What a difference a year can make. When Asia-Pacific airline presidents met for their annual assembly a year ago in Manila, most were still finding optimism elusive, despite the first budding signs of traffic recovery. The atmosphere at the latest meeting of the Association of Asia-Pacific Airlines (AAPA)in Tokyo at the end of November was a different matter.
Executives, who a year earlier had been under visible stress, were in relaxed mood. After two years of grappling with the fallout of the region's economic crisis, most were finally prepared to declare that the emergency is over. "I don't think there's any doubt at all that the airlines have re-established growth and most have turned the corner in terms of profit," says AAPA director general Richard Stirland.
The signs of upturn were everywhere. Philippine Airlines (PAL), which had failed to attend the event in its home city of Manila, as it struggled with collapse, was back in Tokyo under new management. Ironically, its re-emergence coincides with the AAPA's decision to investigate a move from Manila, its headquarters for over 30 years, in favour of Kuala Lumpur.
Garuda Indonesia was also present and keen to talk about the new business plan put in place with the help of Deutsche Bank and due to be agreed with creditors early this year. The plan was to end 1999 with profits of $34 million.
Of the 19 members, only Air Niugini was again absent. Having failed to pay its membership fees for at least a couple of years it was finally expelled from the association.
Elsewhere, there is good reason for the renewed enthusiasm. When the AAPA last met in Manila, the region's passenger traffic had shown its first monthly growth in a year. With just one positive sign and yields still in free fall, it was too early for optimism warned the presidents. But the traffic growth has continued unabated ever since with freight too bouncing back even more robustly.
Stirland admits that growth may have been "set back by a year", but argues that with the lost ground is now mostly recovered and a more stable environment in prospect for the year ahead, the effect of the economic crisis "will be history".
In the year to August - the latest month for which the AAPA has reported - passenger traffic growth appears to be back in rude health, rising by just over 8%. Given a modest 1.3% growth in capacity, load factors soared back over the 70% mark. In August alone they were at an all-time high of 79.6%. With the obvious exceptions of PAL and Garuda, all of the AAPA members showed traffic growth, led by EVA and Singapore Airlines with some 13%.
Capacity has been returning on international routes into the region, however, as carriers in both west and east are tempted back by the prospect of recovery. The monthly OAG statistics show a sustained growth on European routes and signs of life on the transpacific.
Yields have remained patchy despite the traffic rise, although financial results coming in so far this year suggest that the worst of the damage is over. The depth of the slump appears to have been reached in the 1998/9 fiscal year to March, with revenues down by close to 15% and operating profits halved. With economies and currencies now more stable throughout much of the region, that fall looks certain to be reversed over the current financial year.
Although the early stages of traffic recovery were largely fuelled by economy travellers, including a healthy rise in tourism, Stirland believes that premium travel is beginning to return within the key intra-Asian market.
Question marks still hang over Japan, where the downturn is proving difficult to shift. All Nippon Airways president Kichisaburo Nomura, hosting the AAPA assembly, complains of weak yields despite the return of passengers. Over the first half of the year to September overall passenger traffic grew by around 3% for the major Japanese carriers, including a 2.8% rise in the sluggish domestic market. Yet the majors still showed an overall decline in revenue as yields plummeted.
The outlook, however, could be improving, with revenues in November and December reported to be more buoyant, albeit with some worrying gaps appearing around Japan's traditionally busy New Year holiday period.
Although Nomura cautions against too much optimism for a turnaround in Japan, he adds that 2000 is, after all, the year of the dragon. A good omen perhaps for Asia.
Source: Airline Business
