Challenging Times for Asia-Pacific Airlines
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S U N DAY 1 I SUNDAY I 12 OCTOBER 2008 D A Y BRINGING YOU THE NEWS FROM THE 14TH WORLD ROUTE DEVELOPMENT FORUM IN KUALA LUMPUR r e n r a Changed G A little y o R / s atmosphere e r bit of u t a e f to permeate x e Eastern R © Routes Promise BY KERRY EZARD This year’s Routes moves to Asia for the first time, but the location of the event will not be the only thing that is different. This stunning The atmosphere is expected to picture of an be markedly changed from last ornate temple in year’s event in Stockholm as the terminal at Bangkok’s new high oil prices and the global airport sets the economic slowdown continue scene for to blight the airline industry, Routes’ first as Routes chairman Mike foray into the Howarth explains. Far East. “Obviously things are very different from last year. Last year the industry was still on a roll and lots of airlines were Challenging times for talking about new services,” said Howarth. However, he ex - pects that deals will still be done at this year’s conference Asia-Pacific airlines here in Kuala Lumpur as air - lines look towards the future and take advantage of the fail - BY KERRY EZARD Aviation (right). “The IATA chief economist ures of some of their rivals. sia-Pacific airlines are finding negatives are worst in Brian Pearce agrees that “Some carriers will still be there Athemselves hit harder than India, which in August Asia-Pacific airlines are talking about new air services most anticipated by the global saw a 17.3% downturn being hit harder than because some are still expand - economic slowdown. in the number of passen - anticipated, and also ing and some are looking be - As the credit crunch began to gers travelling domesti - points to airlines in yond the next couple of years. bite and the downturn started to cally year-over-year. It’s a China and India as being “Quite a few airlines have materialise, many expected the pretty ugly scene there the worst affected. “It gone out of business so there Asia-Pacific to fare better than and the losses are quite was certainly the as - are routes that other airlines other parts of the world because substantial.” sumption [that Asia-Pacific carri - can pick up. Some are routes of the region’s strong economies. China is another country high - ers would fare better than those in that have been flown for 20 However, this no longer appears lighted by Harbison as being par - Europe and North America] but in years and these are easier than to be the case and industry ex - ticularly hard hit. “China again July and August Asia-Pacific air - starting routes from scratch.” perts are warning that airlines in saw very significant downturns in lines suffered more than most in But one thing airlines will be the Asia-Pacific are facing just as August. We’re assuming a fair bit terms of traffic contracting,” said asking for from airports during tough a time as everyone else, if of this was down to the Olympics Pearce. IATA figures show that the event is help, according to not tougher. and the surrounding security airline traffic in the Asia-Pacific Howarth. “Some airlines are “Looking at the big picture, yes restrictions, overlapped with the shrunk by 3.1% in August while coming to Routes to say to the region is being affected much Szechuan earthquakes,” he said, international traffic carried by airports ‘you’ve got to share faster than most expected,” said adding: “We expect a turn-up in North American airlines grew some of the pain – the route we Peter Harbison, executive chair - September and October, but this man of the Centre for Asia Pacific is by no means certain.” Continued on Page 3 Continued on Page 3 INSIDE THIS ISSUE Distribution sponsored by: Asian liberalisation Page 10 Meet the host (pictured left) Page 18 Air Canada’s Montie Brewer Page 12 AirAsia/MAS competition Page 20 Clash of the Titans Page 14 After hours Page 30 NEWS Asia-Pacific carriers face fall in traffic Continued from Page 1 Credit crunch impacts on region’s airlines provide benefits you and your community, and we want you to help us’,” he said. “Airlines Continued from Page 1 Tough now see airports as very talking 5.2%. European carriers saw their important to the success of a from Brian route. They see that they can traffic grow by 1.6% in August. Pearce “US and European airlines, get help from airports.” although weak, have been And that help could be bottoming out but Asia-Pacific forthcoming with one as-yet airlines are suffering the most at undisclosed airport planning to the moment,” said Pearce. “The use the event to unveil “a cut effect of lower world trade due to in landing fees that will be backdated to the start of the the credit crunch has been year”, he added. impacting Asia.” This year’s Routes will be And the negative impact of the “about the same size as last Olympics has so far shown no year”, said Howarth, and will sign of lessening, according to once again include the Routes Pearce: “There was some impact Leaders’ Forum that was from the Olympics in China but that it’s going to be a tough time inaugurated in 2007 (see p22). there hasn’t been the expected “It’s going to be a very for Asia-Pacific airlines and there Last year more than 250 senior rebound. I would have expected difficult six to nine months could be some failures. “It’s going industry leaders representing to see some recovery by now but for airlines in the region” to be a very difficult six to nine airlines, airports, governmental it hasn’t happened.” In India, months for airlines in the region. Brian Pearce – authorities, research bodies, Pearce points to a “very sharp The bottom is falling out of the chief economist, IATA banking and investment slowdown in traffic” and market,” he said. “Up to the end houses, aerospace industries predicts airline losses of “well of the year load factors will drop and service providers attended over $1 billion”. But will this gloomy outlook off and it will be very difficult for the Leaders’ Forum in the Harbison lists Cathay Pacific, translate into airline failures and cash flow, but banks will be re - Swedish capital Stockholm. Singapore Airlines and Qantas as consolidation in Asia-Pacific, as luctant to extend credit. It’s going Howarth is confident that the airlines in the region that are feel - we have seen in both Europe and to be a very difficult time. I problems affecting the airline ing the pinch. “Carriers with North America? Both Harbison wouldn’t like to predict failures industry will not dampen the premium brands are seeing a and Pearce agree that consolida - but it would be no surprise.” spirit of this year’s event. “The considerable softening of the tion is unlikely because the air - Harbison also believes there is highlight will be that despite all premium market,” he said. line market in the region is less only a very slim chance of con - the problems in the industry, “There’s quite an overhang of mature. “The airline industry in solidation, and warns that further this will be an enjoyable event,” aircraft deliveries starting to come Asia is at a different stage to Eu - liberalisation in the Asia-Pacific he said. “Delegates will like the through and that’s going to rope and North America,” said airline sector could be under location and the host will do a continue to push supply even if Pearce. “Liberalisation took place threat: “The prospect of consoli - good job. The layout is different demand doesn’t keep up, so in Europe and North America dation across borders is some - this year because it’s all going yields will get hurt.” Cathay Pa - years ago, but it’s just starting in where between zero and 1%. to take place in one area, cific surprised the markets by in - Asia. There is not a long-term We’re seeing a bit of a backlash – whereas last year the venue curring a first-half net loss of $71 need for consolidation or a reduc - probably the biggest worry in this was outside the city centre. It million, compared to a net profit tion in capacity as there is in region is that rather than seeing will be more of a campus of $341 million in the same six- North America and Europe.” liberalisation we’re seeing a atmosphere this year.” I month period of 2007. Nevertheless, Pearce points out return to protectionism.” I I ROUTES PROGRAMME I SUNDAY PUBLISHED BY AIRLINE BUSINESS IN ASSOCIATION WITH AEROCOMM 09:00-13:00 The 1st Tourism and Air Service DAILY editorial team Photography Visit us on the web: Development Summit. Location: Plenary Geoff Thomas Ian Billinghurst flightglobal.com/ab Theatre, Level 3, West Wing Nick Ionides ©Airline Business 2008 Alan Peaford Advertisement sales 13:30 Registration. Networking village open Mike Miller Robert Hancock Got a story? 15:00-16:30 Inaugural International Air Route Mike Martin Shawn Buck Come and see us in the Development Association Annual Hospitality Lounge 1 General Meeting. Plenary Theatre Design and Printed by overlooking Networking production Times Offset Hall 1 17:30-19:30 Welcome reception (hosted by Malaysia Amelia Clark Malaysia Airports) flightglobal.com/ab October 2008 I Airline Business Daily @ Routes I NEWS I LOW COST CARRIERS The gospel according to Herb ASIA STILL From pistols to pickles, Kelleher calls the shots THE LAND OF OPPORTUNITY BY MARK PILLING Kelleher sked recently if he’d ever slides “Asia is the last great growth Athought about setting up into opportunity for airlines in the another low-cost airline, South - the world,” said Tony Davis, the west Airlines founder Herb Kelle - limelight chief executive of Tiger her was only half joking when he Airways (pictured), at the re - said: “If the thought entered my cent World Low Cost Airline mind, I’d buy a pistol.” conference.