Asia Pacific airlines may be settling into a more normalised market cycle

As more Asia-Pacific airlines report financial results, it is becoming clear that while profitability will still be strong this year, many of them will see a step down from the spectacular results of 2023.

Last year demand outstripped supply by a large margin as travel rebounded faster than airlines could reactivate their fleets, and the imbalance helped spur record profits for many companies.

A major factor in 2024 has been the rise of capacity and competition in the international market as airlines restore more routes. This trend would have been even greater, if not for delivery delays and engine maintenance backlogs that are limiting growth for some airlines.

Traffic will be up considerably as services increase. But the overall rise in capacity is expected to cause airfare levels and yields to fall somewhat, and costs remain high - thanks to factors such as supply chain problems and hiring campaigns.

Many Asia-Pacific airlines are also hurt by currency devaluation and operational headaches caused by geopolitical tensions.

One of the terms being repeated in many earnings calls is "normalisation," as longer-term industry dynamics begin to reassert themselves. Profits and yields will ease in most cases, but probably not back to pre-pandemic levels.

Time will tell if 2023 can really be viewed as the peak of the current cycle, or if it was an outlier that will be followed by a more moderate growth rate.