ing to rebound from poor ;nancial performance. Garuda
Indonesia, for example, wants to put its ;eet growth on
hold so it can focus on strengthening its position. Executives have recently succeeded in deferring deliveries of its
remaining Boeing 737-8s until 2020, after the ;rst of its
50 orders arrived in December.
Even traditionally stellar performer Singapore Airlines
(SIA) wobbled brie;y in 2017. ;e carrier recorded a rare
net loss for the three months through March 31, its ;scal
fourth quarter. ;is prompted SIA to establish a transformation o;ce to examine ways to boost revenue and reduce its cost base. SIA has bounced back well since then,
recording a net pro;t of S$425 million ($320 million) for
the six months through the end of September, up 32%
from the same period a year earlier.
;e wider Asia-Paci;c market remains strong overall,
however, according to IATA statistics. ;e association
predicts airlines in the region will report collective pro;ts
of $8.3 billion for 2017—up slightly from the previous
year—and $9 billion in 2018.
Because the Asia-Paci;c region is so vast, results have
been mixed, IATA chief economist Brian Pearce noted in
brie;ngs at the end of 2017. However, pro;ts are “mostly
improving to varying degrees” in Asian markets. Strengthening domestic conditions in China, India and Japan
have helped, although Southeast Asian pro;ts have been
suppressed by new LCC competition.
While airline passenger yields have been rising globally, the improvement has been slower to materialize in
Asia, Association of Asia Paci;c Airlines (AAPA) director general Andrew Herdman said. ;is is because of
the “intensely competitive” market conditions that have
prevailed in this region, he said during the AAPA annual
assembly in October.
;ere has been much greater capacity discipline in
North America than in Asia, Herdman noted. ;is is
because cross-border ownership restrictions make mergers and consolidation a di;cult proposition for Asian
Cargo, however, has ;nally become a real bright spot for
Asian carriers after years in the doldrums. AAPA said this
sector began to rebound in the second half of 2016, with
the momentum continuing in 2017. Cargo volume rose
10% year-on-year for the ;rst 11 months of 2017, outpacing a capacity gain of 4.3%.
Stronger cargo revenues—up 15% in 2017—have
been “a key driver of improved ;nancial performance” by
Asian airlines, Pearce agreed. Airlines in this region carry
more than 37% of global air cargo. IATA forecasts cargo
tra;c will continue to increase at a faster rate than overall
world trade in 2018.
But one of the major challenges the Asian legacy airlines
will face this year is yet another wave of growth by the
region’s LCCs. AirAsia, in particular, is ramping up its
expansion plans. ;e multinational LCC group achieved
a net increase of 22 aircraft in 2017, boosting its total
;eet to 196. ;is represents the group’s highest growth
rate of the past four years. ;e company is planning to
add another 33 aircraft in 2018, to be used throughout
the group. ;e core operation is in Malaysia, with o;-shore joint ventures and a;liates in ;ailand, Indonesia,
the Philippines, Japan and India. AirAsia also intends to
expand its footprint by setting up new a;liates in China
and Vietnam. By 2027, AirAsia plans to expand its ;eet
to 500 aircraft, which will mean adding about 30 per year
for the next 10 years. Its Indonesia-based rival, Lion Air,
also has ambitious long-term growth aspirations, and
AirAsia and Lion Air combined have about 800 narrowbody aircraft on order.
;e LCCs are not just disrupting short- and medium-haul routes. ;e long-haul LCC model is continuing
to develop in Asia, particularly through AirAsia X and
Scoot. AirAsia X intends to lease nine more A330ceos in
2018, and the ;rst of its 66 A330neo orders are scheduled to begin arriving late in the year. AirAsia X group
currently operates 30 A330s.
Scoot, meanwhile, is pushing into the Asia-Europe
market that has traditionally been the domain of full-service carriers. Scoot launched a Singapore-Athens
;ight in June using Boeing 787s and intends to add a
;ight to Berlin this year.
Despite the raft of challenges they face, there are
many long-term positives for the Southeast Asian major airlines. Passenger tra;c is growing strongly, and
there is still plenty of untapped potential for inbound
and outbound markets. Airbus estimates Asia-Paci;c
airlines have a 30% share of global tra;c, the highest
for any region. Tra;c in the region is tipped to increase at an average rate of 5.6% per year—
signi;cantly faster than either North America or Europe—
and will account for a 38% global share by 2036.
While airport infrastructure must improve to keep
pace, airlines should be able to count on strong underlying demand in Asia. How they tap that demand and
be pro;table is what will shape the region’s air transport landscape.