Home' Asian Aviation : AAV Dec Jan 2010 Contents The global airline industry is enjoying a rebound,
but airlines still face weak yields and questions
remain about the sustainability of the recovery.
In a bid to improve yields, some carriers are
reconfiguring their premium cabins, turning
away from top-end, first-class seating.
In his opening speech at the Aviation Outlook
Asia conference in Singapore, Peter Harbison,
executive chairman of the Sydney-based Centre
for Asia Pacific Aviation (CAPA), said airlines are
cutting the number of first-class seats they offer.
Harbison cited Singapore Airlines (SIA) as one
carrier doing this on some routes.
Early this year, Qantas said it would eliminate
first-class seats on most long-haul services,
except major routes to London and Los Angeles.
British Airways, too, took delivery of several
Boeing 777s with no first-class cabin for the
first time -- but the UK carrier said it has plans
to invest US$150 million to upgrade existing
US carrier Air Tran, which is being acquired
by Southwest Airlines, says it will drop first class
when the merger is completed in 2011. Early
this year, Hong Kong's Cathay Pacific Airways
said it has plans to reduce or remove first
class on certain routes.
The number of first class cabins
is shrinking as demand sags, with
companies opting to book cheaper
business-class seats for their travelling
executives. Some airlines have also
improved their business-class service,
making the product even more appealing.
It remains difficult to determine whether first-
class travel demand may yet return to the peaks
experienced in 2007.
According to an International Air Transport
Association (IATA) report released in October,
business-class demand has clearly outstripped
the need for first-class capacity at some airlines.
In August, premium passenger traffic
increased 9.1 percent year-on-year, a slowdown
of 4.7 percentage points compared with July's
growth figure. Premium traffic on international
flights -- including both business and first class --
declined 16 percent in 2009.
CAPA's Harbison predicted that full-service
carriers operating short-haul routes will continue
to do well, while low-cost airlines like Jakarta-
based Lion Air will expand rapidly.
However, the story could be different in
China, Japan and Korea which are more tightly
regulated. Harbison said that high-speed train
services in China are expanding rapidly and
could pose a serious threat to the domestic
Chinese domestic carriers are already feeling
the heat of competition with trains on several
routes, forcing them to cut fares. The world's
fastest long-distance bullet train service was
launched in January between Guangzhou and
Known as the Harmony Express -- and
offering a top speed of 394kmh -- the train has
reduced rail-travel time on the route from 10
hours, 25 minutes to just three hours. Flight
time on the route is one hour and 50 minutes.
The Aviation Outlook Asia 2010 conference was held at Marina Bay Sands, Singapore, on 20-22 October,
bringing together senior officials from airlines, airports, aviation authorities and service providers.
William Dennis reports.
Airlines reconfigure premium cabins
Garuda to fund expansion with initial public offering
Garuda Indonesia plans to use the proceeds
of its planned initial public offering (IPO) in
February 2011 to strengthen its cash flow and
help fund the purchase of six Airbus A330-200
jetliners. The airline hopes to raise US$300
million from the share sale.
Garuda President and Chief Executive Officer
Emirsyah Satar said that, now that the European
Union (EU) ban on the carrier has been lifted,
the airline needs to move forward and plan its
expansion. All 51 of Indonesia's airlines were
banned by the EU in 2007 after a series of fatal
crashes involving Indonesian carriers -- including
The ban on the flag carrier was lifted in
November 2009 and Garuda resumed flying
to Amsterdam on 2 June, operating five-times
weekly via Dubai using A330-200s. The service
will be upgraded to larger Boeing 777-300ER
jetliners in 2011, when the airline starts taking
delivery of aircraft ordered in February 2008 at
the Singapore Air Show.
Garuda has outstanding orders with Boeing
for 10 widebody 777-300ERs and 25 single-aisle
"We had to work real hard to convince the
EU to lift the ban on Garuda, as it was not
only crucial for the airline's expansion but of
paramount importance that we are [recognised
as] a safe airline again," Emirsyah said.
Tapping growing demand for travel in the
Asia-Pacific region, the airline is planning to
expand its international network from 19
destinations now to 28 by 2014, adding more
destinations in Japan, China, South Korea,
Australia and the Middle East.
Emirsyah said the resumption of flights to
London, Rome, Paris and Vienna -- which
were dropped in 2004 as part of Garuda's
restructuring -- will come at a later date, once
the airline has its 777-300ER fleet in operation.
Garuda is also looking at domestic expansion,
with the addition of 11 more destinations to its
Emirsyah said there is tremendous untapped
potential at home and the airline plans to
take advantage of the booming Indonesian
economy, stimulating domestic travel demand.
Garuda has a market share of about 30 percent
domestically, lagging behind low-cost carrier
Lion Air, which has 45 percent.
Aviation Outlook Asia
18 AsianAviation | DECEMBER 2010 / JANUARY 2011
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