The Asia-Pacific region continues to maintain its flagship role at the sharp end of global air travel recovery. Double-digit growth is again forecast through 1996, bringing further financial gains for regional operators and benefits for major airlines operating into the area from elsewhere.
There will, however, be dramatically differing levels of expansion, with impressive traffic lifts in markets such as China, Vietnam and India tempered by more moderate gains in established areas such as Australasia, Japan and Singapore.
After several years of caution airline managements are again making serious decisions on fleet expansion, with new orders for airframes set to spark a return to far more healthy production levels for aircraft and engine manufacturers. Singapore Airlines, Cathay Pacific, Malaysia Airlines and Philippine Airlines have already placed large orders for new generation widebodies and firm decisions for multi-billion dollar orders are expected from China's largest carriers and others.
Fast growing internationals such as Taiwan's EVA Air and Korea's Asiana will continue their expansion, joined by ambitious new regionals and startups. While this will help to maintain upward trends in traffic and revenue, it also means a further intensification of competition.
The Orient Airlines Association (OAA), which represents the region's 17 primary operators, says that while airlines have always competed vigorously on product offerings, there are indications that pricing is being used as a tool to attract traffic. 'As long as this is being employed tactically and not as a strategy to replace other marketing tools, there is no danger that the region will witness the ruinous price wars prevalent in the US,' says the OAA optimistically.
The OAA expects to see Asian airlines launching new transpacific services, the thickening of regional routes by even greater use of widebody aircraft, and new airport development. 'This, in turn, will permit the continued double digit growth of belly space cargo loads and the postponement of some of the evils of airport congestion in the region,' it says.
Surprisingly, however, the organisation predicts US and European trends towards consolidation through alliances and codeshares are unlikely to be followed closely in the Asia-Pacific region. This view is disputed by many analysts.
The British Airways/Qantas partnership is now producing strong financial benefits for both carriers. Thai Airways International is now forging a powerful alliance with both Lufthansa and United and others are following suit. Malaysia Airlines' links with Virgin and the recently forged ties between All Nippon Airways and American Airlines signal a gathering pace in the alliance stakes.
While this presents an optimistic outlook, some problems remain. Not all Asia-Pacific carriers have been successful in meeting new challenges. Among those are Philippine Airlines, Garuda Indonesia and Thai International, which face varying political, financial and internal management problems. Japan's operators also continue to suffer from the strong yen.
Despite overall financial gains, all operators face the continuing task of fighting persistently declining yields by further reducing operating costs in the face of rising living standards.
Bilateral relationships will remain a prime issue for the region as it comes to terms with external demands for more access and freer skies, although there are signs that US and Asian air service negotiators are coming to realise that both sides can benefit from a more flexible attitude towards air route access - in both directions. Recent treaties between the US and Thailand, the Philippines and Hong Kong after years of acrimony are evidence of that.
While serious hurdles remain to settlement of the long-running dispute between the US and Japan, 1996 may well be the year which sees them thrash out a more equitable arrangement.
According to the OAA, another possible development in the current year could be a surprisingly rapid establishment of direct air services between Taiwan and mainland China, although the rising temperature of the political debate between the two sides could again delay this. The OAA also points to the likely emergence of Seoul as a transpacific hub equal to Narita, and a swift transition to Future Air Navigation Systems (Fans) technology.
While the constant struggle for improved profitability will be the major focus, progress in the development of China's aviation industry will again be the centre of much attention. Not only will analysts be watching closely for further signs of an opening of the market and a possible breakthrough on China/Taiwan air links, but as 1997 approaches there will be keen interest in what signals are being sent out on the future of Hong Kong.
Asia-Pacific will again be a significant contributor to the worldwide upswing in aviation's recovery cycle. During 1994/95 intra-Orient passenger numbers lifted 13.5 per cent while outbound traffic from the region rose 12 per cent. Cargo within the region soared 28.8 per cent with outbound freight increasing 16.1 per cent. These impressive results are likely to be equalled or bettered in the coming year.
Tom Ballantyne
Source: Airline Business
