Asian airline profits plunge nearly 50%
Airlines based in the Asia Pacific region generated net profits of US$4.8 billion in 2011, 47% lower than the record US$9.0 billion achieved in the previous year. The result was impacted by surging oil prices and a weak cargo market.
According to a report released this week by the Association of Asia Pacific Airlines (AAPA), total revenues for the region’s carriers reached US$162 billion in 2011 – 10% higher than the US$147 billion reported in 2010. This result was driven by passenger revenues, which increased 15% to US$121 billion. Cargo revenues however, fell 1% to US$22 billion.
The most significant factor affecting Asian airlines’ financial performance last year however, was the price of jet fuel. Operating expenses increased 15% to US$155 billion in 2011, driven by 28% surge in fuel costs to US$52 billion. Fuel costs now account for 34% of the region’s airlines’ total operating expenses, up from 30% in 2010. Non-fuel expenditures climbed 9.6% to US$103 billion.
Asian airlines’ international passenger traffic grew by 3.7% last year.
“Asia Pacific carriers continued to outperform the overall industry in 2011, with continued growth in passenger numbers, but profit margins were squeezed by high oil prices, as well as the impact of a weak air cargo market. Overall, Asian airlines in aggregate made combined profits of US$4.8 billion, but on revenues of US$162 billion, that represents only a 3% profit margin and a poor return on invested capital,” said the AAPA’s Director General, Andrew Herdman.
Commenting on the outlook for 2012, Herdman added that “persistently high oil prices and slower economic growth in the major developed markets” could impact airlines’ performance.
“So far this year, Asian airlines have continued to benefit from stronger economic growth within the region, seeing further growth in international passenger numbers, but air cargo markets remain weak, with the result that operating margins remain under pressure. Airlines are responding by carefully matching capacity to changes in demand, and maintaining strict cost controls throughout the business,” Herdman said.