Airlines in Asia and the Middle East set for further expansion in 2005

According to the Centre for Asia Pacific Aviation airlines in Asia and the Middle East are set to consolidate on the unexpectedly high traffic growth achieved in the markets last year, with further significant expansion in 2005.

“2004 for Asia Pacific airlines was an oasis in a desert of global bad news,” Centre for Asia Pacific Aviation, Managing Director, Peter Harbison says.

“While operators in Europe and North America licked their wounds, the region’s carriers moved rapidly from recovery to robust growth – and one of the most profitable ever.”

“That growth should consolidate in 2005, barring further upsets, and establish the Asia Pacific as a key target for major investment in service expansion and new operations.”

Mr Harbison was previewing the Centre’s annual report on expectations for aviation and tourism, which is due to be presented at the Asia Pacific & Middle East Aviation and Tourism Outlook 2005 conference at the Suntec centre, Singapore, on January 24 -25.

The conference, probably the most significant ever for Asian aviation, features addresses by top level government and aviation industry heads from the middle east and India to China. It will focus on the prospects for the year ahead for airlines, airports, government aviation policy and tourism. Among the key speakers will be the Singapore Minister for Transport, the Hon. Yeo Cheow Tong, India’s Secretary for Civil Aviation, Mr Ajay Prasad, the Director-General of the Association of Asia Pacific Airlines Andrew Herdman and numerous airline CEOs.

Mr Harbison said that, despite “unexpected and excessive” fuel costs, 2004 was highly profitable for most airlines in the Asia Pacific and the Middle East. By contrast, North American and European carriers respectively lost a collective USD6 billion and USD500 million.

Economic conditions were generally strong, and the combination of China’s aggressive growth, a weaker US dollar and tentative revival in Japanese ensured robust conditions for traffic growth. The continuing aviation expansion and liberalisation in China and growth in India, off a low base, is expected to maintain the momentum in 2005, and this should be reflected in financial returns for the airlines and airports and their share market performance.

“The outstanding profit levels of 2004 are unlikely to be repeated, although results should be strong again this year,” he says. “As liberalisation sweeps through the region, traffic growth should be impressive, with double figure increases again commonplace.”

Mr Harbison added that the entry of many more new airlines, including low-cost and regional ventures in particularly in China and India, and expansion of access rights on long-haul routes will stimulate the growth, but at the same time potentially dilute profitability for the inefficient.

However, he warned that, for the airlines, the prospect of high growth is overshadowed by risks in 2005 of possible manpower shortages and a further depletion of yields on long haul routes, “raising the potential for a profitless volume scenario for some”.

The benefits from this growth are also likely to be moderated for airlines that have not yet undergone necessary restructuring, Mr Harbison said. Tourism, too, is likely to suffer some adverse longer term effects from the recent tsunami disaster in the Indian Ocean, but the outlook for the region as a whole is for more solid growth in international visitation.

The Centre will release the full findings of its Outlook 2005 report – the fourth report in this series - at the Singapore conference. A country-by-country breakdown of predictions for the Asia Pacific and Middle East will also be available.

Following the Asia Pacific & Middle East Aviation and Tourism Outlook 2005 conference, the Centre will stage the 2nd Annual Asia Pacific Low Cost Airlines Symposium on January 26-27, also at Suntec, Singapore. The symposium showcases an impressive list of speakers, including the chief executive of most low-cost airlines operating within the region.

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