7 October 2016
Traffic demand for Asia Pacific released by the International Air Transport Association (IATA) continues to show strength. International traffic flown by Asian carriers rose by 5.6% YoY in August (see IATA release). Intra-Asia travel made up the bulk of the growth, with many Asians eschewing European destinations in favour of those closer to home.
Mainland Chinese are the biggest leisure travellers, underscoring the resilience of China’s economy despite its (temporary) problems. The Chinese are flocking to Southeast Asia in huge volumes, particularly to Singapore and Malaysia.
Flights from southern China are increasing, especially to resorts and historical towns in peninsular Malaysia such as Langkawi and Malacca. AirAsia is the main benefactor, taking advantage of the lack of competition in these sectors. It currently flies 4x a week between Guangzhou and Langkawi.
AirAsia also has similar number of flights from Guangzhou to Johor Bahru Senai, with load factors averaging 70%, according to state officials. And on September 29 China Southern Airlines added scheduled charter services to Malacca, using an Airbus A319.
Inbound and outbound traffic are also on the rise in Indochina. We know there’s a huge surge in ticket sales in Vietnam (population around 90 million); among their favourite destinations: Singapore and South Korea.
Likewise Cambodia is becoming one of the fastest growing markets, too, and passenger growth is well above 20% in the past two years. Airports at Siem Reap, gateway to the famed Angkor Wat ruins, and Phnom Penh (where Singaporeans are increasingly dabbling in real estate), are seeing double-digit growth.
But the single biggest boom in air travel is probably between China and Japan. There are at least 14 Chinese carriers serving various cities in Japan. Japan is fast embracing the low-cost air travel model, too, with five startups in four years – Jetstar, Vanilla Air, Spring Japan, Peach and AirAsia Japan.
SIA expands services in Oceania
On 21 September Singapore Airlines launched new services to Canberra (see photos below) and Wellington. The 4x weekly flights, dubbed Capital Express, put SIA as the first carrier to offer flights between the two cities. This will likely pave the way for more CBR-WLG flights, possibly from Chinese carriers.
Another crafty move by the airline is the launch of 3x weekly flights from Singapore to Sydney via Jakarta. This is scheduled to start on 23 November and would appear to be an additional flight to the nine daily services from Changi to Jakarta and five daily services to Sydney.
It’s heartening to see SIA do something creative after being fairly subdued the past few years. The airline is extremely popular amongst Indonesians and wouldn’t have gone into this if it didn’t think it could make money. We are told that SIA ferried 15%-18% of Indonesians to Australia in 2015 and many high net worth Indonesians are loyal SIA customers.
Separately, SIA has decided not to renew the lease on its first Airbus A380, a wise move indeed. The carrier now operates 19 A380s in its fleet with another five due to arrive in 2017.
SIA’s decision is no doubt unwelcome news to a group of German investors – 2,660 of them – who bought into a closed-end fund called Dr Peters. When the lease expires in 2017, these investors won’t be getting any income from their A380.
In October 2007, when SIA became the world’s launch customer of the A380, investors put USD94 million into the fund, and along with loans of around USD120 million, meant the aircraft had a price tag of USD214 million. We’ve been skeptical of the A380’s economic viability (yes, it’s a fantastic plane from a passenger’s perspective, not from the airline’s) from the start – view here.
In July Airbus announced it was reducing the build rate for the A380 to just one a month in 2018. Airbus once predicted airlines would buy 1,200 of these mammoth planes over 20 years (that was over 10 years ago). So far the European manufacturer has delivered just over 190 aircraft (mostly to Emirates) with only 126 orders left to fill. Even then, some of these orders may not materialise. We’ll focus more on the A380’s fate in the coming weeks…
Indonesia stumbles (again) at ICAO bid
Indonesia has failed again, after four attempts, at becoming a council member at the International Civil Aviation Organisation (ICAO), a body affiliated with the United Nations. The country has a poor air safety record and this was largely attributed to the decision.
The unsuccessful bid by the Indonesians has far reaching ramifications, given that Jakarta recently made moves to reclaim part of its airspace in the Riau archipelago currently managed by Singapore.
Singapore has overseen this region since 1946 when the ICAO authorised the island state based on its technical capabilities. Singapore’s stance is that its management of this particular Indonesian airspace does not compromise Indonesia’s sovereignty.
Indonesia needs to work harder to assure the ICAO and international aviation bodies such as the FAA and EASA that it is improving its aviation safety and quality of trained personnel (read here). The country is hugely important in terms of size and economy in Southeast Asia, hence the urgent need for its government to get its act in order.
Meanwhile, both Singapore and Malaysia were re-elected into the ICAO council for the next three years. See the full list here.