Notwithstanding talk of darkening economic prospects for the Asia Pacific region and persistent pressures on the profitability of its airlines, Boeing continues to see Southeast Asia traffic growing at a 6.5 percent annual rate for the next 20 years. The U.S. airframer believes this will result in demand for 3,750 new airplanes valued at $550 billion.
Speaking at his company’s Singapore offices on Monday, Boeing Commercial Airplanes senior vice president of sales for Asia Pacific and India Dinesh Keskar cited a bright outlook for emerging economies such as Myanmar and Indonesia and strong replacement demand for a region whose low-fare carriers now command 54 percent of the market.
“Growth is being driven by emerging economies and also LCCs [low-cost carriers], which are getting more predominant in our part of the world,” he noted. “The market is much more diverse and balanced. Different business models are doing well across the region...In our estimation Myanmar will become like the next Thailand in the next five years,” said Keskar.
Keskar characterized the fundamentals driving 6.7 percent passenger traffic growth in 2015 and greater than 80 percent load factors as “very, very strong,” and cited “good stability” in lease rates. Although earlier in the day, during the Singapore Airshow Aviation Leadership Summit, IATA director general Tony Tyler reminded attendees of lagging profitability of Asia Pacific airlines, Keskar cited Southeast Asia’s “own share of profitable carriers” as cause for optimism.
While fuel prices continue to help a lot “for the time being,” said the Boeing executive, the liberalization of ASEAN skies over time will ensure sustained growth. Of the total number of new airplanes destined for Southeast Asia, 76 percent will satisfy growth needs compared with 58 percent for the entire world, according to Boeing. “Very few airplanes that you see today are going to be retained in the next 20 years, just because the airplanes are coming in here at a much faster rate and older airplanes are going out in places like Indonesia, Vietnam and even Myanmar,” said Keskar.
Addressing comments in the press by Tyler about the prospect for delivery deferrals by Asia Pacific airlines that placed huge orders for airliners during headier economic times, Keskar insisted that Boeing has not seen any unusual deferral activity in the region or any signals from customers that any such moves could be coming.
“From Boeing’s point of view, we are in a good spot for several reasons,” he explained. “In terms of the LCC market our big customer here is Lion Air. We have delivered 165 airplanes for them and they continue to take deliveries on time. They have not asked for deferrals and you can check with [Lion Air CEO] Rusdi [Kirana] and he will tell you the same thing.
“Nobody has come to us and asked for any deferrals,” continued Keskar. “When we look at airlines like Virgin Australia or Jet Airways or SpiceJet in India, all of them are doing fine. In fact, some of them want their airplanes early.”
