Centre for Asia Pacific Aviation predicts Asia Pacific airline earnings will be depressed in 2007 and 2008, due to cost pressures, increasing liberalisation, rising capacity growth and rising competition from new entrants, according to its new Outlook 2007 report.“Long-haul profitability will be weakened by rising competition from Middle East carriers and an intensified focus on Asia by European and North American airlines, as well as increasing long-haul activity by the region’s LCCs”, said Peter Harbison, Executive Chairman of the Centre for Asia Pacific Aviation.“There is arguably some justification for the reluctance to reduce surcharges quickly, given the initial lag in increasing them as fuel prices rose. But the key observation is the continuing strength of consumer demand, even despite the negative effect of oil price increases in the wider economy”, said Mr Harbison.“But the sheer number of carriers seeking funds means investors will be spoilt for choice. Not all the carriers seeking funds are attractive targets for reasons that include: weakness of the underlying business, rising competition and unfavourable investment environments. However, a strong wind is sweeping through the markets now, as private equity investment groups start to turn their view towards the airline industry”, concluded Mr Harbison.
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