Asian airlines fighting to survive<\/p>\n
SINGAPORE (Reuters): Airlines across Asia are struggling to
\nadapt to an unprecedented crisis which they can do little about,
\nand some are fighting to survive.<\/p>\n
After a year-long slump in the Asian travel market, the only
\noption for many carriers is to slash costs by selling planes,
\nsacking staff and cutting routes.<\/p>\n
Some airlines have seen passenger load factors shrink by 10
\npercent in an industry where 1 percent can be the difference
\nbetween profit and loss, according to the Sydney-based Center for
\nAsia-Pacific Aviation.<\/p>\n
Load factors for some airlines in countries which have
\nsuffered the worst economic and political turmoil may have taken
\nan even bigger hit, other analysts said.<\/p>\n
\"There are simply too many airlines for the existing
\ncompetitive regime,\" the center said in a report.<\/p>\n
Managing director Peter Harbison said the end result will be a
\nleaner Asian aviation industry, instead of the boom the industry
\nwas gearing up for, although he anticipates intervention by some
\ngovernments to help ailing national carriers.<\/p>\n
Airline managers have been slow to realize the severity of the
\ncrisis, Harbison said.<\/p>\n
\"Many in airline management were not able to accept that
\nthings were like this,\" he said. \"There is no precedent and in
\nthat case it is difficult to factor in this kind of judgment,
\nwhich seems to go against your previous experience.\"<\/p>\n
Falls in Asian currencies have had a major impact on airlines
\n-- typically 80 percent of carriers' costs are denominated in
\ndollars.<\/p>\n
Some carriers have tried shifting planes to routes which
\ngenerate income in dollars, but that does not necessarily mean
\nthere is traffic. Fare-cutting equally cuts into airlines' profit
\nmargins.<\/p>\n
Earlier this month the crisis in Asia's skies claimed its
\nfirst victim, Indonesian domestic airline Sempati. The Indonesian
\nrupiah, the currency most badly hit by the Asian crisis, has
\ndepreciated more than 80 percent against the dollar over the past
\nyear.<\/p>\n
The Indonesian National Air Carriers Association has issued
\ndire warnings that further collapses could follow.<\/p>\n
Flag carrier Garuda Indonesia has announced plans to return
\nall its leased aircraft. The airline has foreign debt of around
\nUS$200 million, of which half is already due.<\/p>\n
There have been calls for Indonesian airlines to pool their
\nresources and combine domestic routes and newspaper reports
\nsuggest they are seriously considering it.<\/p>\n
\"Outside of Bali, I am not sure that Indonesia is really a big
\nmarket right now,\" said Peter Negline, regional airline analyst
\nat Salomon Smith Barney in Hong Kong.<\/p>\n
Jose Antonio Garcia, president of Philippine Airlines Inc.,
\nwarned closing down was an option for PAL as the airline sacked
\nstriking pilots and abandoned most of its international routes
\nearlier this month.<\/p>\n
Even the region's most profitable airline, Singapore Airlines
\nLtd., has said it anticipates a difficult business environment in
\nthe immediate future.<\/p>\n
Negline said most Asian airlines are trying to control costs
\nbecause they cannot control revenues.<\/p>\n
\"For most of them the pain is starting to get a bit intense.\"<\/p>\n
Stronger regional carriers like Singapore Airlines may
\neventually benefit from their rivals' cutbacks, he said. Open
\nskies policies adopted by many Asian countries make this easier.
\nBut this is a long way off.<\/p>\n
Cargo volumes have also dropped, although not as severely as
\npassenger traffic. Asian exports of high value-added goods, a
\nmainstay of air cargo, have remained strong.<\/p>\n
The only truly bright spot for airlines has been low oil
\nprices, which have reduced the cost of aviation fuel, one major
\ndollar-denominated cost.<\/p>\n
Jet kerosene is now hovering around $13.70 a barrel, compared
\nwith $23.45 a barrel a year ago, and recently hit its lowest
\nlevel in more than a decade.<\/p>\n
Without this the outlook for Asian carriers would be even
\ngrimmer, said James Ong, spokesman for the Manila-based
\nAssociation of Asia-Pacific Airlines.<\/p>\n
\"For the carriers that are hardest hit I can't say with any
\ndegree of confidence what they will do,\" said Ong.<\/p>\n
Philippine Airlines and Korean Air are both selling planes.
\nAny aircraft not flying is a liability, bringing in no revenues
\nbut costing airlines parking fees and maintenance.<\/p>\n
But there is a danger of Asian airlines flooding the used
\naircraft market and depressing prices, said Keith Nam, analyst
\nfor ABN-AMRO in Seoul.<\/p>\n
Korean Air's entire fleet should be worth about $4.44 billion
\ngoing by recent prices, while its debts are $5.5 billion, Nam
\nsaid.<\/p>\n
KAL reported a net loss of 397.48 billion won for 1997, nearly
\ntwice that of the previous year. Some $619 million was attributed
\nto foreign exchange losses.<\/p>\n
While selling older aircraft will ease the financial strain,
\nKAL is also facing major costs in the next few years to replace a
\nlarge part of its aging fleet.<\/p>\n
But Nam anticipates KAL will survive, with government help if
\nneed be.<\/p>\n
\"It has just got to restructure like the rest of corporate
\nKorea and it might take a while,\" he said.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/asian-airlines-fighting-to-survive-1447893297",
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