Airlines face lower yields amidst falling costs

epa05128697 Passengers look at model of aircrafts flown by different air carriers at Kuala Lumpur International Airport (KLIA) in Kuala Lumpur, Malaysia, 27 January 2016. KLIA, the home of Malaysia Airlines, is the largest airport in the country, and world wide rates among the top 13 airports handling the most international passenger traffic. EPA/BARBARA WALTON

STRONG signs are pointing to a recovering airline industry helped largely by lower crude oil prices. However, at the same time, airline yields are also dropping due to rising competition, which is a cause for concern.

Yields, which are a measure of revenue multiplied by revenue per kilometre (RPK), has been on a downtrend since the fourth quarter of 2014, according to Maybank Kim Eng. Revenue per average seat kilometres (RASK), often described as the sweet spot to profitability for any airline, has also been on a similar downtrend over that time period.