Asian airlines fly high on low-cost travel

The boom in low-cost travel and a growing web of open-skies agreements are expected to power long-term growth for Asian airlines after the global recession, said industry bosses and analysts.

Participants in the Singapore Airshow, which ended yesterday, expressed optimism that the region, particularly China, will lead the rest of the world to recovery after the most harrowing year in global travel.

The world aviation industry lost an estimated $11 billion (Dh40bn) in 2009 after a financial crisis that began in the US grounded travellers and forced airlines to cancel or defer plane orders.

Organisers of the Singapore Airshow said $10bn worth of contracts were signed during the event, down from $13bn in 2008.

"We look forward to the market picking up further as the industry rides the upturn," said Jimmy Lau, Managing Director of the show, Asia's biggest civilian-military aerospace conference and exhibition.

Top aircraft makers Boeing and Airbus say Asia will be the world's biggest airplane market in the next 20 years, with orders expected to surpass 8,000 passenger and cargo planes worth over $1 trillion.

A key demand driver is the explosion in budget air travel. This has allowed many ordinary Asian families to travel by plane for the first time because of dirt-cheap fares and services to more destinations outside capital cities, ending the dominance of big national carriers.

By the latest count, there are at least 45 low-fare airlines across Asia from Japan to Pakistan. Unlike premium airlines, many of them managed to soar above the economic turbulence.

John Leahy, Airbus Chief Operating Officer for Customers, said that last year Asian budget carriers flew an average 1,800km per flight to 576 airports, up from 2001 when they averaged 700km to 48 airports.

"If you put that together, you can see a growth rate compounding of almost 40 per cent a year," he said.

Randy Tinseth, Vice-President for marketing at Boeing Commercial Airplanes, said opening up busy routes to more competition will make tickets even more affordable. "When you have open skies, you have liberalisation. It opens up a level playing field," he said.

Market liberalisation is the other growth engine, with the opening of new routes between secondary destinations, especially in China, India and Southeast Asia, enabling more people to travel by air.

"Asian aviation will not reach its potential if the airlines are constrained to old ways of doing business," said Giovanni Bisigniani, Director General of the International Air Transport Association (Iata).

Iata estimates that the global aviation industry's losses will narrow from $11bn last year to $5.6bn in 2010. Asia-Pacific airlines' losses are forecast to fall from $3.4bn in 2009 to $700 million this year.

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