--By Sanjeev Sharma

 

Aerodromes and air routes around the world are getting more crowded and busier these days. Thanks to the sharp rise in the number of air passengers across the globe, airliners are hustling hastily to serve their commuters. 

 

Not long ago the global aviation market also witnessed turbulent times. After the near collapse of global financial market in 2008, the global aviation sector was also pushed into a recession. Some major commercial international airliners were forced to file bankruptcy protection in their respective countries. American Airlines, Sun Country Airlines, Aloha Airlines and Skybus Airlines were the major bankrupt US global airliners since 2008. In Europe, IceJet (Iceland), Cargoitalia (Italy), Amsterdam Airlines (Netherlands), Mint Airways and Spanair (Spain), Armavia (Flag carrier of Armenia) and Lauda Air (Austria) were the major victims of global economic slowdown and spiraling debt contagion of Eurozone. Some of the Asia's biggest commercial airliners such as Japan Airlines (JAL), Hong Kong Airlines, Galaxy Airlines (Japan), Batavia Air (Indonesia), Silverfly (Malaysia), Air Phoenix (Thailand) were also forced to shut their operations. The outbreak of SARS virus epidemic in mid and late 2000s', skyrocketing fuel prices and labour disputes were also seen as contributing factors of corporate bankruptcies in aviation market apart from the financial crisis. Large number of flight cancellations and weakening demand of air ticket not only took away incomes of airliners but also reduced the sales of commercial airplanes.

 

However, the gradual recovery of global economy has helped remove the cloud of uncertainty hovering over the global airline industry. The Japanese flag carrier Japan Airlines (JAL) and American Airlines emerged from bankruptcy protection after their organisational restructuring. The number of air travelers also increased following the economic recovery. "The global market for commercial aircraft is ready for takeoff." US-based aircraft manufacturer Boeing concluded in its annual analysis of the commercial aviation market which the company released during mid-2013. The company forecasted a $4 trillion market for new aircraft over the next 2 decades. 

 

The European rival Airbus also reported with similar optimism regarding the increase in air traffic rate. According to estimation by the company," Long-term airline traffic growth will average 4.7 per cent per year, while cargo traffic grows at a slightly higher annual rate, 4.8 per cent for the next 20 years." Airbus pointed the rise in air travelers in emerging economies including the Asia-Pacific as the main driving factor of global aviation market. Due to the air traffic growth in Asia-Pacific region, Airbus expressed “no surprise” that the region will require 47 percent of new large aircraft.

 

 

Low Cost Carriers Boom in Asia

In a time of economic and financial turbulence, people are more likely to avoid air routes and opt land or sea routes. As there is a significant difference of travel fare rate between air and land/sea medium, travelers choose the transport medium that is friendlier to their pockets. Likewise, travelers are also likely to prefer less comfortable economy class airplane seats rather than expensive business class sections. The global economic downturn prompted many air travelers to choose economy class seats following the sharp decline in corporate earnings of companies. This resulted in the fall of profit and overall income of big airlines across the world threatening their business. 

 

However, the airline industry effectively managed to continue to serve its customers without fearing about the negative economic consequences. In that context, Low Cost Carriers (LCC) or budget airliners are seen as the saviours of global aviation market. Various reports suggest that Asia-Pacific along with other emerging regions is now becoming a major hub for LCC. According to Sydney-based Center for Asia Pacific Aviation (CAPA), in the first eight months of 2013, more than 138 million passengers were carried by Asia-Pacific airlines in the region - a rise of five percent over the last year. CAPA informed that this growth is being driven by low cost airlines, which accounted for more than half of all seats in 2012. 

 

Experts are citing to the Asia's massively expanding middle class and rise in their disposable income as one of the reason for the LCC boom. "Asia's growing middle class is pushing the demand for travel. Massive increase in intra-Asian tourism and air travel is simply driven by the fact that so many more people are going into the so-called 'middle-class' status with discretionary income and one of the first things they want to spend their hard earned spare cash is on going overseas," said Martin Craig, the CEO at the Pacific Asia Travel Association (PATA). South East Asia's burgeoning middle class, now estimated at around 500 million people, is expected to reach as many as 1.7 billion by 2030. 

 

China, Indonesia, Malaysia, Vietnam, Thailand, Singapore and Burma are now being regarded as the frontiers of aviation market in Asia Pacific region. India has also joined the league despite the failure of some big carriers (such as Kingfisher Airlines) and declining profit of Indian airlines companies. Middle East also accompany the growing popularity of LCCs. Air Arabia and Fly Dubai (UAE), Nas Air (Saudi Arabia),Air Busan and Jeju Air (South Korea), Air India Express, Indigo, Spice Jet and Jet Airways (India), JAL Express and Air Next (Japan), Air Asia (Malaysia), Cebu Pacific Air (Philippines), Lion Air (Indonesia), China United Airlines (China), Thai Air Asia (Thailand) and Tiger Airways (Singapore) are among the biggest players in the Asian budget airline market. Recently published reports have suggested that Southeast Asia has a remarkably high LCC presence of almost 50% -- meaning more than half of total seats are sold by low-cost carriers. According to a Boeing report, budget airlines in South East Asia would increase their market share to 42 per cent by 2032, up from 22 per cent of 2012. This indicates the high value market for the commercial airplane manufacturers of the world. 

 

International Air Transport Association (IATA), the trade association for the world’s airlines also highlighted this remarkable progress of Asia-Pacific and Middle Eastern Airlines. For the year 2013, IATA forecasted that the global airline sector's profit is likely to be at $7.5 billion. This is compared to $4.6 billion worth of profit recorded in 2009. IATA in its report clearly highlighted the rise of Asia-Pacific and Middle East based airlines dominating the international passenger market and leading the way in terms of improved operating margins. Studies of various independent market researchers showed that Asia region as a whole has become the most the most important sales region for Boeing and Airbus, worth an estimated $1.5 trillion over the next 20 years. Given China's population of 1.35 billion, airplane manufacturers are exploring over a huge market expansion. Airbus expects China to be the most valuable aircraft market in the world over the next 20 years, taking delivery of 4,401 jets worth $545.1 billion. Similarly, rival Boeing estimates that China’s fleet of aircraft will be more than triple to 5,930 by 2030 compared to 1,750 jets in 2010. 

 

The expanding wings of LCCs are not only limited to South East Asia or Middle East. Europe, having witnessed sharp economic contraction in recent years is also seeing a number of budget airplanes flying over its skies. Ryan Air (Ireland), Easy Jet (United Kingdom), Air Berlin (Germany), Air One (Italy), Feel Air (Norway), Helvetic Airways (Switzerland), Iberia Express (Spain) and Smart Wings (Czech Republic) are popular among the budget sky travelers around Europe and elsewhere. US and Canada, once dominated by big airlines is also witnessing a similar phenomenon. The near financial meltdown squeezed the income of the North American passengers who are now choosing cost saving travel mediums. Similarly, more and more Latin and African air travelers are also opting for budget airlines.