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Stormclouds gather over Asia

 
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attitudetravel



Joined: 15 Nov 2007
Posts: 401
Location: London, UK

PostPosted: Fri Oct 31, 2008 11:36 am    Post subject: Stormclouds gather over Asia If a post contains some illegal issues you may abuse on it - just click Abuse and fill the form Reply with quote

The skies on Asia's horizon are darkening. So far, in the face of global economic uncertainty, almost all the Asian low cost airlines established in 2004-2007 have robustly kept flying.

The immediate future may not be so bright according to this Reuters piece by Kevin Lim and Lawrence Tan:

Quote:
Aviation analysts warned on Thursday that Asian airlines will fail as tourism in the region slows and a worsening global economic outlook leads carriers such as Singapore Airlines to cut back flights.

The financial crisis is moving into the real economy as layoffs hurt consumer sentiment, leading airlines from China to India to post losses or layoff staff and hoteliers to focus on budget travellers as the luxury market takes a hit.

"There is not one airline in this region, and the rest of the world, that will be confident they will still be here this time next year," Peter Harbison, executive chairman at the Centre for Asia Pacific Aviation, told Reuters on the sidelines of an aviation conference in Singapore.


Source: Analysts warn of Asia airline failure as tourism slows

While North America and Europe have seen many low fare airline failures in 2008 - including Skybus in the United States in April, Zoom in Canada in August and XL Airways, LTE and this week Sterling in the European Union in the last two months - Asia has remained relatively unscathed.

In fact, in 2008, the only high-profile airline failure in Asia to date has been Oasis Hong Kong Airlines.

Apart from that, the year-long grounding of Mihin Lanka, Nok Air's withdrawal of its international routes and some consolidation in India there has been relatively little turbulence.

All that may be about to change.
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attitudetravel



Joined: 15 Nov 2007
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Location: London, UK

PostPosted: Fri Oct 31, 2008 11:52 am    Post subject: If a post contains some illegal issues you may abuse on it - just click Abuse and fill the form Reply with quote

Does anyone want to place bets on which Asian low fare carriers may not make it through the winter?
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attitudetravel



Joined: 15 Nov 2007
Posts: 401
Location: London, UK

PostPosted: Fri Oct 31, 2008 11:59 am    Post subject: If a post contains some illegal issues you may abuse on it - just click Abuse and fill the form Reply with quote

From the same article:

Quote:
"From past lessons, the strong will get stronger and the weakest may not survive, and the not so strong ones may involve consolidation, merger, partnering," said Andrew Herdman, Director General for trade body the Association of Asia Pacific Airlines.


Source: Analysts warn of Asia airline failure as tourism slows

I think this is a reasonable assessment. I can imagine we may see some consolidation in either South Korea, Indonesia or the Philippines.

It seems fair to expect that the major Asian low cost carriers - Air Asia, Tiger Airways, Cebu Pacific Air and Jetstar Asia will probably come out of this downturn stronger and some of their smaller rivals won't be here by this time next year.
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Konangrit



Joined: 27 Nov 2007
Posts: 137


PostPosted: Sun Nov 02, 2008 8:43 am    Post subject: If a post contains some illegal issues you may abuse on it - just click Abuse and fill the form Reply with quote

My bet is on Hansung Airlines Razz

Quote:
High fuel prices and plummeting consumer demand are forcing budget airlines in Korea to carry through harsh restructuring, with one of them already closing down.

Hansung Airlines, the nation's first low cost carrier which started services in August 2005, suspended operations Saturday for an indefinite period.

The Cheongju-based carrier, which flew on the Seoul-Jeju and Cheongju-Jeju routes, said in a statement that it failed to raise funds due to soaring fuel prices, unfavorable currency rates and the global economic crisis.

``We've decided to suspend services. Operations under such circumstances might cause unsafe flights,'' the airline said.

Hansung failed to pay 990 million won ($800,000) in airport facility fees and salaries to employees for the last two months. It was in debt to the tune of 27.2 billion won up to June.

The airline will seek to resume operations through emergency measures including a merger with other budget carriers. However, experts are skeptical, noting other carriers have also been driven into a corner.


Link

I don't think it will be too bad, fuel prices have plummeted, and Asian LCCs are starting to lower their fuel surcharges:

Quote:
BUDGET CARRIER Cebu Pacific has cut its year-round fares for most of its Asian routes and some domestic services by as much as three-quarters as it lures more Filipinos to travel by air and draw more foreign tourists.

The cut in fuel and insurance surcharges, effective starting Oct. 15, followed the recent drop in global oil prices, which until now have been blamed for airlines’ rising costs.

In a statement, Cebu Pacific said it had cut fuel and insurance surcharges for domestic flights by P200 and by as much as $10 for most of its international routes.


Link

In a bulk email apologising about their call centre response times from "Tony Fernandes" of AirAsia:

Quote:
On another note, I have been working very hard with the team at AirAsia to look at reducing our fuel surcharge and you should look forward to the good news in the next couple of months.


I think the economic downturn will be somewhat offset by lower fuel prices. As you suggest, the four major LCCs in the region should be fine, but some of the smaller weaker airlines will probably use the economic downturn as an excuse if they go bust. I think poor management and financing is usually the real reason though.
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Konangrit



Joined: 27 Nov 2007
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PostPosted: Sun Nov 02, 2008 9:10 am    Post subject: If a post contains some illegal issues you may abuse on it - just click Abuse and fill the form Reply with quote

It wouldn't surprise me if Viva Macau doesn't make it through the winter. I see both their charter and scheduled operations being hit by the current economic conditions.

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Unlike Las Vegas, Macau always has one billion mainland Chinese to fall back on, but Viva Macau doesn't, they don't fly there. How many Japanese will feel like taking a trip to the casinos of Macau with Japanese stocks plummeting? The weak A$ combined with economic concerns must really hurt their Australian flights too.

They're a tiny airline, only operating two aircraft, so I'm placing my bets (no pun intended) on Viva Macau.
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attitudetravel



Joined: 15 Nov 2007
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Location: London, UK

PostPosted: Tue Nov 04, 2008 4:02 pm    Post subject: If a post contains some illegal issues you may abuse on it - just click Abuse and fill the form Reply with quote

Quote:
Unlike Las Vegas, Macau always has one billion mainland Chinese to fall back on, but Viva Macau doesn't, they don't fly there.


An excellent point.

I wonder if that ever crossed the minds of the investors?
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