An Aviation Crisis – with a Twist

Subscribe  Apple Podcasts | Spotify | YouTube | RSS

In part one, Gordon and Jay unpack a whirlwind few days for the global airline industry, including fresh insights on jet fuel prices. In part two, the conversation turns to intriguing developments at Filipino low-cost carrier Cebu Pacific.

Watch This Episode

Transcript of This Conversation

This transcript is generated by artificial intelligence.

Hello, and welcome to the Airline Weekly Lounge. I'm your host Gordon Smith, and I'm joined as usual by co-host Jay Shabat. In part one, we're making sense of a busy few days of industry news.

And in part two, we turn our attention to the Philippines. Hi, Jay, how's it going?

I'm good, Gordon, how are you?

Doing very, very well. I'm on my travels this week. I got the sort of palatial splendor of a hotel room instead of my usual background in Portugal, but we're keeping the show on the road literally here because it is such a busy time for the industry.

Meghna Maharishi, who obviously is a familiar voice to many on the podcast. She's in Los Angeles today with United. I think she's expecting to get some time with Scott Kirby and Adrian Nacela, the C-suite team there.

So looking forward to some interesting news lines there. Keep an eye on Skift and Airline Weekly for that.

But Jay, we thought we'd start the show this week with just a bit of a recap on what's going on because there are a lot of issues that in a normal week, I know last week we spoke about, the airline industry is always in a state of flux.

It's just a case of how crazy it is. But there are a lot of elements just now that I think even within the airline industry are notable and they are worth just updating our listeners and our viewers on. Let's start with the fuel price.

Where are we there? Because this is a crisis, as we described last week, which some people thought it might have a sharp spike, and it might come back down to earth quite quickly with political and diplomatic solutions.

But that straight-of-home news is proving pretty tricky.

It is. And yeah, I think crisis is the right word to use, particularly if you're talking on the cost side of the industry.

Of course, the demand side of the industry is a little bit different, but I think we talked a little bit about last week, how demand is actually very strong throughout the industry. We'll talk a little bit more about that today.

So it's a little bit of a crisis, but at the same time, not everybody is experiencing it to the same degree. Okay. So you asked me about the fuel price.

So we are speaking on Tuesday, March 24th. I will refresh my browser here. The price of oil, two major indexes, indices that we use or benchmarks that we use.

WTI, which is Texas. So that's a lot of US prices are based off that benchmark. We're at 91.

So we're down a little bit from where we were. And then the Brent, which is, I would say the same majority of contracts are based off of the Brent. That is at 102.

So that's a little bit higher, but still down from where it was. So we're a bit of a better position this week, week four of the quote unquote crisis than we were a week earlier, but still very high. And that's obviously just the oil price.

The jet fuel price is a little bit harder to pin down because it can vary so much in different parts of the world and even different parts within each markets.

But using the IATA Jet Fuel Price Monitor, their latest data, they have jet fuel prices on average up 119% year on year. So we're talking about more than double there.

And you can see, if nothing else, that alone explains why we're using the term crisis here. And if I can just say one, even get more specific, we'll talk more about Cebu Pacific Airlines in this second part of our discussion here.

And the reason we'll talk about them is because they just reported their earnings. But the reason why that's relevant is because we have a very fresh perspective on what this quote unquote crisis actually means to this one individual airline.

And they said over the past two or three weeks, and by the way, Cebu is what we'll explain later for those who are new to the industry or don't know, Cebu is a low cost carrier in the Philippines.

So remember last week, we talked a lot about the US Airlines, their perspective. We get some insight from Asia now.

They said over the past two weeks, two to three weeks, jet fuel prices have increased significantly from an average of around $86 per barrel in February to a run rate of approximately 180 through the month of March.

And in recent days, I think it was talking on Monday here, in recent days, it's exceeded $200 per barrel.

Thanks for that fuel price update, Jay. Obviously, a lot of caveats, a lot more detail that we didn't get into there, but as always, a lot more detail in the next issue of Airline Weekly.

And we'll be keeping our readers abreast of other issues as well, because obviously we've got the TSA drama ongoing at US airports.

I would be remiss not to mention the Air Canada Express incident as well at LaGuardia, as we're recording here on the 24th of March. Our thoughts go to everyone involved in that situation there.

But there's also just more general drama in the industry. Some changes around Indigo's new strategy chief, United's big order. I know we'll have Meghna, as we mentioned, bringing us a lot more detail on that.

Finnair going for E2 jets. There's a lot more detail that we will get into in the next issue of Airline Weekly.

And we've also got some earnings as well coming up, Jay, because you mentioned Cebu, which we're going to preview in part two, but some big Brazilian carriers, or really only the two biggest Brazilian carriers in town.

Maybe if you exclude Latam, which is more of a South American, everywhere, anywhere player. But yeah, Gull and Azul, both reporting in the next few days.

Right, Q4 earnings tend to roll out over an extended period. Some airlines, I suppose, need longer time to put together their annual reports and whatnot.

So as you mentioned, yeah, the Brazilian carriers, the two independent ones, aside from Latam, have not yet reported and they will this week. So by the time Airline Weekly is published on Monday, we'll have all the information about that.

We're still waiting on the mainland Chinese carriers as well. At least as far as I know, I'm a little behind on my earnings updates here because I spent the entire day yesterday in the dentist chair.

So I spent the morning catching up, but I, so I don't think they reported yet. So please don't, no angry emails about, yeah, what are you talking about? You missed the Chinese earning, Chinese carriers just reported yesterday.

What are you, so I may be a little behind, but we haven't seen the big, I have not seen the big Chinese carriers report yet. So we have those, we have a few other stragglers.

What's more painful, Jay, a root canal or try to navigate the investor relations section of a Chinese Airlines website?

Oh, put, coming up with those operating margins in China, they are only published in Chinese language and have to use Google Translate and that is, yeah, that's a horse race there between what's more painful, it's a fair question.

Well, thanks for the speedy recovery. I don't know who your dentist is, but big shout out to them. And I dare say you were enjoying the Archland Saga class when you were in your dental chair.

I was, as I told you, I have read for anybody watching listening, I texted Gordon yesterday and I said, you made me laugh.

I was sitting in my chair and I was literally like laughing out loud thinking of Gordon talking about the business class that feels like a dental chair.

And so thanks for providing that little bit of lighthearted relief for me when I was under the drill there.

Literally laughing gas, organic laughing gas, there we go.

Yeah, who needs laughing gas? Just got some good Saga class jokes.

Yeah, some airline nerdy jokes, that's all you need to get through a root canal. And yeah, we're capping off Q4 here, Jay, and sort of financial year numbers or fiscal year numbers for a lot of carriers.

But believe it or not, we already have the date for Delta for their Q1 numbers.

Yeah, should we, is it too early to wish everybody a happy earning season?

It's a perennial, it's a perennial celebration at this stage.

I've decorated my house already. I've got the trees that is up and ready to celebrate. But yeah, you're not kidding.

April 8th is Delta's first quarter earnings call. So stay tuned, it's about two weeks from now. So we have a whole another round of information coming from first the US.

Airlines and some others as well will report early. We'll get a better sense of how airlines are reacting to and thinking about this, again, quote unquote, crisis.

Absolutely. Not a word that we like to use flippantly on the podcast. We like to be a little bit more measured.

But I think for most intents and purposes, our qualification for what is a crisis has been met on this occasion. So yeah, definitely more detail.

This crisis, the reason why I struggle with using that word is because, like I said before, as we've talked about, demand is so good and I'm trying to come up with a metaphor in my mind.

I haven't come up, but I just picture it's a lightning storm out and people are swimming in the beach and having a good time and what it feels like. People are still traveling.

People are obviously, with a major exception, of the area directly hit by the war, the Gulf carriers and that's obviously an exception.

But demand is, we've heard from Lufthansa and Turkish and United and Delta, now Cebu Pacific, that Cathay Pacific is another, that demand has been very, very strong. So the question, there's multiple sub-questions to that.

Is demand strong because that's demand diverted away from the Gulf? Maybe, but it's got to be more than that because even US domestic demand is very strong.

Even demand, although who knows, it could be, well, I was thinking about going to, this is more I'd say for Asia.

So Cebu Pacific, for example, they said like, I was thinking someone in Asia, maybe thinking about going on vacation in Dubai, but right now instead, they're going to travel locally to Tokyo or to Korea, somewhere within East Asia.

So that could be the driver of the demand of some of this. Could just be the economy is still pretty strong in a lot of regions and could be people just trying to get ahead of these fare increases.

Oh, let me just do the vacation now because it's going to be more expensive. If I wait two weeks, the buck could be that. I think, was it Alaska Airlines?

I can't remember. One or two airlines mentioned last week that the demand driver could be simply that last year, there was so much tariff uncertainty. People may have canceled their vacations and there's a lot of pent up demand.

So, okay, we're not canceling again this year. Who knows? We'll get a better picture of that as Q1 earning season rolls on.

Absolutely.

Delta earnings is not too far away. And lots of nuance, lots of caveats, as always, Jay. But thanks for running us through those key details.

You mentioned Cebu Pacific there. We will be discussing them in part two. But before that, quick reminder to send any questions or comments that you might have for us to podcasts at skift.com.

That's podcasts with an S at the end. And please don't forget to follow or subscribe to the podcast, whether you're listening or watching.

And if you're enjoying the show, please read us five stars or leave us a post to review so we can continue to spread the word about the Airline Weekly Lounge. Don't go anywhere. We will be right back.

Before we head into the break, we're joined by a skifter that you might not be so familiar with, and that's Adam Stacey. He's a Senior Editorial Event and Awards Producer. Oh, that's a big title.

And he's currently working on the Skift Idea Awards. Adam, welcome to the Airline Weekly Lounge.

Thank you very much. Glowing introduction.

For the benefit of listeners who aren't familiar with the Idea Awards, what are they all about?

Yeah. So, Skift Idea Awards, we're just moving into our eighth year. So the awards were launched really to recognize and celebrate the most impactful ideas across travel, just the entire ecosystem.

But I like to think of them as the travel industry's innovation, Ben Snark. You know, we all know we're at the pivotal moment of transformation for the industry, structurally, technologically, operationally.

And these are awards about spotlights in the companies and leaders who are actually driving that change.

So, you know, I'm talking about things like advancements in customer experience, AI, digital transformation, sustainability, product design, all that good stuff. And what's important with the awards as well is that it's not necessarily about scale.

So we're open to everyone because our focus is about impact. So we see submissions from startups, mid-size players, global brands, you know, individual leaders. I was like to think innovation doesn't correlate with the size of the company.

It correlates with the execution and the results that they're putting out. And that's what we are recognizing with these awards.

Totally agree. Sometimes it helps if you're a little bit more nimble, a bit smaller, you can be a little bit more disruptive than a very large corporation.

But what would you say, Adam, to an Airline Weekly Lounge listener who says, that all sounds great, but where do I fit in? Yeah.

And I'm not an airline expert, so I'm not going to tell people what to do. But I think for this audience, we have an obvious category, which is airlines and airports is specifically designed for that industry.

That could cover anything from carbon innovation, distribution strategies, emerging, advanced aimability. We're seeing all this stuff with flying taxis and this crazy stuff. But we also have categories specifically for technology.

So this industry specifically is deep into AI deployment. We're focusing on revenue optimization, workforce planning, retail transformation, data-driven personalization, and sustainability as well.

That's another area where this industry is focused on. So fleet strategy, emissions tracking, new planes, all that stuff.

So we're looking for initiatives really that just demonstrate tangible progress and are bettering the experience for the end user and the industry as a whole.

Sounds great. And if anyone's still unsure, I believe you've got a quiz as well.

We do. We do. Our marketing team, I like to call them the best in the biz.

They've come up with a quiz that you answer a couple of questions and the quiz will tell you basically which categories are the best fit. Amazing.

One new thing we've launched this year is where is that you can actually download a sample form before you submit.

So if you're entering on behalf of a client maybe, or you're not quite sure what the submission forms looks like, you can just download a PDF sample and take a look in advance.

Super, super helpful. Okay. You've got everyone interested.

What is the call to action? Where do they go next if they want to apply or learn a little bit more?

Yeah. So the next step is to just head to the website, which is hosted on live.skift.com and then you just follow through to ID Rewards. As you mentioned, we've got a quiz.

You'll find all of the categories, the sample PDFs, judges, previous winners, if you're curious to see who was made in the past and all of the relevant timelines. The submission process is very straightforward and streamlined.

It's all done remotely via our online system. You can buy now at the lowest rate and continue to add it up until the entry deadline in July. So there's no huge time commitment there.

And one thing I would say is even if you're unsure about whether your project or initiative will qualify is worth exploring, some from speaking to past winners, some of the most compelling have come from projects that they didn't think would be a

good fit, and then they've gone on to win. So yeah, if you've got a smart solution that solves a real world problem, take a look.

We'd love to hear from you. Fantastic. Yeah, sounds great.

Thanks again for coming up to the show, Adam and telling us all about it. And I can speak for myself for the Global Forum in New York last September.

We got to see for ourselves many of the iDEA Awards winners, and they are from right across the industry. It's not always who you might expect. So yeah, do check that website, ourlifed.skift.com, where you find all the details for the iDEA Awards.

Just scroll down to the bottom of the page. You'll get all the info there. Thanks to Adam for joining us on the show and listeners hang around because we'll be talking IAG right after this short break.

Hello and welcome back to the Airline Weekly Lounge. I'm Gordon Smith, joined as usual by co-host Jay Shabat. Part one, we were having a bit of a news review really, Jay.

I don't know, it was a bit of a hodgepodge, but just keeping our listeners and our viewers updated on the various big stories floating around at the moment. But we're going to drill down now. I was going to say Cebu Pacific.

Hey, don't use that word.

Hey, is it a trigger for you now after the dentist?

Yeah.

I get nightmares when I hear that. When you said that, I just heard the drilling sound.

And now, Jay, we're going to discuss Cebu Pacific because this is an airline out of the Philippines. Gained a little bit of notoriety or maybe...

I'm going to go for notoriety by packing in more people into an A350, I think it was, than any other in a very dense all economy config. I think it was more than 450 seats on the very, very dense A350.

But notwithstanding that incredible aircraft, it is actually a very interesting airline. They're doing some very interesting things.

And it's maybe one that doesn't get the appreciation for its operation, its complexity, and actually sometimes its profitability on the international scene.

I know you're in that part of the world, AirAsia and Vietjet, and some of the Japanese carriers certainly carry a little bit more international currency.

But we thought we'd give a little bit of airtime to Cebu Pacific, maybe an overlooked carrier, because they're doing some pretty interesting stuff.

459 seats on their A330 Neos.

A330 Neo? I thought it was a 350. Good grief.

459.

Wow.

Imagine how many they could get into a 350.

Yeah, wow. Yeah, or how about a 380?

There's a few in the second hand market, Jay.

All right, more seriously, you want to hear about Cebu Pacific. So yeah, Cebu Pacific is, for those who don't know, I mentioned before, they're a low-cost carrier in the Philippines. And they do, they are primarily narrow body.

They do have some ATR turboprops, but they're very heavy on the A321neo. In fact, they just purchased a, you know, made a big order, I think it was 2024.

But they do have a handful of those super densely seeded A330neos, which they actually, they mostly use those within Asia.

The reason why they have them is mostly because Manila, which is the capital of the Philippines, the airport there is just heavily, heavily slot constrained.

So, they're able to just get a lot more revenue out of the limited slot positions that they have. So, it just, it's very Cebu Pacific, specifically to them, they, it's a very, you know, they have a unique reason why they have that aircraft.

They do fly them to Australia, and they will fly them to the Gulf. They've canceled their Dubai flights, as you can imagine. They are still running their flights to Riyadh in Saudi Arabia.

So, those are, as of, you know, as of now, they're still operating. And a lot of those flights are catered to Philippine workers.

You know, a lot of, there's a large number of Philippine, large percentage of the Philippine population that work abroad in different sites around the world, including the United States, including Europe, including Gulf, Japan, etc.

So, they cater to that market. But their biggest market is actually domestic. I think something like 70% of their seats are domestic.

And they do very well. This is a very, very profitable airline pre-COVID. I mean, you're talking, you know, there were years where it had, you know, 20% margins, very, very, very profitable.

Yeah, just well-run, good airline. They compete against primarily Philippine airlines and against AirAsia. So the question is, are they just as profitable now as they were pre-COVID?

The answer is no, but they're doing rather well. And as we just learned this week, in 2025 for the full year, they had an 11% operating margin. So that's pretty solid.

They did say that the first half was better than the second half. The second half had some issues with, they do have, because as I mentioned, they had those A320 Neos.

Well, they use the Pratt & Whitney, Geartobra fan engines, which have had the grounding issue, powdered metal issues that require inspections. So they've had a lot of planes grounded.

They've also had some bad weather in the Philippines last quarter, in particular, a couple of typhoons that hit some of the big markets. So they did encounter some challenges, let's say. Now, fast forward to, here we are in 2026.

We've got this quote unquote crisis, certainly fuel price crisis. How are they doing? And we pretty much alluded to it earlier, but they are struggling badly with the fuel costs, but demand is still very, very good.

And they did mention, like I said, they suspect, hard to say for sure, they suspect that some of the demand that they're seeing locally within East Asia is demand that might have gone to the Middle East or might have even gone to Europe.

I don't want to take a vacation to Paris this year, just let's stay closer to home. Let's do a domestic vacation. Let's just go over to Taiwan.

Let's just go over to visit Hong Kong, whatever. So they are seeing that great demand. That seems to be the big theme across the industry.

So far, I don't want to say so far so good, because I'm not necessarily saying that the strong demand is ultimately going to nullify the effects of the pricey fuel. We don't know how that's going to, it depends on how long this whole thing lasts.

It depends exactly just how expensive fuel gets. And then a lot will depend too on to what extent Cebu Pacific will adjust their capacity. They've already started to tweak it a little bit.

They were, and remember, this is an airline that just, they wanted to grow 20% last year, but could only grow 10% because of the GTF issues and the weather issues, and I mentioned other operational issues.

So they really want to grow, that's a big mechanism through which they keep their unit costs low, is through their economies of scale via growth. So they really want to grow.

They're starting to take that growth down a little bit from planned, from what they planned. They did say that, look, if fuel prices stay at these rates for an extended period, we expect more cuts.

In fact, they even, I don't know if I can find it in my notes here, but I think they literally just said that, you know, if fuel stays where it is, the whole industry is going to lose money.

Yeah, I've got a quote here. Is it by Mike Such?

Yeah.

Yes, he's the CEO. I've seen him at a couple of press conferences and Paris Air Show and other bits and pieces. He's a great character.

He gave a pretty interesting earnings call, especially in a part of the world where they can sometimes be a little bit drier, let's say, in terms of the delivery, very corporate, etc. Here we go. Fuel impact.

These levels are clearly not sustainable for Cebu Pacific. If they persist, but alongside the rest of the airline industry, ultimately the industry will face losses.

And then this is, I think, is the one you were referring to in terms of a quote, Jay. Current price levels will effectively double our fuel bill, all else being consistent.

And yeah, Mike, continuing here, we've started taking steps to pass on the incremental cost through fare adjustments. And we are encouraged by the continued resilience in demand from March and April.

However, we know from history that there are limits to fare increases before demand softens. So some fresh insights there from Mike and the team.

Yep. Yep. And I'm glad you kind of said that quote because in there, he mentions how they're aggressively raising fares.

So the demand strength is despite the fare increases, which that's pretty impressive, but how long does that last? At some point, the demand is going to break.

I mean, United Scott Kirby last week kind of was very adamant that a lot of the demand is not particularly elastic. It's not particularly sensitive to fares that people want to go. They're going to go.

A lot of the people traveling are upper income people and they're willing to go. But at some point, it's just the economics 101 says that if you raise fares too much, you're going to start breaking demand.

So it's all, yeah, it's a wait and see at this point. And everybody kind of crossing their fingers that the conflict deescalates and supply chains for energy and other important commodities and products all just kind of normalize.

And remembering that all of this just is happening four years after the Russia-Ukraine conflict caused a lot of very similar fuels by commodity shortages, supply chain bottlenecks. The last thing the world needs is another one of these.

And besides just the human toll of all this. So fingers crossed that the conflict winds down and there's peaceful resolution. But until then, yeah, it's really wait and see from the airline's perspective.

Absolutely.

And as we said earlier in our discussion, Jay, some regions more exposed than others to oil from the Middle East. And I think the Philippines and that part of Asia are particularly exposed. There's not a fuel price podcast.

It never will be. And we're not fuel price experts. But we've got a reasonable working knowledge.

And it is useful, I think, to share with our listeners and our viewers that not everyone is being impacted equally.

And although the global fuel price is obviously global, there are nuances and there are a lot of caveats in there with Cebu Pacific and the airlines more broadly in the Philippines and the Far East.

Among those, generally speaking, that can be hit a little harder by any blockages or any shortages of the usual supply coming out of the Gulf. I'll see a lot more detail in the next issue of Airline Weekly.

If you're not already a subscriber, go to airlineweekly.com/subscribe. There you can get a free trial issue, find out what all the fuss is about.

And a reminder that as an Airline Weekly subscriber, you can access all the airline news on skift.com, especially our daily reporting, which is particularly useful right now when there's so many changes from day to day affecting not just the Gulf,

but the entire global sector. So airlineweekly.com/subscribe. Thanks to Jay for joining me. And thanks as always to our producers, John, Monica and Will.

Wherever you are in the world, thanks for listening and we'll catch you next time. Bye for now. Whether you're listening to us on Spotify, Apple or wherever you get your podcasts, please remember to subscribe.

Rate us 5 stars or leave us a positive review. This really helps us get the word out about the Airline Weekly Lounge, so we can continue to bring you this podcast every week, absolutely free of charge.

And if you're watching us on YouTube, be sure to subscribe to the Skift channel and hit the notification bell to find out whenever a new video drops.