21 Live | Under the heavy pressure of Middle East conflict, how does Malaysia Airlines break through against the trend?

Ask AI · How does Malaysia Airlines lock in nearly half of its operating costs through fuel hedging?

21st Century Business Herald Reporter Gao Jianghong Kuala Lumpur Report

One month into the Middle East conflict, how big is the impact on global airlines?

“Every dollar increase in oil price adds 51 million Malaysian ringgit to our costs.” On April 2nd, Malaysia Airlines Group President and CEO Nasrudin A. Bakar candidly explained the impact of the conflict at the 2025 performance release, such as oil prices rising over $20 per day, European routes flying around for an extra hour on one-way flights leading to an additional daily operating cost of 115k ringgit, and suspending multiple Middle East flights…

The ongoing geopolitical conflict in the Middle East is causing unprecedented operational shocks to Malaysia Airlines Group (MAG, hereafter “MAS”). As a major Southeast Asian airline and key international transit hub operator, MAS not only faces soaring fuel costs but also deals with the suspension of Doha routes and reduced cargo flights.

In response to this global turbulence in civil aviation, MAS has not passively accepted the pressure but has taken urgent action to break the deadlock.

Nasrudin revealed that in the past month, MAS added five flights to London to divert passengers, locked in nearly half of its costs through fuel hedging, and deepened its focus on core customer markets to stabilize revenue fundamentals.

Beyond short-term measures, MAS continues to invest, deploying multiple long-term strategies, and leveraging the 2026 Malaysia Tourism Year opportunity to further attract international travelers, strengthen Kuala Lumpur’s hub radiance, and attempt to turn crisis into opportunity.

On the same day, MAS delivered an impressive annual report, achieving a net profit of 137 million ringgit (about 234 million RMB) in 2025, more than doubling 2024, marking the fourth consecutive year of operational profit.

MAS’s response also provides a practical example for the global civil aviation industry in managing geopolitical risks.

(图注：Malaysia Airlines Group President and CEO Nasrudin A. Bakar and CFO Wu Huiyi)

Oil prices soar, MAS under pressure

The spillover effects of the Middle East geopolitical conflict have spread to the global civil aviation sector, causing comprehensive shocks across all industry segments, with MAS facing multiple operational pressures.

International oil price volatility is the primary impact. Nasrudin said that within just one month of the conflict outbreak, jet fuel prices increased by over 140%, peaking near $240 per barrel, with fuel costs now accounting for 40% of MAS’s total operating costs. He disclosed that, based on current business volume, every $1 increase in oil price results in an additional 51 million ringgit in costs; a 10-cent fluctuation in the ringgit-to-dollar exchange rate can impact the group’s profit and loss by up to 200 million ringgit. Meanwhile, aviation insurance premiums have risen in tandem with the conflict, further increasing operating expenses.

It’s noteworthy that despite MAS’s strong performance in 2025—with total revenue reaching 14.5 billion ringgit (about 24.76 billion RMB), up 6% year-on-year; EBITDA soaring to 1.6 billion ringgit (about 2.74 billion RMB), a 104% increase—regional carriers’ average profit margins remain only 1% to 1.5%. In this low-margin environment, sharp fluctuations in oil prices greatly magnify profit erosion. Nasrudin admitted, “Market volatility and geopolitical uncertainties continue to impact capacity, supply chains, and cost structures, potentially putting pressure on our 2026 financial performance.”

Due to the conflict, several key Middle Eastern airports have temporarily closed, forcing MAS to suspend Doha passenger flights (tentatively until April 15), and reducing many cargo flights passing through the Middle East. Additionally, European long-haul routes need to detour around risk zones, increasing one-way flight time by an hour, with an extra daily fuel consumption of 18,000 kg, adding about 115k ringgit to daily operating costs. Some countries have also introduced fuel surcharge caps, with some regions warning that fuel supply may only be maintained until June, posing serious challenges to the civil aviation supply chain.

“Current market conditions are extremely volatile; daily oil price swings over $20 are common, and another $20 increase the next day is not surprising. External uncertainties are suffocating the entire industry,” Nasrudin said at the press conference. He noted that the chain reaction caused by geopolitical conflicts far exceeds normal market fluctuations, demanding high emergency response and risk management capabilities from airlines.

Diversified strategies to hedge against pressure

MAS has not passively accepted the pressure but relies on long-term planning and flexible adjustment mechanisms, deploying a diversified set of responses to fully hedge against the negative impacts of Middle East conflicts.

In response to high oil prices, MAS adopts a combination of “fuel supply security + financial hedging + refined operations.” Regarding fuel supply, MAS leverages long-term global cooperation agreements to lock in stable supplies from domestic and international suppliers, and pre-stock fuel at key hubs, flexibly reallocating across stations to ensure stable supply on main routes.

In financial hedging, MAS uses jet fuel hedging tools to mitigate price fluctuations. Malaysia Airlines Group CFO Wu Huiyi revealed that in 2026, the overall hedge ratio for jet fuel will reach 36%, approaching 50% in Q2. This hedging strategy aligns with MAS’s 2025 cost control achievements—despite significantly increased capacity, the group optimized fuel-saving flight plans and cut non-core expenses, doubling EBITDA and significantly improving operational efficiency.

On route capacity, MAS dynamically adjusts to “stop-loss and increase revenue.” It shrinks high-risk Middle East routes, suspends core Doha passenger services, and reduces cargo flights passing through high-risk Middle Eastern airspace, lowering operational risks and additional costs.

Meanwhile, MAS actively takes in diverted passengers from Middle Eastern airlines—especially stranded travelers from the East and West seeking safe routes—adding five long-haul flights to London in the past month to meet travel demand. During interviews at Dubai and Doha airports, many Chinese travelers told 21st Century Business Herald that they had to reroute via Kuala Lumpur to return home. Nasrudin also revealed significant growth in transit passenger numbers.

MAS also explores the potential of essential markets, with demand from China and India remaining strong, with many popular routes maintaining over 90% seat occupancy.

The reporter learned that MAS is about to announce three new routes, two of which will target the Chinese market. Currently, MAS has routes to Beijing Daxing, Shanghai Pudong, Guangzhou Baiyun, Xiamen, Hong Kong, Taipei, and Chengdu, all with high seat occupancy and strong demand. Therefore, MAS plans to establish new routes in Shenzhen and Changsha.

Deepening layout to break geopolitical deadlock

“Historical experience shows us that crises are temporary, and recovery can be faster than expected,” Nasrudin said. Besides short-term responses, MAS is also advancing long-term planning to turn crises into opportunities.

It is accelerating the implementation of its 2030 Long-Term Business Plan 3.0 (LTBP3.0), aiming for sustainable, scaled growth from stability. The plan includes four strategic pillars: first, becoming a high-end full-service carrier by introducing 95 new aircraft (including A330neo and Boeing 737 series) to enhance cabin products and customer experience; second, deepening global partnerships and strengthening oneworld alliance cooperation; third, driving operational excellence with top industry punctuality; fourth, expanding resilient businesses such as cargo, aviation training, and MRO to diversify revenue. Nasrudin emphasized that only by continuously investing in products and core capabilities during crises can the airline achieve “decisive growth” when recovery arrives.

Additionally, MAS is accelerating its sustainable development efforts to reduce reliance on traditional fuel. The group has signed a cooperation agreement with FatHopes Energy to explore using waste materials to produce sustainable aviation fuel (SAF). Nasrudin pointed out that despite current volatile oil prices, the long-term strategic direction of carbon reduction and energy independence remains unchanged. MAS also announced plans to build a new airline catering facility (MAG Culinary Solutions), expected to operate by 2029, to promote value chain integration and long-term efficiency.

These initiatives show MAS shifting from “passive crisis response” to “proactive resilience building.”

Nasrudin joked that in the past 50 years, MAS has experienced nine major crises, each breeding recovery and opportunity. “We not only want to survive turbulence but also become stronger from it.”