Wednesday, September 11, 2019

Asia's airline bazaar will help peers fly higher

Hong Kong: Asia's hangars are full. At least six carriers are all or partly up for sale, from SriLankan Airlines to South Korea's Asiana. The region may be the biggest driver of new demand globally, but low-cost rivals have eaten into market share, and cooler demand has hurt too. Most will not find a buyer and deserve to shrink or close; the survivors will benefit.

The International Air Transport Association estimates passenger numbers will roughly double in the 20 years to 2037, with Asia accounting for more than half of all new travellers. Budget offerings will fuel much of that growth.

It's no accident that three of those for sale are state-controlled. Malaysia Airlines, SriLankan, Air India are indebted and loss-making, weighed down by inefficient fleets and years of government meddling. None successfully embraced budget travel. And even the sway is gone: Air India is number three at home. Flag carriers still have some lustre, perhaps for the likes of Singapore Airlines, which needs to compensate for its lack of a domestic market, or Japan Airlines, hoping for more US traffic.

But Sri Lanka illustrates the depth of the problems: Emirates bought a near 44 per cent stake in 1998, only to walk away a decade later after the relationship with Colombo soured. In 2017, prospective buyers, including private equity firm TPG, said potential returns were just too low. The situation has only worsened: Upstart Indian rivals are eating into profitable routes; April bomb attacks, meanwhile, have dragged tourist numbers to their lowest level since the end of the civil war.
11/09/19 Business Times
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