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LCC growth slows and flag carriers
look to restructure but long-term
prospects remain bright.
SOUTHEAST ASIA
IS A MARKET OF BOTH CHALLENGES AND PROMISE.
2015 will mark the second consecutive
year of slower growth and potentially the second consecutive year when most
airlines ended in the red. But improving market conditions, lower fuel prices and
restructuring effort should at least reduce the losses/migrate to profit and
allow new growth.
Southeast Asia has emerged over the last
decade as one of the world’s fastest growing emerging markets, capturing the
attention of global suppliers. The rapid growth has primarily been driven by
fast expansion of LCCs – both independent groups and subsidiaries of full
service groups. Meanwhile, flag carrier growth has stagnated.
LCCs already account for almost 60% of
seat capacity within Southeast Asia and are rapidly making inroads in the
medium-haul market, which will inevitably put further pressure on the legacy
operators.
As of 1-Jan-2015, there were 22 LCCs
based in Southeast Asia, many of them part of wider groups, including eight
within the AirAsia or AirAsia X Groups and four within the Lion Group. Six of
the 22 LCCs are affiliated with fullservice groups (Citilink under Garuda; Jetstar
Asia under Qantas; Jetstar Pacic under Qantas and Vietnam Airlines;
Nok under Thai Airways; and Scoot and Tigerair under SIA;).But these LCCs only account for
86 aircraft, or 16% of the total fleet
Overall, Southeast Asia accounts
for about 15% of the global order book although the region only accounts for 5%
to 6% of the world’s current fleet. there are some legitimate questions
surrounding the longterm viability of the region’s order
book, particularly the LCC portion,as Southeast Asian FSCs only
account for about 400 of the 1600 aircraftorder with a majority being
replacements.
But Southeast Asia should still
be able to support further rapid growth given its relatively strong
economic position and demographics. The fundamentals of the market remain
favourable, particularly at the bottom end as the continued rise of
discretionary incomes means more of the region’s 600 million people can afford
to fly – and those that are already flying can afford to fly
more often. 2015 could bring some more
adjustments to the delivery stream along with consolidation. Capacity cuts
by some of the flag carriers are also likely as they nally start to
make some of the dicult decisions they have avoided for years. But
overall the outlook for Southeast Asia remains relatively bright.
Source: Airline Leader Issue |