Fleet-related dynamics in the Asia Pacific to influence the demand for qualified technical personnel

The last several years have been especially favourable for the aviation industry in the Asia-Pacific, especially so for the local low cost carriers. According to the latest estimates, at the moment there are 47 LCCs in the region, operating around 1,000 aircraft and accounting for about 20% of the region's seat capacity. With the growing appetite of Asian travellers as concerns cheap air travel solutions, most of the major aircraft manufacturers have released a number of impressive forecasts with regard to aircraft demand in the Asia Pacific. However, as there are signs that the local fleets are actually outgrowing the existing demand, local carriers will probably be not the only ones to face certain challenges.

According to CAPA consultancy, LCCs in Asia-Pacific account for up to 50% of the future aircraft orders, with more than 1600 of aircraft on the way, and so far the trend isn’t likely to change. Following AirAsia, which is currently awaiting hundreds of aircraft, the Indonesia-based Lion Air has started welcoming the delivery of its record order of 500+ Airbus A320s and Boeing 737-800s. Moreover, even such a relative newcomer as Vietnam's VietJetAir has announced the purchase of 63 Airbus A320 family aircraft at the Singapore Airshow in February. The Thais Nok Air also placed an order for eight Boeing 737-NGs and seven 737 MAX 8s at the same event.

At the same time, some warning signs suggest that the suppliers, blinded by the recent aforementioned growth, are not being realistic about their opportunities. For instance, recent figures from AirAsia have indicated a fourth-quarter profit drop of 19%. Moreover, Tigerair Singapore reported an operating loss of $13 million in the third quarter of 2013, compared to an operating profit of $21 million in 2012. In Australia, too, Qantas announced a $225 million-worth loss in 2013, followed by Virgin Australia with group losses in 2013 (after tax) amounting to a whopping amount of $83.7 million.

“With the rising income of the middle-class and the open skies agreement upcoming in 2015, the case for growth in the air travel sector is set in concrete across many Asian countries. This dramatic expansion can be partly attributed to the Southeast Asia's unique geography of either old or non-existent rail links, slow and uncomfortable road connections or relatively unsafe ferry services,” says Kestutis Volungevicius, the Head of FL Technics Training. “Nevertheless, as the recent performance-based statistics suggest, some players’ fleet expansions may prove to be hard to justify in the long term, so the situation is likely to push them into making some essential changes to their current strategic plans.”

According to the Head of FL Technics Training, potentially, the Southeast Asia market is approaching a situation where there could be too much choice, even for that massive one-billion-passenger estimated market. This means that for the players who have already committed to large orders, yields have to drop in order to maintain a healthy market share. And some of the players have already started taking action. AirAsia X, for instance, has placed the delivery of seven new A330s on hold due to poor figures. Batik Air has also cancelled an order for five 787s while the aforementioned AirAsia will put off the delivery of seven A320s in 2014, and 12 A320s in 2015. In the meantime, the latter carrier has also announced its plans to sell the current less-fuel-efficient aircraft and introduce significant staff reductions. The problem with such decisions, however, is that they may ultimately influence the MRO market and the training providers as well.

“As more and more carriers may choose to dispose of the older, less-fuel-efficient aircraft to keep up yields, the focus of the MRO providers will inevitably shift as well, since the market share of the new generation aircraft will naturally increase. However, the new technologies used in the new models require to apply new inspection and maintenance techniques, and imply the global deficiency of staff capable of performing such operations. Therefore, the region might face the growing demand for the requalification of the current generation of technicians. This, in turn, is likely to become a major challenge to the local training providers, since such processes are especially time-costly. Thus, even the most remote possibility of such changes in demand must be addressed by the relevant players with all the seriousness,” concludes Kestutis Volungevicius.