ID :
36105
Wed, 12/17/2008 - 13:57
Auther :
Shortlink :
https://oananews.org//node/36105
The shortlink copeid
AVIATION INDUSTRY: OFF THE FRYING PAN BUT INTO THE FIRE
By M. Saraswathi
KUALA LUMPUR, Dec 17 (Bernama) -- The current state of affairs of the
aviation industry can be best described as "out of the frying pan but into the
fire" though the dwindling crude oil prices as 2008 draws to a close is a
blessing indeed but the looming recession is another "headache" to deal
with.
The year 2008 was a "perfect storm" for the highly competitive industry as
oil prices skyrocketed to as high as US$147 per barrel.
About 30 airlines have gone bust since September.
Airlines are forecast to incur US$5 billion in losses this year and thanks
to the slide in crude oil prices as the losses are expected to decline to US$2.5
billion next year.
However, carriers in the Asia-Pacific region are to suffer more than
double from US$500 million in 2008 to US$1.1 billion in 2009.
Nonetheless, 2009 will remain a challenging year for the aviation industry,
with major economies like the United States and Japan slipping into recession,
while India and China, regarded as major aviation markets, may not see a
double digit growth as expected.
"Recession is now the biggest threat to airlines' profitability," the
International Air Transport Association (IATA) director-general and chief
executive officer Giovanni Bisignani said recently.
Emerging economies like China had asked its airline companies to either
cancel or postpone aircraft deliveries in 2009 to counter weakening travel
demand amid a global slowdown which could accelerate global aviation industry's
downturn, said a news report.
This basically means reduced business for the aviation sector as
multinational companies and frequent travellers may opt to tighten their belts
further.
IATA announced that international air traffic for October showed a second
consecutive month of global decline, international passenger traffic dipped by
1.3 percent vis-a-vis October 2007.
Air freight services were down by 7.9 percent in October.
Asia-Pacific carriers, accounting for 31 percent of global international
passenger traffic, saw passenger traffic dwindling by 6.1 percent while cargo
plunging 11 percent.
Asia-Pacific carriers constitutes 44.7 percent of the international cargo
market.
Above all, liberalisation of the aviation sector, especially in the Asean
region, with routes to all capital cities fully opened come Jan 1, will
immensely boost competition and eat into aviation companies' profit
margins.
Towards this end, national flag bearer Malaysia Airlines (MAS) and budget
carrier AirAsia have managed to weather the storm fairly well than other
airlines, more so when MAS was in the midst of a business turnaround plan when
oil price was taking a toll on its operations.
It managed to remain in the positive territory up to nine months of the
financial year ended Sept 30, 2008, posting RM214.942 million in pre-tax profit
and RM11.642 billion in turnover.
In the third quarter, fuel bill surged by 56 percent or RM872 million to
RM1.9 billion.
"If not for the high fuel price, MAS would have posted its highest profit
in
its corporate history in its first half financial year itself,"said Managing
Director and Chief Executive Officer Idris Jala.
As part of the second business turnaround plan, the national carrier has
mapped out strategies to clinch an ambitious RM1 billion profit in 2008.
Besides striving to trim down non-fuel cost, MAS has also started selling
tickets at very low price under its "Everyday Low Fare" campaign, which has
aided the airline grow its revenue by 150 percent in the third quarter.
Like other airlines, MAS has also come up with many innovative initiatives
to offset the high fuel cost, such as "Project Pit Stop," which revolves around
reducing aircraft turnaround time by being more efficient.
Going forward, Idris has reiterated that MAS will have to join an alliance
to grow further.
"We are talking to a number of airlines to create growth synergies. This
ranges from joint ventures, code-sharing to inter-lining partnership," he was
quoted as saying.
As for AirAsia, 2008 was not a rosy year financially but in terms of route
expansion, this year can be regarded as a "watershed year".
Not only it managed to make inroads into MAS and Singapore Airlines'
duopoly
in the Kuala Lumpur-Singapore route earlier than scheduled but significantly
expanded its network into China, India and next year to London - a long time
dream of its Group Chief Executive Officer Datuk Seri Tony Fernandes.
Fernandes fought his way to open the KL-Singapore route much earlier than
the slated Jan 1, 2009 deadline of the Asean Roadmap for Integration of Air
Travel. It was partially opened in February this year and fully on Dec 1, 2008.
Under the roadmap, the liberalisation process will begin at the end of this
year, with the full liberalisation of air freight services and unlimited or full
liberalisation of third and fourth freedom rights between Asean capital cities
for passenger services between capital cities by Dec 31, 2008.
This will be followed by full liberalisation of the fifth freedom traffic
rights Asean capital cities by Dec 31, 2010.
Despite registering RM441.056 million in pre-tax loss in nine months ended
Sept 30, 2008 as compared to RM248.128 million profit previously, AirAsia also
emerged as the world's first airline to scrap fuel surcharge.
News of AirAsia's privatisation surfaced in October but the plan stalled as
Tune Air, which owns 30.8 percent of the airline, was unable to secure financing
from financial institutions due to tight market conditions.
Tune Air was supposed to take AirAsia private by acquiring the shares that
it has yet to own at RM1.35 per share.
As the road ahead for the industry and specifically MAS and AirAsia looks
bumpy, all that we can hope for is that MAS will continue to shine with its
"Malaysian Hospitality" tagline and AirAsia to remain as the "Aviation King" by
breaking new grounds unimpeded. (US$1=RM3.45)
-- BERNAMA
KUALA LUMPUR, Dec 17 (Bernama) -- The current state of affairs of the
aviation industry can be best described as "out of the frying pan but into the
fire" though the dwindling crude oil prices as 2008 draws to a close is a
blessing indeed but the looming recession is another "headache" to deal
with.
The year 2008 was a "perfect storm" for the highly competitive industry as
oil prices skyrocketed to as high as US$147 per barrel.
About 30 airlines have gone bust since September.
Airlines are forecast to incur US$5 billion in losses this year and thanks
to the slide in crude oil prices as the losses are expected to decline to US$2.5
billion next year.
However, carriers in the Asia-Pacific region are to suffer more than
double from US$500 million in 2008 to US$1.1 billion in 2009.
Nonetheless, 2009 will remain a challenging year for the aviation industry,
with major economies like the United States and Japan slipping into recession,
while India and China, regarded as major aviation markets, may not see a
double digit growth as expected.
"Recession is now the biggest threat to airlines' profitability," the
International Air Transport Association (IATA) director-general and chief
executive officer Giovanni Bisignani said recently.
Emerging economies like China had asked its airline companies to either
cancel or postpone aircraft deliveries in 2009 to counter weakening travel
demand amid a global slowdown which could accelerate global aviation industry's
downturn, said a news report.
This basically means reduced business for the aviation sector as
multinational companies and frequent travellers may opt to tighten their belts
further.
IATA announced that international air traffic for October showed a second
consecutive month of global decline, international passenger traffic dipped by
1.3 percent vis-a-vis October 2007.
Air freight services were down by 7.9 percent in October.
Asia-Pacific carriers, accounting for 31 percent of global international
passenger traffic, saw passenger traffic dwindling by 6.1 percent while cargo
plunging 11 percent.
Asia-Pacific carriers constitutes 44.7 percent of the international cargo
market.
Above all, liberalisation of the aviation sector, especially in the Asean
region, with routes to all capital cities fully opened come Jan 1, will
immensely boost competition and eat into aviation companies' profit
margins.
Towards this end, national flag bearer Malaysia Airlines (MAS) and budget
carrier AirAsia have managed to weather the storm fairly well than other
airlines, more so when MAS was in the midst of a business turnaround plan when
oil price was taking a toll on its operations.
It managed to remain in the positive territory up to nine months of the
financial year ended Sept 30, 2008, posting RM214.942 million in pre-tax profit
and RM11.642 billion in turnover.
In the third quarter, fuel bill surged by 56 percent or RM872 million to
RM1.9 billion.
"If not for the high fuel price, MAS would have posted its highest profit
in
its corporate history in its first half financial year itself,"said Managing
Director and Chief Executive Officer Idris Jala.
As part of the second business turnaround plan, the national carrier has
mapped out strategies to clinch an ambitious RM1 billion profit in 2008.
Besides striving to trim down non-fuel cost, MAS has also started selling
tickets at very low price under its "Everyday Low Fare" campaign, which has
aided the airline grow its revenue by 150 percent in the third quarter.
Like other airlines, MAS has also come up with many innovative initiatives
to offset the high fuel cost, such as "Project Pit Stop," which revolves around
reducing aircraft turnaround time by being more efficient.
Going forward, Idris has reiterated that MAS will have to join an alliance
to grow further.
"We are talking to a number of airlines to create growth synergies. This
ranges from joint ventures, code-sharing to inter-lining partnership," he was
quoted as saying.
As for AirAsia, 2008 was not a rosy year financially but in terms of route
expansion, this year can be regarded as a "watershed year".
Not only it managed to make inroads into MAS and Singapore Airlines'
duopoly
in the Kuala Lumpur-Singapore route earlier than scheduled but significantly
expanded its network into China, India and next year to London - a long time
dream of its Group Chief Executive Officer Datuk Seri Tony Fernandes.
Fernandes fought his way to open the KL-Singapore route much earlier than
the slated Jan 1, 2009 deadline of the Asean Roadmap for Integration of Air
Travel. It was partially opened in February this year and fully on Dec 1, 2008.
Under the roadmap, the liberalisation process will begin at the end of this
year, with the full liberalisation of air freight services and unlimited or full
liberalisation of third and fourth freedom rights between Asean capital cities
for passenger services between capital cities by Dec 31, 2008.
This will be followed by full liberalisation of the fifth freedom traffic
rights Asean capital cities by Dec 31, 2010.
Despite registering RM441.056 million in pre-tax loss in nine months ended
Sept 30, 2008 as compared to RM248.128 million profit previously, AirAsia also
emerged as the world's first airline to scrap fuel surcharge.
News of AirAsia's privatisation surfaced in October but the plan stalled as
Tune Air, which owns 30.8 percent of the airline, was unable to secure financing
from financial institutions due to tight market conditions.
Tune Air was supposed to take AirAsia private by acquiring the shares that
it has yet to own at RM1.35 per share.
As the road ahead for the industry and specifically MAS and AirAsia looks
bumpy, all that we can hope for is that MAS will continue to shine with its
"Malaysian Hospitality" tagline and AirAsia to remain as the "Aviation King" by
breaking new grounds unimpeded. (US$1=RM3.45)
-- BERNAMA
