Emerging Asian carriers make presence felt with plane deals

15-Feb-2014 Intellasia | AFP | 6:00 AM Print This Post

Emerging Asian carriers made their presence felt at a major airshow Thursday with multibillion-dollar deals that underscored the region’s importance as the growth driver of global aviation.

Four relatively small Asian carriers already had a combined order book of more than $11 billion halfway into the six-day Singapore Airshow, with smaller planes as their preference.

Airline executives said many smaller cities in Asia remain underserved despite the explosive growth in budget air travel, and they will use the new planes to connect such destinations to metropolitan centres.

Asia’s expanding middle class is driving demand, said Song Seng Wun, regional economist with Malaysian bank CIMB.

“It’s really a function of regional economies experiencing spending power of the rising middle class which benefited from so many years of steady growth,” Song told AFP.

In the latest deal, Indian carrier Air Costa on Thursday ordered 50 E-Jets E2 aircraft, which can seat 70-130 passengers, from Brazilian manufacturer Embraer worth $2.94 billion.

The deal with Air Costa, which began operations only four months ago, also includes purchase rights for 50 more of the aircraft, both companies announced at the show.

With the orders, Air Costa will become the first customer of the E-Jet E2 in the Indian market when it takes delivery of the first plane in 2018.

Thai budget carrier Nok Air also on Thursday firmed up orders for two Q400 86-seater planes from Canada’s Bombardier worth $63 million.

Nok Air indicated it may buy six more depending on its needs.

The Singapore Airshow began Tuesday with an order by Vietnamese budget carrier VietJetAir for 63 Airbus A320 jets worth $6.4 billion.

The deal also covered rights to acquire or lease 38 more A320s, potentially boosting VietJetAir’s current fleet of 11 A320s tenfold.

The Vietnamese airline, founded only in 2011, plies domestic routes as well as services to Bangkok, Seoul and Kunming in China with its current fleet of leased planes.

In another deal, US aicraft maker Boeing on Wednesday announced that Nok Air had committed to buy 15 B737s worth $1.45 billion.

Bangkok Airways, which brands itself as a “boutique carrier” that flies to selected tourist destinations, on Wednesday also signed up to buy six 72-600s from European plane-maker ATR in a deal worth $150 million.

Air Costa executives said they would use the E-Jets E2 aircraft from Embraer to serve smaller Indian cities.

“Our focus has been the tier-two and tier-three cities in India,” Air Costa chief financial officer Vivek Choudhary told a media briefing Thursday.

“Our philosophy is that we believe that 70 percent of the population, of the huge 1.2 billion population in India, still reside in these non-metros,” he added.

“Basically we are linking the metros to the smaller cities.”

Choudhary said the carrier expects the air transport sector in India to grow dramatically in the next 15 to 20 years.

“The huge size of the middle class in India and the profitability levels that are going up adds to the demand in air travel,” he added.

Nok Air chief executive Patee Sarasin said his airline was looking to expand into Myanmar following the opening up of the formerly army-ruled state.

“I think Myanmar has really stepped up,” Patee told reporters after firming up the two jet orders with Bombardier.

“We think it’s a beautiful country and we see a high potential that Myanmar will grow very fast,” he said.

“I am sure within the next few years we are going to see Myanmar growing as fast as Vietnam.”

Economist Song said such new markets were an “added bonus” as even without them demand for travel in Asia was robust.

“Frontier markets are an added bonus,” he said. “Even without the likes of Myanmar, demand continues to grow.”

Airbus, Boeing and Embraer – in their 20-year forecasts for the industry – all said the Asia Pacific is the key market to enter because of the burgeoning middle class.

Embraer’s president and chief executive Paulo Cesar Silva said passenger traffic in the region “is mostly composed by secondary markets with low and medium demand densities of up to 300 passengers daily each way”.

“Some 60 percent of those markets are not served nonstop, and around half of all markets served do not allow for same day return travel,” he said.



Category: FinanceAsia

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