A-Pac airlines profitability declined in CY19 due to competition, global trade tensions
May 06, 2020
Kuala Lumpur [Malaysia], May 6 : Preliminary financial performance figures released on Wednesday by the Association of Asia Pacific Airlines (AAPA) showed that Asia Pacific airlines recorded 3.8 billion dollars in combined net earnings in 2019, marking a 25 per cent decline compared to the 5.1 billion dollars reported in 2018.
Profitability was impacted by intense competition adding downward pressure on yields while air cargo demand was significantly affected by the escalation of trade disputes, including tit-for-tat trade tariffs between the United States 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 per cent increase in 2019, following a strong 7.2 per cent growth in 2018.
Meanwhile, international air cargo traffic as measured in freight tonne-kilometres declined by 5 per cent for the year, marking the steepest fall since the global financial crisis.
Collectively, the region's carriers achieved aggregated operating revenues of 210.5 billion dollars for the calendar year, almost matching the 211.2 billion dollars recorded in 2018.
Passenger revenue increased by 1.5 per cent to 167.1 billion dollars 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.
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 by 14.5 per cent to a combined total of 18.4 billion dollars in 2019, reversing the double-digit gains achieved in the preceding year. Asian airlines bore the brunt of the escalation in trade tensions as they collectively account for over one-third of global air cargo traffic.
"International passenger traffic on Asia Pacific airlines set new records in 2019 but the operating environment became increasingly challenging," said AAPA Director-General Subhas Menon. "The average profit was just four dollars per passenger flown, slimming net margin to a meagre two per cent."
But airlines worldwide are now 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," he said in a statement.
