Anyone still nursing hopes that the Asian downturn would prove to be a short, albeit sharp, shock to the region's once buoyant airline industry, will have struggled to retain their optimism in the face of the extraordinary news pouring out over the past fortnight.
Perhaps most ominous was the suspension of services by Indonesia's largest private carrier Sempati Air Transport - the first major casualty of the Asian downturn and a chill warning that survival is no longer guaranteed. The country's Government also confirmed what many had already realised, that national carrier Garuda Indonesia has run out of cash and is fast running out of time. The carrier duly announced plans to send back a host of leased aircraft which it can no longer afford to keep, but not before the indignity of facing a group of angry protesters on the lawns outside its headquarters demonstrating against links with ousted president Suharto.
At the same time, Philippine Airlines (PAL) was forced to sack 600 pilots in an effort to end a damaging week-long strike that it could ill afford. The sackings were accompanied by plans to lose at least one-third of the fleet and hack away much of the route network, leaving a skeleton service to only four international destinations. Like Garuda, the Filipino airline is in danger of ceasing to exist as an international carrier if the cuts continue.
The Thai Government, too, has belatedly given the go-ahead for the sale of one-fifth of the shares in state-owned Thai Airways. By no coincidence the announcement came as Thai confessed that it too has been forced to put this year's new aircraft deliveries on hold as it struggles to come up with the financing. It joinsa long and distinguished list of Asian carriers that have now been forced to defer orders and rethink fleet plans - not least its counterparts in Hong Kong, South Korea and Malaysia.
Even the region's once reliable economic powerhouse of Japan is in little position to help, having now officially entered recession - its first for 28 years.
That has left many clinging to the hope that China, at least, might be able to keep momentum rolling in Asia. It is a hope that is fading fast. The country is itself struggling to meet economic growth targets this year. Air passenger markets have stalled, which, with capacity continuing to grow by 11-12%, has left load factors and yields in a tail spin. Profits have begun to evaporate, with 11 of the largest Chinese carriers revealing combined losses of around $200 million in the first quarter alone.
Neither are there any signs of much better news on the horizon for Asia/Pacific. Traffic figures for the region thus far this year have shown a steady decline. Zero growth in January had turned into an 8% decline in passenger traffic by March. Load factors were off by six points.
The former tiger economies remain distinctly bearish. What started a year ago with the region's stockmarkets catching a cold has since turned into a bad case of Asian flu and now looks dangerously like developing into a prolonged bout of pneumonia, for which no-one yet has the cure.
Precipitous falls in exchange rates have been hard to bear for airlines heavily exposed to dollar costs. Urged on by fanciful market projections and aircraft suppliers warning of rapidly disappearing production slots, airlines placed multi-billion dollar-denominated orders for new aircraft years in advance of deliveries.
They are now finding themselves locked into 8-10% capacity growth and facing mounting debts, at a time when the market is stagnating or worse in decline.
Early hopes that cheap money would stimulate the tourist trade have been killed off quickly for countries like Indonesia where images of rioting and burning forests have failed to appeal to choosy international holidaymakers.
The shock of economic slump for many of these Asian airlines is all the harder for the fact they have for years put off facing up to the need to restructure and modernise. Many have existed in cosy markets with limited competition and with a blind eye turned to over staffing, poor management and occasional corruption. For some, it is too late to talk of restructuring. The battle is for survival.
Source: Flight International
