North American carriers are enjoying a golden
age right now but the future will be in Asia-Pacific, according to IATA
regional vice president Asia-Pacific, Conrad Clifford.
Clifford described the present times as the
second golden age (after the PanAm era in the 1960s) led by North America where
prices are at their lowest; efficiency is better than ever; airlines are
re-fleeted, re-consolidated and re-structured; and there is convergence with
the emergence of new airline models incorporating the strengths and removing
the weaknesses of both the full-service carriers (FSCs) and LCCs.
But he expects a third golden age of aviation
where Asia-Pacific carriers will lead the world.
“The market has recognised the turnaround and
North American airlines are becoming investment-grade vehicles: this is
unprecedented and that’s why I am calling it the second golden age,” said
Clifford in his opening remarks on the second day of Aviation Festival Asia in
Singapore on Wednesday.
“The top four net profits in 2015 were all
North American (airlines): American Airlines made a net profit of US$6 billion
in 2015, United Airlines US$4 billion, Delta Air Lines US$4 billion and
Southwest Airlines US$2 billion. These four North American carriers accounted
for 45 per cent of the total global industry profit for 2015 (US$35.3 billion).
And 2016 was estimated to be an even better year than 2015. And 2017 will still
be good and deliver real returns to shareholders.
“Of course we may be cynical and say that
it’s only due to the low fuel prices…but I would like to say this is not just
about the fuel price.”
He said it is about the magic three C’s:
capacity discipline, consolidation and charging for everything.
In 15 years’ time, all the world’s most
profitable airlines – FSCs, LCCs and hybrids – will all be based in the
Asia-Pacific region, with growth fuelled by the region's demographics, Clifford
projected.
“North America may be the largest aviation
market in the world today but more than half of mankind is within a 5.5-hour
flight time – that’s the profitable payload range on the latest Boeing's and
Airbus' narrowbody 737 max, A321neo – from us all sitting in this room in
Singapore.
“China will be the largest market in the
world in less than 20 years, India will be number three, Indonesia number five
and Japan number seven. And right now India has the fastest growing domestic
market on the planet,” said Clifford.
Presently, the future looks likely to be
dominated by LCCs in this part of the world, he said, pointing out that the
region with the biggest LCC penetration in the world is South-east Asia, while
China is growing fast since last year.
But
Clifford believed the future is going to be those airlines “that capture the
best of FSCs and LCCs, eliminate the parts of those models that don’t suit our
Asia-Pacific markets, and keep on changing and growing”.
-TTG Asia.
