White Paper Highlights Airline Consolidation, Southeast Asia Growth

Two of the most significant trends in the Asia-Pacific aviation market are airline consolidation and the increasing importance of the Southeast Asia subregion, according to a new study.

A white paper released by the Alton Aviation Consultancy cited some high-profile consolidation moves within the broader region and predicts that further consolidation and restructuring is likely.

Such moves will be spurred by growing pressure on airline profitability, Singapore-based Alton Director Alan Lim told Aviation Week. He noted that more capacity is coming into the market as supply chain issues show signs of easing and aircraft deliveries begin to pick up pace.

The region may start to return to the oversupply that existed before the COVID-19 pandemic, Lim said. In response, more airlines will likely look to consolidation through mergers or by rationalizing their own operations.

Mergers involving major carriers in India and South Korea are the best-known examples, but the white paper also highlighted the consolidation of AirAsia and AirAsia X, and the decision by Qantas Group to withdraw from its Jetstar franchises in Japan and Singapore to focus on its core markets.

While cross-border mergers are generally difficult, there is still scope for consolidation within countries, Lim said. Smaller players in particular may come under pressure as competition heats up.

Airlines are also continuing to form more strategic partnerships, and there are many cases of cross-border investment to strengthen ties between carriers.

Another theme highlighted by the white paper is the rapid growth of demand and traffic in Southeast Asia. While China and India are typically viewed as the Asia-Pacific region’s powerhouses, the Southeast Asian market should be increasingly seen as a third important growth engine in the region, Lim said.

He noted that while India and China each have larger populations of around 1.4 billion, Southeast Asia’s combined population of about 700 million still makes it a very significant market.

Mainland China’s domestic market has recovered well, but international outbound travel is still down from 2019 levels. Lim said this is partly due to economic challenges in China and the fact that international travel is less affordable now. Visa-free initiatives in some other Asian countries have also not boosted Chinese tourism as much as expected.

Rapidly changing geopolitical factors have caused shifts in some Asia-Pacific international traffic flows. This reinforces the need for airlines to be much more agile in the current environment and streamline their planning and decision processes, Lim said.

It also highlights the importance of contingency plans for where to deploy capacity when some markets are affected by external factors, he said.