The mainstream news media has been reporting that airlines are suspending some air services due to fuel shortages, but it is far more complex than that.

It is correct that in Asia there are airlines that have scaled back flights to ration fuel. Examples include some Bangladesh and Philippine carriers. These countries rely on imported fuel, largely from the Middle East, and reports suggest these nations have in sufficient stockpiles of jet fuel to deal with unforeseen market shocks.

But there are many countries in Asia and around the world that are not so dependent on Middle Eastern fuel supplies.

The issue – for airlines grappling with higher fuel prices – is they are unable, in most instances, to pass higher prices onto consumers due to a faltering economy.

Asian countries that were already experiencing less than two percent economic growth per annum, prior to the oil crisis, include: Japan, Korea and Thailand. Higher fuel prices are now setting off an economic malaise across the region and the globe.

Airlines are unable to absorb higher fuel costs, because fuel already accounted for 30-40 percent of an airline’s cost base prior to the fuel price hikes.

When the economy is strong, airlines can pass on higher fuel costs by increasing air fares. But the poor economic climate means higher fares causes passenger demand to suddenly drop.

The only solution is to suspend some flights, to reduce overall capacity in the market, so as to meet lower passenger demand. This is why many airlines are reducing flights.

Consumers will continue to fly, but they will be more selective and fly fewer times per year. Travelling to visit friends and relatives (VFR) will be the top priority. If people do decide to travel purely for leisure, they will opt for short-haul destinations rather than long-haul.

For Asian leisure travelers, North America and Europe – once popular destinations – are now increasingly ‘no go’. Cheaper holiday destinations closer to home will now become far more attractive.

Feature picture, from economyindia.co.in , shows Indian workers.