Asia’s aviation industry is booming, so why isn’t it making money?
- Only six of the 20 publicly traded airlines based in the region made a profit in the last reported quarter
- Revenues have taken a hit from falling fares and increased competition from rapidly expanding budget carriers
A surge in air travel has yet to pay off for Southeast Asian airlines, with experts predicting that 2019 will see more fierce competition as regional carriers struggle to return to profitability.
Only six of the region’s 20 publicly traded airlines made a profit in the last reported quarter, according to a study by the Sydney-based CAPA Centre for Aviation, while 19 airlines posted declines in profits from the same July to September period a year before.
The study said Southeast Asia was a market of “rapid growth but meagre profits” and forecast that “profitability will likely slip further following a deterioration in market conditions”.
“This has been happening for several years. The main reason is the intense level of competition,” said Brendan Sobie, the study’s author. “Airlines have struggled to increase fares, which keep going down despite an increase in demand. And they weren’t able to increase fare prices when fuel went up.”
Executives from legacy airlines and low-cost carriers alike have been left scrambling for answers. Krittaphon Chantalitanon, vice-president of commercial strategy at Thai Airways, said the Bangkok-based flag carrier had faced up to the challenges of competition “with difficulty”.
