Enjoy it while it lasts. Some of Asia's marquee airlines that provide free alcohol and in-flight entertainment may soon have to stop the habit. The reason? Fuel costs.
Singapore Airlines famously rolled out the on-board giveaways in the 1970s, but due to Organisation of Petroleum Exporting Countries' (OPEC) production cuts, these will be unsustainable to some carriers.
The organization agreed to reduce collective production to 32.5 million barrels a day and an additional 600,000 barrels a day of cuts from non-OPEC suppliers. This is OPEC's first production cut in eight years, The Sydney Morning Herald reported.
Asian carriers like Cathay Pacific and Singapore Air are already battling excess capacity and declining premium traffic, making them vulnerable to rising fuel costs. Analysts say that OPEC's cut in production will really take a toll especially on budget airlines like AirAsia and Jetstar, which is owned by Qantas, to the point that they may be forced to give up extras, like free wine.
Fuel is typically an airlines biggest expense. This year's 30 percent fuel price increase will definitely threaten the global aviation energy. Cathay, Asia's biggest international airline, is conducting a "critical review" of its business after facing an 82 percent drop in revenues for the first six months of 2015. According to Chicago Tribune, just last week, Cathay said that 2017 will be "challenging."
Analysts say airlines may soon start charging fees for extra services. In 2009, chief executive officer of European low-cost airline Ryanair Holdings, even suggested charging customers to use the toilet.
Oil prices went up from $US100 a barrel in mid-2014 to about $US26 in January this year. Airlines may find aircrafts like Boeing's 787 Dreamliner and Airbus's A350 to be more appealing because they have twin-engine aircraft burn less fuel than four-engined models such as the Boeing 747 and the Airbus A380.
