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Asia-Pacific airlines’ earnings dive 25% in 2019

Asia-Pacific airlines recorded a 25% decline in combined net earnings to US$3.8 billion in 2019 from $5.1 billion in 2018, according to preliminary figures from the Association of Asia Pacific Airlines (AAPA).

Intense competition caused downward pressure on yields, AAPA said in a statement.

Air cargo demand was significantly affected by the escalation of trade disputes, including tit-for-tat tariffs between the US and China.

“Overall, against the backdrop of a slowing global economy, Asia Pacific airlines saw international passenger traffic as measured in revenue passenger kilometres moderate to a 4.2% increase in 2019, following a strong 7.2% growth in 2018,” AAPA.

International air cargo traffic as measured in freight tonne kilometres also declined by 5% in 2019, marking the steepest fall since the global financial crisis.

Collectively, the region’s carriers achieved aggregated operating revenues of $210.5 billion for the calendar year, almost matching the $211.2 billion recorded in 2018.

Passenger revenue increased by 1.5% to $167.1 billion, as regional economic expansion supported growth in both leisure and business travel markets, helping to offset the fall in passenger yields caused by persistently stiff market competition.

Cargo revenue down 14.5%

Air cargo markets were adversely affected by a combination of lower demand and corresponding downward pressure on freight rates. As a result, cargo revenue fell significantly, by 14.5% to a combined total of $18.4 billion in 2019, reversing the double-digit gains achieved in the preceding year.

READ: 2019 marks deepest cargo decline for Asian airlines since financial crisis — AAPA

AAPA said Asian airlines bore the brunt of the escalation in trade tensions, as they collectively account for over a third of global air cargo traffic.

Combined operating expenses totaled $200.4 billion, unchanged from 2018. With global jet fuel prices down by 7.2% to an average of $78.9 per barrel, fuel expenditure fell by 4.5% to $52.8 billion.

The decline in average fuel prices provided some relief to operating expenditure, but this was offset by higher non-fuel expenses to $147.6 billion, up 1.8%, on the back of increased depreciation costs as well as landing fees and en-route charges.

Consequently, overall operating profit declined by 7.4% to US$10.1 billion, while operating margin edged 0.4 percentage points lower to 4.8% for the year.

“International passenger traffic on Asia Pacific airlines set new records in 2019, but the operating environment became increasingly challenging. The average profit was just US$4 per passenger flown, slimming net margin to a meagre 2%,” AAPA director Subhas Menon, general said.

“Given the current crisis, it is sobering to look back on a time when we all took safe and affordable air travel for granted, and Asian airlines were carrying over four million passengers a day. Since the end of January 2020, that number has plunged dramatically as almost all countries introduced lockdowns and severe restrictions on international travel. Airlines have been forced to ground thousands of aircraft and are currently operating only skeletal networks to meet demand for repatriation flights as well as for shipments of medical supplies and essential goods.”

Menon concluded that “airlines worldwide are fighting for their very survival, given the collapse of demand.

“Hopes of a V-shaped recovery have waned. It may take years for the industry to recover to pre-COVID levels. Nevertheless, the early restart of aviation will spur global recovery from the current crisis. To this end, the Asia Pacific aviation community is committed to working closely with governments, public health authorities, and other international bodies in charting a course for a timely and measured restoration of air services,” he said.

Image by David Z from Pixabay 

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