At the recent Routes Asia event, it appeared that the future growth of Asia’s airline industry is all but assured, but there are concerns that governments and airport authorities may not be investing fast enough to keep up.
While airport capacity problems are nothing new for Asia, concerns are shifting from the lack of terminal and runway capacity in some cities to the delays caused by hold-ups in security, customs and immigration processing.
Airlines and airports were largely united in their calls on governments to look at ways to speed up passenger processing as a way of decongesting terminals, and ultimately being able to use them more efficiently.
Key is the adoption of technologies such as facial recognition, automated kiosks and self-service options for passengers. For some governments that has been an easy process, but many in Asia are reticent to rely on technology to process passengers rather than people.
Malindo Air’s head of network planning Nimalan Vikneswaran pointed out another constraint that has faced his airline – under-prepared suppliers. He revealed that the airline has had to push out some of its plans by three months – and in some cases up to a year – due to its ground handler having insufficient resources.
SLOTS STILL AN ISSUE
That’s not to say that the more traditional issues around a lack of slots at key airports have been solved. Some airlines mentioned the difficulty securing slots during the peak morning period at Sydney and backed recent calls to free up some of the airport’s operational restrictions.
“In the peak times in particular there are no slots available,” says Virgin Australia group executive Rob Sharp on the situation at Sydney – a sentiment echoed by other carriers looking to serve the city.
The situation is even more dire at Hong Kong International airport. Hong Kong Express Airways general manager network planning and scheduling Stephen Milstrey says that slot requests at Hong Kong International Airport are regularly “20-30% oversubscribed”, and even when there are three runways in 2024, new slots are only expected to be drip-fed to carriers.
Over the years, HK Express has been able to accumulate some slots and manage them such to get respectable utilisation out of its Airbus A321s. However, the A320s are “not being utilised as high as other LCCs”.
Bangkok Airways’ adviser network management Peter Wiesner points out that the solutions to infrastructure problems are not short term in nature. “Infrastructure problems cannot be done in two years; it takes 7-10 years,” he says.
It appears to be a major issue, with IATA forecasting that more than half of the airports in the region will require additional investment to grow their capacity over the next 15 years, requiring $1.4 trillion in capital.
Some airports are already doing their best to get ahead of the curve. Chongqing airport general manager Dai Ke says that it could start construction as soon as next year on a fourth terminal and runway. That’s no mean feat given that only last August it opened its third terminal – said to be one of the largest in China – and a third runway.
Another key constraint on the industry is availability of pilots required to crew all the aircraft due into the region over the next few decades.
“We’ve been talking about it for five years,” says Virgin Australia group executive Robert Sharp. He adds that airlines need to spend more time in high schools and universities to attract talented people to take up flying careers.
Other carriers noted that more needs to be done to create pathways for new pilots to come through the ranks, while more harmonised regulations could make it easier for pilots to move between jurisdictions.
LONG-HAUL LOW-COST A SURE BET
There was little disagreement that low-cost carriers will continue to grow in Asia and beyond, while new players from outside the region such as Norwegian will find their place in the market.
“I think LCC penetration domestically has been very successful and I can’t see that long-haul markets will necessarily be any different,” says IATA regional vice-president for Asia Pacific Conrad Clifford.
It’s little surprise really, as Asia has been the region that has birthed carriers like Scoot, AirAsia X and Cebu Pacific Air. As Jetstar group chief executive Gareth Evans pointed out, his carrier has been operating widebodies into Asia and Hawaii since 2006.
AirAsia X head of network and regulatory affairs Dilhan Haradasa says that the airline’s network will likely evolve to link more second- and third-tier cities throughout Asia. Nonetheless, he also raised again the prospect that the carrier may return to Europe and even reach out to the continental United States.
But Evans says there may be some limits on how long a route can be to remain viable for LCCs. “I’m not sure yet whether it’s fully proven for 16,17 or 18h flights,” he says.
For most Asian low-cost carriers however, Europe is around a 12-14h flight, and Thai AirAsia X and AirAsia X both again signalled interest in tapping that market in future.
Overall, both carriers appeared to be content to keep their capacity growth aligned with the growth in demand, but the latter could accelerate in future.
“I think the capacity at the moment is equivalent to the demand, and the demand may grow faster than capacity,” said Niadu, adding that demand is “already on the upwards part of the ‘S’ curve”.
Even with growing demand, there were still a number of cautionary tales around expanding too fast and placing capacity on markets that were not ready for it.
Thai AirAsia X chief executive Nadda Buranasiri admitted that the carrier had grown too quickly in 2016 in markets it did not understand well and paid the price for it. Nowadays, it is firmly focused on the North Asia market, which is where its three Airbus A330-300s that will be delivered this year will be deployed.
Even Jetstar, with its pan-Asia strategy, has signalled that there is a limit to how many markets it will serve.
“Our strategy was never to be in every market. We want to be in the right markets with the right partners and build from there, because you can do a lot of damage and lose a lot of money,” says Evans.
CHINA: PLEASURE AND PAIN
China continues to be the powerhouse for the region’s airlines, and a number of airports from cities including Chongqing, Dalian and Shenzhen were well represented at Routes Asia.
Although a number were actively courting foreign carriers, some speakers noted that while China has huge demand and continued growth in the middle-class, there were pitfalls.
Evans commented that airlines need to be very focused in China, and not take a scatter-gun approach when it comes to adding destinations in China.
“You’ve got to be really strategic about how you do that,” he says, adding that partnerships – both for low-cost and full-service carriers are key.
In Jetstar’s case, although the group serves around 20 mainland destinations, the majority of those are charters underwritten by local travel companies.
Virgin’s Sharp demonstrated the advantage to having a local partner to access the greater China market based on the carrier’s experience on the Melbourne-Hong Kong route. Its alliance with HNA Group sees around half of passengers on its Hong Kong flights connect from greater China through HNA carriers, such as Hong Kong Airlines.
Wiesner was more cautious about the China story. “The growth is tremendous, but so is the risk,” he said. “What happens if the government decides ‘no, enough is enough, you cannot travel’? How will it change the whole travel industry?”
Food for thought as World Routes heads to Guangzhou in September.