In early February 2026, the air travel sector appeared poised for growth, but geopolitical developments in Iran and Iran's Operation Epic Fury drove oil prices above US$100 per barrel, creating new headwinds for airlines. Singapore Airlines (SIA), the country's flagship carrier, despite a 5.5% revenue increase to S$5.5 billion in its third quarter ended December 31, 2025, reported rising fuel costs impacting margins. SIA’s fuel expenses, which account for roughly 29% of total costs, were buoyed by these higher prices, yet its demand remained resilient due to passenger demand and fuel hedging strategies.
SATS Ltd, a major ground services provider, derives significant revenue from the aviation sector—about 92%—and reported strong cargo volumes in the same quarter. However, with oil prices expected to stay elevated, the broader industry faces potential slowing, especially if air freight shifts from air to sea routes. Major airlines like AirAsia X are considering fare hikes and capacity reductions as geopolitical conflicts and oil surges threaten recovery prospects. Furthermore, airlines such as Indonesia’s examine surcharges and ticket prices to offset rising costs, while Saudi Arabia's decision to raise oil prices indicates persistent geopolitical tensions.
Despite these challenges, some aviation stakeholders continue to expand operations, like SIA’s plans for new routes in Hangzhou and Western Sydney International Airport. These developments hinge on maintaining high passenger load factors, which at 87.5%, are critical for translating network growth into sustained revenue. In this complex landscape, investors are advised to monitor industry indicators closely, noting diversification strategies such as SATS’s partnerships beyond aviation, to mitigate risks associated with global demand fluctuations.
