Analysis of the asia pacific airline industry

Analysis of the asia pacific airline industry There are many industries that the world has come to heavily rely on as globalization has become more widespread. The idea of national and continental boundaries being a limitation has gradually been overtaken by the innovations of mankind over the past few decades. The inventor of the airplane; Orville Wright is quoted as saying in 1908; â€Å"No airship will ever fly from New York to Paris.  That seems to me to be impossibleà ¢Ã¢â€š ¬Ã‚ ¦the airship will always be a special messenger, never a load-carrier† (Smithsonian Education, 2010). What he could not have imagined was that a century later his invention would be at the centre of the globalisation movement taking place and that the airplanes would be the core of an industry which directly facilitates economic growth, world trade, international investment and tourism (Doganis, 2000). The International Air Transport Association (IATA) forecasts international air travel to grow by an average of 6.6% a year to the end of t he decade and over 5% a year from 2000 to 2010 (Stanford University; 2010). These rates correlate with the levels of profitability that have been noted over the past five years as illustrated in Figure-1, showing that the level of profitability in the industry has been steadily growing over the past 5 years. Figure-1: IATA, 2010 The Asia Pacific Airline Industry The most dynamic growth is centred on the Asia Pacific region, where fast-growing trade and investment are coupled with rising domestic prosperity. Home to more than 4 billion people and driven by two of the largest dynamic economies; India and China, the Asia-Pacific region carries more than 25% of global passenger traffic annually (IATA Annual Report, 2010). According to IATA CEO Giovanni Bisignani, as of April 2010 the Asia Pacific region was deemed to be the world’s largest aviation market (IATA Annual Report 2010). High rates of economic growth in the emerging markets within the Asia Pacific have led to the rapid expansion of aviation industries serving Asia and The Pacific (Sumner et al. 1995). The Asia Pacific airline industry witnessed a boom in the 1990’s that can only be termed as remarkable especially when compared to the performance of other airline markets such as the USA and Europe (Sumner et al. 1995). The dynamic nature of this region places it as an area of economic interest and analysis. This paper will give an economic analysis which will present arguments of how the airline industry functions and the plausible economic justifications for the massive growth that has been seen in the Asia Pacific airline industry. To present a concise analysis we will focus on three major commercial airlines in the region namely; Cathay Pacific, Singapore Airlines and All Nippon Airways as well as three market leaders in the Low Cost Carriers Sector (LCCs) namely; Cebu Pacific Air, Tiger Airways and Air Asia. 2. Asia Pacific Airline Industry: A Competitive Analysis Airline services categ orized as low cost carriers or LCC’s emerged in the airline industry in the South-East Asia region following deregulation in the early 2000’s and Air Asia pioneered low cost travelling (Arifin et al. 2010). Arifin et al. (2010) further highlight that as the number of LCC’s has grown; these airlines have begun to compete with one another in addition to the full service airlines. A competitive analysis of the Asia Pacific airline industry is therefore two-fold; firstly analysis on the basis of the competition between LCC’s themselves and secondly between LCC’s and full service airlines.