AAPA says regional full-year profits declined 25% in 2019 as carriers now fight for survival

US-China trade dispute and ‘intense’ competition drove down earnings to US$3.8 billion

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The main trade association for many of Asia’s top airlines, the Association of Asia-Pacific Airlines (AAPA), said Wednesday (6 May) that regional airlines earned US$3.8 billion in 2019, a 25 percent decline compared to the US$5.1 billion reported in 2018. The group said profits were hurt by “intense competition adding downward pressure on yields” and that cargo demand was “significantly affected by the escalation of trade disputes between the US and China”.

The association said Asia-Pacific airlines saw international passenger traffic as measured in revenue passenger kilometres (RPKs) moderate to a 4.2 percent increase in 2019, following strong 7.2 percent growth in 2018. International air cargo traffic as measured in freight tonne kilometres (FTKs) declined by 5 percent for the year, marking the steepest fall since the global financial crisis in 2008-2009.

Collectively, Asia-Pacific carriers achieved aggregated operating revenues of US$210.5 billion for the calendar year, almost matching the US$211.2 billion recorded in 2018, AAPA said. Passenger revenue increased by 1.5 percent to US$167.1 billion.

“International passenger traffic on Asia-Pacific airlines set new records in 2019, but the operating environment became increasingly challenging. The average profit was just US$4 per passenger flown, slimming net margin to a meagre 2 percent,” said Subhas Menon, AAPA’s director general said. “Given the current (COVID-19 pandemic) crisis, it is sobering to look back on a time when we all took safe and affordable air travel for granted, and Asian airlines were carrying over 4 million passengers a day. Since the end of January 2020, that number has plunged dramatically as almost all countries introduced lockdowns and severe restrictions on international travel. Airlines have been forced to ground thousands of aircraft and are currently operating only skeletal networks to meet demand for repatriation flights as well as for shipments of medical supplies and essential goods.”

Air cargo currently is one of the brighter spots in international aviation although it too has been impacted like passenger carriers due to border closures. (PHOTO: Korean Air)

The association said air cargo revenue fell significantly by 14.5 percent to a combined total of US$18.4 billion 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.

Combined operating expenses totalled US$200.4 billion, unchanged from 2018. With global jet fuel prices down by 7.2 percent to an average of US$78.9 per barrel, fuel expenditure fell by 4.5 percent to US$52.8 billion. The share of fuel expenditure as a percentage of total operating costs declined by 1.3 percentage points to 26.4 percent. In contrast, non-fuel expenditure rose by 1.8 percent to US$147.6 billion, on the back of higher depreciation costs as well as landing fees and en route charges.

(SOURCE: IATA)

The decline in average fuel prices provided some relief to operating expenditure, but this was offset by higher non-fuel expenses. Consequently, overall operating profit declined by 7.4 percent to US$10.1 billion, whilst operating margin edged 0.4 percentage points lower to 4.8 percent for the year.

“Airlines worldwide are fighting for their very survival, given the collapse of demand. Hopes of a V-shaped recovery have waned,” Menon said. “It may take years for the industry to recover to pre-COVID levels. Nevertheless, the early restart of aviation will spur global recovery from the current crisis.To this end, the Asia-Pacific aviation community is committed to working closely with governments, public health authorities, and other international bodies in charting a course for a timely and measured restoration of air services.”


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