Asian airlines expect rebound this year<\/p>\n
Jason Szep, Reuters, Tokyo<\/p>\n
Flying to Bali from Tokyo on New Year's Eve cost at least
\nUS$1,290. That's for an economy seat in one of Asia's cheapest
\nairlines, Garuda Indonesia.<\/p>\n
Wait another week, and the price tumbles to $375.<\/p>\n
The peak holiday season gave airlines a chance to claw back
\nsome losses after Sept. 11 turned a bad year into a horrific one.
\nBut most major Asian carriers will face a grisly first quarter
\nwith many logging losses.<\/p>\n
After that, however, the ride gets a little smoother.<\/p>\n
Travel within Asia is not as bad as in Europe and the United
\nStates, and by summer the bigger carriers such as Singapore
\nAirlines, Cathay Pacific and Qantas could feel some improvement
\nas steep capacity cuts and low fuel costs begin to pay off.<\/p>\n
"The decline relative to their overall network hasn't been as
\nsevere as for the other regions," said Philip Wickham, analyst at
\nING Barings in Hong Kong.<\/p>\n
But 2001 has been a nightmare of a year, with typically
\nlucrative first and business class cabins hollowed out, passenger
\nand cargo volumes dwindling each month and long-haul routes to
\nthe United States and Europe hemorrhaging severe losses.<\/p>\n
The $375 fare on Garuda from Tokyo to Bali in early January
\nwould barely be enough for Indonesia's flag carrier to pay its
\nfuel costs. "They are simply keeping the route alive," said John
\nKoldowksi, an official at the Pacific Asia Travel Association.<\/p>\n
Making matters worse, the fear of flying and global economic
\nchill that followed the attacks on Washington and New York in
\nSeptember came in a year that was already seeing cargo traffic
\nslipping across Asia.<\/p>\n
For most airlines, it's not as bad as Asia's 1997-98 financial
\ncrisis that sent some to the brink of bankruptcy, and analysts
\nsay the long-term outlook in the Asian aviation market, the
\nworld's fastest growing, helps dispel some of the gloom.<\/p>\n
In China, airlines are adding capacity in a booming domestic
\nmarket.<\/p>\n
In Southeast Asia, Thai Airlines and Malaysian Air are heavily
\nfocused on intra-Asia routes, with less exposure to the money-
\nlosing U.S. and European routes.<\/p>\n
Singapore Airlines (SIA), Cathay Pacific Airways Ltd., Qantas
\nAirways Ltd. and Korean Air Lines Co Ltd. all posted sturdy gains
\nin October and November, last year, linked also to low fuel
\nprices and hopes for a turnaround.<\/p>\n
But analysts say the pace of any recovery still depends on the
\nspeed of an economic turnaround in the United States, and how
\nfast this trickles into the Asian economies.<\/p>\n
"It doesn't really matter which of those three airlines you
\nlook at," said Kevin O'Connor, analyst at Deutsche Bank,
\nreferring to SIA, Cathay or Qantas. "Making money in the March
\nquarter of this year is going to be pretty much impossible."<\/p>\n
Chinese airlines have low international exposure compared with
\nother Asian carriers as they are focused on the growing domestic
\nmarket, where still-strong economic growth and WTO membership are
\nexpected to fuel traffic demand.<\/p>\n
Analysts expect domestic traffic volume to grow about 10
\npercent this year, helped by increased trade during China's first
\nyear in the World Trade Organization, making China one of the
\nfastest-growing aviation markets in the world.<\/p>\n
The three biggest players, flag carrier Air China, China
\nSouthern, the country's largest airline, and China Eastern
\noperate most of the country's international flights.<\/p>\n
This year, the big three carriers will also be focusing on
\ncarrying out a government-directed merger with smaller Chinese
\nairlines -- taking over their fleets and consolidating routes
\nwhile restructuring their debts.<\/p>\n
Australia's Qantas, which recently ordered 15 new Boeing
\nplanes in a A$1.5 billion ($757.6 million) upgrade, looks set to
\nremain one of the strongest in the region, dominating around 85
\npercent of Australia's A$10 billion domestic market following the
\ndemise of second-ranked Ansett Australia.<\/p>\n
But a sharp drop in international traffic, which has forced
\nQantas to cut routes and redirect planes to busier domestic
\nroutes, is likely to remain a drag on its performance this year.<\/p>\n
Singapore Airlines Ltd., among the world's most capitalized
\nairlines and renowned for its modern fleet, high level of service
\nand penchant for expansion, suffered its biggest drop in
\npassenger loads in October, last year since January 1996.<\/p>\n
Passenger numbers in the month dwindled 14.6 percent from a
\nyear earlier, while freight slipped 7.8 percent.<\/p>\n
Taiwan has big exposure to the U.S. market, and this means
\ndeep slides in passenger traffic on its key trans-Pacific routes
\nto the United States, leading to cuts in capacity. Yields,
\nhowever, have held up well thanks mostly to a weak Taiwan dollar.<\/p>\n
Hong Kong's Cathay Pacific Airways, Asia's fourth-largest
\nairline by capacity, has said its 2001 financial year was shaping
\nup worse than 1998, when a regional financial crisis sunk it into
\nits first-ever loss.<\/p>\n
It is reported to have told analysts to expect a second-half
\nloss but a full-year profit. Many analysts, however, expect
\nCathay to suffer a full-year loss in 2001.<\/p>\n
In north Asia, Japan's airlines are forecasting heavy losses
\nfor the current business year to March, with the nation's largest
\ncarrier, Japan Airlines Co Ltd., forecasting a 40 billion yen
\n($311 million) plunge into the red, which would be its worst
\nfull-year net result since 1996\/97.<\/p>\n
Number-two All Nippon Airways Co Ltd. has forecast a net loss
\nof 11 billion yen and third-ranked Japan Air System Co Ltd. has
\ncut its full-year net profit forecast by 77 percent to 700
\nmillion yen from three billion yen.<\/p>\n
Korean Air, also hit by big exposure to the trans-Pacific, is
\npinning its hopes on the 2002 World Cup to be co-hosted by Japan
\nnext year and expects the event to help swell revenue by 100
\nbillion won ($77.91 million) next year.<\/p>\n
South Asian airlines, such as Indian Airlines, generally have
\nmore exposure to the European market, with about 40 percent of
\narrivals in 2000 coming from Europe, according to the Pacific
\nAsia Travel Association.<\/p>\n
As such, all three major Indian airlines are expecting losses
\nfor the year to March.<\/p>",
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