SEOUL - When Air Asia launched the region's first low-cost airline in 2001, the
Malaysian carrier's no-frills, efficiency-driven model irreversibly shifted the
industry's economics and competitive airscape. The distinction between full
service and low-cost carriers has since been blurred as traditional Asian
carriers take on more budget characteristics.
New rounds of Asian innovation and convergence promise to transform the global
aviation industry, but rising protectionism in the West threatens to reverse
the rising trend, according to aviation experts and executives convened here at
a recent meeting of the Association of Asia Pacific Airlines (AAPA), a regional
trade body.
It is significant, they say, that the world's largest plane, the Airbus A380,
was recently first flown commercially by Singapore Airlines
while Boeing's new 787 Dreamliner's maiden voyage was piloted by Japan's Nippon
Airways. These potential industry-changing planes, both produced in the West,
conspicuously scheduled their high-profile launches and landings for the
world's most modern airports and thriving travel industries in the East.
While Western airlines struggle with slowing passenger growth, outdated travel
facilities and new financial turbulence, many Asian airlines are accelerating
and now carry a quarter of global passenger traffic and 40% of global freight.
AAPA figures show Asian carriers excluding China flew a total of 16 million
international passengers in September, up 5.4% over the same month last year.
Economic malaise in the US and Europe meant demand for international air
freight decreased 6.5% compared with September 2010.
Joint ventures, particularly between traditional and budget carriers, have
given many Asian airlines an innovative lift and more focused global outlook,
say industry sources. Recent tie-ups include Japan's JAL and Australia's
Jetstar, Malaysia's Air Asia and Japan's ANA, and a series of joint ventures
launched by Singapore's Tiger Airways, including in Indonesia, the Philippines
and Thailand. (A proposed Tiger Airways joint venture with South Korea's
Incheon Metropolitan City never got of the ground.)
"Joint ventures are being formed between traditional carriers and new entrants
seeking to combine their respective strengths to tap new markets
internationally," said Andrew Herdman, AAPA's director general. "As always, the
key to success will be efficient execution, regardless of the chosen business
model."
Partially in response to national rules and restrictions on ownership,
partially in imitation of Air Asia's original upstart model, traditional Asian
carriers are launching new brands to tap new and expand emerging markets,
including low-cost, long-haul flights to the US and Europe. East to West
flights have traditionally been dominated by full-service Western carriers.
Singapore Airlines, frequently ranked as the world's best premium airline, in
April launched a new long-haul budget carrier known as Scoot. In apparent
competitive response, Thai Airways announced it would launch Thai Smile, an
international budget carrier scheduled for take off in July 2012 that aims to
fill a perceived market gap between low-cost and full-service airlines.
Despite the growth, innovation and new linkages, industry executives say they
are bracing for market turbulence rising from the West. Leading the list of
concerns are growing signs of a possible double-dip recession in the US and
Europe, markets many Asian carriers are banking on for future growth and
expansion, and potential government responses to contain the fallout.
The industry outlook "depends on the European recovery and North America," said
EVA air's deputy senior vice president, Liao Chi-wei. Shinichiro Ito, ANA's
president and chief executive officer, acknowledged at the AAPA meeting a
recent significant decline in revenue derived from US and Europe destined cargo
transport.
Green with envy
US and European protectionism, including certain measures seemingly designed to
repel Asian carriers in particular, is the bigger risk. A growing number of
cash-strapped Western governments are slapping higher taxes and surcharges on
air travel, many creatively disguised as "green" initiatives.
Examples include Germany's and Austria's new "ecological" travel taxes and the
United Kingdom's ever-rising Air Passenger Duty (APD), which since 2009 has
made flights to and from Asia significantly more expensive in the name of
environmental protection. These new taxes come on top of the European Union's
Emissions Trading Scheme, which likewise has in recent years made air travel to
and from Europe more expensive.
So, too, has the recent growth of quasi-visa "travel authorization" fees in the
debt-ridden US. As a national of a visa waiver country, including many in Asia,
it now costs US$14 to apply for "authorization" to travel to the US before
landing in the country.
One of the more telling moments at the AAPA meeting came when a PowerPoint
presentation underlined the ways the US and individual European Union
governments support their domestic airlines against foreign competition.
A number of Asian governments have threatened retaliatory measures, raising the
prospect of an East versus West aviation trade war. The region's airlines,
meanwhile, are seeking a level of influence more commensurate with their
growing economic and market clout through the AAPA. The trade association has
been particularly outspoken in calling for the EU to recognize that it has
over-reached its authority by imposing the new taxes.
"As airlines, we certainly do not want to see a trade war, which would only
inflict long-lasting damage to the competitiveness of the industry," AAPA said
in a recent statement. At the same time, some in the association are clearly
preparing for a fight. "It's time to stand up to Washington, its time to stand
up to Bruxelles," said AAPA's technical director, Martin Eran-Tasker.
"Taxing the very people who you want to attract as visitors to your country is
neither an effective welcome message [nor] a good way to develop the tourism
industry," added AAPA's Herdman. "Rather than focus on adding layer upon layer
of new regulations or additional taxes, governments would do well to reflect on
the fact that aviation is a key contributor to economic recovery and job
creation, led by travel and tourism," he said.
Brian Simpson, chair of the European Parliament's Transport Committee,
acknowledged at the recent AAPA meeting in Seoul that some of Europe's new air
travel taxes were "revenue streams, not environmental measures" and recognized
that the measures were "a dangerous game". He said "the EU and the rest of the
world are on a collision course that could precipitate a crisis."
Michael Mackey is a Bangkok-based freelance journalist.
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