Rising oil prices are causing short-term pain for many airlines, but ultimately yields will improve to compensate, the head of the Association of Asia Pacific Airlines (AAPA) believes.

Fuel prices have climbed significantly, so fares will increase, AAPA director general Andrew Herdman said on the sidelines of the IATA AGM in Sydney June 4. But there is a lag in this fare rise in Asia, he noted and until it occurs, “airlines are going to be feeling the pinch in terms of a squeeze on margins.”

In 2017, fuel prices trended upwards, but yields declined for Asian carriers, Herdman said. However, it was still a good year generally for airline profits because of continued strong traffic growth and load factors.

In 2018, airlines “ought to be anticipating that passenger yields are going to start to rise,” Herdman said. When oil prices have increased in the past, those costs have been passed on to airfares without hurting demand for travel.

Herdman sees that trend recurring. He does not think fare rises will be “particularly damaging to demand” because passenger and cargo demand are “looking pretty good,” and the global economy is also strong.

Airlines would be much more concerned if demand for travel was under threat, Herdman noted. “We don’t see any of that now,” he said.

Adrian Schofield, avweekscho@gmail.com