Carriers forecast to generate average of just $4 profit per passenger in 2017

Asia-Pacific carriers are lagging behind North American carriers in terms of profitability. And though the future looks brighter, there are challenges ahead.

In 2017, North American airlines are forecast to have a net profit margin of 8.5%, said IATA’s Asia-Pacific Regional Vice President, Conrad Clifford, speaking at the IGHC. 

In the next seven years, China will become the number one passenger market on the planet

Asia-Pacific will post a 2.9% profit margin, he noted, adding that this figure represents an average profit of $4 per passenger, whereas US carriers are generating profits of $20 per passenger. 

“There is a big difference across the regions, and the reason Asia-Pacific carriers are not as profitable is because they are adding big chunks of capacity to cater to growth,” Clifford said. 

“But in the next seven years, China will become the number one passenger market on the planet [overtaking the US], in eight years India moves to number three, and in 20 years Indonesia moves to number five,” he continued. 

Asia-Pacific air traffic is growing, thanks to rising economic prosperity and incomes in the region.

The phenomenal success of the low-cost carrier business model in the region has also contributed significantly. 

But for the ground handling industry in Asia-Pacific, the growth in air traffic and rising incomes is creating its own set of challenges. 

Also speaking at the IGHC, David Walker, CEO Jardine Aviation Services, said that ground handlers have to deal with increasing price pressure, increasing congestion on the ground and in the air, and an increasing requirement for faster turnaround times. 

All this is happening in markets where it is becoming harder to get sufficient manpower. 

The days of having an infinite supply of workers is fast disappearing

He suggested that working for an airport ground handler is no longer an aspirational job.

Employment in the ground handling sector involves working unusual hours for unremarkable pay, and opportunities in other industries may seem more attractive. 

“The days of having an infinite supply of workers is fast disappearing,” he warned. “This is a severe problem. It appears to be a problem across the Asia-Pacific region from Tokyo to Jakarta, Taipei, and Shanghai. Almost everybody is trying to grapple with it.” 

“Working at the airport has fallen down the ‘desirable list’, ” he added. 

“We have had plenty of examples where parents have called us and said their 23-year-old ‘child’ won’t be coming to work for us anymore, because they don’t like coming home at 2am!”

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