Operating environment to remain challenging for Asian airlines

Rising fuel prices and stiffer competition will continue to impact on the airline industry this year, said Andrew Herdman, director general of the Association of Asia Pacific Airlines (AAPA).
Herdman shared his outlook as the group noted that overall profitability was sustained last year.

“The operating environment remains challenging, against a backdrop of stiff competition, higher oil prices and other cost pressures,” Herdman said in a statement from the AAPA.

Already, local carriers are feeling the pinch. PAL Holdings, operator of flag carrier Philippine Airlines, posted a net loss of P1.13 billion in the first quarter of 2017, reversing its profit of P2.9 billion a year ago. It cited higher expenses including more than 50-percent jump in fuel prices.

Cebu Air Inc., operator of Cebu Pacific, saw net income fall 68.2 percent to P1.28 billion during the period.

Both companies saw higher passenger volume, indicating that demand remained strong.

It was the same in the rest of the region, AAPA said.

“Continued growth in passenger demand and the pick-up in air cargo markets, with significantly higher load factors during the first quarter, give some cause for optimism for the remainder of this year,” Herdman said.

“Asia Pacific airlines are focused on enhancing business performance and investing effectively in new technologies and aircraft, with the aim of strengthening resilience and further improving long-term profitability,” he added.

For 2016, Asia Pacific carriers benefited from lower oil prices and healthy demand, the AAPA said.
It noted that Asia Pacific airlines reported a combined $6.9 billion in net earnings for the full year.
It said carriers in the region saw a 6.4-percent increase in international passenger traffic.
Industry-wide revenue last year hit $165.3 billion, down 0.3 percent year-on-year while total operating expenses hit $151.8 billion, unchanged from 2015.