Asia’s air travel is booming but it shows troubling signs

Asia has become a hotspot within the growing aviation industry. The continent is slowly but surely becoming the number one region in carried passengers. While traffic numbers rise, a worrying trend has emerged. Local flag carriers, like Air India or Malaysia Airlines, are not following the growth of the region and contrarily, are regressing as they succumb to pressure locally and internationally.

Over the next 20 years, Asia-Pacific will account for 39% of new aircraft deliveries and will grab 38%, 39% and 37% of the global demand for pilots, maintenance technicians and cabin crew, respectively, according to Boeing. Airbus’ numbers are even higher, as the European manufacturer predicts that Asia-Pacific will receive 42% of new aircraft deliveries between 2018 and 2037. However, both agree that the most popular aircraft type in the region will be the narrow-body aircraft, like the A320 or the 737.

There is no doubt that Asia has become the main target of both Airbus and Boeing sales campaigns. Just recently, Airbus spread the A220’s wings and toured Asia, showcasing the capabilities of the aircraft to potential customers. Back in 2011, the former United States president, Barack Obama, helped Boeing negotiate and ink a deal worth $21.7 billion for 230 Boeing aircraft. The aircraft was the 737 MAX, a narrow-body aircraft that promised “MAX efficiency, MAX reliability and MAX passenger appeal”.

Both manufacturers fight for their bigger piece of the duopoly within Asia-Pacific. The airlines, which are based in the region, have to be booming as well, right?  With growing demand and a lot of attention from the manufacturers, the airlines should be entering their own Golden Age, with peace, stability and prosperity being the three words that would perfectly describe the state of a carrier in the region.

But for some, the situation is quite grim – and it has been for some time.

Struggling legacy airlines

According to IATA‘s annual review of 2019, four out of the top five largest origin and destination markets are located within Asia-Pacific, with China‘s domestic routes being the busiest routes out of all Asian markets. The two markets that follow China are domestic routes within India and Indonesia – these markets have seen an increase of around 20 and 10 million passengers in 2018, respectively. However, a worrying trend is that legacy carriers are struggling.

India has seen the collapse of Kingfisher Airlines in 2012, while Jet Airways has also collapsed in 2019. Meanwhile, the flag carrier of India, Air India is struggling financially – reportedly, the airline expects a loss of over $1 billion (₹7,600 crore) in 2018-2019, as it still struggles to post a profit ever since it merged with Indian Airlines in 2007.

Garuda Indonesia, which is partly owned by the Indonesian government, has seen its profits plummet since 2016 when it posted a net profit of $9.4 million, a drop of 88% compared to 2015. In 2017 and 2018, Garuda’s financial statements went red, as the Indonesian airline announced a net loss of $213.4 and $175 million, respectively.