Asia Airlines Weather the Storm
Well it has been a tough year for the world’s airlines since September 11, but as Lisa Barron reports, airlines in this region are weathering the storm.
Hong Kong’s flagship carrier, Cathay Pacific says it has cancelled some of its September 22 flights to the United States because of low demand. But one year on from the terrorist attacks in New York and Washington, Asian airlines are taking off again and out-flying their peers in the West.
Asian airlines are doing better than airlines anywhere else in the world. And certain airlines in Asia are doing very very well, DragonAir, Cathay Pacific, Singapore Airlines, are certainly right up there in terms of profitability, compared to airlines in the United States and airlines in Europe.
Traffic in the United States and Europe remains down because of the psychological impact of 911 and the economic slowdown. Where as Asia has an advantage on both fronts.
What you’ve got to remember is that Asia’s economies maybe weren’t hit as hared. Secondly, in terms of confidence, passenger confidence for flying, people know, or feel that it’s a heck of a lot safer to fly around Asia, down to Australia, that it is, say, in the US.
And unlike the West, Asian airlines have already been tightening their belts since the 1997 to 1998 financial crisis. Slashing costs and reducing gearing. But today, there is another potential crisis looming on the horizon, war in Iraq, and that could send oil prices skyward. And travelers could potentially end up paying more. The benefits of lower fuel costs helped propel the airlines profits in the first half of this year.
Kevin O’Connor, Deutsche Bank
If you’ve got flat revenues, rising costs, then that will squeeze your profits. And that is I think the scenario people are concerned about at the moment. What I would say, of course, is that we shouldn’t forget that cargo volumes have been rising very fast, in the double digits, cargo yields have been rising double digits, to the extent that oil prices rise, it really doesn’t matter if there’s a short term price spike.
Another potentially saving grace – a growing number of oil suppliers.
There are more non-Arab producers who are producing significant larger quantities of oil. Therefore they would have an impact on bringing prices under control. Not for the first couple of weeks. But once the future of the war was decided..
For now at least, barring more serious terrorist attacks, or a significant downturn in the US economy, Asian airlines appear to be on a steady journey towards greater profitability in 2003.