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Excess capacity spectre looms for Asia-Pacific airlines

February 14, 2014 Aviation, Headline News No Comments Email Email

egtmedia59Low-cost carriers face the prospect of overcapacity as they acquire more and more aircraft, push into each other’s markets and face currency weakness which threatens to puncture economic growth.

In the long-term, however, the size of the market is truly awesome – Boeing sees Asia Pacific airlines needing 12,820 new aircraft, valued at USD 1.9 trillion, over the next 20 years.

An analysis published  by airwise.com in the run-up to the Singapore Airshow this week points out that airlines in the region haveUHR 1 Article-Banners-250-x-250-pixels been gambling that low fares and rising disposable incomes will lure the region’s population (about 600 million) to keep flying to new destinations.

Vietnam’s VietJetAir and Thailand’s Nok Air are among regional carriers tipped to place orders at the airshow.

Airwise says cheap interest rates and Western export credits are fuelling the aircraft buying binge.

Fleet orders in Southeast Asia have been so prolific that orders outnumber existing fleet. CAPA estimates carriers in the region will have a combined fleet of 1800 aircraft by year end, with a further 2000 planes on order. Airbus says Asia-Pacific orders make up over a third (36%) of the world total.

Yields are already under pressure. The endless injection of extra capacity could accelerate the trend in 2014, as carriers in Southeast Asia add a new jet aircraft every working day.

The two fastest growing carriers, Malaysia’s AirAsia and Indonesia’s Lion Air, have ordered hundreds of new Boeing and Airbus planes. Other buyers include Jetstar, Jetstar Asia, TigerAir, Cebu Pacific and Citilink (Garuda’s low-cost carrier).

So far there’s little sign of any slackening of demand or lessening of orders.

As the International Air Transport Association (IATA) noted just a couple of weeks ago:

“Asia-Pacific airlines’ traffic rose 5.3% in 2013, the highest increase among the three major regions and slightly above 2012 annual growth of 5.2%. After a slow start, carriers in the region saw a pick-up in demand in the third quarter, supported by stronger performance of major economies such as China and Japan. Capacity expansion of 5.2% meant load factor was virtually flat at 77.7%.”

Boeing, looking into the future, says:

“During the next 20 years, nearly half of the world’s air traffic growth will be driven by travel to, from, or within the Asia Pacific region. Total traffic for the region will grow 6.3% per year. Fuelled by national economic growth and the increasing accessibility of air transport services, traffic within the region will grow faster than traffic to and from other regions. Domestic and international travel within the region will grow 6.5% per year.

“Asia Pacific airlines will need 12,820 new airplanes, valued at USD 1.9 trillion, over the next 20 years. The number of airplanes in the Asia Pacific fleet will nearly triple, from 5,090 airplanes in 2012 to 14,750 airplanes in 2032. New low-cost carriers and demand for intra-Asia travel have spurred a substantial increase in single-aisle airplanes, a trend that will continue as single-aisle airplanes gain an increasing percentage of the region’s traffic.”

Written by : Peter Needham

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