TTG Asia looks at how South-east Asia’s national airlines have fared in their performance last year, whether global uncertainties have affected sales, as well as their plans to bolster growth in 2017
Thai Airways International
Thai Airways International’s (THAI) European routes continue to emerge as strong performers, said its vice president of sales, Bryan Banston, with the airline intensifying its presence with more services and new routes and sprung back from the red in 2016.
Last year, the airline reintroduced four-times weekly Bangkok-Moscow flights, launched a new link between Frankfurt and Phuket, as well as deployed A380s on its Paris, London and Frankfurt routes.
Meanwhile, the delivery of two Airbus A350-900 XWB aircraft has also enabled THAI to pursue European capacity growth by deploying the new widebody aircraft on its Milan and Rome routes, while the third A350 (see page 17 for the review) – delivered in mid-April – will enter service on the Bangkok-Frankfurt route come May 1.
“One of our key strategies is to grow European routes to daily in the short term. These include Brussels, Milan, Rome and Moscow,” he told TTG Asia.
THAI currently flies to 12 European destinations including seven Star Alliance hubs: Brussels, Copenhagen, Frankfurt, Munich, Oslo, Stockholm and Zurich. Banston highlighted that Scandinavia “has a particular strength as it serves three ports: Copenhagen, Stockholm and Oslo”.
China is another key market for THAI, especially as the Chinese market has recovered since the Thai government’s clampdown on zero-fee tours and more Chinese FITs are visiting Thailand, according to Banston.
The carrier currently flies to six cities in China – Shanghai, Beijing, Guangzhou, Chengdu, Xiamen and Kunming – as well as Hong Kong and Taipei. Most recently in March, it launched a four-times weekly service connecting Beijing and Phuket, adding to its Kunming-Chiang Mai and Hong Kong-Phuket routes that bypass the Bangkok hub.
The Thai national carrier has also revealed clear ambitions to position itself as a network carrier in South-east Asia through its Bangkok hub. “We see good growth in network selling,” said Banston. “We also see opportunities to focus on our network to move passengers beyond Bangkok to other parts of South-east Asia, Asia and Australia.”
Regional subsidiary Thai Smile will hence play an integral role to generate new feed for THAI’s longhaul network, as it has fallen behind competitors in terms of regional network development in recent years. For instance, it has identified Europe to be a good source for Thai Smile’s Kota Kinabalu-Bangkok service starting in end-March.
When asked if the aggressive competition of the Gulf airlines on the Europe-Asia market poses any threat, Banston said: “THAI’s edge lies in our non-stop operations, which comprise one long and short sector. Premium and corporate passengers prefer such arrangements than to have the leg broken up into two.” – Xinyi Liang-Pholsena and Barathi Narayan
Philippine Airlines
Philippine Airlines (PAL) is increasingly propelling its international growth through secondary gateways including Clark and Cebu, given that the runway congestion at Manila’s Ninoy Aquino International Airport (NAIA) limits its expansion.
The Philippine national flag carrier debuted in Clark last December by mounting flights from Incheon to Caticlan (Boracay), immediately followed by flights from Clark to Cebu, Davao to Puerto Princesa and Coron in Palawan.
Also in 1Q this year, PAL mounted more domestic services from Cebu to Puerto Princesa, Coron, General Santos and Surigao, enabling tourists to visit major tourist attractions without transiting in Manila, said president Jaime Bautista.
The increased domestic services from Cebu came on the heels of the successful Cebu-Los Angeles services that began last year, its first longhaul flight outside NAIA.
Bautista said PAL is planning more frequencies from China, including Beijing and Shanghai, and a new service from Chengdu, in addition to more chartered flights from other mainland cities.
PAL is currently the only carrier that flies non-stop from Philippines to Europe. Its Manila-London route was made a daily service in mid-2016, up from thrice weekly. However, Bautista has indicated that its European expansion is currently on hold.
While Bautista did not cite the reason for deferring the European expansion, observers note that it’s a good decision as it will be difficult for PAL to compete in terms of product, pricing and the extensive European networks of the Gulf carriers that have been flying aggressively from Manila and Clark to Europe last year, with a stopover in their Middle Eastern hubs.
It is also understood that PAL does not currently have a suitable aircraft for Europe. It will receive its order of six A350-900 aircraft in 2018, which will be used for non-stop flights to the US.
In the meantime, Bautista said that the carrier is currently focused on upgrading its Skytrax rating from its current three- to five-star rating by 2020. Initiatives underway include upgrading product and services such as cuisine, technology, onboard amenities and entertainment; developing and rationalising routes, network and connectivity; and delivering the desired passenger experience.
Once all these are in place, perhaps PAL would then be more on an even keel to expand in Europe. – Rosa Ocampo
Singapore Airlines
Singapore Airlines (SIA) operated an average of 106 weekly flights to and from 14 destinations in Europe in 2015 and 2016. According to an SIA spokesman, the passenger load factor for Europe in the first half of the 2016/2017 financial year was at 77.2 per cent, compared with 81.5 per cent for the same period in the previous year.
With regard to its 2016 performance in the European sector, the spokesman said: “Outbound demand remains under pressure due to uncertainty in the macro economic environment following Brexit, coupled with weak inbound sentiment surrounding security concerns.”
For 2017, plans will include launching services to Stockholm via Moscow, as well as introducing the A350 on more European routes. Stockholm would be the airline’s second destination in the Scandinavian region. The flights will be operated on the airline’s new Airbus 350-900s, and would complement the airline’s existing flights to Copenhagen in Denmark, boosting connectivity between South-east Asia and Northern Europe.
Subject to approval from the relevant authorities, the new services will also be included in a joint venture agreement between SIA and Scandinavian Airlines. The agreement took effect in 2013 and covers flights between Scandinavia and Singapore.
According to the SIA spokesman, the passenger load factor in the East Asian region stood at 78.6 per cent from April to December for the FY2016/17, an increase from 76.9 per cent for the same period in FY2015/16.
The spokesman shared that frequency to various points in South-east Asia will also increase during the northern summer season (March 26, 2017 – October 28, 2017) to meet growing travel demand. In South-east Asia, the Bangkok flight frequency will increase from five to six daily with effect from March 26, 2017. Ho Chi Minh City will also be served 19 times per week, up from 17.
The spokesman said: “2017 is expected to be another challenging year amid tepid global economic conditions and geopolitical concerns, alongside other market headwinds such as overcapacity and aggressive pricing by competitors. Loads and yields for both the passenger and cargo businesses are projected to remain under pressure.”
To combat this, SIA will tap into initiatives such as their joint venture with Lufthansa, which will allow better connectivity to new markets, and a more efficient fleet deployment.
The spokesman added: “It is our policy to carefully match our capacity to market demand. We will continue to monitor air travel demand closely, and be flexible in making adjustments to our frequencies.”
Meanwhile the carrier’s subsidiary Scoot is also preparing to launch services to Athens on June 20, 2017. This will mark it as the longest flight operation of any budget carrier with a journey time of 11 hours and flight distance exceeding 10,000km. – Paige Lee Pei Qi
Malaysia Airlines
Malaysia Airlines will expand its network in China this year by serving eight new destinations and 11 new routes with 35 additional frequencies between Malaysia and China.
Malaysia Airlines’ CEO Peter Bellew said: “We plan to triple our Chinese business over the next five years. I see potential for direct flights to 20 Chinese cities from Kuala Lumpur, Penang, Kota Kinabalu and Kuching by 2019. We have huge confidence in China. The improved connectivity will foster deeper business (and tourism) links between the two nations.
“In addition to this initial growth, we will promote tourism in Malaysia and China through seasonal or ad-hoc services to key leisure markets such as Langkawi, Kuching and Kota Kinabalu.”
As part of its cost-cutting measures in 2015 and 2016, Malaysia Airlines suspended services to Amsterdam and Paris in January 2016, and Frankfurt in May 2015, with London remaining as the only European destination served. The Kuala Lumpur-London route is operated twice daily utilising an A380 aircraft, but the airline plans to replace it with A350s in April 2018.
In 3Q2016, the airline became the official global airline partner of Liverpool Football Club in a bid to increase brand awareness in the UK and globally.
On how this effort has panned out, Malaysia Airlines said in an email response: “Targeted marketing has led to a 14 per cent market share increase on the Kuala Lumpur-London route, from 45 per cent in May to 60 per cent in September. December saw the load factor increase to 86.2 per cent.”
The carrier remains bullish about demand on this route in 2017, and expects it to “continuously grow throughout 2017”.
Overall, Malaysia Airlines announced a “marked improvement” in revenue and passenger loads as of 3Q2016. Passenger load factor improved to 79 per cent, up from 69 per cent in 2Q.
Regarding the expansion of services to Europe, Bellew said in an Aviation International News report in January this year: “Market conditions have to be right before we start flying to Europe again. I do not see this happening before the 2019-2021 time frame.”
The airline is adopting a cautious stance for 2017. In a statement, it said: “A weak Malaysian ringgit, Brexit uncertainty and overcapacity in the Malaysian market will be the dominant features of 2017. We have hedged significant fuel requirements but we will continue to be exposed to dollar volatility in 1H2017.
“We expect unit costs will fall by a further three per cent in 2017. The price of fuel in 2017, combined with increased efficiency measures, are expected to deliver significant savings and these savings will be passed on to our customers.” – S Puvaneswary
Vietnam Airlines
Vietnam Airlines enjoyed record results in 2016 as it works towards its goal of becoming South-east Asia’s second largest full-service carrier.
Last year saw the Vietnamese national carrier enjoy an 18.7 per cent increase in traffic, welcoming 20.6 million passengers on board more than 133,000 flights. Revenue also grew by 10 per cent, hitting US$3.4 billion. Pre-tax profits jumped by a staggering 140 per cent to US$113.7 million.
Despite showing strong growth and record results, the airline is fighting off fierce competition from rising LCC rival Vietjet to retain its title as the country’s largest domestic carrier. CAPA Centre for Aviation predicts Vietjet is on track to surpass Vietnam Airlines this year as the country’s largest domestic carrier.
The latest figures show Vietnam Airlines holds 42.5 per cent of the domestic market versus Vietjet’s 41.5 per cent.
However, the airline’s modernisation and expansion of its longhaul fleet is paying off as it continues to plough ahead with bolstering its international offerings. In March, the Hanoi to Tokyo (Haneda) route welcomed its inaugural Airbus A350-900 XWB service, becoming the fifth destination worldwide to be served by the new A350 fleet.
From October 2015, the fleet has been used for the Hanoi/Ho Chi Minh City (HCMC)-Paris and Hanoi-Seoul routes. The A350 has been deployed in HCMC-Shanghai route from April 2016 and HCMC-Osaka route from October 2016.
Vietnam Airlines CEO Duong Tri Thanh said this is part of the carrier’s plan to replace the widebody fleet on longhaul flights.
In a significant move, Vietnam Airlines forged a partnership with All Nippon Airways in January 2016, linking Japan with Vietnam. This helped to strengthen its position to enter the US market, with a direct route linking HCMC and Los Angeles slated to start in October, after Vietnam Airlines acquired 40 A350-900s.
The airline launched a thrice-weekly service from Hanoi to Sydney in end-March, the latest in a series of new routes that span Myanmar, Indonesia, Central Vietnam, Bangkok and Cambodia.
And in February, it was unveiled Vietnam Airlines secured long-term leases with Aviation Capital Group for six new Airbus A321neo aircraft to be used on domestic and shorthaul routes, which are scheduled for delivery in 2018 and 2019.
It currently boasts a fleet of 83 aircraft, which fly to 52 destinations in 17 countries. By 2020, Thanh said the airline plans to operate 170 aircraft, making Vietnam Airlines the second-largest full-service carrier in South-east Asia. – Marissa Carruthers
Garuda Indonesia
Garuda Indonesia is keen to expand its international network this year by increasing the number of flights to existing destinations as well as opening new routes.
The Indonesian national carrier recently announced that it would increase seasonal flight frequencies on the Jakarta-Australia routes from four- to five-times weekly flights and Bali-Australia routes from six- to seven-times weekly flights from May until October 2017. Destinations in Australia on its radar include Sydney, Melbourne and Perth.
With an average load factor of 75 per cent, Garuda last year carried 644,000 passengers on its Australian services, 17 per cent higher than in 2015. With the additional flights it is expecting to carry 650 passengers this year.
In the mean time, other new routes include connecting Jakarta with Mumbai, Moscow and the US.
The first direct connection between Jakarta and Mumbai started on December 12, 2016. The service is served through Bangkok three times a week with Boeing 738 aircraft with a two-class cabin configuration.
The airline is also planning to start thrice-weekly services using Airbus A330-200 aircraft between Jakarta and Moscow in August 2017. The direct flight connection from Moscow is expected to improve Russian tourist visits to Indonesia to 100,000 this year, according to the airline’s vice president communications Benny Butarbutar.
In addition to Moscow and Mumbai, Garuda Indonesia will also launch Jakarta-Los Angeles via Tokyo in mid-2017.
However, with the recent reshuffle within Garuda, which sees Arif Wibowo replaced by Pahala Nugraha Mansury as president and CEO at press time, the new management has indicated a review of the airline’s network and route expansion. – Mimi Hudoyo
