Asia Pacific Airlines Reduced Losses in 2009

Preliminary financial performance figures from the Association of Asia Pacific Airlines (AAPA) show that Asia Pacific-based carriers reported significantly lower aggregate losses in the 2009 calendar year. Net losses for 2009 totalled US$2 billion, compared to aggregate losses of US$8.8 billion recorded in 2008. Declining revenues as a result of weak traffic demand and falling yields were partially offset by lower fuel prices and effective cost control measures.

Combined revenues for Asia Pacific airlines totalled US$114.2 billion, 16.1% lower than the US$136.1 billion reported in 2008. Operating expenses fell by 19.8% to US$112.1 billion. Fuel expenses, the single largest cost item, declined by 34.9% to US$32.2 billion, with an average oil price of US$62 per barrel compared to US$97 per barrel in 2008.

Fuel accounted for 29% of total operating costs, compared to 35% in 2008. Non-fuel expenditures fell 11.6% to US$80 billion as a result of reductions in staff costs, rationalisation of unprofitable routes and some deferrals of new aircraft deliveries. A number of carriers also benefited from favourable currency exchange movements and reversals of previous mark-to-market fuel hedging losses.

As a result of the global recession, international passenger and air freight demand fell for two consecutive years. International passenger traffic measured in revenue passenger kilometres fell by 4.7% in 2009, with particular weakness on premium long-haul routes, whilst international air cargo traffic expressed in freight tonne kilometres, suffered an even more significant decline, down 10% for the year reflecting the slump in international trade. The fall in revenues was exacerbated by lower average passenger fares and shipping rates in a generally weak market.

Commenting on the 2009 financial results, Mr. Andrew Herdman, AAPA Director General said, “The downturn in global economic activity over the past two years has had a very severe impact on the aviation industry. Asia Pacific carriers were particularly hard hit by the sharp declines seen in the premium business travel and air freight markets. Airlines reacted appropriately by moving quickly to adjust capacity, and introducing a range of measures to restrain costs throughout the business. As a result, they were able to offset much of the impact of lower revenues, reducing the level of aggregate losses for Asian airlines to US$2 billion in 2009, representing a negative 2% margin on combined revenues of US$114.2 billion.”

 “Economic conditions showed welcome signs of improvement in the latter part of 2009, with a rebound in international trade and renewed consumer and business confidence, led by strong growth in the Asia Pacific region. Positive sentiment has been maintained into the first quarter of 2010, and both cargo and passenger demand are close to returning to the levels seen before the recession,” Mr Herdman added. “Provided the current momentum is sustained, Asia Pacific airlines are poised to spearhead the recovery in the aviation industry, with an anticipated further improvement in financial performance for the year 2010 following two years of heavy losses.”

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