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Higher Fuel Costs Might Make Asia Pacific Carriers a Little Less Luxurious

Recent OPEC production cuts reportedly have Asian airlines, long known for lavish service, considering a decidedly more North American-style business model.

The threat of rising fuel costs may soon mean last call for complimentary drinks and other perks on some of the very Asia Pacific airlines that have built their reputations based on inflight opulence. Industry analysts say that the experience of flying on Pacific Rim legacy carriers such as Cathay, Singapore Air and Qantas will change drastically as rising jet fuel prices put pressure on the airlines to protect the bottom line.

A Bloomberg report this week found that North American airlines far outperform their Asia Pacific based counterparts when it comes to earning money. According to data from the International Air Transport Association (IATA), profit margins for North American airlines are nearly double that of their Asia Pacific counterparts. As fuel costs rise in reaction to announced OPEC production cuts, those underperforming airlines are said to be much more open to a move to a fee structure that charges extra for everything from seat selection to in-flight entertainment and of course, cocktails.

In fact, some Asia Pacific airlines have already experimented with instituting policies like baggage fees and à la carte dining menu prices that closely mirror the way North American carriers do business. “More full-service airlines in Asia Pacific might consider doing the same,” aviation consultant Mathieu De Marchi told Bloomberg’s Angus Whitley.

Analysts say that moving to more fuel-efficient aircraft and hiking ticket prices might not be enough to keep some of the biggest Asia Pacific airlines profitable. A new business model could be required to keep these airlines in the black.

While the legacy carriers in question have survived historically high fuel prices in the past, this time the airlines are facing stiff competition from low-cost carriers that use ancillary fees to help insulate profits from the toll jet fuel price fluctuations have on earnings. The temptation to find other revenue sources from previously complimentary services may finally be too much to resist.

[Photo: Shutterstock]

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