geoff dixon - Orient Aviation

By Charles Anderson
giving the International Air Transport
Association’s (IATA) Simplifying the
Business campaign added relevance as the
industry body continued with conferences
and meetings in the region, pushing for
the streamlining of complex procedures
that could save the industry US$3 billion
worldwide.
From the outside, however, Asia-Pacific
airlines remained the envy of the world. In
2004-05, the AAPA member carriers made a
record US$3.5 net profit while the Europeans
broke even and U.S. airlines lost a whopping
$8 billion.
First half results from Cathay Pacific
Airways, Singapore Airlines (SIA) and All
Nippon Airways (ANA), EVA Air, MAS and
THAI suggest the Asia-Pacific figures may
be clipped back in the current financial year.
Qantas, Air New Zealand and AirAsia, on the
other hand, all produced good results.
In China, f leet growth and
infrastructure investment continued
and three new private airlines took to
the skies.
But of the big three groups, China
Southern Airlines and China Eastern
Airlines reported six-month losses,
mainly due to oil prices in an officiallycontrolled
pricing environment and Air
China announced a big drop in first-half
profits.
Indian aviation companies,
meanwhile, continued their spending
spree with a plethora of start-ups keeping the
airframe manufacturers happy and Airbus,
in particular, celebrating a whopping order
for 100 A320s from start-up low-cost
carrier (LCC) Indigo. Some of it may end
in tears, but for now the champagne corks
are popping.
Airbus officially launched its A350
in October and the A380 snared orders
from China Southern Airlines and India’s
Kingfisher Airlines during the year.
The giant jumbo, after making its
maiden flight in April, made a flying visit to
Singapore, Kuala Lumpur and Australia in
November to boost launch customers SIA,
MAS and Qantas.
They needed cheering up. Production
problems led to the announcement of
delivery delays to all early customers,
meaning SIA could not receive its first
aircraft until December 2006, more than six
Air New Zealand: produced profits
in tough operating environment
months later than planned.
Pride of place went instead to Boeing’s
787. At press time, the year had seen orders
for 188 of the fuel-efficient Dreamliner from
Asia-Pacific carriers, out of a total order
book of 309 aircrafts with 25 customers.
The company also launched its B747-8
passenger and freighter models with orders
from Nippon Cargo Airlines and Cargolux.
This year saw keen demand for the
smaller B737s and the A320 family across the
region, particularly from LCCs like AirAsia
which ordered 60 of the latter.
Many LCCs, however, were fine-tuning
their business models, looking to add some
services after a fight back by legacy carriers
that saw them come closer to their new rivals
in price, while continuing their full-service
tradition.
Fuel prices added another threat to thin
margins and, in Singapore, the first major
shake-out in this young sector was
seen when Jetstar Asia and Valuair
merged.
Tony Fernandes, who pledged
to keep AirAsia true to the lowcost
model, was scathing about both
the trend towards “mid-frills” and
other business actions of some of
his contemporaries. “Some of these
carriers are spreading themselves so
thin it is desperation time. There are
some desperate men out there,” he
said.
LOW-COST CARRIERS
‘Frilling’ time for low-cost carriers
No one said it was going to be easy,
but 2005 was the year when reality
struck at many low-cost carriers
(LCCs).
As full-service legacy airlines challenged
them on price, some responded by adapting
their business models and, to AirAsia boss
Tony Fernandes’s horror, adding a few
frills.
Singapore again saw much of the action,
although there was plenty going on in India
as well. Qantas Airways’ low-cost subsidiary
Jetstar Asia, which is based in the Lion City,
merged with rival budget operator Valuair.
Both are expected to continue operating in
much the same way for now, under a single
management, but the smart money is on the
Valuair brand disappearing in the not-toodistant
future.
Fernandes said his Kuala Lumpurbased
AirAsia had abandoned a US$12
million bid for Valuair a few days before
Jetstar announced it would merge with it.
Meanwhile, Singapore Airlines’ (SIA) affiliate,
Tiger Airways, was said to be seeking
a partner to set up a second base elsewhere
in the region.
While a market shake-out was to be
expected in such a young sector, especially
when fuel costs are soaring, the argument
that the basic, no-frills genre favoured in
Europe and the U.S. might not fly in the
Asia-Pacific was perhaps the most significant
development.
Many of the region’s LCCs added a bit
of extra service and a touch more comfort,
becoming what IATA’s Asia-Pacific regional
vice-president, Andrew Drysdale, called
“carriers in the middle, halfway between
LCCs and traditional airlines”.
Udom Tantiprasongchai, chairman of
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DECEMBER 2005-JANUARY 2006 ORIENT AVIATION 47