KUALA LUMPUR, July 14 (Bernama) -- Airlines are expected to see a gradual improvement in yield going into the second half of 2010, given better capacity utilisation, says ECM Libra Investment Research.

In a note, ECM Libra said this, however, would still depend on the discipline among airlines to refrain from predatory airfare pricing again.

"While passenger traffic is growing, the greatest challenge to airlines right now is the continued pressure on yields due to aggressive fare cutting among airlines," it said.

ECM Libra said passenger traffic in the Asia-Pacific has continued to improve after posting nine consecutive months of year-on-year (y-o-y) growth up to May this year.

It said Malaysia Airlines (MAS) saw its yield y-o-y declined 21.2 per cent to 23.2 sen/RPK (revenue passenger kilometre) in 1Q10, while AirAsia's revenue per person decreased 7.1 per cent to RM210.70, or equivalent to 21.5 sen/RPK.

"AirAsia is still able to remain profitable with such depressed yields, but full-serviced carriers with higher cost structures such as MAS are only breaking even at best," it said.

ECM Libra said such crude oil price stability was positive for airlines as it would support a stable fare structure going forward.

"West Texas Intermediate crude oil has stayed within a tight range of US$70 and US$80 per barrel for a good start of this year," it said.