Southeast Asian airline sector returns to profitability in 1H2015 but long-term challenges remain

Southeast Asia's airline sector was back in the black in 1H2015, boosted by improved market conditions, slower capacity growth and lower fuel prices. A sample of 16 airlines from the region generated combined operating profits of USD641 million in 1H2015 compared to operating losses exceeding USD500 million in 1H2014.

The improvement in profitability cut across virtually every market in Southeast Asia and all types of carriers. Overall 12 of the 18 airlines were profitable or break-even in 1H2015 compared to only five airlines in 1H2014.

But operating margins generally remain in the single-digits and lag most other regions. Southeast Asia remains an extremely competitive market with a high risk of continued overcapacity given the region's huge order book.