AAPA Director General Update

Transcript

Andrew Herdman:I think the mood is pretty upbeat because the passenger and cargo traffic both performing well. It's still very competitive. Profitability is mixed, but overall it's, I think, another successful year for Asia-Pacific aviation. I think there are some key regulatory issues that are always of concern. Safety, security results are good. The performance is very good, but we're constantly receiving requests from governments for further security measures. That was a big discussion topic. We think we need more consultation between governments and industry and multilateral cooperation, preferably through ICAO, to develop aviation security standards globally. At the moment, what we're seeing—the U.S. measures and other countries initiating. Destination-specific measures, and that's making life difficult for passengers, airports, and airlines. Other things— sustainability. Obviously very pleased at the work done in ICAO on CORSIA, and a lot of attention needed to turn CORSIA into reality, the carbon offsetting scheme for aviation. It's a mixed picture and has been, but if we look back at 2015, 2016, 2017, Asian airlines in aggregate are making about $7 billion. But that's a profit margin of, you know, well under 5%. So it's a, it's a very competitive industry. You're right that US carriers as a group have been more profitable in recent years, and they're continuing that position. European carriers are somewhere in between. But overall, airlines are focused on revenue optimization, cost control, and trying to just preserve those margins. Most of the savings from the fuel were passed on to consumers. Now that fuel prices have bottomed, we're seeing fares having bottomed also. So we should see profitability maintained, I think, at pretty much similar levels. I'm hesitant to use the word overcapacity because if you track the load factors, load factors have been steadily rising and the traffic growth has exceeded expectations for both passenger and cargo. And so the capacity growth has been behind the demand growth and load factors have increased. So in that context, It's not sensible, I think, to talk about overcapacity per se. The threat of overcapacity, given the size of orders that are coming, you know, that's a concern. But let's see, it depends on deliveries, not orders. And deliveries are pretty well matched, I think, with the expected growth in demand. How about yield pressure then? Yeah, so yield pressure reflects the competitive dynamics. Most routes in Asia are contested by multiple airlines, you know, 5 or more airlines on all the busy routes competing with each other on single routes. And that translates into very competitive fares for the consumer. Well, so far this year we've seen cargo traffic volumes up 10.7%. Obviously that's a strong recovery and it's been sustained over the last 18 months and it seems to be continuing right now. Whether that will taper off because of the higher comparisons of last year, that may happen, but still I think it's a pretty positive signal the global economy is in pretty good shape, and trade is picking up after some very weak years following the financial crisis. CAPA is a member of the ICAO.

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