Singapore - Low-cost carriers are flying high in south-east Asia on sharp growth in air travel, but as hundreds of new jets swarm into the region concerns are rising about its ability to absorb the record numbers of planes on order.
South-east Asian carriers have been devouring as many new aircraft as plane makers can sell, gambling that low fares and rising disposable incomes will drive the region’s 600 million-strong population to keep flying to new destinations.
An aircraft buying binge fuelled by cheap interest rates and backed by Western export credits shows few signs of halting, with Vietnam’s VietJetAir and Thailand’s Nok Air both expected to place orders at the Singapore Airshow this week.
But after years of explosive growth, the region’s budget carriers are now facing fears of overcapacity as deliveries accelerate, airlines expand into each other’s markets and currency weakness threatens to puncture economic growth.
South-east Asian airlines were forecast to have a fleet of 1 800 by the end of this year, while their order book was expected to surpass the 2 000 mark, Brendan Sobie, the chief analyst at industry consultancy Capa, said.
Already last year, available capacity grew faster than passenger demand in countries such as Malaysia, the Philippines and Singapore, putting pressure on yields, measured as the average revenue per passenger for every kilometre flown.
That could extend further this year as carriers in south-east Asia take delivery of about 230 aircraft worth over $20 billion (R221bn).
Most of the aircraft orders come from the region’s two fastest-growing airlines – Malaysia’s AirAsia, run by entrepreneur Tony Fernandes, and Lion Air, co-founded by Indonesian businessman turned politician Rusdi Kirana.
But concerns about an order bubble and consolidation in the sector are unlikely to get much of a public airing at this week’s air show, where deals may be signed for between 100 and 200 jets worth $10bn to $20bn – albeit far below the record $200bn seen in Dubai in November last year. – Reuters