The Australian Centre for Asia Pacific Aviation predicts that the crisis affecting Asia's airline industry will continue "well into the next decade".
"The original shock was sharp and painful, but the bleeding will continue well beyond 1999," says Peter Harbison, managing director of the Sydney-based airport and aviation research and consulting group.
He cited airline yields that are down nearly 10% in 1998 compared to 1997, unsustainably high debt levels, falling growth rates for gross domestic products in the region, and excess capacity despite order deferrals and emergency sales of new and used aircraft.
"Conventional cost reduction methods cannot be adequate to stem the flow," says Harbison. "Yet no country can tolerate living without at least one international airline. It is seen as vital for an international tourism strategy, for defence capability and essential for domestic communications."
As a result, Harbison predicts, airline strategic alliances will have an increasingly important role, encouraging cross-border mergers. If airlines do not consolidate across national boundaries - which they cannot do now because of national and international restrictions on foreign ownership - further carrier collapses, like that of Philippine Airlines, are inevitable.
"This will lead to important changes in the national ownership rules of 'substantial ownership and effective control' - and, in turn, to a fundamental rewriting of the nature of international aviation regulation," says the consulting group managing director.
He says that there is a danger of policy makers moving "from denial to delusion", having once dismissed the crisis as a blip in the long-term growth of aviation, and now shifted to the belief that recovery is on the way.
"While there are today encouraging signs of a slowdown in the slide, good times are not around the corner," says Harbison.
Source: Flight International
