The Association of Asia Pacific Airlines (AAPA) has reported that in 2017 Asia Pacific airlines achieved $8.8 billion in combined net earnings for the full year – an increase of 31.6 per cent on 2016.
AAPA said the global economy saw broadly based growth in advanced and emerging markets, boosting both business and leisure travel demand. At the same time, moderate capacity expansion lent support to airline yields.
Asian airlines saw international passenger traffic, expressed in revenue passenger kilometer terms (RPK), recording a robust annual growth rate of 8.6 per cent, supported by the widespread availability of affordable airfares and continued expansion in network connections.
Underpinned by the firm increases in both air passenger and cargo markets, Asia Pacific airlines achieved a 6.7 per cent growth in combined operating revenue to $176.6 billion in 2017. Passenger revenue increased by six per cent to $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.
Combined operating expenses climbed 8.7 per cent higher to $165 billion for the year. Fuel costs rose significantly, by 19.6 per cent to $40.6 billion, as global jet fuel prices climbed 24.5 per cent to average $65.4 per barrel. 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 increased by 5.6 per cent to $124.4 billion, in line with higher traffic volumes.
AAPA director general, Andrew Herdman said: “Overall, Asia Pacific carriers as a group achieved commendable earnings performance in 2017, with the solid 31.6% increase in net earnings to US$8.8 billion underpinned by strong growth in both air passenger and cargo volumes, and higher average load factors.”
Herdman added: “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% for the year, with net profits of just over US$6 per passenger.”
Herdman continued: “The ongoing expansion in the global economy bodes well for Asian airlines. Business activity is expected to remain relatively robust whilst increased consumer spending should underpin further growth in passenger travel and continue to support air cargo demand in the coming months.
“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.”