Asia may be seen as the biggest market in terms of passenger numbers, but its carriers’ relentless growth has not been translated into profits. Large aircraft orders and deliveries throughout the Asian region, both to full service airlines and low-cost carriers, have caused capacity to get ahead of the growth in demand.
According to IATA, in March 2014, total international passenger traffic in Asia rose just 1.1% from a year earlier, far below the 5.3% rise in new aircraft capacity. Southwest and Southeast Asia are among the areas we have to watch out for overcapacity, according to Randy Tinseth, Vice President of Marketing at Boeing – as cited by the Wall Street Journal.
Facing the challenge of balancing growth and profitability, Asian airlines are seeing very low return on investment. They’re focused on growing, they’re focused on distribution, but they might have not been focused enough on how to do so in a financially sound way. It’s time now for Asian carriers to focus on some of their common problems in order to become more profitable. This will mean taking a rational approach to their investment in aircraft, and route planning, as well as products and services.
The growth in the Asian air travel market is definitely there, it’s just a matter of not introducing too much capacity too soon.
Author: Phu Nguyen