Airlines see strong forward bookings in H2

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From The Star: http://biz.thestar.com.my/news/story.asp?file=/2010/8/26/business/6920079&sec=business

 

PETALING JAYA: While airlines in Malaysia are seeing strong forward bookings for the second half of 2010, the International Air Transport Association (IATA) has warned that growth in the aviation sector will slow as consumer demand remains weak.

 

The association released its monthly statistics for July yesterday showing a growth from a year ago for international passenger traffic of 9.2% and air freight 22.7%.

 

These figures were, however, lower than that recorded a month earlier with international passenger traffic at 11.9% and air freight at 26.5%.

 

“The recovery in demand has been faster than anticipated, but as we look toward the end of the year the pace of the recovery will likely slow.

 

“The jobless economic recovery is keeping consumer confidence fragile, particularly in North America and Europe. This affects the leisure markets and cargo traffic,” IATA director general and chief executive Giovanni Bisignani said in a statement.

 

But the four local airlines are not so worried about the second half. Their forward bookings are strong, at least that was what the bosses are saying.

 

AirAsia Bhd group chief executive officer Datuk Seri Tony Fernandes said the second-half bookings for this year were ahead of last year. For 2009 the airline load factor was 83%.

 

“The second half is very strong. In fact, our traffic for Ramadhan is the best ever in our 9-year history. This goes to show globalisation of the AirAsia business that does not rely on the domestic market. We carry traffic from all over be it China, Europe and other markets.

 

“All our brand and network building efforts are also paying off. Even in a recession we record growth, so in good and bad times we will still benefit,” Fernandes told StarBiz.

 

But IATA said Asian carriers outperformed the industry average with a 10.9% growth for July. The Asian carriers are slated to lead the industry’s recovery and IATA has predicted that the Asian carriers would report US$2.2bil in profit this year.

 

The Association of Asia Pacific Airlines (AAPA) also released its numbers saying that the Asia Pacific-based airlines carried a record 17.2 million international passengers in July, 20.4% up from the same month last year.

 

The better loads were boosted by particularly strong demand on busy regional routes.

 

Even AAPA was cautious over the outlook of the sector. It said the very high growth rates recorded in recent months, as a result of the surprisingly sharp V-shaped recovery, would obviously taper off as the economy stabilises and reverts to a more normal pattern of growth.

 

“Asia Pacific airlines are generally well placed to benefit from the improving business environment, and are making some measured additions to capacity and selective expansion of their route networks, although continuing uncertainties about the prospects for further growth in North America and Europe suggest a measure of caution,” its director-general Andrew Herdman said.

 

AirAsia X CEO Azran Osman-Rani said the long haul low cost carriers’ forward bookings for second half were also “much better than the first half.” In 2009, AirAsia X’s average load factor was 77%.

 

“Bookings for Melbourne, Perth and Taipei are strong, London is picking up and we are seeing strong sales for Seoul even though we are launching the route only in November. Loads to Tehran which only has twice weekly flights are about 80%,” Azran said.

 

Firefly managing director Datuk Eddy Leong said the airline’s forward booking were typically very short due to the nature of the routes they fly and passengers they care.

 

“So far the trend is very postiive and upwards even during Ramadhan,’’ Leong said.

 

MAS senior general manager sales and marketing Datuk Bernard Francis said forward bookings for the second half had improved by 10%-15% from a year ago.

 

MAS’ average seat factor for the third and fourth quarters in 2009 was 76.7% and 76.5% respectively.

 

“The bookings are looking good and passenger traffic growing and we expect December to be an exceptionally good month,” Bernard said.

 

While the Malaysian carriers are seeing strong passenger forward bookings, fuel remains a concern and since aviation was a cyclical business whatever happens globally would have an impact on the airlines.

 

While the local carriers are doing well, in Singapore, Tiger Airways was undertaking some route cuts for its domestic operations in Australia due to slow demand, competition and the lack of pilots to fly its aircraft.

 

It is also not so rosy for two budget carriers in the United Arab Emirates. Air Arabia suspended its services while Sama Airlines grounded its fleet as the airline was running out of cash.