SYDNEY, Dec 31 (AFP): 2006 will be a make-or-break year for airlines with big expansion plans in the Asian region, the Centre for Asia-Pacific Aviation (CAPA) said in its annual outlook report.
With an unprecedented number of aircraft ordered by Asian
airlines for delivery in 2007, the Sydney-based industry research group said next year represented "the quiet before the storm.
"As we enter 2006, there is a higher-than-usual-level of
unpredictability as the still-unknown impact of higher fuel costs continues to flow through to consumer spending," it said.
The centre said 2006 would be a year of consolidation after the shocks posed by SARS and terrorism, with airlines preparing for massive fleet upgrades and overhauls of their route systems.
"If, for whatever reason, their efforts are thwarted, it places in jeopardy strategic development plans which are essential to their medium-term futures and, in some cases, to survival," the report said.
The centre said the expansion plans would present new challenges, including a pilot shortage and industrial tensions as airlines outsource the service and maintenance of their newly- arrived fleets.
Recent aircraft purchases in the region include Qantas' order earlier this month of up to 115 new Boeing 787 Dreamliners, China's decision to buy 150 Airbus A319, A320 and A321's along with 70 Boeing B737's, and Emirates move for 42 Boeing B777s, bringing its new planes on order to 132.
Cathay Pacific has also ordered 19 new planes-mostly Boeing 777- 200ERs-and the centre said Singapore Airlines was set to buy 60 long- haul aircraft while a combined order of 111 was planned in India.
The centre said slow progress was being made towards freeing up air routes in the region, with Singapore leading the liberalisation push with its proposal for an "open skies" agreement covering the 10 member Association of South East Asian Nations (ASEAN) grouping.
It said China's rapid growth meant it was the lynchpin market for Asia, while India's aviation reform program and moves towards greater liberalisation in Southeast and North Asia would be key issues during the year.
CAPA predicted the pilot shortage would be most acute in
China, where airlines were also accruing ever-increasing debt to pay for fleet upgrades.
"This offers difficult choices for the (authorities), anxious on one hand to ensure the economic viability of its three major airlines while constantly being pressured to admit new independent entrants," it said.
In Hong Kong, home to Cathay Pacific, CAPA said the market would undergo its greatest change in a decade as new entrants challenged the status quo, forcing local operators to rethink their attitudes to low-cost carriers. It predicted continued volatility and expansion of discount carriers in the Singapore hub, saying intense regional competition would increase pressure on Malaysia Airlines to restructure. "The airline will face a watershed year in 2006 as the government's patience runs low and (no-frills) AirAsia continues its growth pattern," it said. Japan Airlines and Air New Zealand were both expected to try to slash costs in the new year, either through lower salary levels, retiring less economic aircraft or axeing jobs. "It is imrobable that these changes will be introduced without upheaval," it said of the prospect Air New Zealand will outsource 500 engineering jobs. In India, it said a partial float of up to 20 per cent of Air India and Indian Airlines would raise capital needed for growth. CAPA forecast the Australian government would relax foreign ownership restrictions on flag carrier Qantas but expected it to offer only limited access to Singapore Airlines on the lucrative trans-Pacific route despite repeated appeals from the Singapore government.
"There is the risk that a refusal to enter into open skies with Singapore will be perceived as unduly protectionist and rebound on future attempts to gain improved access to certain markets for Australian carriers," it warned.