Fuel prices trended upward in 2017, butyieldsdeclinedfor Asian carriers yet it was still a good year generally for airline prof- its because of continued strong traffic growth and load factors. In 2018, Association of Asia Pa- cific Airlines(AAPA)directorgeneral
Andrew Herdman noted, airlines “ought to be anticipating that passenger yields are going to start to rise.”
When oil prices have increased in the past, those costs
have been passed on to airfares without hurting demand for travel.
Herdman sees that trend recurring. He does not
think fare rises will be “particularly damaging to demand” because passenger and cargo demand are “
looking pretty good,” and the global economy is also strong.
Airlines would be much more concerned if demand
for travel was under threat, Herdman said. “We don’t
see any of that now,” he said on the sidelines of the
IATA AGM in June.
Asia-Pacific airlines saw a collective 31.3% rise in
net profits in 2017, earning $8.8 billion in net profit
during 2017, compared to $6.7 billion in 2016, according to AAPA. Te strong results—aggregated from
24 Asia-Pacific carriers—reflected the reach of global
economic growth into both advanced and emerging
markets. Te region responded with improvements in
both passenger and cargo traffic and accompanying revenue, tempered by moderate capacity expansion.
Asia-Pacific carriers posted collective operating
revenues of $176.6 billion in 2017, up 6.7% from
$165.5 billion in 2016. Passenger revenue rose 6% to
$135.6 billion. Passenger yields dipped 1% year-over-
year (YOY) to 7. 9 cents per RPK, a consequence of
strong competition, AAPA said, but less severe than
in previous years. International passenger traffic in-
creased 8.6% YOY, reflecting more affordable fares
growing travel destination and connectivity options,
A surge in trade activity boosted manufacturers output in the region, and air freight traffic responded with
a 9.6% YOY rise in FTKs. Cargo revenue grew 14.6%
to $18.6 billion.
Collective operating expenses in the region were up
8.7% to $165 billion, as fuel costs increased 19.6%
to $40.6 billion, making up nearly a quarter of total
Herdman forecast continued “relatively robust”
business activity for the Asia-Pacific region, driving increased consumer spending on passenger travel and air
“Asian airlines continue to evolve … implementing
measures to increase efficiency and carefully control op-
erating costs whilst seeking opportunities to maximize
revenue.” Herdman said. “Te ongoing expansion in
the global economy bodes well for Asian airlines.”
And Asia’s ever-growing LCC sector continued to see
new entrants and changes. All Nippon Airways (ANA) be-
gan merging its LCC subsidiaries Peach Aviation and Vanil-
la Air, after boosting its shareholding in Peach.
MIND THE YIELDS
Asia-Pacific still the fast-growth region, but competition softens profits.
BY ADRIAN SCHOFIELD