Asia's first time flyers the big winners as Paris Air Show PR juggernaut winds down


The major beneficiaries of this week's frenetic (public relations) activity just outside Paris live half a world away. They are Asia's emerging travellers - the millions that have never stepped inside an aircraft, but for whom air travel is becoming attainable. That opportunity took a major step forward as Asian carriers - many of whom the world had never heard of a decade or even five years ago - stepped up in front of the world's media to order narrowbodies for the mass markets they see blossoming at home.

  • Asian carriers, particularly those in emerging markets, have made substantial orders for Airbus' new A320neo/A321neo aircraft, indicating the growing demand for air travel in Asia.
  • The new aircraft with efficient engines is expected to reduce unit costs by 5% and offer 15% greater fuel efficiency, leading to lower fares for consumers.
  • The International Air Transport Association (IATA) forecasts a significant increase in air travelers worldwide, with Asia expected to contribute 146 million new passengers by 2014.
  • The Asia Pacific region, excluding China, is projected to surpass 650 million passengers by 2014 and reach around 900 million by the end of the decade.
  • The rush to secure early production slots for the A320neo has driven the recent surge in orders, with airlines and lessors aiming to capitalize on the fuel efficiency and cost savings offered by the new aircraft.
  • The faster adoption of the A320neo by Asian carriers could potentially widen the growth gap between Asia and other regions, as well as between low-cost carriers (LCCs) and legacy carriers. This may lead to a further loss of market share for legacy carriers on short-haul routes, potentially necessitating alliances and mergers.

Over the past two weeks, the Philippines' Cebu Pacific, Indonesia's Garuda/Citilink, AirAsia, based in Malaysia, Thailand, Indonesia, and soon the Philippines and Vietnam, as well as India's Indigo and GoAir made substantial announcements and confirmations for Airbus' new A320neo/A321neo.

The aircraft, with new efficient engines, is expected to slash their already world-leading unit costs by 5% when they enter service in late 2015, given the expected 15% greater fuel efficiency. The savings will be passed onto emerging consumers in the form of lower fares in an increasingly competitive and liberalised aviation marketplace in Asia.

IATA indicates that by 2014 there will be 3.3 billion air travellers worldwide, up by 800 million from 2.5 billion in 2009.

The industry body is forecasting 146 million new passengers in Asia (excluding China, which now accounts for one-third of Asian aviation) by 2014, or roughly 30 million new passengers every year between 2009-2014. It is possible this could accelerate to 35-40 million new flyers p/a in Asia (excluding China) under the influence of lower fares, aviation liberalisation and ongoing economic growth in the latter part of the decade.

The Asia Pacific region, excluding China, should cross the 650 million passenger barrier by 2014, rising to a market of around 900 million by the end of the decade.

It is a region in need of vast numbers of aircraft. Indeed the fleet of some 500 A320neos ordered in (or in the lead-up to) Paris (assuming some of the lessors' neos find their way into the Asian fleet) would produce around 164 million seats p/a (that is 180 seats per aircraft flying 365 days p/a, with five sectors per day).

Click here for CAPA's full Paris Air Show coverage

Froth and bubble?

The Asian growth story aside, there was much commentary this week about the industry resuming an upswing. But rising fuel prices, the recent spate of natural disasters and the economic problems in Europe are resulting in lower rather than higher profits this year, even in Asia (the latest air freight figures from the Association of Asia Pacific Aviation point to an economic slowdown).

See related report: Asian air cargo demand wilts reflecting "some moderation" in economic growth - AAPA

Paris is a publicity machine that many established carriers, eg US, Chinese and European flag carriers, tend to avoid.

Most of the noise at Paris centred around Airbus' new neo, which garnered the lion's share of orders. But the frenzy is not being driven by an upswing in the airline industry but rather by pressure to secure prized early production slots. It will take Airbus almost three years to ramp up neo production. That means there were a precious few slots in 4Q2015 (when neo deliveries start), 2016, 2017 and 1H2018. These slots are now sold out (though Airbus is no doubt holding a few back still for some of its best customers who are still evaluating).

Airlines, in particular existing A320 operators (who can easily transition to the neo without most of the costs typically associated with changing aircraft types), were aware of the slot issues and felt they needed to make a move in the first six months of the programme in order to ensure they have the aircraft they need in the second half of this decade. If they waited, they would have lost an opportunity for narrowbody growth and replacements which give them a 15% improvement in fuel burn, which is a big number these days in an era of high fuel prices and emission trading schemes.

Likewise, the major lessors realised they needed to act quickly to secure early neo slots, which they can now offer with a premium to airlines that have missed out. Much of this posturing and positioning has been occurring for months. So Asia's emerging airlines with a growth story to tell and brands to build, along with the opportunistic leasing companies, came out in force in Paris.

But the fact that Asian carriers have been quicker to order neos could potentially widen the growth gap between Asia and the other regions - and between LCCs and legacy carriers, which have barely participated in the neo story to date. This raises questions about where the legacy carriers will be in the narrowbody game later this decade. The answer is they almost certainly face a further loss of market share on short-haul routes, which will reinforce the need for alliances and mergers.

Background Information

Paris Air Show Orders By Region


Firm orders Type # $bn
Air Lease Corp A330 11 2.4
Air Lease Corp A321 1 0.1
GECAS A320neo 60 5.5
Air Lease Corpo B737-800 6 0.6
Air Lease Corp E190 5 0.2
GECAS E190 2 0.09
GECAS ATR 72-600 15 0.34
Nordic Aviation Capital ATR 72-600 10 0.22
MoU/ Commitments
ALAFCO A320neo 30 2.7
Air Lease Corp A320neo 36 3.3
ALAFCO A350-900 6 1.6
CIT Leasing A320neo 50 4.6
Air Lease B737-800 14 1.1
Air Lease B777-300ER 5 1.4
Air Lease B787-9 4 0.9
GECAS 777-300ER 8 2.3
GECAS B747-8F 2 0.6

Asia Pacific

Firm orders Type # $bn
AirAsia A320neo 200 18.2
GoAir A320neo 72 6.6
IndiGo A320 30 2.5
IndiGo A320neo 150 13.7
Skymark A380 2 0.8
TransAsia A321neo 6 0.6
Korean Air CS300 10 0.7
MoU/ Commitments
Garuda Indonesia A320 15 1.3
Garuda Indonesia A320neo 10 0.9
Sriwijaya Air E190 20 0.86
PT Sky Aviation Superjet 100 12 0.38
Customers identified
Malaysia Airlines 737-800 10 0.81
Mongolian B767-300ER 1 0.1
Mongolian B737-800 2 0.16

Latin America

Firm orders Type # $bn
LAN A320neo 20 1.8
TAME ATR 42-500 3 0.05
Azul ATR 72-600 10 0.22
MoU / Commitments
Avianca A320 18 1.5
Avianca A320neo 33 3

North America

MoU / Commitments # $bn
JetBlue A320neo 40 3.6
Republic Airways A320neo 40 3.6
Republic Airways A319neo 40 3.4
Firm orders Type # $bn
Blue Panorama Airlines Superjet 100 12 0.37
Air Astana E190 2 0.09
UTair Aviation 737-900ER 7 0.6
UTair Aviation 737-800 33 2.6
Norwegian B787 3 0.6
Norwegian B737-800 15 1.2
SAS A320neo 30 2.7
Customers identified # bn
Aeroflot 777-300ER 8 2.3
Firm orders # $bn
Saudi Arabian Airlines A330 4 0.9
Customers identified
Qatar Airways 777-300ER 6 1.7


MoU / Commitments # $bn
Kenya Airways E190 10 0.44


Firm orders # $bn
Unidentified customer CS100 10 0.62
Unidentified B747-8 2 0.64
Unidentified customer A380 10 3.8
MoU / Commitments
Unidentified B747-8 15 4.7

Want More Analysis Like This?

CAPA Membership provides access to all news and analysis on the site, along with access to many areas of our comprehensive databases and toolsets.
Find Out More