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Aviation

Record profits revealed for Asian carriers despite troubles plaguing Cathay Pacific, Singapore Airlines

Major industry group cites global economic growth, higher ticket prices and more travellers

PUBLISHED : Wednesday, 06 December, 2017, 6:04am
UPDATED : Wednesday, 06 December, 2017, 10:59am

Asia-Pacific airlines will achieve record levels of profitability next year as strong global economic growth, higher ticket prices and more travellers than ever before boost carriers’ bottom lines, the industry’s trade body revealed on Tuesday.

The robust performance would equal the highs of 2015, led by three state-owned Chinese airlines and despite the difficulties faced by two of the region’s most prominent carriers, Cathay Pacific Airways and Singapore Airlines.

“These are good times for the global air transport industry,” said Alexandre de Juniac, director general of the International Air Transport Association. “More people than ever are travelling. The demand for air cargo is at its strongest level in over a decade. Employment is growing. More routes are being opened.”

The Geneva-based association, representing 275 airlines accounting for 83 per cent of global air traffic, said airlines were set to conclude the year with a tally of US$34.5 billion in net profit, revised upwards 10 per cent from an earlier estimate this year of US$31.4 billion.

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Similarly, net profit is poised to rise almost 20 per cent in 2018 to US$38.4 billion – the industry’s highest amount ever in one year. However, the association estimated it would earn about US$10 billion less than the profit of a single company – Apple.

“Airlines are achieving sustainable levels of profitability,” de Juniac said. “It’s still, however, a tough business, and we are being challenged on the cost front by rising fuel, labour and infrastructure expenses.”

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As a whole, the strength of mainland Chinese and Japanese carriers and the air cargo business would help the region’s airlines generate US$9 billion of profit.

All major aviation markets saw profit growth, with levels in Asia trailing those of Europe and North America, where forecasts were US$11.5 billion and US$16.4 billion respectively. The region looked to face “intensifying competition” amid the rise of low-cost airlines, particularly in Southeast Asia.

Airlines are achieving sustainable levels of profitability
Alexandre de Juniac, International Air Transport Association

The association’s chief economist, Brian Pearce, said China had driven a large part of the industry’s profits and the country had benefited from a weaker US dollar.

“Regional economies have been pretty strong, although the Chinese economy as a whole has been slowing down but demand has been very strong,” Pearce said. “Prospects are looking pretty favourable at the moment.”

Yet challenges remain for Asia’s largest international carrier, Cathay Pacific, as well as Singapore Airlines.

Stiffer competition prompted the two to carry out restructuring programmes, and both carriers have cut jobs to help save on costs.

Cathay Pacific, Hong Kong’s de facto flagship airline, recorded a HK$2.05 billion loss (US$262 million) for the first half of this year and is on track to remain deep in the red by the end of 2017. The airline lost HK$575 million last year.

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Singapore Airlines showed signs of improvement after reporting a surprise S$138 million (US$102 million) fourth-quarter loss.

Its restructuring efforts to fend off competition showed signs of paying off. In the three months to June, Singapore Airlines recorded a profit of S$281 million, up S$88 million from a year before.

Danny Lee is reporting from Geneva