Positive Outlook as Asia Pacific Airlines Return to Profitability

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(18/06/24)
 Preliminary financial performance figures from
the Association of Asia Pacific Airlines (AAPA) show a strong
rebound in the earnings of Asia Pacific airlines in 2023,
following three consecutive years of losses.

Combined net earnings totaled US$8.8
billion for the calendar year, on the back of healthy travel
demand in both leisure and business sectors regionally and
worldwide.

The lifting of the final remaining
pandemic-induced travel restrictions facilitated the resurgence of
travel demand in 2023, leading to an 130.7% increase in
international passenger traffic as measured in revenue passenger kilometres (RPK).

International air cargo demand,
measured in freight tonne kilometres (FTK), saw a 2.8% annual
decline, driven by inflationary pressures, a robust US Dollar and
consequent downturn in the demand for goods.

Batik Air Malaysia Boeing 737 reg: 9M-LDD. Picture by Steven Howard of TravelNewsAsia.com

For the year, Asia Pacific airlines achieved
operating revenues totaling US$198.1 billion, a 54.8% jump
compared to the US$128 billion recorded in 2022.

Combined
passenger revenue more than doubled, by 105.4% to US$151.5
billion, driven by the sturdy growth in passenger demand.

However,
reflecting the steady increase in flights, passenger yields
declined by 6.7% to 8.6 US cents per RPK, whilst aggregated
cargo revenue fell markedly, by 43.3% to US$21 billion in 2023,
driven by weakness in trade activity and easing freight rates, as
reflected in the 41.7% drop in cargo yields to 33.6 US cents per
FTK. Despite the decline, average cargo yields remained above
pre-pandemic levels.

Meanwhile, operating expenses rose by 30.9% to a
combined total of US$182.6 billion in 2023, in tandem with the
ramp-up in flight frequencies and restoration of networks.

Fuel
expenditure rose by 41.5% to US$57.7 billion, in part mitigated by
a 20% fall in global jet fuel prices to an average of US$113.4
per barrel. The share of fuel expenditure as a percentage of total
operating costs increased by 2.4 percentage points to 31.6%.

Non-fuel costs increased by 26.5% to US$124.9 billion,
as a result of higher expenditure on staff as well as landing fees
and enroute charges.

“In 2023, Asia Pacific airlines
made a welcome turnaround following three consecutive years of
steep losses during the COVID19 pandemic years. The region’s
carriers recorded a significant operating profit margin of 7.8%,
compared to the -9.3% posted in 2022,” said Subhas
Menon, AAPA Director General. “The outlook for Asian airlines is
generally positive, as demand for air travel globally continues to
be strong, complemented by resurgent growth in international air
cargo markets. The region’s carriers continue to face numerous
challenges, including delayed deployment of additional capacity
due to supply chain constraints and persistent cost pressures. Notwithstanding, Asia Pacific airlines remain
nimble and proactive, seeking to open new routes and meet customer
demand. Improving cost efficiency and profitability, as well as
keeping the focus on safety standards, and sustainability targets,
are ongoing priorities.”

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