Travel demand, lower fuel prices hold up APAC airline profits

Preliminary figures from the Association of Asia Pacific Airlines (AAPA) revealed the region's airlines made US$6.9 billion in aggregate net earnings, with passenger demand growing 6.4 per cent to alleviate yield pressures and a fall in jet fuel prices ameliorating operating costs.

Asia-Pacific airlines saw revenue dip 0.2 per cent to US$126.4 billion, as lower airfares saw a 5.5 per cent decline in average passenger yields to 7.9 US cents per RPK. Total operating revenue was down 0.3 per cent to US$165.3 billion in 2016.

Combined operating expenses totalled US$151.8 billion, unchanged from 2015. Reflecting the 17.7 per cent drop in global jet fuel prices to an average of US$52.6 per barrel, fuel expenditure fell by 16.8 per cent to US$33.7 billion and its share of total operating costs declined by 4.5 percentage points to 22.2 per cent. This was offset by non-fuel expenditure, which rose 6.1 per cent to US$118 billion.

Commenting on results, Andrew Herdman, AAPA director general, said: "Asia-Pacific carriers achieved another year of respectable earnings in 2016, with an average 8.2 per cent operating margin and net profits of around US$6 per passenger, reflecting the still very competitive market environment.

"(However), the strengthening of the US dollar against many Asian currencies affected revenue performance and increased the burden of dollar obligations for a number of carriers."

Looking ahead, Herdman said the operating environment remains challenging, against a backdrop of stiff competition, higher oil prices and other cost pressures.

“Nevertheless, Asia-Pacific airlines are focused on enhancing business performance and investing effectively in new technologies and aircraft, with the aim of strengthening resilience and further improving long-term profitability," he noted.

-TTG Asia.