Major Asian airlines see tougher year ahead

Hong Kong, Nov 18 | Updated: Nov 19 2005, 07:13am hrs
Major Asia-Pacific airlines see a tougher year in 2006 with fuel costs expected to remain high and growth in both passengers and cargo likely to lose steam, an industry representative said on Friday.

The Association of Asia Pacific Airlines (AAPA), whose 17 members are leading carriers in the Asia Pacific region including Cathay Pacific Airways and Singapore Airlines said it is taking a cautious view on 2006. We are seeing a slight slowdown in the global economy and I think there is a risk that we will see slower passenger growth next year approximately in the 4 to 5%, Andrew Herdman, the director general of AAPA, told Reuters in an interview.

AAPA members, which accounted for about 18 percent of the global passenger market and 33% of global cargo traffic in 2004, have posted passenger growth of 6.4% in the year to date. Last year, they made a combined net profit of about $4 billion on revenue of $66 billion, much better than their US rivals, many of which suffered huge losses.

AAPA expects members revenue to grow to about $70 billion this year but profits will probably fall, Herdman said.

Overall, I still expect the members to be profitable (this year) but not at the record level we saw in 2004, he said. Fuel costs of AAPA members are seen rising to $18 billion in 2005 from last years $12 billion and $9 billion in 2003. They accounted for about 15% of total member costs in 2003 and 20% in 2004. Probably now theyre pushing up towards 28 percent of total cost, Herdman said, predicting oil prices will remain volatile next year. Growth in the cargo sector is slowing after three strong years, Herdman said.

When air cargo slows down, thats usually a sign of a slowing global economy, he said. AAPA members saw cargo throughput rise about 3% in the year to date, but growth flattened in the last few months.The airline industry is also facing a challenge amid fears that bird flu could become transmitted between humans, touching off a pandemic. Analysts believe the worst-hit businesses would be those that depend on large congregations of people, including airlines.