APAC airlines’ earnings climb on higher passenger volumes, load factor

Decline in passenger yields slowed in 2017

Asia-Pacific airlines achieved US$8.8 billion in net earnings in 2017, up 31.6 per cent from the previous year, underpinned by higher volumes and with load factors, according to preliminary figures released today by the Association of Asia Pacific Airlines (AAPA).

AAPA revealed that Asian airlines recorded 8.6 per cent increase in international passenger traffic, expressed in revenue passenger kilometre terms (RPK), supported by the widespread availability of affordable airfares and continued expansion in network connections.

Passenger revenue increased by six per cent to US$135.6 billion. Intense competition led to a marginal one per cent decline in passenger yields to 7.9 US cents per RPK, although the decline was less severe compared to previous years.

Fuel costs rose significantly, by 19.6 per cent to US$40.6 billion, as global jet fuel prices climbed 24.5 per cent to average US$65.40 per barrel, while the share of fuel expenditure as a percentage of total operating expenses rose by 2.2 percentage points to 24.6 per cent.

Non-fuel expenditure also increased, by 5.6 per cent to US$124.4 billion, in line with higher traffic volumes, AAPA figures show.

Commenting on the 2017 financial results, Andrew Herdman, AAPA director general, said: “Nevertheless, the region’s airlines continued to face some significant headwinds in the form of stiff competition, and increased cost pressures from markedly higher fuel prices and rising labour costs.

“Reflecting the highly competitive business environment, the average operating margin was 6.6 per cent for the year, with net profits of just over US$6 per passenger.”

In addition to continued growth in passenger volumes going ahead, Herdman also forecasted: “Overall, Asian airlines continue to evolve in the face of changing market dynamics, implementing measures to increase efficiency and carefully control operating costs whilst seeking opportunities to maximise revenue. In addition, the region’s airlines remain focused on enhancing business performance through increased investments in new technologies and modern fuel efficient aircraft.”

-TTG Asia.