Asian airlines struggled to break even in 2014 – report
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Airlines in the Asia Pacific region operated at close to break-even in 2014, according to figures released this week.
Data from the Association of Asia Pacific Airlines (AAPA) revealed that last year’s flat result contrasted with aggregated net profits of US$2.2 billion in 2013.
Total operating revenues of US$176.6bn were recorded for the 2014 calendar year, 1.9% more than the US$173.4bn recorded in 2013. Passenger revenues increased by 1.4% to US$135.4bn, driven by a 4.7% rise in traffic.
But AAPA said that “downward pressure on airfares from stiff competition and excess capacity, as well as the effects of high fuel costs and Asian currency volatility” impact airlines’ profitability in 2014. “Restructuring costs also acted as a drag on the overall results,” it added.
Combined operating expenses increased 2.5% to US$173.8 billion, while fuel costs declined 1.1% to US$60.0bn.
“Asia Pacific carriers faced a number of significant challenges in 2014, with capacity growth slightly outpacing market demand leading to intensely competitive market conditions across all segments of the industry,” said Andrew Herdman, director general of the AAPA.
“In addition, the strengthening of the US dollar against many Asian currencies had some effects on travel patterns as well as increasing the burden of dollar obligations. In spite of this, overall, the region’s carriers managed a thin operating margin of 1.6%, down from 2.3% in 2013.”
Looking ahead, Herdman added; “The operating environment remains highly competitive, even though airlines have been carefully reviewing their route networks and closely matching capacity with the expected growth in demand. The benefits of lower oil prices should be reflected in further growth in travel demand, although the financial impact on individual airlines will vary depending on their respective fuel hedging policies.
“Overall, Asian carriers remain very focused on efforts to restore margins through a disciplined approach to managing costs, further productivity improvements, and ongoing investments in route development and customer service enhancements,” he concluded.
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