Carriers in Asia Pacific stuck in red

Carriers in Asia Pacific stuck in red

Major Asia-Pacific airlines were mired in red ink last year despite inching towards the break-even point.

Newly released preliminary figures from the Association of Asia Pacific Airlines (AAPA) showed the region's 26 carriers posted aggregate losses of US$50 million compared with a net profit of $2.2 billion in 2013.

The Kuala Lumpur-based AAPA attributed the decline to the downward pressure on airfares from stiff competition and excess capacity as well as the effects of high fuel costs and Asian currency volatility.

Restructuring costs also acted as a drag on overall results, it added.

The AAPA did not name airlines involved in its financial results compilation.

There are 16 Asia-Pacific-based members including All Nippon Airways, Asiana Airlines, Cathay Pacific Airways, Singapore Airlines and Thai Airways International (THAI).

Struggling THAI posted a net loss of 15.6 billion baht last year, more than the 12-billion-baht loss the national flag carrier posted in 2013.

Overall, the region's carriers achieved aggregated operating revenue of $177 billion for the calendar year, 1.85% higher than in 2013, the AAPA said.

Passenger revenue increased by 1.4% to $135 billion, driven by an increase in traffic demand, which more than offset the fall in passenger yields.

Although air cargo markets were also not spared from persistent yield pressure, the upswing in demand helped lift cargo revenue to a combined total of $20.8 billion for the year, up by 2.7% from 2013.

Combined operating expenses climbed 2.5% to $174 billion, driven by a 4.5% increase in non-fuel expenditure, led by higher aircraft operating lease expenses as well as landing fees and en-route charges.

Fuel expenditure declined marginally by 1.1% to $60 billion on the back of a 7.8% decline in global jet fuel prices to an average of $113 a barrel for the year.

As a result, the share of fuel expenditure as a percentage of total operating costs declined by 1.3 percentage points to 34.5% in 2014.

The region's carriers managed a thin operating margin of 1.6%, down from 2.3% in 2013.

AAPA director-general Andrew Herdman said the operating environment remained highly competitive.

The benefits of lower oil prices should be reflected in further growth in travel demand, although the financial impact on individual airlines would vary depending on their respective fuel-hedging policies, he said.

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