Air Transport World

Asia/Pacific.(WORLD AIRLINE REPORT)(Financial report)


With a fourfold improvement in profits for the fiscal first half ended Dec. 31 to MYR227 million ($66.1 million) and expectations of carrying 18 million passengers in the just-ended fiscal year, Asia's leading low-cost carrier appears to be well on the way to another outstanding financial year (ATW, 4/07, p. 24). Last year was highlighted by its takeover of most of Malaysia Airlines' money-losing domestic network, making it Malaysia's largest domestic carrier with a 51% market share.

Even as it continues to develop its joint-venture airlines in Thailand and Indonesia, AirAsia is preparing to get its next major project off the ground: The launch of AirAsia Xpress, its long-haul alter-ego airline that will be operated under a franchise agreement by FlyAsianExpress, a small Malaysian carrier that ordered 10 A330-300s in April for delivery from 2008. AirAsia X plans to operate to Europe, India, Japan, Korea and Australia with startup expected in 2008.

In early January, AirAsia added to its backlog with an order for 50 A320s plus 50 options, bringing the number of its firm orders to 150 plus 50 options.


Air China Ltd., the holding company for both Air China and Air Macau, had a stellar year, posting a 2006 net profit of CNY3.19 billion ($411.8 million), up 86.71% over the prior year, on a 17.4% lift in operating revenue to CNY44.9 billion. The company attributed the result to its A-share listing in Shanghai and the restructuring of its cross-shareholding with Cathay Pacific Airways, which helped stabilize the capital structure and provided the resources to continue with the airline's fleet expansion. It also said that the tie-up with Cathay offered valuable know-how on inflight service.


The result made Air China the most profitable airline in the country for the third year running. The good times appear to be rolling on, with no letup in the expanding Chinese economy.

The carrier will take delivery of 30 aircraft a year for the next two years, including the first of an order for 15 787s in June 2008. It is continuing to introduce its business class flatbed and at the same time is increasing frequencies across the globe. Air China Cargo took delivery of three 747-400Fs and three Tu-204Fs in 2006.

Aside from the linkage with Cathay, Air China is set to become a member of Star Alliance. It also has pursued expanded bilaterals and now has partnerships with 19 airlines in codesharing agreements and 108 SPA agreements with 84 carriers.


Air Deccan's bid to remain independent in the face of heavy losses came to an end at the end of May when parent Deccan Aviation sold a 26% stake in itself to Kingfisher for INR5.46 billion ($133.6 million). The transfer includes a promise from Kingfisher parent United Breweries Holdings to make an open offer for a further 20% of Air Deccan, the country's first low-fare carrier.

Launched in 2003 by Capt. GR Gopinath, Air Deccan brought the no-frills model to India and sought to serve smaller and more isolated regions using ATR turboprops while A320s competed on the trunk routes (ATW, 5/07, p. 48). But while it operates to more than 60 cities with 350 flights a day and carries an estimated one in five domestic air travelers, it has been unprofitable. For the six months ended Dec. 31, it lost IN333.5 million ($7.5 million). Having run through most of the $40 million raised in its May 2006 IPO, it forward-sold delivery positions for its 60 A320s on order, raising $100 million that will be paid out in four tranches.


The historic merger of stateowned Air India and Indian Airlines could give the combined carrier, which will adopt the Air India name this month, the scale and scope necessary to compete with the flood of new entrants. Much about the merger remains to be clarified, including how the organization will be structured. Both airlines operate international flights into Southeast Asia and the Gulf region and significant rationalization is planned.

In mid-May, the Ministry of Civil Aviation announced that the carrier will have its registered office in New Delhi while the corporate headquarters will be in Mumbai, with the exception that its office for domestic operations and its "Strategic Business Units" will be in Delhi.

Like many national carriers, both Air India and Indian face an existential crisis in an era when service quality and passenger focus are more important than livery. From its monopoly position in the 1990s, Indian steadily ceded market share and now lags behind Jet Airways and Air Deccan. For Air India, the situation is even grimmer. Holding just 16% of the outbound international market, its domain is being whittled away by the onslaught of international airlines that have greater access to India and private carriers that have started flying abroad.


Both airlines have launched significant expansions and will take delivery of more than 100 aircraft over the next five years. Air India ordered 68 combined 777s, 787s and 737-800s in 2006. Indian has begun induction of the first of 43 A320 family aircraft ordered from Airbus. The merged carrier will have a fleet of 125 new-generation aircraft by 2010 and is expected to rank among the top 30 airlines globally. Turnover is expected to top $3.3 billion.


Air Macau now serves 14 destinations in China and is majority (51%) owned by China National Aviation Corp. A significant part of its revenue comes from its same-plane service between Taipei and Chinese cities. It operates 72 roundtrips a week to Taipei and 28 to Kaohsiung. Passengers need only complete a brief transfer procedure at Macau International Airport and then reboard their aircraft. It also flies to Manila, Seoul, Busan and Bangkok. Each month it carries 184,000 passengers and 15,000 tons of cargo on just over 2,000 flights.


Air New Zealand is enjoying another banner year with a 61% hike in net profit to NZ$74 million ($52.4 million) for the first half ended Dec. 31, with long-haul yields jumping 12.7% as passengers upgraded to its new Premium Economy and Premier Business products. Premium Economy proved so popular that it has increased the size of that 747 cabin twice and will boost the number of seats in its 777s during their first major overhaul. The makeover was completed in 2006 with delivery of the final of eight 777-200ERs and reconfiguration of eight 747-400s. During the year, ANZ ordered four more 787s and changed its order to the larger-9 model. …

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