ANALYSIS: Asia-Pacific airline market review July 2014

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The MH17 disaster once again thrust Malaysia Airlines into the spotlight, and overshadowed a busy July for Asia’s airlines.

The Boeing 777-200ER, registered 9M-MRD, is believed to have been shot down by a surface-to-air missile on 17 July over Ukraine’s Donetsk region while flying at 34,000 feet. The aircraft was enroute from Amsterdam to Kuala Lumpur.

Efforts to recover the bodies and other crucial parts of evidence have been hampered by fighting between Ukrainian forces and pro-Russian separatists. The Netherlands has been appointed to lead the investigation into the accident.

That tragedy was followed less than a week later by another fatal crash in Taiwan, when a TransAsia Airways ATR 72-500 crashed into two buildings while trying to land at Magong. The accident resulted in 48 fatalities.


More positively, Air New Zealand took delivery of the first Boeing 787-9 on 9 July, but All Nippon Airways will be the first carrier to operate the stretched variant on scheduled services. The Japanese carrier will deploy its first aircraft domestically from 7 August, ahead of Air NZ’s official first flight in October.

ANA also firmed up previously announced plans to order Airbus A320neos, 787s and 777X’s, locking in most of its long-term fleet plans.

The bigger news in Japan came from relative minnow Skymark Airlines. The airline indicated at the end of July that it was holding discussions with Airbus to potentially cancel its order for six Airbus A380s, two of which are in stages of finally assembly. No sooner had it spoken, when Airbus terminated the order, leaving it with two white-tail aircraft to sell.

Asia’s carriers actively placed orders and commitments over the month, helped in large part by the Farnborough air show. AirAsia X became the first airline to commit to the re-engined A330neo with a tentative order for 50 A330-900neos. Air Mandalay also ended the drought for Mitsubishi Aircraft's MRJ regional jet, placing an order for up to 10 MRJ90s at the show. Away from the show, Tianjin Airlines signed for 20 E190 E1s plus 20 E2s.

Asian lessors also had an active month of orders with Hong Kong Aviation Capital and BOC Aviation firming up orders for A320neos. ICBC Leasing also placed an order for 10 E190 E2s with purchase rights on 10 more.

Hong Kong based lessor China Aircraft Leasing Corporation had a successful debut on the Hong Kong Stock Exchange on 11 July, raising HK$591 million ($76.2 million). The majority of funds will be used for aircraft acquisitions.

Tigerair’s operating loss for the first quarter ballooned to S$16.4 million ($13.2 million), while Garuda was also in the red to the tune of $234 million over the first half. Air China, China Eastern Airlines and China Southern Airlines all issued profit warnings ahead of the release of their first half results, citing the slowing Chinese economy and adverse currency movements.

Air India fulfilled its long-held ambition and officially joined the Star Alliance on 11 July.

Further south, the Australian government passed laws that will loosen foreign ownership restrictions on Qantas. A last minute deal resulted in the 49% total foreign ownership cap being retained, while other restrictions have been lifted.

It appears that equity changes are looming for Philippine Airlines, with San Miguel Corporation and Lucio Tan Group confirming that they are both in talks to take control of the airline. SMC and LTG are 51:49 shareholders in Trust Mark Holdings, which in turn owns 89% of PAL.


Passenger traffic growth failed to keep pace with the extra capacity added in June among Asia-Pacific carriers. Passenger traffic grew 2.4% over the same month in 2013, but capacity was increased 4.5%. As a result passenger load factor was down nearly two percentage points among Asia-Pacific airlines to 77.6%.

The figures include another tough month for Thai Airways amid the recent political uncertainty in the country. Traffic at the Star Alliance carrier was down more than a fifth in June on capacity cut 10%. Passenger load factor plummeted 10 percentage points to 59.2%. It continues a dismal year for the carrier, continued board upheaval at which saw five executives removed from their roles at the end of July, which has seen traffic slump 14% and load factor fall more than eight points over the first half of the year.

Passenger load factor was also down sharply at Malaysia Airlines in June, even before the loss of MH17 in the Ukraine in the mid-July. Passenger traffic in July was running 4% down on 5% extra capacity.

Traffic was also down at Singapore Airlines, but as capacity was cut 4.5%, the carrier's load factor was nearly three points higher. The airline, together with All Nippon Airways, Cathay Pacific and a fractional improvement at Air Astana, were the only carriers from the Asia-Pacific sample not to report a fall in load factors.

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Asia-Pacific carriers operated a collective fleet of just over 6,600 aircraft in July, virtually unchanged on June. With just short of 500 aircraft parked during the month, it left just under 7% of the Asia-Pacific carrier fleet parked. The largest portion of fleet parked by percentage share is in the regional and turboprop sectors, while just 5% of the narrowbody and almost 7% of its widebody fleet was parked in June.

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