Asian airlines profits slump

Stiff competition and poor cargo market hit region's carriers

Airlines based in the Asia Pacific region recorded combined net profits of US$2.5 billion in 2013, 55% less than in 2012.
According to the latest data from the Association of Asia Pacific Airlines (AAPA), intense competition and lacklustre demand for air cargo had a major impact on the result.

Asia’s airline profits fell 55% in 2013

Operating revenues totalled US$171.2bn, 2.1% lower than 2012. This included a 2.2% decline in passenger revenues, to US$131.4bn, which occurred despite a 6.3% rise in passenger traffic (measured in revenue passenger kilometres).
Operating expenses edged 0.4% higher to US$167.4bn, with the region’s fuel bill falling 3.2% to US$59.9bn. Non-fuel expenditure however, increased by 2.5% to US$107.5bn, due to higher depreciation and staff costs.
“Overall, Asia Pacific airlines faced challenging conditions in 2013, and registered a net profit margin of just 1.5%, compared with the 3.2% margin achieved in 2012,” said AAPA director general, Andrew Herdman.
“Intense competition in both the passenger and air cargo business segments led to pressure on fares, and weaker Asian currencies adversely affected costs, even more so for airlines with significant exposure to foreign denominated debt.”
Looking ahead, Herdman added; “Asian carriers are still facing a difficult operating environment marked by continued market competition and volatile currency markets. The focus for airlines remains firmly on strict cost controls and further productivity improvements.
“Overall, however, prospects for a further pick-up in the global economy and expectations of a cyclical upswing in international trade should give some grounds for optimism,” Herdman concluded.