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As the Singapore Airshow 2016 kicks off, DW examines the latest trends in the Asia-Pacific’s civil aviation industry, and the countries profiting most from the rise in domestic and international air passenger numbers.
Covering all sectors of aviation, Asia’s largest aerospace and defense exhibition will be taking place from February 16-21 at Singapore’s Changi Exhibition Centre. Over 1,000 companies from some 50 countries – including top manufacturers and potential buyers – will be taking part in the fifth edition of the Singapore Airshow.
But the bi-annual event, which usually draws tens of thousands of visitors and serves as a platform for the industry’s leading players, has also become a showcase for the Asia-Pacific’s (APAC) growing importance in the global commercial aviation market.
A key market
“Asian airlines and their increasing passenger numbers are driving global aviation markets. We envisage that APAC will account for up to half of total annual increase in air traffic by 2020,” Shukor Yusof, an aviation expert at Endau Analytics, told DW.
The Asia Pacific’s aviation industry has experienced remarkable growth over the past decade. In fact, the number of Asian airlines now totals 230, with an estimated 27 percent of the world commercial aircraft fleet, according to global analytics firm IHS. APAC also accounted for around 28 percent of international and 40 percent of domestic scheduled air passenger traffic last year, as Rajiv Biswas, Asia-Pacific chief economist at IHS, told DW.
“The sharp increase in Asian airline passenger numbers reflects fast-rising household incomes in many of these countries, notably China and India, as well as the rapid growth of Asian low-cost carriers, which have helped to make air travel much more affordable in Asia,” said Biswas.
Analyst Yusof has a similar view: “Leisure travel is the main activity for many passengers, so we see low-cost airlines among the most active players in the region – flag carriers less so, given the decline in premium travel,” he told DW.
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But that’s not all. Over the next two decades, Asia-Pacific airlines are forecast to account for 38 percent of total new commercial aircraft orders according to Boeing long-term forecasts, making the Asia-Pacific a key growth market for the commercial aerospace manufacturing firms such as Boeing, Airbus, Rolls-Royce and Pratt & Whitney.
There are many positive effects from the rapid growth of the commercial aviation sector. These can be seen in new employment growth, value-added contribution to national GDP, the creation of industry clusters around aviation and aerospace industries, as well as accelerated development of the national tourism industries.
However, there are also some downsides related to the management of carbon emissions from the global airline industry, aircraft noise in urban areas, as well as the land requirements close to major cities for major airports, particularly for expansion, as economist Biswas pointed out.
There is also the potential for accelerated transmission of diseases around the world, such as SARS, Ebola or the Zika virus. “This requires high technology and advanced health safety standards on board aircraft as well as advanced health risk management on the ground at international airports,” said the expert.
Analyst Yusof that believes liquidity could pose a key challenge for these countries. He argues that a currency mismatch such as the weakness of many Asian currencies vis-a-vis the US dollar could affect aircraft financing.
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For example, he says, “Vietjet is taking an aircraft every month this year. It’s not clear whether the company’s cash-flow will be able to sustain this if Vietnam’s currency is further weakened. This could also be the case for countries such as Malaysia and Indonesia.”
Last but not least, the analyst warns of the consequences of over-estimating the degree of the market expansion. “Too much expansion means too many seats, therefore airlines will inevitably make less profit as fares will be slashed amidst intense competition,” Yusof told DW.