Much Of Region Already In Record Slump

For the past several years, strong bookings in the Asia-Pacific region spearheaded generally healthy numbers for the global airline industry as a whole... but if recent trends are any indication, those heady times have been over for awhile now.

The Associated Press reports the traditionally busy year-end travel season for carriers like Singapore Airlines waned considerably in 2008, as business travelers and tourists alike scale back their flying plans. And 2009 looks to be even worse.

"Last December I remember being in a very buoyant mood, telling you all that the airline was in excellent shape and the overall picture was very healthy," wrote Tony Tyler, CEO of Hong Kong's Cathay Pacific Airways in a recent company newsletter. "Now, as 2008 draws to a close, we are facing very uncertain times and the mood has turned decidedly somber."

Even "somber" may be an understatement, according to figures released by the International Air Transport Association. IATA predicts the industry has a whole will more than double the $500 million in losses seen in 2008. Asia-Pacific carriers account for close to a third of the entire worldwide passenger market, and 45 percent of the global air cargo segment.

There are some encouraging signs. Dropping fuel prices have eased the sting somewhat, as declining operating expenses have roughly paralleled the drop in passenger traffic. Most airlines in the region also had strong balance sheets before the downturn hit, and several are government-owned and supported. There's also less competition on most routes, versus North American carriers.

Still, things are bleak for a number of traditionally strong airlines. Japan Air Lines and All Nippon Airways have cut their revenue forecasts for 2009, and Korean Airlines posted its fourth straight quarterly loss last month. Cathay Pacific recently reported its first six-month loss since 2003, and warned investors they would be "disappointed" with the airline's 2008 results.

As ANN has reported, Australian flag carrier Qantas recently entertained talk of a merger with British Airways, on the heels of cutting about 1,500 jobs. Airlines in India -- which have seen some of the strongest growth over the past three years -- are also feeling the effects of the slumping global economy, and analysts predict the recent bombings in Mumbai will depress traffic even further.

Perhaps the hardest hit market will be China, whose predominantly state-run airlines were hoping for a record year buoyed by the Beijing Olympics. That expected boom never materialized... and the country's largest airlines have been told to slash orders for new aircraft, on the heels of a $440 million government bailout.

"The overall airline sector appears to be in its worst mess ever, and it will be pretty hard to survive," said Great Wall Securities researcher Song Weiya.

FMI: www.iata.aero