Airlines face collapse on Asian woes: Report

Airlines face collapse on Asian woes: Report

MELBOURNE (Reuters): At least three Asian airlines face collapse as some of the region's high-flying economies skid to a virtual halt over the next two years, an Australian-based aviation consultant said in a report released yesterday.

The Center for Asia Pacific Aviation, assessing the fall-out of Asia's financial turmoil on regional airlines, also said governments might be less willing, or less able, to support airlines through expected turbulence in their markets.

The report's author, center managing director Peter Harbison, declined to name airlines he saw as most vulnerable to a sharp downturn in Asian economic growth rates.

"The prospect of up to two years of economic slowdown followed by muted recovery...will quite probably lead to the demise of at least three major airlines in this region by the turn of the century," the report said.

"They will at least cease to exist in their current form." Another aviation analyst, who declined to be identified, said he believed that three fledgling regional carriers -- Taiwan's Eva Air, South Korea's Asiana Airlines and Australia's Ansett International -- were most vulnerable.

Loss-making Ansett International is owned 49 percent by Ansett Holdings Ltd which is in turn owned by Air New Zealand and media group News Corp.

"They have all put a lot of capital in over the past few years and are bleeding," the Sydney-based analyst said.

He said the region's major carriers -- Singapore Airlines, Malaysian Airlines, Thai Airways and Cathay Pacific Airways -- would all survive but their profits would come under pressure.

"My view is we are going to see a hell of a slowdown in Asia over the next couple of years," the analyst added.

The report said many Asian airlines were committed to fleet upgrades, despite rising capacity and a hefty three percent fall in passenger loads in the region over the past year.

"It is unlikely that demand will realign with capacity until well into 1999," it said.

The report said governments were unlikely to let airlines "go quietly" but would be under strong pressure from lenders like the International Monetary Fund (IMF) to liberalize aviation markets, putting further pressure on national carriers.

The IMF has already rushed to the aid of Thailand, the Philippines and Indonesia since the flight of foreign capital from the region began in Southeast Asian four months ago.

The report said governments would also be likely to sell more of their airline interests, as well as sell airports or encourage private construction of new ones.

It also predicted regional airlines would seriously consider forging code-sharing deals, if not full mergers, with each other to cut costs. So far, Asian airlines have chosen partners from outside the region, avoiding alliances with regional rivals.