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Asia aviation outlook: high demand, low fuel, but overcapacity and uncertainty (Brexit) hurt profits

Asian aviation should be experiencing boom times. So why isn't it? The region is unique for alignment of three key factors: low fuel, high demand and geopolitical stability. Yet financially the market is subdued, largely the result of overcapacity at most airlines. There are some special features too: Cathay Pacific and Singapore Airlines' benefit from low fuel prices has been muted by to hedging, currency swings have hurt the financials of Chinese and Korean airlines.

Strategically most airlines in Asia remain confident of long term opportunities but identify short term challenges, starting with overcapacity. The region's growth is above the IATA average, but financial performance is below. Airlines are watching Europe to see if demand has plateaued or will further weaken due to security concerns. Freight – especially important at Northeast Asian airlines – is facing its usual challenges. New consumer electronics – iPhone 7, for example – may deliver a short-term boost, but will not be as high or profitable as it used to be. The collapse of Hanjin container shipping might deliver some relief, but not on the scale of the 2015 US port closure.

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