Fare Discounting and airline restructuring to intensify in 2006 - CAPA
(SYDNEY: 19 October 2005) High fuel prices and recent relaxation of the international regulatory structure and national policy trends in this region have passed the point of no return, which is creating radical change in the Asia Pacific region’s aviation market.
As predicted by the Centre for Asia Pacific Aviation, it has become increasingly dangerous for the region’s airlines to rely on continuing and unquestioning government support. Such support is becoming politically unacceptable for most governments. As a result, more point to point route access, more fifth freedom operations and more new entry will be permitted, resulting in further competitive pressures.
The Centre also predicts a period of fierce price discounting in 2006 as consumer demand slows in many countries. Fleet expansion is a part of most airlines’ strategy and 2005, despite record fuel prices, has been a record year for aircraft orders, particularly in China and India, to accommodate the anticipated growth.
Many of these new aircraft will join the competitive mix regardless, adding capacity faster than traffic growth and driving down yields.
The warning comes as The Centre prepares to hold its annual Asia Pacific & Middle East Aviation Outlook Summit 2006 in Kuala Lumpur, Malaysia, on 5-6 December 2005. This year the theme is “Towards Best Practice: Maximising Revenues and Minimising Costs”. The Summit will also feature the Annual CAPA Asia Pacific Awards for Excellence in Aviation, to be presented at a Gala Dinner on 5 December.
While cost cutting efforts are underway at most carriers, merely chipping away at the edges may both entrench old work practices and leave some of the region’s airlines in a weakened condition when major surgery becomes unavoidable. Airline “restructuring” which relies on cost reduction alone will no longer be forgiven by a paternalistic government.
The Outlook Conference includes a session on airline restructuring, which features presentations from leaders of some the restructuring success stories, including the Centre’s CEO, Andrew Miller, who helped turn around Air New Zealand during his time as COO of the carrier.
The innovative programme includes sessions such as ‘The Sales & Revenue Sages’, ‘Growth Market Gurus, ‘Cross Border JV Kings and M&A Merchants’, ‘The Fuel Foxes & Capacity Utilisation Cats’, ‘Productivity Powerhouses’ and ‘Outsourcing and Alliance Whizzes’.
Key speakers include former easyJet CEO, Ray Webster, AirAsia CEO, Tony Fernandes, Incheon International Airport CEO, Jae Hee Lee, Malaysia Airports Managing Director, Dato’ Seri Bashir Ahmad, European Commission Head of Bilateral Air Transport Agreements, Olivier Onidi, and former Ryanair Chairman, Patrick Murphy.
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