Jetrader - Spring 2017 - 20
Reaching the Peak:
Asian Airline Analysis
By Cody Smith
In the aviation industry, all eyes are watching the growth of the Asia-Pacific market.
Comprising markets such as China, Japan,
Singapore, Korea and others, the region
transformed into an aviation powerhouse
seemingly overnight. Its rapid growth correlates to the growth of ISTAT Asia, ISTAT's
Asia-Pacific event that has quickly become
one of ISTAT's most popular events.
As is the case with aviation around the
globe, manufacturers, lessors, financiers
and more industry sectors depend upon
airlines to function. The Asia-Pacific airline
market expanded rapidly in conjunction
with the region's overall growth, but many
industry experts are predicting challenges
to come in the future. IATA published a
report that predicts the region will experience a $1 billion USD decline in profitability in 2017, and Aviation Week points to
infrastructure and revenue as contributors
to Asia-Pacific airline instability.
How does the world's fastest growing market prepare for such projections? Ian Reid,
senior financial advisor at Philippine Airlines,
said the Philippines' flag carrier airline prepared by taking advantage of the lower fuel
prices within the industry as of late.
"Philippine Airlines has used the benign
fuel environment to invest in new routes
and new aircraft and add service to existing
routes," Reid said. "Although these investments may reduce the level of profitability
in the short term, it will allow the airline to
sustain competitiveness in the longer term."
Fuel prices are gradually rising, but
Andrew Cowen, director and CEO of LCC
airline Hong Kong Express Airways Limited,
said that LCCs in the region will not be as
strongly affected due to their business
practices of LCCs.
"An LCC model is resilient to issues such
as higher average of oil price, production
cuts and so on," Cowen said. "We don't rely
on business or first-class guests. We can
reduce unit costs by 20 percent over the
next year. Unit costs are right now about
4.3 cents per km."
Both PAL and HK Express are some of the
region's greatest airline success stories.
PAL celebrated its 75th anniversary last
year and implemented a complete branding
overhaul. HK Express, a relatively recent
converter to the LCC market, services
20 The official publication of the International Society of Transport Aircraft Trading
Hong Kong, China, Japan, Taiwan and several other countries.
Both airlines are adding to and streamlining their fleets as well. On the PAL
side, the addition of 39 aircraft from a
64-aircraft order in 2012 and the disposal
of 30 older aircraft have transformed its
81-strong fleet into a youthful assembly.
"PAL has six A350s to replace our six
A340s, five Q400NGs to replace our five
aging Q400s and 21 A321NEOs over the next
eight years for future growth and replacement of our A320s," Reid said.
Meanwhile, HK Express accepted the delivery of the airline's first two A320neos and is
now the first carrier in North Asia to operate
the aircraft at its 188-seat configuration.
Cowen said this effective utilization is paramount to keeping costs down, a necessary
move given the projections of the AsiaPacific region.