After the scares around the Chinese economy and financial markets which dominated headlines in January, China's air travel market - and across the Asia-Pacific in general - is producing a robust performance for airlines in the region.
“I don’t think much has changed that much, but the perceptions in the West have,” says director general of the Association of Asia-Pacific Airlines, Andrew Herman, of the market conditions now compared with the financial concerns that sent stock markets tumbling at the start of the year. " At the time it was front page risk of slowdown. Let’s be clear, the air cargo business is in a very tough spot, global trade has slowed right down. You look at the export industries in China….there’s a marked slow-down.
“But the services sector, the general economy, the growing middle class, rising incomes - that story is still intact, and air travel is a beneficiary of that and so air travel is growing robustly. Growth continues, and that’s across the region,” Herdman says. He cites continued traffic growth of around 8%.
“Some of that is the stimulus of low fuel prices translating into lower fares,” he says, but adds: “With the oil prices having bottomed out…we should not count on the stimulus of the falling air fares to continue.”
Herdman points out airlines in the region have just posted profits of around $7 billion for 2015, equating to a margin of 4% - dwarfed by that of the North American carriers.
“Even as air fares come down, costs are coming down as well, so are margins going to be preserved or improved slightly? We are seeing mixed signals. Some airlines are seeing some profits edging upwards," he says.
“So despite the uncertainty around the global economic outlook, Asian airlines are reasonably optimistic of the growth trend, perhaps slowing a little if fuel prices are at this level or slightly higher, but nothing fundamentally changing.”
Source: Cirium Dashboard
