Asian airlines need to turn growth into profits – AAPA

Asian airlines meeting this week in Tokyo still have work to do to turn growth into profits, according to the Association of Asia Pacific Airlines (AAPA).

The region’s carriers have seen passenger traffic increase 5% in the past 12 months. But capacity issues are still impacting airlines’ bottom lines.

“Relentless growth has not been translated into profits,” the group’s director-general, Andrew Herdman, told reporters ahead of the annual AAPA Assembly of Presidents in Tokyo on Tuesday. The exception, Herdman noted, is JAL, which after restructuring has reported operating profits.

Large aircraft orders and deliveries throughout the Asian region, both to full service carriers and their low-cost rivals and subsidiaries, have caused capacity to grow 1-2% ahead of demand. In turn this has forced price reductions, with a knock-on effect on balance sheets.

Andrew Herdman
Andrew Herdman

“Asian carriers are operating close to break-even and the LCCs are not much different,” Herdman revealed.

This is all in contrast to the American market where recently ailing carriers have become resurgent – and not just because of the pick-up the American economy. US carriers are now more consolidated which has helped as restructuring via protected bankruptcy, and tight discipline, especially of capacity, which has produced high load factors.

“They (American carriers) are seeing very healthy profits for the first time in a very long time,” said Herdman. “The situation in Asia and indeed in Europe remains very different.”

Airline leaders gathering in Tokyo are optimistic, both in the short- and long-term, but are aware they need to focus on some of their common problems to become profitable.

And the way forward will be a quiet one, according to Herdman. His view is that “slight misjudges” will be corrected in the course of the coming year by individual carriers acting quietly.

“Maybe less [aircraft] deliveries and maybe [more] retirements” he predicted, adding that the turnaround could be underway already. “The anecdotal evidence is it’s starting but is not evident in terms of yield,” said Herdman without giving details.

Carriers are being helped by falling oil prices, although the AAPA’s view of the impact of better-priced aviation fuel is a muted one.

“We’d actually welcome lower oil prices not so much as a windfall for the industry but as an overall benefit,” said Herdman.

AAPA slams Asiana’s San Fran ban

The Association of Asia Pacific Airlines (AAPA) has joined a chorus of criticism of the Korean government for banning Asiana Airlines from flying to San Francisco. At its annual Assembly of Presidents in Tokyo, AAPA director-general Andrew Herdman said the decision was “very regrettable”.

“I think it would be very unfortunate if you were to see the emergence of a punitive culture,” he added.

South Korea’s Asiana Airlines has been banned from flying its Seoul-San Francisco route for 45 days, as punishment for a 2013 crash. Earlier this week IATA also criticized the Korean government for the ban.

Michael Mackey reports for Travel Daily Asia from the AAPA Assembly of Presidents in Tokyo

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