Asian airlines’ local demand let them weather the worst global travel slump since World War II. The carriers are now looking for growth in Europe and the US to help fill planes next year.
“If Europe and the US aren’t recovering that may impact Asia,” Malaysian Airline System Bhd Chief Executive Officer Tengku Azmil Zahruddin said in an interview last week in Brunei. The carrier started taking delivery of 35 new Boeing Co 737s this month as it modernises and expands its fleet.
A double-dip recession in the US and Europe could damp demand for Asia-Pacific carriers that are already expected to suffer profit declines because of increasing capacity. Profits at the region’s airlines will likely fall to $3 billion next year from an expected $5.2 billion this year as new planes enter service, according to the International Air Transport Association.
“We’re going to see more capacity coming into the market and that usually impacts profitability,” Cathay Pacific Airways Ltd Chief Executive Officer Tony Tyler said at a two-day regional airline meeting in Brunei. Up until now, “we’ve been very lucky in Asia,” he said.
The airline, Hong Kong’s biggest, is returning capacity to pre-crisis levels after boosting first-half profit more than eightfold on rising passenger numbers and the sale of a stake in a maintenance provider. The carrier is due to receive nine new passenger planes next year.
ANA expansion
All Nippon Airways Co, Asia’s largest listed carrier by sales, plans to boost overseas flights 15 per cent in the year ending March helped by the opening of a new terminal at Tokyo’s Haneda airport. Singapore Airlines Ltd has added flights to cities including Los Angeles, Moscow and Tokyo.
International air travel in the Asia-Pacific region increased 10 per cent in the first nine months, outpacing gains in Europe and North America, according to IATA. The region’s cargo traffic jumped 30 per cent, as manufacturers shipped more clothes and consumer electronics to European and US retailers.
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Demand may falter amid US unemployment rates of around 10 per cent and reduced government spending in Europe. Former Federal Reserve Chairman Paul Volcker, an adviser to President Barack Obama, said on November 5 the revival in developed economies has been unsatisfactory. Recovery in the US, the world’s largest economy, will be slow and not robust, he said.
“A double-dip or slowdown in any of the major blocks would clearly undermine the pace of the recovery overall,” said Andrew Herdman, director general of the Association of Asia Pacific Airlines, which hosted the Brunei meeting.
Traffic growth
Global passenger traffic fell 3.5 per cent last year, amid the economic slump, making it the worst year in the airline industry’s history, according to IATA. In the first nine months of this year, North American international air travel has risen 6.7 per cent, while European demand has gained 4.4 per cent, the slowest increase worldwide.
“One thing we’re hoping for is for the European economy to pick up a little bit faster,” said Teerapol Chotichanapibal, acting executive vice president at Thai Airways International’s commercial department. The carrier gets about 20 per cent of sales from Europe.
Asia-Pacific airlines have so far limited capacity increases to preserve margins. Passenger numbers jumped 15 per cent in the nine months ended in September, while capacity rose 3.3 per cent, according to the Association of Asia Pacific Airlines.