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Stagnant Airline Profits Persist in the Asia-Pacific Region

Stagnant Airline Profits Persist in the Asia-Pacific Region

Asia-Pacific is on track to experience the second-lowest aviation profit per region this year, standing at $1.2 per passenger. This is primarily due to slow growth in China and disruptions in the supply chain, as reported by the International Air Transport Association (IATA).

Xie Xingquan, serving as the regional vice-president for North Asia and interim for Asia-Pacific at IATA, forecasts a $2.2 billion profit for the region out of the total industry profit of $30.5 billion expected this year. This projection shows an improvement from the previous estimate of $1.1 billion and surpasses the $600 million profit recorded in 2023.

Despite the anticipated profit per passenger of $1.2, which is higher than Africa’s forecasted $0.9 per passenger, it remains notably below the industry average of $6.14, as per IATA.

Delayed reopening from the pandemic and a more modest recovery compared to other regions have impacted Asia-Pacific, leading to a slower increase in international travel, especially from China, which has only reached 70% of 2019 levels. Travelers in this region are opting for domestic or short-haul trips due to cost-saving measures.

Furthermore, geopolitical conflicts causing airspace closures have driven up costs for long-haul air travel, affecting routes to and from the Middle East and Russia.

During a recent interview at IATA’s annual summit in Dubai, Carsten Spohr, the CEO of Lufthansa Group, highlighted challenges in travel times due to the closure of Russian airspace. The closure has extended flight durations from Europe to China by up to 13 hours, compared to the typical 10-hour flight from Frankfurt to Beijing.

Key industry players like Annette Mann, the CEO of Austrian Airlines, emphasized the importance of the Asia market, particularly Thailand, in their expansion plans. Austrian Airlines is set to increase its long-haul fleet to 11 aircraft, aiming to cater to strong demand by adding more flights between Vienna and Bangkok during the upcoming winter season.

Ross Leggett, the managing executive officer and senior vice-president for route marketing at Japan Airlines, noted that while flight capacity in Asia has largely recovered to pre-pandemic levels, China’s market is slower to bounce back. With favorable market conditions and a weakening yen, Japan Airlines anticipates a robust inbound tourist market from Asia, especially in the coming years.

These industry insights shed light on the current challenges and opportunities faced by airlines in the Asia-Pacific region, as they navigate through a complex landscape shaped by both regional dynamics and global factors.

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