No signs yet of overcapacity in airline industry – AAPA

MANILA, Philippines - Asian carriers are not yet experiencing excess capacity that could lead to lower load factor according to the Association of Asia Pacific Airlines (AAPA).

AAPA said in a report that there are no signs yet of over capacity in Asia as the average load factor inched up by 1.5 percentage points to 77.9 percent last year from 76.4 percent in 2011, reversing the two percentage point decline-recorded between 2010 and 2011.

“Encouragingly, warnings from early 2012 of potential excess capacity and lower load factors for Asian carriers proved to be false,” the report said.

The group reported that Asian carriers continue to record healthy passenger booking growth as demand in the region increases enough to keep up with the additional capacity.

The 77.9-percent load factor represents the second highest mark of the decade but slightly behind the 78.4-percent figure from 2010. Over the last decade, Asia-Pacific carriers have seen their passenger traffic more than double to 207 million in 2012 from 96 million in 2003.

On the other hand, AAPA data showed that revenue passenger kilometers (RPKs) increased by 84 percent to 774 trillion in 2012 from 421 trillion in 2003.

The faster passenger growth compared to RPK growth illustrates the relative strength of the short-haul market. The faster growth of traffic within Asia reflects in part the stronger economic conditions in the region compared to other parts of the world.

AAPA added that Asian low-cost carriers are in a better position because they carry limited cargo and nearly all their capacity is allocated to the fast-expanding intra-Asia market.

According to the report, Asian carriers of all types continue to benefit from rapid passenger growth in short-haul and medium-haul markets within Asia but weaker economic conditions in Europe and North America impacted long-haul traffic.

AAPA traced the faster growth in the intra-Asia market to the lower fares offered by low-cost carriers over the last decade.

In 2012, budget airlines accounted for about 24 percent of seat capacity within the Asia-Pacific region, compared to only about two percent in 2003.

The AAPA surveyed 25 airline groups including full-service carrier members and low cost carriers which operate international services and publicly report their traffic figures.

Several Asian countries – including Indonesia, Malaysia, Philippines and Thailand – have large domestic markets with budget airlines accounting for over half of total capacity.

“The continued growth of low cost carriers in these countries is expected to drive overall rapid growth in the dynamic Southeast Asian market in 2013,” AAPA reported.

AAPA director general Andrew Herdman, however, said the cargo traffic of Asian airlines declined in last five years and would continue to affect the performance of airlines this year.

Asian carrier cargo traffic in 2012 was only five percent higher than in 2007.