Rising Oil Prices Could Impact Tourism Recovery

With oil prices now teetering on the US$60 a barrel level, many global airlines are reviewing fuel hedging issues and possibly a return to surcharges which for the most part were discontinued during the economic downturn that say oil trading in the US$30 level. Long haul markets are the most susceptible to these, where the all important airlift capacity (available seats) has shrunk by wholesale levels from North America and Europe over the past year. If oil prices do spike upward, this could spell trouble for the upcoming high season with many long haul travelers looking to holiday in locations closer to their homes.
Here in Asia Cathay Pacific saw their profits plummet on miscalculations over fuel hedging and for airlines such as Thai between 30-40% of their operating costs are attributed to the precious commodity. Thai has indicated that it will possibly be canceling its order for the super jumbo A380 and may be looking a smaller aircraft to replace this.
Despite travel declines some regional low cost airlines such as AirAsia are in expansion mode and launched long haul affiliate AirAsia X. At the recent Paris Air show many of the smaller aircraft such as Airbus A320 and A321; though the wide-bodied A350 which is slated to roll out in 2013 will compete with Boeings overdue 787 Dreamliner.
For Phuket's airport expansion the trend in smaller regional aircraft shows there is little necessity to lengthen the runway as looking into the future smaller not larger appears to be the trend in airline travel. The money earmarked for the new terminal and an upgrade is certainly better spent improving the passenger facilities and existing infrastructure.