Asia Pacific airlines report $8.8 b in combined net earnings for 2017

Preliminary aggregated financial performance figures from the Association of Asia Pacific Airlines (AAPA) show that Asia Pacific airlines achieved US$8.8 billion in combined net earnings for the full year 2017.

The global economy saw broadly based growth in advanced and emerging markets, boosting both business and leisure travel demand, whilst air cargo markets were lifted by an acceleration in global trade activity. 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%, supported by the widespread availability of affordable airfares and continued expansion in network connections. 

With major manufacturing economies located in the region benefitting from increased trade activity, the region’s airlines recorded an impressive 9.6% jump in international air cargo traffic as measured in Freight Ton Lilometres (FTK) for the year.

Underpinned by the firm increases in both air passenger and cargo markets, Asia Pacific airlines achieved a 6.7% growth in combined operating revenue to US$176.6 billion in 2017. Passenger revenue increased by 6.0% to US$135.6 billion. Intense competition led to a marginal 1.0% decline in passenger yields to 7.9 US cents per RPK, although the decline was less severe compared to previous years. Cargo revenue increased significantly, by 14.6% to US$18.6 billion. Following several years of contraction, cargo yields rebounded with a 6.0% growth to 25.0 US cents per FTK.

Combined operating expenses climbed 8.7% higher to US$165.0 billion for the year. Fuel costs rose significantly, by 19.6% to US$40.6 billion, as global jet fuel prices climbed 24.5% to average US$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%. Non-fuel expenditure increased by 5.6% to US$124.4 billion, in line with higher traffic volumes.

Commenting on the 2017 financial results 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. 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.”

Looking ahead, Herdman said, “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.”