Asia still a bright aviation market despite slowdown

Asia remains a 'relatively Bright' aviation market despite the recent slowdown, with a fast-expanding middle class providing the launch pad for further growth, a study by an airlines' body said on Thursday.

While China continues to be the largest engine for growth in Asia, other parts of the region were also seeing significant increases in demand for travel with a fast-expanding middle class providing a 'brighter outlook' for Asian carriers, the latest study by the Association of Asia Pacific Airlines has said.

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The outlook for the Asian market 'remains relatively Bright' for 2013 despite a recent slowdown in traffic growth, challenging conditions in the cargo sector, stubbornly high oil prices and continued economic weakness in Europe, it said.

While it is unlikely that the peak of 2010 would be reached anytime soon, Asia remains a dynamic and generally profitable high growth market that outperforms all other regions, AAPA director general Andrew Herdman said.

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Observing that some Southeast Asian markets like Indonesia were 'booming' as income levels rise making air travel more affordable, he said this was 'leading not only to more budget passengers in the regional market but more long-haul passengers, helping offset the weaker demand in Europe'.

Of the world's middle class population of 2.1 billion, about 750 million or 30 per cent are from Asia, with Herdman saying Asian middle class was expected to grow by 500 per cent over the next 20 years to 3.4 billion and account for about 60 per cent of the world's middle class populace by 2021.

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He said that innovative strategies, which have seen the Asian industry at the forefront of new global partnerships and multi-brand strategies, have also helped Asian full service carriers survive the slump.

"By establishing low-cost subsidiaries, several Asian full service airline groups are now well positioned to capture the anticipated growth at the lower end of the market," he said.

In this context, Herdman referred to the launch of three new LCCs in Japan, the launch of new SIA long-haul low-cost carrier Scoot and the new hybrid carrier Thai Smile as well as the recent partnership agreements between Emirates and Qantas and between Virgin Australia and Tiger Airways.

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Indian carriers like Jet Airways and Air India have also been operating no-frill models for a few years now.       

The AAPA study said the downturn in Europe and the US has had a 'big hit' on Asian carriers which currently account for about 40 per cent of the global air cargo market.

Even though profits in Asia and globally have decreased steadily since 2010 because of the 'relentless squeeze by high oil prices', Asian carriers, despite the slowdown, have continued to be more profitable than their counterparts in other regions, the AAPA study said.