Tue, 24 May 2016

Asia Pacific Airlines Return to Profitability

Preliminary financial performance figures compiled by the Association of Asia Pacific Airlines (AAPA) show that Asia Pacific airlines recorded US$6.9 billion in combined net earnings in 2015, an upswing from net losses of US$1.2 billion reported in 2014.

The strong results were underpinned by sustained growth in passenger markets, lower fuel prices and operating efficiencies including a record high passenger load factor of 78.4%.

Mr. Andrew Herdman, AAPA Director General said, "Asia Pacific carriers saw a welcome return to profitability in 2015, after suffering aggregate losses in the previous year. The region's carriers registered a significant operating margin of 8.3%, compared with the 1.0% margin achieved in 2014. Overall, Asian airlines benefitted from strong passenger demand and the significant fall in oil prices, although the financial impact on individual carriers would also depend on currency volatility and variations in individual fuel hedging policies, amongst other factors."

Overall, the region's carriers achieved aggregated operating revenues of US$166.9 billion for the calendar year, 5.6% less than the US$176.8 billion in 2014. Passenger revenue fell by 5.4% to US$128.4 billion, due to a decline in yields despite the growth in traffic demand. Cargo revenue declined by a significant 11.7% to US$18.5 billion, as a result of the general slowdown in global trade conditions.

During the year 2015, Asia Pacific airlines registered an 8.3% increase in international passenger traffic, measured in revenue passenger kilometre (RPK) terms. International air cargo traffic, expressed in freight tonne kilometres (FTK), grew by 2.1%.

Combined operating expenses fell by 12.6% to US$153.0 billion, driven by a 31.4% decline in fuel expenditure to US$41.2 billion. Within the year, global jet fuel prices dropped significantly, by 43.5% to an average of US$64 per barrel. As a result, the share of fuel expenditure as a percentage of total operating costs declined by 7.4 percentage points to 27.0%. Non-fuel expenditure fell by 2.7% to US$111.8 billion.

"Asian carriers are encouraged by the sustained growth in passenger demand, but continue to face a challenging operating environment characterized by intense competition, cost pressures and volatile currency markets. Air cargo markets remain weak as a result of the slowdown in global trade. Nevertheless, taking a positive view of the future, Asia Pacific airlines are continuously reviewing their fleet and network development plans in line with evolving market trends, and introducing new customer service initiatives, whilst continuing to focus on disciplined cost management efforts," said Mr. Herdman.

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