11 July 2016
Latest figures from the International Air Transport Association (IATA) “Air Passenger Market Analysis” for May 2016 and 60th Edition of World Air Transport Statistics show: (a) Asia-Pacific is still the leader in global air passenger traffic growth and (b) India is the fastest domestic growth in the world.
Asia-Pacific airlines flew the most number of passengers in 2015 – 1.2 billion (Click here). That’s up 10% from 2014 and makes up 34% of market share. Globally airlines ferried 3.6 billion passengers on scheduled flights, up 7.2% over 2014 or an additional 240 million trips.
With annual growth of almost 19% in a market of 80 million domestic passengers, India’s performance exceeded that of the U.S. (5.4% in a market of 708 million), China (9.7% in a market of 394 million) and Russia (12% in a market of 47 million).
The numbers continue to support the trend of aviation moving eastwards, according to the report, with “seven of the top 10 increasing origin-destination passenger markets in 2015 located in Asia”.
More specifically, Indian carriers including low-cost carriers such as Indigo, SpiceJet, AirAsia India, are likely to drive more traffic within the subcontinent in the next five to 10 years.
The lifting of the 5/20 ruling recently would also spark a new wave of orders for aircraft. SpiceJet is believed to be in talks with Airbus and Boeing to expand its fleet of 38 aircraft now to at least a hundred. SpiceJet currently operates Boeing 737NGs and several Bombardier Q400s, so the smart money is on Boeing snaring an order for a sizeable number of its narrowbodies.
Changi Airport sees lower traffic from JKT, HKG
Meanwhile, the top five international/regional airport-pairs were all in the region, too. These are:
- Hong Kong-Taipei (5.1 million, up 2.1% from 2014);
- Jakarta-Singapore (3.4 million, down 2.6%);
- Bangkok Suvarnabhumi-Hong Kong (3 million, up 29.2%);
- Kuala Lumpur-Singapore (2.7 million, up 13%); and
- Hong Kong-Singapore (2.7 million, down 3.2%).
The numbers must be of some concern to Singapore authorities, given the importance of Indonesian and Hong Kong visitors to the island state. That said, they could take heart in the growing numbers arriving from Kuala Lumpur despite the widening MYR-SGD forex band. (See here)
The top five domestic passenger airport-pairs are also in Asia-Pacific. The five are:
- Jeju-Seoul Gimpo (11.1 million, up 7.1% over 2014);
- Sapporo-Tokyo Haneda (7.8 million, up 1.3%);
- Fukuoka-Tokyo Haneda (7.6 million, down 7.4%);
- Melbourne Tullamarine-Sydney (7.2 million, down 2.2%); and
- Beijing Capital-Shanghai Hongqiao (6.1 million, up 6.1%).
Jeju Island in South Korea in recent years has become a hot tourist destination for visitors from China, Japan and Southeast Asia, attracted by its balmy weather and Haenyeo divers (see photo below). Among the many LCCs that ply the Gimpo-Jeju sector include Eastar Jet, Jeju Air, Jin Air and T’way Airlines.
What’s driving the phenomenal growth in Southeast and East Asia?
People with more disposable income i.e. the middle class. From Chiangmai to Changchun, from Danang to Davao, incomes are rising, meaning more people can afford to fly. And it’s no coincident that this came hand-in-hand with the advent of LCCs, which have pushed fares to very low levels. LCCs now make up over 60% of traffic within Southeast Asia.
Discount airlines are no longer a trend in Southeast Asia. At end-2015 LCCs in the region had 610 aircraft, with over 1,100 aircraft on order. This year seat growth among the players appear to have cooled a bit but still likely to be between 7% and 9% compared to 30% in 2013, 14% in 2014 and 9% in 2015.
The decline is partly due to a slowdown at AirAsia, the region’s first and most successful LCC, whose drop in passenger numbers in 2014 and 2015 (under 10%) account for the overall sluggishness in the LCC sector.
All things being equal, the rapid growth of LCCs in the region has brought about overcapacity as more airlines join the club. In Southeast Asia alone there are at least 25 discount carriers.
While some, like AirAsia, Cebu Pacific and Lion Air have shown resilience, there are others such as VietJet and Nok Air whose fortunes are as different as night and day… VietJet is growing so quickly (almost an aircraft every month) that it seems a matter of time before it runs out of oxygen (and possibly cash?). Nok Air has not made much money since its inception but then it has very patient stakeholders.
Nevertheless, the outlook for the rest of 2016 remains bright for LCCs and FSCs in Southeast and East Asia although we expect to see some form of consolidation taking place in the next 12-18 months.