The Association of Asia Pacific Airlines (AAPA) recently released preliminary financial figures for 2023, revealing a robust recovery in earnings for airlines in the region. After three years of consecutive losses, Asia Pacific airlines posted combined net earnings of $8.8 billion, driven by healthy travel demand across leisure and business sectors both regionally and globally.
The lifting of pandemic-related travel restrictions in 2023 played a key role in this financial turnaround. The year saw a 130.7% increase in international passenger traffic, measured in revenue passenger kilometers (RPK). However, international air cargo demand, measured in freight tonne kilometers (FTK), declined by 2.8%, affected by inflationary pressures, a strong US Dollar, and reduced demand for goods.
Revenue and Yield Analysis
In 2023, Asia Pacific airlines achieved operating revenues of $198.1 billion, marking a 54.8% increase from $128.0 billion in 2022. Passenger revenue more than doubled to $151.5 billion, reflecting the strong growth in passenger demand. Despite this, passenger yields fell by 6.7% to 8.6 cents per RPK due to the increase in flight frequencies. Conversely, cargo revenue dropped by 43.3% to $21.0 billion, influenced by reduced trade activity and lower freight rates. Cargo yields saw a 41.7% decrease to 33.6 cents per FTK but remained above pre-pandemic levels.
Operating expenses rose by 30.9% to $182.6 billion in 2023, aligned with the increase in flight frequencies and network restorations. Fuel expenditure saw a 41.5% rise to $57.7 billion, partly offset by a 20.0% decline in global jet fuel prices to an average of $113.4 per barrel. The share of fuel costs in total operating expenses increased to 31.6%. Non-fuel costs also rose by 26.5% to $124.9 billion, driven by higher spending on staff, landing fees, and en route charges.
Subhas Menon, AAPA Director General, noted, “In 2023, Asia Pacific airlines made a welcome turnaround following three consecutive years of steep losses during the COVID-19 pandemic years. The region’s carriers recorded an operating profit margin of 7.8%, compared to -9.3% in 2022. Asian airlines benefited from the vigorous recovery in passenger demand. While still relatively high compared to historical averages, the decline in oil prices helped alleviate cost pressures from persistent inflation and a strong US dollar.”
Looking Ahead
Menon added, “The outlook for Asian airlines is generally positive, with strong global air travel demand and growing international air cargo markets. However, challenges remain, including supply chain constraints affecting capacity deployment and ongoing cost pressures. Asia Pacific airlines continue to adapt, focusing on opening new routes, meeting customer demand, improving cost efficiency, and maintaining high safety and sustainability standards.”
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