aer Lingus has pulled hundreds of trips from its summer schedule — a combined capacity withdrawal that is concentrating demand onto fewer, pricier seats.

AirAsia has sold 50,000 tickets for its Kuala Lumpur–London service via Bahrain in June, though Fernandes confirmed the airline has stopped actively promoting those flights. The Bahrain hub remains operational — “unless there’s another war,” he said — but the signal is clear: long-haul commitments are being managed carefully, not expanded.

Regulatory pressures are easing at the margins, with the UK government reportedly loosening airport slot rules to help airlines manage the capacity crunch without losing valuable runway rights. It helps airlines. It does not help passengers.

For the full picture on how Europe-Asia capacity is being rationed, jet fuel shortages are projected to cut Europe-Asia flights 30–50% by June — the structural supply picture behind these individual airline decisions.

Why fuel costs are breaking the low-cost model specifically

Jet fuel typically accounts for 25–30% of an airline’s operating costs. When that cost triples, the entire pricing architecture collapses — particularly for low-cost carriers whose business model depends on thin margins at high volume. A full-service carrier like Lufthansa can absorb some shock through premium cabin revenue and hedging contracts. A carrier like Spirit, operating on $30 fares with no hedging buffer, cannot. That is why Spirit went first, and why Fernandes is warning others will follow.

The Iran war’s disruption of Middle East oil shipping lanes has removed Gulf carrier capacity from Europe routes simultaneously — which is why AirAsia is seeing a demand surge into its own network even as costs rise. Fernandes noted that “geopolitics is causing more Asians to stay in our part of the world,” and Gulf capacity removal is pushing Europe-bound traffic toward Asian hub carriers. The demand is there. The fuel to serve it affordably is not. Understanding why flights to Asia are expensive in 2026 requires seeing both sides of that equation.

Compensation rights offer little relief here. Under EU261/2004 and UK261, fuel shortages are classified as extraordinary circumstances — meaning airlines owe rebooking or refund, but not the €250–600 cash compensation passengers expect. US DOT and Canadian APPR rules don’t recognize fuel shortage as an exemption, but they also don’t mandate compensation beyond rebooking. Australian Consumer Law similarly requires refund or rebooking only.

Steps to protect your booking now

Carriers are issuing cancellation notices 10–30 days out — which means passengers on May and June departures may have days, not weeks, to act before their options narrow.

• Check Thai AirAsia X route status immediately if you hold bookings on DMK-PVG, DMK-RUH, DMK-NRT, DMK-KIX, or DMK-DEL. Call the Bangkok centre at 02-078-1094 or use the Ask Bo chatbot (24/7). Do not wait for the airline to contact you — notification timelines are tight.
• Rebook Asia-Europe routes via Qatar Airways, Emirates, or Etihad if your current routing goes through a suspended Gulf or European hub. These carriers have maintained capacity and are absorbing displaced demand — fares are rising but seats exist now.
• Understand your compensation rights before you call: EU and UK passengers are entitled to rebooking or full refund under EU261 and UK261, but fuel shortage exemptions eliminate the €250–600 cash payout. US, Canadian, and Australian passengers have rebooking and refund rights but no cash compensation entitlement regardless.
• For North America–Asia bookings, route via Tokyo (Narita or Haneda) or Singapore (Changi) rather than Gulf hubs — these connections have maintained schedule integrity and face lower suspension risk through Q3.
• Do not book intra-Europe legs as separate tickets if connecting to an Asia flight. If the short-haul leg is cancelled under extraordinary circumstances, the airline’s obligation covers only that segment — your long-haul connection becomes your problem.

Watch: The OPEC+ June 2026 production decision will determine whether this crisis stabilizes or deepens into Q3. If output increases, fares may ease by August. If cuts extend, the next wave of airline bankruptcies and route closures follows by September — and the window to rebook at current prices closes well before then.

Questions? Answers.