For the Asian air transport industry, the world was a very different place at the time of the last Paris air show in June 1997.
The region's economies were growing at phenomenal rates and its airlines were riding a seemingly endless wave of growth.
But weeks later, it all fell apart with the onset of the Asian economic downturn, starting in Thailand in July 1997. Nearly two years on, its effects continue to be felt.
While there are some signs of an upturn, the world's manufacturers and parts suppliers are looking at Asia with different eyes today. No longer is it the Holy Grail of growth - dealing with Asia now takes greater patience and a longer-term perspective.
The damage caused by the downturn has been immense. Aircraft fleets are smaller, airlines are operating fewer routes, yields remain depressed and some carriers are on the brink of bankruptcy.
Airlines
Who would have thought just a couple of years ago that Hong Kong's Cathay Pacific Airways, traditionally one of the world's most profitable airlines, could be operating in the red? Last year it posted its first full-year loss in 35 years, and its troubles are continuing.
Who would have thought that Philippine Airlines (PAL), the region's oldest carrier, would be put in receivership? It was in June 1998 and is still fighting for its survival today.
Who would have thought that South Korea's Asiana Airlines, one of the brightest startups of the 1990s, could have come close to collapse? It came close to it last year and while it is doing better today, it is not yet out of the woods.
During this period of decline, few aircraft orders have been placed and analysts say it will be several years before the string of big orders of years gone by can be repeated.
Singapore Airlines (SIA) became an early customer for the new Airbus A340-500 with an order for up to 10 in 1998 during the worst of the crisis, but this positive development was balanced against a negative when EVA Airways of Taiwan cancelled a similar letter of intent for the ultra-long-range type.
Chinese carriers have placed only the odd aircraft order, while Korean Air (KAL) has ordered Boeing 737-800/900s only as part of a wider lease-back deal with GECAS that provides it with much-needed cash.
The past two years' orders are more difficult to remember than the deferrals and cancellations, perhaps the biggest being PAL's cancellation of an order for seven 747-400s for which Boeing is still trying to recover damages. Asiana, Garuda Indonesia, KAL, SIA, SilkAir, Thai Airways International - virtually every big carrier in the region either deferred Airbus and Boeing orders, or cancelled them outright.
And there are some carriers that no longer exist. Asia Pacific Airlines and Saeaga Airlines of Malaysia shut down last year after announcing grand plans for expansion. The same fate may yet befall PAL.
Industry observers say not to expect much from the region's airlines for some time yet, even though improvements are now being reported. They also say not to look at the most recent aircraft orders as an indication that all is better.
By this they mean EVA, which recently ordered three Boeing 747-400 freighters. Its home-based rival in Taiwan, China Airlines (CAL), will likewise probably announce a deal for new Boeing widebodies during the show, if it has not done so just before.
The one bright spot for airlines has been cargo, which has done well with regional currencies having lost so much value against the US dollar over the past two years. Airlines are pulling in more revenue from airfreight operations today and although it is primarily one-way business out of Asia, it remains profitable for most. CAL and EVA in Taiwan have boosted their cargo fleets, as has KAL in South Korea. China is another bright spot, and major expansion in airfreight is forecast there.
Manufacturing
It is not just the region's airlines that have been affected by the downturn. The Asia-Pacific's manufacturers, which used to have grand plans to compete in the world market with their own 100-seat jets, have scrapped most of those plans and made consolidation the word of the day.
In China, plans by state-owned Aviation Industries of China to cooperate with Airbus to build a 100-seater collapsed early in 1998. Soon after, China's so-called TrunkLiner programme, under which Boeing MD-90s were to have been built in Shanghai, was scrapped.
In Japan, longstanding plans to build a 90 to 110-seater dubbed the YS-X were effectively cancelled. Although the country's manufacturers through Japan Aircraft Development are now looking at a 70 to 80-seater, there is doubt that anything will happen, in part because the Japanese government has scaled back funding for the project.
In South Korea, the government last year ordered the country's conglomerates, or chaebols, to merge competing businesses to eliminate "duplicate investment". Daewoo, Hyundai and Samsung now aim to merge their respective aerospace subsidiaries into one company to be known as Korea Aerospace Industries and are seeking foreign investors.
The Korean conglomerates have at the same time all but given up on plans to find a global aircraft programme in which to become risk-sharing partners. However, Taiwan's Aerospace Industrial Development has become a partner on Bombardier's Continental.
In Indonesia, state funding for fledgling manufacturer IPTN has been halted, and the company is struggling to keep its N2130 and N250 aircraft programmes afloat.
Analysts say the Chinese, Japanese, South Korean and Taiwanese groups - all of which wanted to become big players in the global market - will now have to accept their fate and settle for supplier roles. This could bode well for Western-based manufacturers looking for cheaper locations from which to source parts.
Maintenance
The maintenance industry also remains depressed in Asia. Older aircraft have been phased out by many carriers and the newer aircraft that remain require less work. In addition to smaller fleets, aircraft are flying fewer hours and overcapacity in the maintenance sector is taking its toll.
Another issue facing the established players such as Aircraft Maintenance Engineering of Beijing, Hong Kong Aircraft Engineering and Singapore's ST Aviation Service is one of airlines in the region that do not have heavy maintenance capabilities seeking to acquire them. Many of those that have such capabilities are also expanding, and Thai Airways and CAL are but two examples.
There are positives for international firms with eyes set on expanding in the region, however. Rolls-Royce has a much bigger presence in the Asia-Pacific today, with joint ventures in Hong Kong and Singapore. General Electric has a joint venture with EVA Airways in Taiwan and Boeing has bought into Taikoo (Xiamen) Aircraft Engineering in China.
Looking up
While Asia has no doubt been a story of disaster since the last Paris air show in June 1997, there are some bright spots at the start of a new show two years later.
Carriers are generally more efficient today and more accountable to their shareholders. Some governments, such as those in Thailand, India and Bangladesh, have promised to privatise their national airlines and the region's air services agreements are being made more liberal. Airlines have become more inclined to enter into partnerships in the maintenance industry, and have realised after many years of complacency that multilateral alliances are necessary as the airline industry evolves.
The region's manufacturers are more willing to enter into partnerships with foreign concerns and settle for supplier positions to the likes of Boeing and Airbus as more realistic attitudes prevail.
All this can only bode well for the industry as a whole, but longer-term thinking is clearly required. Borrowing from an age-old expression as pessimism continues to prevail: things can only get better.
Source: Flight Daily News
