Thailand’s aviation sector is expected to face mounting pressure in the second and third quarters of 2026 as soaring jet fuel prices linked to the US-Israeli conflict with Iran continue to strain airline profitability.
Analysts said rising airfares and fuel surcharges remain insufficient to offset surging operational costs, particularly for low-cost carriers. Domestic passenger traffic and flight volumes declined sharply in early May as airlines reduced capacity amid weaker demand and elevated fuel prices.
Low-cost carriers such as AirAsia have been hit hardest, with Thai AirAsia reducing seat capacity by 20% during May and June to preserve liquidity and manage costs. The airline also warned that fares may continue to rise if fuel prices remain elevated throughout the year.
Jet fuel prices, which peaked at around US$240 per barrel earlier this year, remain significantly above pre-war levels despite easing slightly in recent weeks. Analysts warned the impact will become more visible in the second quarter, with some airlines potentially slipping into losses.
Thailand’s tourism outlook also remains fragile, with softer visitor arrivals from several regions linked to geopolitical uncertainty and higher travel costs. Meanwhile, Airports of Thailand expects flight traffic during the summer schedule to contract slightly year-on-year.
Despite industry headwinds, Thai Airways International continues to demonstrate resilience through fleet expansion and operational efficiency, with analysts expecting stronger profit momentum once geopolitical tensions ease.