Southeast Asia’s aviation sector remains an extremely competitive market with a high risk of continued overcapacity given the region’s huge aircraft orders , according to Centre for Asia Pacific Aviation’s recent analysis.
The centre said competition with and between LCCs will continue to intensify as LCCs account for over 70% of outstanding aircraft orders in Southeast Asia.
“Among all regions and sub-regions, Southeast Asia has the highest ratio of orders to current fleet (about 0.9). While the rate of capacity growth has slowed somewhat for the short-term following a spate of deferrals and subleases, the unprecedented high ratio of orders to current fleet indicates that overcapacity could be a challenge over the long-term.”
“If airlines are disciplined with capacity and fuel prices remain low, Southeast Asian airline profitability should continue to improve. But in the highly dynamic Southeast Asian market place it is hard imagine all airlines refraining from ambitious or strategic expansion. Meanwhile low fuel prices along with political and economic stability can never be guaranteed.”
CAPA said the 16 publicly traded airlines in Southeast Asia, including affiliates or subsidiaries which report financial figures, turned a combined operating profit of about USD641 million in the first half of the year.
The same group of airlines incurred over USD500 million in operating losses in the first half of last year, representing a year-over-year swing of over USD1.1 billion.
Of these 16 carriers, 15 saw their profitability improve in the first half of this year. The only exception was Indonesia AirAsia, which saw a slight increase in operating losses following the 28 December 2014 crash of one of its A320s.
In 1H2014 only five carriers in this group of 16 were profitable. All five –Malaysia AirAsia, Cebu Pacific, Philippine Airlines, Bangkok Airways and SilkAir – were able to further growth operating profits in 1H2015.
Of the 11 airlines that were unprofitable in 1H2014 five swung to profits in 1H2015 – Singapore Airlines, Thai Airways, Thai AirAsia, Garuda Indonesia and Citilink – and two posted break-even results – Nok Air and Tigerair Singapore. Three carriers were able to narrow their losses – SIA Cargo, Philippines AirAsia and Malaysia AirAsia X.
Note: All figures are for six months ending 30 June 2015 and 30 June 2014.
Conversions to USD are based on average conversion rates for 1H2015 and 1H2014.
*All figures are for individual airline except for Cebu Pacific and Thai Airways, which only reports operating figures at the group level. Therefore in only these cases subsidiaries (Cebgo and Thai Smile) are not listed separately and are combined with their parent airlines.