KUALA LUMPUR -- Rising fuel prices sunk Garuda Indonesia and Thai Airways International into the red last year and continue to weigh on airlines' earnings as competition between budget and legacy carriers intensifies.
Both state-controlled carriers Garuda and Thai Airways logged net losses in fiscal 2017 despite revenue growth from rising demand for air travel. Garuda posted a net loss of $213.4 million for 2017, compared with a net profit of $9.4 million the year before. Operating revenue, nonetheless, rose 8% annually to $4.2 billion.
Thai Airways swung back to a net loss of $67 million last year after posting a marginal profit in 2016, the result of a turnaround plan helped by low fuel prices then. Operating revenue, however, grew 6.3% to $6.1 billion.
Both companies blamed the losses on a near-25% spike in jet fuel prices and a drop in airfare that suppressed passenger yield to 3% for Garuda and 7% for Thai Airways. Earnings were also pressured by unexpected expenses, a penalty related to a government tax amnesty for Garuda and an excise tax hike on fuel for Thai Airways.
Despite the losses and higher fuel prices, investment bank Nomura maintains a 4% earnings growth projection for Thai Airways this year. To stem further losses, Garuda said it will cut 10 more routes this year, on top of over a dozen already ceased in 2017. It will also renegotiate contracts and redeploy aircraft for new routes in the region.
Demand for air travel remained strong, as suggested by the load factor or the percentage of occupied seats -- 75% for Garuda, 79% for Thai Airways and 88% for AirAsia, Malaysian-based short-haul low-cost carrier.
AirAsia said in filing to the stock exchange on Tuesday revenue increased by 42% to 9.7 billion ringgit ($2.5 billion) in 2017 due to the high load factor and higher passenger traffic, which grew 11% to 39 million people.
The figures were based on consolidated numbers from operations in Malaysia, Indonesia and the Philippines under a proposed internal reorganization through a share swap to create an investment holding company.
Net profit rose by 1% to 1.64 billion ringgit, weighed down by a 74% increase in jet fuel expenses. On a quarterly basis, net profit declined by 20% to 372 million ringgit on revenue of 2.6 billion ringgit in the October-December period due to higher operating costs.
Average fare for the year remained unchanged at 176 ringgit, suggesting a subdued pricing mechanism due to competition. Group capacity as reflected by available seat kilometers increased by 9%, in line with a growth in total fleet size from 105 aircraft in 2016 to 123 aircraft in 2017.
Other group associates also recorded growth in the numbers of passengers carried, a 15% rise for Thai AirAsia and 81% for AirAsia India. AirAsia Japan, which began operations in October carried 29,455 passengers on a load factor of 64%.
The group said it will add five aircraft through operating leases in the first quarter of 2018 to cater to growing demand in the region.
Staff writers Erwida Maulia in Jakarta and Yukako Ono in Bangkok contributed to this article.