Despite booming economies and emerging middle classes across much of Asia, the continent’s major airlines aren’t performing well.
There have been many predictions about the bright future of aviation in Asia. In the next two decades, half of the world’s air traffic growth will take place in China, India, and neighboring countries. Asian airlines will buy a third of all airplanes built in the same period.
Yet national carriers across the region are struggling. Last quarter, Singapore Airlines posted a loss for the first time in two years. Cathay Pacific and Malaysian Airlines recorded dismal profits.
High fuel costs are making life difficult. But the main problem for big airlines is aggressive competition from low-cost rivals. Asia has witnessed a boom in budget air travel in the last few years, with AirAsia, Cebu Pacific and Tiger Airways stealing market share from their bigger competitors.
Flag carriers have responded by establishing their own low-cost subsidiaries. Garuda Airlines is the parent company of CitiLink, and Singapore Airlines owns SilkAir. In Australia, Qantas founded Jetstar to compete in the budget travel sector.
Yet the big players continue to flat line in an ever-more crowded marketplace. Demand for travel is rising sharply in most Asian countries, but it’s the the smaller and cheaper airlines that are reaping the benefits.