The only certainty in the aviation sector is learning to deal with uncertainty on a daily basis. With air transport closely linked with global trade the smallest of tremors – whether that geological or geopolitical – on one side of the world can be felt with incredible force on the other.
At this month’s CAPA Asia Aviation Summit in Singapore, CAPA – Centre for Aviation executive chairman, Peter Harbison, delivered his own insights into the six big trends to look out for in the aviation sector in the region. But, far from just being limited to this market, the growth of air transport across Asia and in particularly China, India and Indonesia means developments in this part of the world will have a knock-on effect across global skies.
“In five years’ time we won’t recognise this industry.”
Peter Harbison, executive chairman, CAPA – Centre for Aviation
Here’s the views of Mr Harbison…
While there is some correlation between lower fuel prices and ASK growth, this is not the case for all airlines, particularly major full service carriers. Ticket prices followed fuel prices downwards since 2011 and especially since 2014, while increased profitability mirrors the drop in fuel prices. Load factor increased slightly while passenger growth was much greater. There is some correlation between the price of fuel and market growth and low fuel prices are beneficial for airlines, passengers, tourism and economies. There may be a slowing of market growth in 2018 as the industry reaches capacity in a number of areas, including personnel (especially pilots) and airport slots.
- Southeast Asia as the “competitive battlefront”
There are many opportunities for growth in the region. Growth and competition will be driven by carriers with large fleet orders, such as the Lion Air and AirAsia groups.
- North Asia and China
The region continues to lag behind others and remains constrained by lack of liberalisation. The growth profile for aviation in China is “astonishing” with great potential for LCC expansion. The number of domestic airlines in China increased from 26 in 2007 to 44 in 2017 and routes increased from 1178 to 2739. The number of international airlines increased from 95 to 159 and the number of international routes increased from 416 to 1285 over the same period. China has a “massive impact globally” but is less influential within the intra-North Asia market;
- Long haul low cost carriers (LHLCC) and new narrowbody aircraft
LHLCCs now account for 5% of the market and are “very much where we’re heading in the future”. There are now 43 LHLCCs from 28 countries, including 16 from 10 countries in Asia Pacific. The US accounts for 20 of the 23 domestic LHLCC routes. International LCC market share increased from 3.5% in 2007 to 11.3% in 2017, with Asia Pacific market share increasing from 1.6% to 7.7%, behind the market average largely due to North Asia. LCCs hold the bulk of long haul narrowbody aircraft orders, including A320neos and Boeing 737 MAXs;
- Superconnectors losing steam
After recording a compound growth rate of about 13% over the last 10 years, there is a lot of change among the airlines which have been driving long haul growth. Emirates Airline is now starting to adjust its route structure, Etihad Airways is undergoing a major upheaval, Qatar Airways is facing a blockade and Turkish Airlines is reducing its expansion plans;
There will be massive disruption over the next five to 10 years. Tens of thousands of apps are being developed in the travel space and innovation and creativity are destabilising forces. Progress is likely to be very untidy and while some changes will be good, others will be confusing and not helpful. Mr Harbison said: “In five years’ time we won’t recognise this industry”.