SINGAPORE (TVLW) – After two good years Asia’s airline sector is set for a possibly steep slowdown in 2008 as the global credit crunch hits consumers, dampening air travel demand, an industry group said Sunday.
Increased capacity as the region’s airlines take delivery of larger-sized planes and staff shortages will also affect the sector next year, the Center for Asia Pacific Aviation said in a report.
‘The center is projecting a downturn in early 2008, perhaps even a steep downturn, as the credit shortage and high oil prices hurt consumer demand,’ the Sydney-based consultancy said.
‘Economic conditions could deteriorate quickly, as credit pressures make themselves felt.
‘These negative pressures are already powerful in Europe and the US and it is only a matter of time before the influence starts to dampen consumer demand.’
The consultancy said business travel, often by far the most lucrative for airlines, will be the first affected.
‘Business travel will be an early casualty of softening demand,’ the consultancy said.
At a time of slackening demand, the expansion of fleet capacity will add to the pressure while staff shortages, notably of flight crew and engineers, will drive up hiring costs, the consultancy said.
‘Airline capacity will increase at a greater rate in 2008, as new orders are delivered,’ it said.
Asia is a key battlefield for Airbus and Boeing Co (NYSE:BA) for new aircraft sales, with the region’s carriers making huge orders as they expand.