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The airline industry is suffering from global economic turmoil. But people like Kelvin Mok, who just graduated from college in Hong Kong, are helping to ensure that in Asia, at least, the sector is continuing to grow.



Asia Takes to the Air

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Kiyoshi Ota/Bloomberg News

AirAsia Japan is due to start flying within the next few weeks.


Mr. Mok and seven of his friends were headed to Thailand last weekend for a 12-day graduation trip that will take them to Phuket, Bangkok and Chiang Mai, on several flights on AirAsia, a regional low-cost airline.

Or consider Venkateswara Konduru, who comes from Bangalore, India, and works in the information technology sector in Hong


Kong. Mr. Konduru&rsquos wife and two children were visiting him in Hong Kong and flew back to Bangalore on Dragonair, a subsidiary of Cathay Pacific.


Europe is struggling to contain its debt crisis. Many Americans are jobless. Consumers are thinking twice about buying plane tickets. And freight volumes have slumped.


Still, although the once rapid pace of growth in China and India has slowed, airlines in the Asia-Pacific region will generate profits of $2 billion this year according to the latest forecasts by the International Air Transport Association, published Monday. That is far more than airlines in any other region.


And new airlines are popping up at a faster pace than ever.


The latest is Scoot, a no-frills offshoot of the venerable and proudly high-end Singapore Airlines. Scoot&rsquos first flight took off from Changi Airport in Singapore on June 4, carrying about 400 passengers to Sydney, Australia.


Two more low-cost airlines, AirAsia Japan and Jetstar Japan, are scheduled to start flying within weeks. Peach, a low-cost airline in Japan, started flying in March. And a/ venture by China Eastern Airlines and Qantas is in the pipeline for next year.


Are the skies above Asia big enough, and are the pockets of Asian consumers deep enough, to support even more airlines?


Many airline executives and analysts say they are, because of a combination of rising affluence that has created a growing middle class the construction of many more airports more affordable tickets and the region&rsquos vast geography.

Scoot, for one, was undaunted by the ominous economy as it began commercial operations last week.

Bookings are solid, Scoot&rsquos chief executive, Campbell Wilson, said in an interview in a bustling coffee shop at Changi Airport here.


In part, the burst of activity in Asia shows that the region is still catching up with Europe and the United States.


In particular, no-frills airlines resembling those that shook up the United States and European markets in the 1970s and 80s have been flying in Asia only since 2001, when AirAsia introduced the concept locally from its base in Malaysia. Much of the recent growth in Asian airline activity has been in the low-cost sector.


But Asia&rsquos airline boom also reflects the rapid growth of many of the region&rsquos economies.


Just five years ago, Asia-Pacific airlines had a combined fleet totaling 3,800 passenger planes. That number has increased to 5,600, said Corrine Png, head of regional transportation research for JPMorgan Chase in Singapore, who estimated that at least 10 airlines had started in the region in the last decade. She expects the low-cost airline market in the region to grow to $23 billion,about 30 percent of the overall market, by 2014 from $18 billion now.


Beijing could soon overtake Atlanta as the world&rsquos busiest airport in passenger traffic. In 2001, Beijing was not even among the world&rsquos top 30, according to the Airports Council International.


There&rsquos a huge potential driven by economic growth,&rdquo said Chris de Lavigne, an analyst at the research firm Frost & Sullivan in Singapore. &ldquoPurchasing power is increasing quite rapidly. More and more people can afford to fly.


Attesting to that fact was a group of 36 Thais who were checking in last weekend for a Hong Kong-to-Phuket flight after a few days of sightseeing and shopping in Hong Kong and Macau. Most of them had never been abroad before, said their harried guide, wielding stacks of passports.


Changing lifestyles have also contributed to rising demand for air travel.


As most Asian economies power ahead, companies are finding it tough to attract and retain workers. One way to appeal to employees is to emphasize work-life balance &mdash encouraging employees to take vacation, for example.


That shift, said Mr. Wilson of Scoot, is feeding through to more leisure travel and helps to explain the soaring demand for low-cost flights in the region.


And then there is the sheer geography of Asia, where huge distances separate nations and where some countries consist of numerous islands.


As Mr. Wilson put it: You can&rsquot drive to the Philippines from Singapore, you can drive to Indonesia.


Governments have been expanding airports and adding dozens of new ones in recent years. Many more are likely to come.


There are 270 cities with a population of 1 million in Asia today that don&rsquot have an airport, Mr. de Lavigne of Frost & Sullivan said. Emerging Asia is clearly where the opportunities are in the next 20 to 30 years.


The Asian airline sector has not been without casualties. In India, nearly all airlines are losing money, despite growing traffic volumes. In Australia, Qantas, one of the oldest and most established airlines in the region, is struggling to revive its ailing international operations. In Japan, the bankruptcy of Japan Airlines in 2010 started a regulatory rethinking that opened the country to a clutch of new no-frills operations.


In mainland China, state-controlled airlines like Air China and China Eastern and China Southern dominate the domestic market, shielded by regulations that allow little competition. Beijing may begin opening the market to low-cost operators in two to three years, said Mark Webb, regional transportation analyst for HSBC in Hong Kong, but until then, the established airlines &ldquohave a lot of work to do before they can compete internationally.&rdquo


Still, the Asia-Pacific airline sector is growing, especially in the low-cost segment. Budget airlines like Jetstar, Cebu Pacific Air, Tiger Airways and AirAsia now have about one-quarter of the market, according to Ms. Png, the JPMorgan analyst. That compares with 35 percent for no-frills airlines in Europe and 30 percent in North America.


Low-cost airlines are also attracting business travel as the region becomes more important to the global economy. Ray Davis, an information technology project manager from Texas who lives in Hong Kong, was headed to Singapore on Tiger Airways on Sunday evening.


Still, rather than eroding older airlines&rsquo revenue, such airlines have helped expand the air-travel market.

Low-cost carriers are stimulating more demand by putting air travel within the reach of people who might not otherwise be able to afford to fly,&rdquo Ms. Png said. &ldquoIt is not a zero-sum game.&rdquo 

[Source = The New York Times, Jun 13, 2012]