AIN Air Transport Perspective » February 13, 2012
AirAsia has formed a new budget carrier with ANA called AirAsia Japan.
February 13, 2012, 5:39 PM
Even as Asia Pacific airlines survived a testing 2011, overcapacity as a result of increased fleet orders is still concerning investors, who are already less willing to finance procurements in the current debt-laden environment. This was the message from Sydney-based thinktank the Center for Asia Pacific Aviation (CAPA) at the Low Cost Airlines Asia summit in Singapore last week.
Record aircraft deliveries are under way this year despite the slow growth in traffic. Overall, Asia Pacific airlines have 520 aircraft on firm order for delivery over the next three years, of which 120 are widebodies, with many of the new deliveries additional rather than replacement aircraft. This equates to 15 aircraft deliveries per month—a rate that could more than double when leased additions are factored in, cautions CAPA.
“The upshot of the combination of factors is lower load factors and reduced yields… That in turn implies damage to airlines’ bottom lines in what is now an intensely competitive market, with low-cost airlines, Gulf carriers and Chinese airlines all vying for larger shares of markets that were historically the territory of the region’s flag carriers,” added CAPA.
Five new airlines were launched in Asia last year. “What worries equity investors is overcapacity and a rise in fuel prices. If fuel spikes, yields will fall. As a result of overcapacity, business will be down,” said Anup Mysoor, managing director and Asia head of aviation with Citi’s Global Investment Banking division, at last week’s conference.
Already frequencies are being added feverishly in the North and Northeast Asia (China, Japan, Korea, Taiwan) sectors and discounted airfares are becoming the norm. Budget airlines with large orders seem to be aware of the challenges ahead. “Growth will happen here, north to Asia and south to Australia,” said Azran Osman Rani, CEO of budget operator AirAsia X. “We are reallocating. We need to bring scale. There is difficulty in spreading too thin. Concentration and scale will be key as we double our fleet. For us, it is driving the power of the network. That is why we chose Japan,” he added. ANA Group, Japan’s largest airline, and AirAsia have teamed to form AirAsia Japan, a new budget carrier.
The words of Garry Kingshott, chief executive advisor of Cebu Pacific, might be a sign of things to come. When asked how he views competition in light of excessive entrants heading in the same direction, he said: “Who cares? We’re the lowest-cost producer. We’ll win the war.”
According to OAG data as of January 27, the total Asia Pacific fleet stands at 5,436 aircraft (plus 75 “in storage”) with a further 3,202 on order.
Record aircraft deliveries are under way this year despite the slow growth in traffic. Overall, Asia Pacific airlines have 520 aircraft on firm order for delivery over the next three years, of which 120 are widebodies, with many of the new deliveries additional rather than replacement aircraft. This equates to 15 aircraft deliveries per month—a rate that could more than double when leased additions are factored in, cautions CAPA.
“The upshot of the combination of factors is lower load factors and reduced yields… That in turn implies damage to airlines’ bottom lines in what is now an intensely competitive market, with low-cost airlines, Gulf carriers and Chinese airlines all vying for larger shares of markets that were historically the territory of the region’s flag carriers,” added CAPA.
Five new airlines were launched in Asia last year. “What worries equity investors is overcapacity and a rise in fuel prices. If fuel spikes, yields will fall. As a result of overcapacity, business will be down,” said Anup Mysoor, managing director and Asia head of aviation with Citi’s Global Investment Banking division, at last week’s conference.
Already frequencies are being added feverishly in the North and Northeast Asia (China, Japan, Korea, Taiwan) sectors and discounted airfares are becoming the norm. Budget airlines with large orders seem to be aware of the challenges ahead. “Growth will happen here, north to Asia and south to Australia,” said Azran Osman Rani, CEO of budget operator AirAsia X. “We are reallocating. We need to bring scale. There is difficulty in spreading too thin. Concentration and scale will be key as we double our fleet. For us, it is driving the power of the network. That is why we chose Japan,” he added. ANA Group, Japan’s largest airline, and AirAsia have teamed to form AirAsia Japan, a new budget carrier.
The words of Garry Kingshott, chief executive advisor of Cebu Pacific, might be a sign of things to come. When asked how he views competition in light of excessive entrants heading in the same direction, he said: “Who cares? We’re the lowest-cost producer. We’ll win the war.”
According to OAG data as of January 27, the total Asia Pacific fleet stands at 5,436 aircraft (plus 75 “in storage”) with a further 3,202 on order.
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