PETALING JAYA: BIMB Research has suspended its call on AirAsia X Bhd
(AAX) just two weeks after initiating coverage on the company on developing concerns in the aviation sector.
The research house said major jet kerosene benchmarks have risen 53% to 54% since last Friday’s close, just prior to the US–Israel war with Iran, and volatility had been extreme.
Singapore jet kerosene, meanwhile, has spiked by 54% from last Friday close to US$145.80 per barrel and reached an intraday high of US$193.80 per barrel ,which is a historical high.
“The speed and magnitude of this move are unprecedented in recent aviation history. The developments in the oil market are extraordinary even compared with the 2008 global financial crisis, the European debt crisis and the Covid-19 crisis,” it said.
AAX carries no fuel hedges, meaning it absorbs any cost surge fully, it noted.
“Our financial year 2026 (FY26) forecast assumed jet fuel at US$96 per barrel, with every US$1 per barrel increase reducing earnings by roughly 7%, all else being equal.
“With jet fuel rising by roughly US$45 per barrel in four days, the entire cost equation has shifted dramatically. In practical terms, it is difficult to see airlines making money this week, except for the minority that entered this period with meaningful fuel hedges,” it said.
A fuel surcharge is expected to be announced imminently, as per management’s indication, BIMB Research said.
“Our estimates suggest that every RM1 increase in FY26 unit revenue per passenger boosts earnings by roughly 13%. But offsetting the recent fuel spike, would require fares to rise by about RM24 per passenger, equivalent to roughly 7.5% above FY25’s average fare, which we view as difficult to achieve immediately,” BIMB Research said.
Airlines can manage high fuel prices, but extreme fuel price volatility is far harder to absorb, it noted.
Seats being flown were largely sold weeks or months ago when fuel prices were far lower, BIMB Research said.
“Airlines, therefore, face a mismatch where revenues are fixed while fuel costs surge, leaving little scope to recover losses on already-sold inventory.
“If elevated fuel prices persist, AAX is likely to face material earnings pressure in the coming quarters,” it cautioned.
