Falling fuel prices allow Asian airlines to fly back into the black

Falling fuel prices allow Asian airlines to fly back into the black

AAPA data reveals that airlines recorded combined net profits of US$6.9bn last year

AAPA data reveals that airlines recorded combined net profits of US$6.9bn last year

Asia Pacific's airlines recorded combined net profits of US$6.9 billion last year
Asia Pacific’s airlines recorded combined net profits of US$6.9 billion last year

Airlines based in the Asia Pacific region returned to profit in 2015, driven by a sharp decline in fuel prices, new data has revealed.

According to preliminary figures released today by the Association of Asia Pacific Airlines (AAPA), the region’s carriers recorded combined net profits of US$6.9 billion last year, marking a major upswing from the cumulative net losses of US$1.2bn reported in 2014.

These strong results were underpinned by sustained growth in passenger traffic, lower fuel prices and the ability to match demand with seat capacity. This resulted in a record average passenger load factor of 78.4%.

But combined revenues actually declined in 2015, falling 5.6% year-on-year to US$166.9bn. This included a 5.4% drop in passenger revenues, to US$128.4bn, despite the growth in traffic. These declines were offset however, by a 12.6% reduction in the airlines’ operating costs, to US$153.0bn.

And the main driver of this was a 31.4% drop in fuel expenditure, to US$41.2bn. Global jet fuel prices dropped significantly last year, falling 43.5% to an average of US$64 per barrel. As a result, fuel expenditure as a percentage of the airlines’ total operating costs declined by 7.4 percentage points to 27.0%. Non-fuel expenditure declined 2.7% to US$111.8bn.

AAPA director general Andrew Herdman
AAPA director general Andrew Herdman

“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,” said AAPA director general Andrew Herdman.

“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.”

Moving forward, Herdman said that Asia Pacific’s airlines are likely to see continued growth in terms of passenger demand in 2016, although they still face “a challenging operating environment characterised by intense competition, cost pressures and volatile currency markets”.

“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,” Herdman concluded.

In terms of operating performance, Asia Pacific’s airlines registered an 8.3% increase in international passenger traffic last year, measured in revenue passenger kilometres (RPK).

Mark Elliott
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Mark Elliott
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