Asia Pacific Aviation Feb09

Industry Report - Aviation - February 2009
Adding Value to Information Since 1900
Asia-Pacific
Aviation Sectors
A Company and Industry Analysis February 2009
CONTENTS
Current Environment — Key Points
Current Environment • Asia-Pacific airlines were hit by dwindling demand for air travel as consumers and companies cut
back on their spending amid the global financial turmoil.
• Sector Overview • The continuing fall in oil prices pressured airlines to drop or reduce their fuel surcharges.
• Sector Performance • To stay afloat in this period of market meltdown and diminished consumer confidence, airlines
• Leading Players scaled back their expansion plans, grounded planes and adjusted their flight schedules.
• Mergers and Alliances • An average of the share prices of eight Asia-Pacific airlines tracked by Mergent dipped by 0.55%
in the July-September 2008 period.
Industry Profile • Airlines in China were bruised by huge losses in fuel price hedging and a decline in the number of
domestic and overseas travelers.
• Industry Size and Value • India’s Kingfisher Airlines entered into a strategic and operational alliance with arch-rival Jet
• Airline Fleets Airways last October.
• Policy and Regulatory
Environment Industry Profile — Key Points
• The top five Asia-Pacific airlines ranked by third quarter 2008 revenues are Singapore Airlines,
Market Trends and Outlook
Korean Air, Air China, Thai Airways and China Eastern Airlines, according to a Mergent
analysis.
• Hedging Problems Threaten
• The Asia-Pacific’s five largest airlines in terms of passenger traffic employed 128,413 people in
Airlines 2007. Their combined fleet totaled 831 aircraft.
• More Job and Capacity Cuts • Revenues at the top 12 airport groups in the Asia-Pacific totaled US$5.4 billion in 2007.
• Air Travel Gets Cheaper • The race to re-equip and renew fleets decelerated in the second half of last year, due to the global
• Market Outlook economic downturn and the subsequent lower demand for air travel.
• Many airlines find it increasing difficult to get loans for new aircraft, particularly in this period of
Country Profiles falling market shares and ongoing global credit crunch.
• China is progressively opening its closely guarded civil aviation sector to competition.
• Australia
• China Market Trends and Outlook — Key Points
• Hong Kong
• Japan • With oil prices now in the US$35 to US$40 a barrel range, airlines that have hedged at higher levels
• Malaysia are expected to report significant hedging losses.
• Singapore • More airlines are expected to report high hedging losses. Cathay Pacific as of December 31, 2008
estimated it would suffer hedging losses of about HK$7.6 billion (US$980.62 million).
• Asia-Pacific airlines are expected to press ahead with more rigorous cost reduction measures and
Currency Conversion Table capacity cuts to protect their margins.
• Fares are expected to remain under pressure, as airlines continue to battle for market share, amid a
The Scope of this Report
backdrop of slower passenger growth and intense competition.
Key References
• Monthly passenger volumes in the Indian and Chinese airline industry will continue to decline, as
Comparative Data
the global downturn discourages air travel.
Reports Coverage • IATA has projected a total worldwide industry loss of approximately US$2.5 billion for 2009.
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Current Environment
Sector Overview
Asia-Pacific airlines, which account for nearly 33% of November 11, 2008. The following day, Bangkok Airways
global passenger traffic and 45% of global air freight, and Siem Reap Airways slashed up to 40% of its fuel
reported lower passenger loads and cargo traffic in the surcharge rates for international flights. In Australia, Virgin
first nine months of 2008, as business shrank across the Blue (ASX: VBA) reduced its fuel levies by 20% from
industry due to recession in major economies around the November 11, 2008, and Qantas Airways (ASX: QAN)
world. Both leisure and corporate air travelers became cut its international fuel surcharge by between 7% and
increasingly cost-conscious. As a result, passenger demand 9.5% from October 9, 2008. Effective November 7, 2008,
weakened, particularly for first and business class travel, Singapore Airlines (SIA) (SGX: SIA) lowered its fuel
hurting revenues at full-service airlines. Many of the charge by about 20%, across different routes and classes
region’s top players saw their profits dip and some swung of travel.
into the red, due to foreign exchanges losses, high fuel
costs and falling air traffic demand. Although fuel prices fell back, they remained a major
concern. With crude oil now trading in the US$35 to
In this period of market meltdown and diminished US$40 a barrel range, airlines that had locked in fuel at
consumer confidence, airlines continued to take all higher prices paid dearly for it. Many airlines responded
possible steps to stay afloat, including reviewing route by trimming their fuel hedges to save on steep premium
and capacity adjustments and making sure that their fares costs. The rapid decline in oil prices from record highs of
remain competitive to attract incremental business. Intense US$147.27 a barrel on July 11, 2008, is likely to erode the
competition in the industry drove airlines to further cut value of some airlines’ hedges, resulting in losses in the
unnecessary costs throughout their businesses and boost quarter ending March 31. To cope with the harsh downturn,
productivity and operational efficiency. Some shed jobs, some airlines in China and India sought government
scaled back their expansion plans, canceled or deferred support, while others gravitated toward mergers and
aircraft deliveries and grounded planes, to eke out further partnerships with foreign carriers.
savings to cover rising costs.
At the same time, airlines battled for market share as the
The continuing fall in oil prices pressured Asia-Pacific Association of South East Asian Nations (ASEAN) capital-
airlines to drop or reduce their fuel surcharges. AirAsia city skies opened up. The once protected Singapore-Kuala
(KLSE: 5099) took the lead by scrapping its fuel on Lumpur (KL) route opened up on December 1, 2008,
Table 1: Stock Performances of Selected Asia-Pacific Airlines
Closing Share Price as of

Airline Company Country Total Return
July 2, 2008 Sept 30, 2008
Qantas Australia US$2.20 US$2.18 -0.91%
Air China China US$0.48 US$0.44 -8.3%
China Eastern Airlines China US$0.30 US$0.17 -43.3%
China Southern Airlines China US$0.38 US$0.20 -47.4%
Cathay Pacific Hong Kong US$1.80 US$1.69 -6.1%
All Nippon Airways Japan US$3.20 US$3.42 6.9%
Singapore Airlines Singapore US$9.24 US$9.61 4%
Thai Airways Thailand US$0.54 US$0.33 -38.9%
Sources: Australian Stock Exchange, Hong Kong Stock Exchange, Frankfurt Stock Exchange
Current Environment
allowing AirAsia, JetStar, SilkAir and Tiger Airways to join the Association of Asia-Pacific Airlines (AAPA), the
in the fray for passengers. With heightened competition, number of international passengers carried by AAPA
fares are expected to come under more pressure and airlines members totaled 107.952 million in the nine months, up
will be encouraged to improve their services to compete by a mere 0.6% from the corresponding period of 2007. In
with other carriers. The International Air Transport terms of revenue passenger kilometers (RPK), passenger
Association (IATA) forecast that airfares would decline by traffic grew by just 1.6% to 455.608 billion and capacity,
5% globally and passenger volumes would drop by 3% in measured in available seat kilometers (ASK), rose by 3.2%
2009. to 599.094 billion. As traffic growth was insufficient to
fully meet the increase in capacity, passenger load factor
Sector Performance slid by 1.2 percentage points to 76.1%.
Airline Stocks Cargo and Freight Services
The average share prices of eight Asia-Pacific airlines The rapid fall in global trade and the broadening impact
tracked by Mergent fell by 0.55% in the three months of the economic slowdown has resulted in a decline
from July 2, 2008 to September 30, 2008. China Southern in international air cargo traffic in the first nine months
Airlines (CSN) (HKSE: 1055; SSE: 600029) and China of 2008. The high price of jet fuel also added pressure
Eastern Airlines (CEA) (HKSE: 0670; SSE: 600115) were to the sector, prompting customers to use other modes
the top two decliners, followed by Thai Airways (SET: of transport, particularly sea shipping. Freight tonne
THAI) and Air China (HKSE: 0753; SSE: 601111). CSN kilometers (FTK) flown by AAPA members dipped by
shares plummeted 47.4% to HK$1.53 (US$0.20), CEA’s 1.6% to 40.631 billion in the first nine months of 2008,
plunged by 43.3% to HK$1.33 (US$0.17), Thai Airways’ compared with 41.299 billion FTK in the corresponding
tumbled by 38.9% to US$0.33, and Air China’s dropped period of 2007. Freight capacity, measured in available
by 8.3% to HK$3.41 (US$0.44). Of the eight selected freight tonne kilometers (AFTK), fell by 3.1% to 60.821
airlines, only two showed positive growth in the three- billion. This led to a one percentage point rise in freight
month period. All Nippon Airways’ (ANA) (TSE: 9202) load factor to 66.8%.
shares climbed by 6.9% to US$3.42 and SIA’s improved
by 4% to US$9.61. Leading Players
Passenger Services Asia-Pacific airlines were hit hard by the global financial
crisis, weakened consumer confidence, a drop in trade
Passenger demand has dampened in the first nine activity and volatile fuel prices. Many struggled to match
months of 2008, as companies and tourists cut back on capacity with demand and reported lower load factors and
travel. According to preliminary statistics released by profits.
Table 2: International Scheduled Services of 17 Asia-Pacific Airlines
January-September January-September
Change
2008 2007
Passengers carried (‘000) 107,952 107,262 0.6%
Revenue passenger kilometers (millions) 455,608 448,490 1.6%
Available seat kilometers (millions) 599,094 580,446 3.2%
Passenger load factor 76.1% 77.3% -1.2P
Freight tonne kilometers (millions) 40,631 41,299 -1.6%
Available freight tonne kilometers (millions) 60,821 62,771 -3.1%
Freight load factor 66.8% 65.8% 1P
Source: Association of Asia-Pacific Airlines
Note: Changes in % and P (percentage points) are in comparison with the corresponding period of the previous year.
Current Environment
Australia’s largest airline, Qantas, saw its net profit fall ¥49.8 billion (US$548.55 million), on the back of falling
2.5% year-on-year to A$351.4 million (US$245.27 million) demand for domestic air travel, heightening competition
in the half year ended June 30, 2008, dragged by the spike and softening demand for business travel.
in fuel prices earlier that year and softer demand for travel
in some key markets. The group’s total RPK deteriorated Weaker demand hit both economy and first-class travel at
by 0.9% and 2.9% respectively to 8.396 billion in August Malaysia Airlines (MAS) (KLSE: 3786). Its net profit nose-
2008 and 8.278 billion in September 2008. To cope with dived by 67.5% to RM198 million (US$57.1 million) in
shrinking demand and a slowing economy, Qantas planned the nine months ended September 30, 2008, from RM609
to reduce capacity, equivalent to grounding ten planes, by million (US$175.63 million) in the corresponding period a
foregoing the lease of two Airbus A330-200 aircraft and by year previously, buffeted by lower seat factor and a 46.6%
cutting its planned growth in fiscal 2010 from 10% to 2%. surge in fuel costs to RM5.072 billion (US$1.46 billion).
During the same period, domestic rival AirAsia registered a
Hong Kong’s Cathay Pacific Airways (HKSE: 0293) swung net loss of RM294.8 million (US$85.02 million), reversing
to a net loss of HK$663 million (US$85.55 million) in the a net profit of RM451.9 million (US$130.33 million) in the
half year ended June 30, 2008, from a HK$2.58 billion nine months ended September 30, 2007. Despite operating
(US$332.89 million) profit in the corresponding period in a difficult environment, the budget carrier continued
of 2007, due to soaring fuel costs and falling demand as to book double-digit growth in passenger volume and
the global recession loomed. Compared with the half year ancillary income.
ended June 30, 2007, its operating expenses soared by
35.4% to HK$42.584 billion (US$5.49 billion), fueled by Korean Air (KSE: 3490) turned in a larger-than-expected
an 83% hike in fuel bill to HK$19.307 billion (US$2.49 loss of KRW684.1 billion (US$541.12 million) in quarter
billion). As of December 31, 2008, the airline’s fuel hedging ended September 30, 2008, reversing a profit of KRW129.6
losses stood at about HK$7.6 billion (US$980.62 million), billion (US$102.51 million) in the corresponding quarter a
mainly due to the rapid decline in fuel prices fourth quarter year earlier. This was mainly due to high fuel costs, lower
of 2008. passenger demand and the weak South Korean won, which
raised the cost of purchasing fuel and servicing foreign
SIA, the world’s largest airline by market value, saw debt. The airline’s operating loss totaled KRW25.1 billion
declining demand for airline seats last year and warned of (US$19.85 million) — its first quarterly operating loss in
weakness in its advanced passenger bookings, as turmoil five years. Meanwhile, Thai Airways swung to a net profit
in the financial markets crimped corporate and leisure of THB426.2 million (US$12.27 million), from a loss of
travel. In the first half ended September 30, 2008, the group THB971.09 million (US$27.97 million) in the quarter
posted a net profit attributable to equity holders of S$682.4 ended September 30, 2007, as a foreign exchange gain of
million (US$474.77 million), down by 26.8% from S$931.9 THB4.73 billion (US$136.23 million) more than offset a
million (US$648.35 million) in the corresponding period a 68.2% jump in fuel and oil costs.
year earlier. The parent airline company’s operating profit
tumbled by 36.6% to S$286 million (US$198.98 million) Airlines in China were bruised by huge losses in fuel
during the period, affected by high fuel expenditure which price hedging and a decline in the number of domestic
leapt by 72.8% to S$3.3 billion (US$2.3 billion). and overseas travelers. According to the Civil Aviation
Administration of China (CAAC), China’s civil aviation
Japan Airlines International Co Ltd (JAL) (TSE: 9205) industry suffered a loss of about RMB3.95 billion
expanded its network restructuring, by increasing flight (US$578.84 million) in the first 11 months of 2008.
frequencies on some high-yield routes, cutting flights China’s three state-owned carriers posted a combined loss
on less profitable routes and suspending services on of RMB5.08 billion (US$744.43 million) in the quarter
underperforming routes. The group’s consolidated operating ended September 30, 2008, with Shanghai-based CEA
income plunged by 46.6% to ¥30.2 billion (US$332.65 recording the largest loss, at RMB2.33 billion (US$341.44
million) in the half year ended September 30, 2008, from million), followed by Beijing-based Air China, with a loss
¥56.6 billion (US$623.45 million) in the corresponding of RMB1.94 billion (US$284.29 million), and Guangzhou-
period of 2007, as high fuel prices and sluggish demand based CSN, with a loss of RMB810 million (US$118.7
took their toll. During the same period, arch-rival ANA million). The parent groups of CEA and CSN are expected
saw its consolidated operating profit skid by 25.7% to to receive a total of RMB10 billion (US$1.465 billion) in
Current Environment
cash injections from the Government, to help ease their

financial and operational difficulties.
Mergers and Alliances
Rising costs combined with slowing demand and

intensifying competition continued to encourage Asia-
Pacific airlines to join forces with other airlines, in order to
survive, reduce costs and strengthen their positions. CEA
announced last August it would continue to seek investors,
following the expiry of an agreement on a stake sale to
SIA. Last December, AirAsia and Qantas’ budget airline
Jetstar were reported to be in merger talks. With a merger,
passengers from Asia would have wider choices to fly to
Australia, China, India and New Zealand via Jetstar, said
AirAsia’s chief executive officer Tony Fernandes. Rival
MAS denied reports of merger talks with Qantas, but said
that they were in talks on a joint maintenance venture.
Meanwhile, Qantas and British Airways (LSE: BAY)
called off talks for a US$6.4 billion merger, after failing to
agree on key terms.
In India, private carrier Kingfisher Airlines revealed that

foreign airlines had expressed interest in purchasing a stake
in it. Last November, it requested the Indian Government
to allow foreign airlines to acquire up to 25% in Indian
carriers. By allowing foreign stake sale, this would help
cash-starved domestic carriers to raise funds and to attract
more foreign financial support. Last October, Kingfisher
Airlines entered into a strategic and operational alliance
with arch-rival Jet Airways, India’s largest private carrier,
in efforts to cut costs by sharing engineering, ticketing,
ground handling and other services. Jet Airways also
forged a frequent flyer partnership with UAL Corp’s
(NASDAQ: UAUA) United Airlines last November, to
boost connectivity on the India-US sector. Meanwhile, Air
India tied-up with American Express (Amex) last October,
under which an Amex cardholder who travels by Air India
would be entitled to some free tickets and discounts.
Industry Profile
Industry Size and Value
The top five Asia-Pacific airlines ranked by third quarter 128,413 people in 2007; 35% employed by CSN, 25.6% by
2008 revenues are SIA, Korean Air, Air China, Thai Qantas, 15.4% by Cathay Pacific, 13% by JAL and 11% by
Airways and CEA, according to a Mergent analysis. SIA SIA. Their combined fleet totaled 831 aircraft, with CSN
recorded the highest revenue, at S$4.3793 billion (US$3.05 having the highest number (290 aircraft), followed by JAL
billion), followed by Korean Air, at KRW2.7597 trillion (199 aircraft) and Qantas (127 aircraft). The survey showed
(US$2.18 billion), up by 10.4% and 16.4%, respectively, that among the Asia-Pacific’s five largest airlines, Qantas
from the third quarter of 2007. Korean Air is the world’s had the highest RPK in 2007, at 97.622 billion, followed by
largest air cargo carrier, in terms of FTK volume. Its SIA (91.485 billion), JAL (85.888 billion), Cathay Pacific
cargo revenue climbed by 29.4% to KRW815.82 billion (81.801 billion) and CSN (81.172 billion).
(US$645.31 million) during the quarter, on a 9.5% decrease
in FTK to 2.204 billion. China’s Air China and CEA posted Of the world’s top 100 airport groups ranked by revenues, 20
combined third quarter 2008 revenues of US$3.614 billion. are in the Asia-Pacific, based on 2007 figures from Airline
Air China’s revenue fell by 3.8% to US$2.034 billion Business’ airport rankings survey. Revenues at the top 12
and CEA’s tumbled by 13.7% to US$1.58 billion, due to airport groups in the Asia-Pacific totaled US$5.4 billion
slumping passenger demand. in 2007. Narita International Airport posted the highest
revenue, at US$1.76 billion. Hong Kong International
Of the world’s top 50 airlines ranked by passenger traffic Airport (HKIA), also known as Chek Lap Kok Airport,
(RPK) in 2007, 16 were from the Asia-Pacific, according ranked second, followed by Seoul Incheon International
to an Airline Business airline rankings survey. The Asia- Airport and Kansai International Airport Co. Tokyo’s
Pacific’s five largest airlines in terms of RPK employed Haneda Airport ranked first among the Asia-Pacific’s
Table 3: Asia-Pacific Airlines Ranked by Revenues for the Third Quarter of 2008
Rank Airline Group Billion Y-O-Y %

1 Singapore Airlines US$3.05 10.4
2 Korean Air US$2.18 16.4
3 Air China US$2.03 -3.8
4 Thai Airways US$1.56 8.7
5 China Eastern Airlines US$1.58 -13.7
Source: Company Filings, Airline Business
Note: Y-O-Y = year-on-year
Table 4: Employee and Fleet Data for Asia-Pacific’s Five Largest Airlines* — 2007
Group/Airline Employees Fleet Size

Qantas Airways 32,831 127
Singapore Airlines 14,071 100
Japan Airlines International 16,671 199
Cathay Pacific Airways 19,840 115
China Southern Airlines 45,000 290
Total 128,413 831
Source: Airline Business
Note: Five largest airlines in terms of passenger traffic
Industry Profile
Table 5: Top Ten Airports in the Asia-Pacific Ranked by Revenues, 2007
Revenue
Rank Airport Groups Country
(in millions)
1 Narita International Airport Japan US$1,760.1
2 Hong Kong International Airport Hong Kong US$1,100.3
3 Seoul Incheon International South Korea US$1,046.8
4 Kansai International Airport Co Japan US$934.5
5 Airports Authority of India India US$824.4
6 Civil Aviation Authority of Singapore Singapore US$814.1
7 Airports of Thailand Thailand US$575.7
8 Southern Cross Airports Corp Holdings Australia US$568.4
9 Beijing Capital International Group Co China US$463.7
10 Shanghai Airport Authority China US$414.7
11 Malaysia Airport Berhad Malaysia US$404.3
12 Chiang Kai-Shek International Airport Taiwan US$396.4
Source: Airline Business
busiest passenger airports; it handled a total of 66.671 its leased aircraft, due to the downfall in international and
million passengers in 2007, surpassing Beijing Capital domestic business demand. Indian domestic airlines opted
International Airport, HKIA and Thailand’s Suvarnabhumi for smaller, more fuel-efficient aircraft to reduce operating
Airport. costs. Air India, Jet Airways and Kingfisher Airlines clipped
their orders for the larger 150-to-350-seater Boeing and
Airline Fleets Airbus aircraft, while maintaining orders for 102 smaller
50-to-74-seater ATR aircraft, scheduled to be delivered
The race to re-equip and renew fleets decelerated in between 2009 and 2012.
the second half of last year, due to the global economic
downturn and the subsequent lower demand for air travel. Some airlines took delivery of new aircraft in the second
Many airlines shelved plane orders, after they scaled back half of 2008, but only few ordered new ones. AirAsia X,
growth plans. Cathay Pacific announced last November that the long-haul affiliate of AirAsia, received its first Airbus
it planned to delay deliveries of its Boeing aircraft, worth A330 last October. SIA took delivery of three Airbus A380-
approximately US$9.5 billion at list prices. The airline also 800s and four Boeing 777-300ERs and decommissioned
planned to shed five Boeing 777-200s from its fleet. Thai four Boeing 747-400s in the half year ended September
Airways planned to ask Airbus to delay the delivery of six 30, 2008. Qantas took delivery of its first Airbus A380s in
A330-300s due later this year. Meanwhile, JAL expects to September 2008 and two more A380s in December 2008.
get its first Boeing 787 Dreamliner this October, instead By the end of 2013, it expects to have a fleet of 20 A380s in
of last August, and ANA expects to receive its first 787 service. Meanwhile, South Korea’s Asiana Airlines inked
this August, 15 months later than originally planned, due on July 16, 2008 an order for ten Airbus A350-100s, plus
to production delays at Boeing. The economic slump also ten each of the smaller A350-800 and -900 twin-jets. Bank
threatened the Airbus A380 sale to ANA. of China’s Singapore-based aviation leasing arm ordered
20 Airbus A320-family aircraft, worth approximately
In India, Kingfisher Airlines deferred deliveries of 32 US$1.6 billion, last November.
Airbus A320-family aircraft from 2008-2009 to 2010-
2012, in an effort to cut costs and stem losses. Jet Airways’ Many airlines found it increasing difficult to get loans for
chief commercial officer Sudheer Raghavan announced last new aircraft, particularly in this period of falling market
October that the airline was considering returning some of shares and an ongoing global credit crunch. Analysts were
Industry Profile
concerned how some of them would fund the impending Japan. The expansion also allows Singapore carriers to
large aircraft deliveries. AirAsia has since 2005 ordered operate passenger flights beyond Osaka and Nagoya to the
175 aircraft with 50 under option — that puts the budget US, while Japanese carriers can fly beyond Singapore to
carrier as potentially one with the largest fleet in the region. India and the Middle East.
This year, the carrier will take delivery of 14 aircraft,
followed by 23 in 2010. Last November, AirAsia secured a Singapore also concluded two separate open skies
US$336 million financing deal for eight Airbus A320-200 agreements with Romania and Zambia on November 28,
aircraft and announced that it was close to finalizing a deal 2008 and another agreement with Kuwait on November
worth close to RM3.5 billion (US$1.01 billion) to fund the 4, 2008. The Singapore-Romania agreement allows
purchase of 37 aircraft between 2009 and 2010. Singapore carriers to operate unlimited passenger and
cargo flights between Singapore and points in Romania,
Boeing Co (NYSE: BA) estimated last October that China as well as beyond Romania to any other city worldwide.
would need 3,710 new planes, worth approximately US$390 With this, Singapore has sealed open skies agreements with
billion, over the next 20 years. Air China’s shareholders 16 countries in the European Union. The agreement with
approved the acquisition of 20 additional Airbus A330s as Zambia — Singapore’s first open skies agreement with
well as 15 Boeing 777-300ERs and 30 Boeing 737-800s an African country — allows both passenger and cargo
last October. However, lagging traffic demand in China has carriers of Singapore to operate unlimited flights between
largely reduced the need for new aircraft. China’s aviation and beyond both countries to any other city in the world.
regulator, CAAC, encouraged Chinese airlines to cancel
or postpone taking delivery of new planes this year and China is progressively opening its closely-guarded civil
China’s Government asked airlines to suspend the purchase aviation sector to competition. Last May, China and the
of new planes from foreign manufacturers to reduce costs. US agreed to more than double passenger flights between
CEA alone grounded more than 20 planes, or 10% of its the two countries by 2012 and ease most restrictions on
fleet, between June 2008 and mid-November 2008. cargo flights by 2011. The agreement would make it easier,
cheaper and more convenient to fly people and ship goods
Policy and Regulatory Environment between the two countries, according to the US Secretary
of Transportation Mary Peters. On July 4, 2008, China and
ASEAN air liberalization will encourage airlines to focus Taiwan launched direct weekend chartered flights for the
on their competitive strengths and give air passengers wider first time in nearly 60 years — a groundbreaking move that
choice, pricing and connectivity. The lucrative Singapore- is likely to spur more ties and cooperation between the two
KL sector was opened to competition on December 1, 2008. countries. The weekend flights are expected to give a boost
ASEAN carriers can mount fifth freedom rights to capital to carriers on both sides of the Taiwan Strait and would
cities by the end of December 2010 and by 2015 ASEAN result in a huge influx of tourists from China to Taiwan.
skies will be fully liberalized. India and ASEAN agreed
to move forward with open skies talks in the first half of
2009. On November 17, 2008, India and Malaysia decided
to increase the number of weekly flights operating between
the two countries from 2009. The two sides decided that
designated airlines would be allowed to fly unlimited
times on agreed routes and with any type of aircraft, with a
capacity not exceeding that of a Boeing 747-400 aircraft.
Singapore and Japan agreed last September to expand air

services between and beyond both countries. The new
agreement, which will take effect in 2010, will nearly double
the number of passenger flights that Singapore carriers can
operate to Tokyo, according to the Civil Aviation Authority
of Singapore (CAAS). Under the agreement, carriers from
the two countries may now operate any number of passenger
and cargo flights between Singapore and all other cities in
Market Trends & Outlook

Hedging Problems Threaten Airlines
With oil prices now in the US$35 to US$40 a barrel range, 17 member carriers to keep capacity growth flat this year.
airlines that hedged at higher levels are expected to report Besides canceling or postponing aircraft deliveries, some
significant hedging losses. Asia-Pacific airlines have shaved are expected to accelerate retirements of older aircraft to
their fuel hedges, after oil prices began a rapid descent in cut operating costs. Qantas’ chief executive officer Geoff
August 2008. Air New Zealand (NZSE: AIR) cut its fuel Dixon announced last November that the company would
hedges to 65% in the third quarter of 2008 and JAL trimmed reduce capacity, equivalent to grounding ten planes.
its hedges to 75% for the fiscal year ending April 30. During the same month, JAL retired from service its last
AirAsia reported a loss of RM465.526 million (US$134.26 remaining two Boeing 747-200 freighters. Cathay Pacific
million) in the third quarter of 2008, mainly due to a plans to dispose of its five Boeing 777-200s and park two
RM215 million (US$62 million) charge from unwinding freighters, while SIA plans to trim ASK growth for 2009
its fuel hedging contracts and writing off derivatives held to just 1%.
by Lehman Brothers Commodity Services. Last October,
the budget carrier bought back all its hedging contracts Hundreds of thousands of jobs would be at risk, as airlines
up to December 2008, as it was paying higher fuel prices strive to keep costs down. Leading the way, Qantas
of nearly US$80 a barrel when oil prices were hovering announced plans in July 2008 to slash 1,500 jobs, in a move
around US$60 a barrel. Qantas, which had hedged 97% of to counter high fuel costs. Air New Zealand planned to
its fuel needs for 2009 at US$106 a barrel, and SIA, which prune up to 200 of its 11,000 full-time workers, in response
had hedged around 36% of its fuel needs at an average rate to declining passenger numbers. MAS is cutting costs
of between US$104 to US$109 a barrel, are likely to see through a flexible employment plan, whereby employees
the value of their fuel-hedge portfolios decline. would be given a choice between leave and part-time
work. JAL plans to reduce the base pay and stipends of
Air China’s potential losses from its fuel hedging contracts 17,000 employees in its main operating unit by 5% — a
reached RMB3.1 billion (US$454.28 million) as of move that is expected to save it ¥10 billion (US$110.15
October 31, 2008, about RMB2.1 billion (US$307.74 million) a year. Cathay Pacific plans to offer unpaid leave
million) higher than the fair value loss disclosed in its third to employees and CEA plans to cut the salary of its senior
quarter 2008 results. CEA announced on January 11 that and mid-level management by between 10% and 30%,
it would report a large loss for 2008, due to falling traffic effective February.
and losses on fuel price hedging contracts, estimated at
RMB6.2 billion (US$908.56 million). Cathay Pacific With recession eating into their bottom lines, airlines in
warned that its 2008 earnings would be disappointing, India are likely to cut more jobs, wages and benefits. The
amid weakening revenues and losses from fuel hedging. Economic Times newspaper reported last November that
The airline estimated that it would suffer hedging losses of nearly 150 trained pilots holding commercial licenses and
about HK$7.6 billion (US$980.62 million) as of December hundreds of cabin crews have been rendered jobless in
31, 2008 — nearly three times higher than the HK$2.8 India. State-owned carrier Air India is considering offering
billion (US$361.28 million) in estimated losses it revealed its staff voluntary unpaid leave. Meanwhile, a slowdown in
on November 4, 2008, due to a substantial drop in oil prices demand forced Jet Airways to retrench 800 employees last
in the final two months of 2008. October. It terminated the services of 35 expatriate pilots
last November, in a bid to cut operational costs, especially
More Job and Capacity Cuts on budget-sensitive non-metro routes. During the same
month, the airline proposed to reduce salaries of its top
To protect margins in the wake of the global financial turmoil key executives by 25%, in a bid to control costs. This year,
and rapidly weakening consumer confidence, Asia-Pacific pilots at Jet Airways are expected to face deeper salary
airlines are expected to press ahead with more rigorous cost cuts and reduction in perks such as accommodation and
reduction measures and capacity cuts. AAPA expects its entertainment allowances.
Market Trends & Outlook
Air Travel Gets Cheaper
Fares are expected to remain under pressure, as airlines continue to decline, as the global downturn discourages air
continue to battle for market share amid a backdrop of slower travel. More airlines, particularly in India’s once booming
passenger growth and intense competition. The opening up aviation sector, are likely to go bust next year, but those
of the ASEAN capital-city skies will also push airlines to with strong cash reserves, good cost structures and solid
become more aggressive and proactive in their offerings, route systems are likely to ride out of the storm.
from fares to quality services. MAS slashed its fares for
the Singapore-KL route when it opened up to competition Indian carriers, which are grappling with high taxes and
last December. It also launched its “all-inclusive low fares” insufficient infrastructure, are expected to post a combined
campaign last November for 66 domestic and international loss of approximately US$2 billion in the fiscal year
destinations, with one-way fares starting from RM63 ending March 31. IATA forecasts that growth at Chinese
(US$18.17) nett for domestic travel, RM158 (US$45.57) carriers will slow this year as a result of the drop-off in
nett for ASEAN destinations and RM472 (US$136.12) exports. Japanese carriers are likely to see their revenues
nett for international destinations. AirAsia retaliated by fall significantly in the fiscal year ending March 31, due to
abolishing fuel surcharges on all its flights on November the recession in Japan. Full-service airlines such as Cathay
11, 2008, and by offering 500,000 free seats for travel Pacific, MAS and SIA are likely to see an increase in the
between June 22 and October 24 in an attempt to attract trading down from business-class to economy-class, as
more travelers. These offers are expected to help boost its business and leisure travelers become more cost conscious.
revenues and load factors. Meanwhile, the region’s low-cost carriers are expected to
benefit from the change in people’s travel habits. Their
Air travelers in India may enjoy cheaper tickets this year, forward bookings are likely to remain steady this year, as
with the Travel Agents Association of India planning to they continue to lure passengers with ultra-cheap fares.
withdraw transaction fees of up to Rs500 (US$10.29) on
each domestic air ticket and between Rs1,200 (US$24.70) Turmoil in the financial markets will continue to hit
and Rs10,000 (US$205.85) on each international ticket. demand for airline seats and yields of full-service airlines
India’s civil aviation minister Praful Patel urged domestic are likely to come under pressure, due to the slump in
carriers, including Jet Airways and Kingfisher Airlines, to premium traffic. To cope with the severe global economic
cut fares, in response to the Indian Government’s support slowdown, airlines are expected to continue to optimize
to the beleaguered industry. The Government was not their flight operations and restructure their networks. SIA
considering any regulatory mechanism for fixing airfares, announced last November that it plans cut flights to a
thus it cannot force airlines to cut fares, according to Patel. number of Asian cities due to falling demand. For the same
Air India announced last November that it planned to reason, Thai Airways has cut flights to China, India, South
reduce its fares by 12% to stimulate demand. Jet Airways Korea and Japan. ANA plans to terminate or reduce about
said it would trim its fares only after becoming profitable, ten routes and JAL plans to cut service or trim flights on 21
while Kingfisher Airlines said that it will do so if aviation routes, as the global recession bites hard. These measures
turbine fuel is put under the declared goods category. are expected to help the airlines reduce their operating
expenses and achieve a better capacity-cost structure.
Market Outlook
The slowing economy, falling demand and weakening

business sentiment have combined to paint a gloomy
picture for 2009. Geneva-based IATA reported that the
global airline industry is likely to post a loss of US$2.5
billion in 2009, due to the chronic industry crisis. Asia-
Pacific airlines are expected to be badly hit; their losses will
more than double from US$500 million in 2008 to US$1.1
billion in 2009, according to IATA. Monthly passenger
volumes in the Indian and Chinese airline industry will
Country Profile
Australia
Sector Overview
Australian airlines were late in 2008 battered by a weak and Virgin Blue. In the six months ended June 30, 2008,
local currency and shrinking demand for air travel due to Qantas posted a net profit of A$351.4 million (US$245.27
the global financial crisis. The international business market million), down by 2.5% from A$360.4 million (US$251.55
slowed and more people opted to spend their holidays closer million) in the corresponding period of 2007. The group
to home, causing a widespread decline in airline profits. (comprising Qantas Domestic, QantasLink, Jetstar and
To cut costs, Qantas slashed capacity aggressively and Qantas International) carried 9.778 million passengers in
scrapped all planned growth within Australia. Turbulent the third quarter of 2008, a decrease of 0.1% from 9,787
market conditions forced the flag carrier to defer a planned million passengers in the corresponding quarter a year
initial public offering of its frequent flyer program, while earlier. ASK improved by 1.2% to 32.102 billion, while
domestic rival Virgin Blue delayed the launch of its new RPK dropped by 1.2% to 25.658 billion, due to weak
long-haul subsidiary, V Australia, due to strikes at Boeing passenger demand in all travel classes. The depreciation
that affected deliveries of its 777-300ERs. V Australia of the Australian dollar also reduced demand for overseas
is now scheduled to launch operations on February 28, travel.
providing daily flights between Sydney and Los Angeles.
Last October, Qantas and British Airways agreed to pay
Sector Performance a combined A$25 million (US$17.45 million) in fines for
price-fixing on international air cargo shipments between
Australian domestic airlines (including regional 2002 and early 2006. Qantas, which has vowed to help
operations) reported a decline in industry-wide load factor regulators as they probed 30 other airlines over the issue,
in September 2008, as domestic passenger traffic grew at agreed to pay A$20 million (US$13.96 million) to settle
a slower rate than capacity. Their load factor tumbled by the price-fixing charges and British Airways will pay A$5
2.3 percentage points to 79.1%, from 81.4% in September million (US$3.49 million), according to the Australian
2007, according to the Bureau of Transport and Regional Competition and Consumer Association (ACCC). The news
Economics. Domestic RPK rose by 6.5% to 4.9 billion, drove Qantas’ shares down by 3.2% to A$2.42 (US$1.69)
lagging behind ASK growth of 9.6% to 6.19 billion. and British Airways’ down by 5.3% to £1.179 (US$1.72)
Melbourne-Sydney remained Australia’s busiest route, on October 28, 2008. Separately, on December 18, 2008,
with 566,665 passengers, followed by Brisbane-Sydney the two airlines called off talks for a US$6.4 billion merger
with 355,418 passengers and Brisbane-Melbourne with as they failed to come to an agreement over key terms of
243,776 passengers. International scheduled passenger the deal.
traffic carried during the month fell by 1.9% to 1.871
million, from 1.908 million in September 2007, reflecting The Virgin Blue airline group has significantly cut planned
challenges in the international market. capacity growth to bring it into line with expected operating
environment over the next two years. It has redeployed
Leading Companies aircraft to trans-Tasman and Pacific routes, ceased to
operate direct services on some underperforming routes,
High fuel prices and softer demand for travel took their toll deferred five Embraer aircraft deliveries into 2010-11 and
on the profits of Australia’s two largest airlines — Qantas launched new services on uncontested routes. Hurt by
Table 6: Qantas Group’s Operational Statistics
July-September 2008 July-September 2007 % Change

Passengers carried (‘000) 9,778 9,787 -0.1
Revenue passenger kilometers (millions) 25,658 25,962 -1.2
Available seat kilometers (millions) 32,102 31,731 1.2
Source: Qantas Airways Ltd
Country Profile - Australia
record high jet fuel costs, the group saw its net profit after
tax dive by 54.6% to A$98 million (US$68.4 million) in the
year ended June 30, 2008, from A$216 million (US$150.76
million) a year earlier. Its earnings per share tumbled by
54.9% from A$0.206 (US$0.14) to A$0.093 (US$0.06).
Last November, fuel surcharges on Virgin Blue domestic
and Pacific Blue trans-Tasman and Pacific Island flights
were reduced by 20%, following a decline in oil prices.
Market Outlook
Business and first-class travel at Qantas is expected to drop

as corporate customers reduce their travel budget amid
tougher economic times. Falling oil prices is likely to hurt
Qantas in the short run. The airline, which has hedged
about 97% of its fuel at US$106 a barrel, estimated that
its 2008 fuel bill would be A$750 million (US$523.48
million) higher than the previous year. For the 12 months
ending June 30, Qantas expects its pre-tax profit to
plummet by 65% to A$500 million (US$348.99 million).
The Virgin Blue airline group aims to cut costs by A$50
million (US$34.9 million) in the fiscal year ending June
30, increase ticket prices by an average of A$5 (US$3.49)
across approximately 55% of Australian domestic routes
and freeze management salaries. At the same time, it
will continue to deploy aircraft to more profitable routes
and focus on growing ancillary and value-added revenue
streams.
Country Profile
China
Sector Overview
Chinese airlines were hit by waning market demand and numbers climbed by 11.3% to 17.08 million during the
hefty losses in fuel price hedging late in 2008. By the end same month, leading to an overall growth of 4% for the
of October 2008, Air China’s losses from fuel hedging industry as a whole.
reached RMB3.1 billion (US$454.28 million) and CEA’s
hit RMB1.83 billion (US$268.17 million). In January, Leading Companies
CEA re-estimated that it would suffer a loss of about
RMB6.2 billion (US$908.56 million) on fuel hedging; China’s big three carriers — Air China, CEA and CSN
the increase in unrealized mark-to-market fuel hedging — all posted losses in the third quarter of 2008, due to
losses was caused by the slide in oil prices in the final weakness in the Chinese air travel market and hedge
two months of 2008. To cut operation costs and maintain losses after oil prices declined rapidly from its peak of
a balance between demand and supply, Chinese airlines US$147.27 a barrel in July 2008. Air China, the country’s
were encouraged to retire older aircraft, suspend purchase largest international carrier, booked a third quarter loss of
of new aircraft and cancel or postpone aircraft deliveries RMB1.94 billion (US$284.29 million); CSN, Asia’s largest
due this year. These moves are likely to hurt Boeing and carrier by passenger numbers and China’s largest carrier
Airbus, which have largely focused on China, the world’s by fleet size, made a loss of RMB810 million (US$118.7
fastest growing aviation market, for growth. million), while CEA, the smallest of the three major state-
owned, lost RMB2.33 billion (US$341.44 million). Hainan
CAAC stopped approving new airlines until 2010 due to Airlines (SSE: 600221), China’s fourth largest carrier,
crisis in the industry. However, it will continue to waive suffered third quarter losses of RMB260 million (US$38.1
more taxes and fees for airlines and subsidize those flying million), while Shanghai Airlines reported a net loss of
less profitable regional routes. This would help relieve the RMB437.44 million (US$64.1 million). Last year, CEA’s
pressure on airlines that are suffering losses amid the global passenger volume dropped for the first time in at least nine
economic slowdown and weak passenger demand. To help years, Air China’s fell by 1.7% and CSN’s slowed to single
airlines save money, China’s state council approved three digits for the first time in five years.
year exemptions for the operational tax on fuel surcharges
paid by airlines, retroactive to January 1, 2008. China’s
Table 7: Passenger and Freight Data — 2008
Government also provided financial aid for some of its
airlines, to help them ride out of the slump. In efforts to Passengers
augment their capital positions, CEA and CSN announced Airline Carried Y-O-Y %
last December that they would place shares in exchange for (millions)
cash from their parents. Air China 34.25 -1.7
China Eastern Airlines 37.05 -5.4
Sector Performance
China Southern Airlines 58.24 2.3
CAAC reported that China’s civil aviation industry lost Source: Company Filings
Note: Y-O-Y = year-on-year
an estimated RMB3.95 billion (US$578.84 million) in
the first 11 months of 2008. After years of robust growth,
China’s air traffic declined between May and July 2008, Some airlines have sought financial help from the
due to a slowing economy and a series of natural disasters, Government to stem mounting losses. Last December, HNA
which dampened people’s enthusiasm for travel. China’s Group, the parent company of Hainan Airlines, received
air passenger volume fell by 12.4% in August 2008, a RMB500 million (US$73.27 million) cash injection
caused by strict airport security for the Beijing Olympics. from the Tianjin municipal Government. CEA announced
According to the CAAC, the number of international on December 29, 2008 that it would receive a RMB7
passengers carried by Chinese carriers tumbled by 17.4% billion (US$1.03 billion) capital injection from the central
to 1.26 million in October 2008, while domestic passenger Government. CEA will issue 1.44 billion new Shanghai-
Country Profile - China
listed A shares to its parent at RMB3.87 (US$0.57) each, in

exchange for the capital. On January 16, CEA announced
that it had obtained a RMB5.6 billion (US$820.64 million)
loan from its parent. Meanwhile, CSN will issue 721.1
million A shares to its parent to raise RMB2.28 billion
(US$334.12 million). It will also issue the same amount of
Hong Kong-listed H shares to the parent’s overseas unit.
Proceeds from CEA and CSN’s share placement will be
used to boost their balance sheets, repay bank debt and
supplement cash flow.
Last November, China successfully flight tested its first

home-grown regional jet, the ARJ21, and formed aviation
conglomerate, Aviation Industry Corp of China (AVIC),
via the merger of its two state aircraft makers — AVIC
I and AVIC II. During the same month, the Commercial
Aircraft Corp of China (COMAC) sealed a RMB5 billion
(US$732.71 million) deal to sell five ARJ21 jets, with an
option for 20 more, to General Electric’s (NYSE: GE)
aircraft leasing arm, GE Commercial Aviation Services.
This aircraft export deal is China’s biggest, in terms of the
number of jets and contract value. The government-backed
COMAC has secured 208 orders for the ARJ21, by the end
of November 2008. In January, ten Chinese banks signed
an agreement to offer RMB176 billion (US$25.79 billion)
in loans to AVIC, in an effort to support the country’s
industrial expansion.
Market Outlook
The slowing economy and rising joblessness in China

will continue to curb demand for air travel. CEA expects
China’s air travel market to remain weak until the second
half of this year. To help ease its financial difficulties, CEA
plans to sell a roughly 30% stake in regional carrier Happy
Airlines to AVIC. Meanwhile, Air China’s parent group
plans to acquire private carrier East Star Airlines, to help
expand its coverage of central China. Last December, an
internal management dispute at Okay Airways, coupled
with financial pressure, forced the Beijing-based private
airline to halt its passenger services. More airlines are
likely to suspend their services this year as fallout from
the global credit crisis spreads. On the brighter side, traffic
volume between China and Taiwan is expected to increase
this year, thanks the launch of direct daily passenger flights,
new shipping routes and postal links between the two sides
in mid-December 2008.
Country Profile
Hong Kong
Sector Overview
The global financial crisis took its toll on Hong Kong’s business sentiment. In October 2008, the two airlines’
aviation industry late in 2008, affecting both business passenger growth of 2.6% fell behind capacity growth
and leisure air travel. HKIA, the world’s fifth busiest of 11.6%, resulting in a 5.3 percentage point drop in load
international passenger airport, handled 3.6 million factor to 75.5%.
passengers and 317,000 tonnes of cargo in September
2008, down by 4.7% and 7.5%, respectively year-on-year, Cargo Services
from the corresponding month a year earlier. In the six
months ended September 30, 2008, both HKIA’s passenger The amount of freight carried by Cathay Pacific and
and cargo volumes grew by a mere 0.7% year-on-year Dragonair depreciated by 7.3%, 7.4% and 15.4%, year-on-
to 24.6 million and 1.89 million tonnes, respectively — year respectively, to 141,570 tonnes in September 2008,
a downward step from the 7.1% year-on-year growth in 144,466 tonnes in October 2008 and 131,758 tonnes in
passenger volumes and the 5.8% year-on-year increase in November 2008. Capacity of the two carriers, measured
cargo volumes recorded in the six months ended September in available cargo and mail tonne kilometers, dipped by
30, 2007. The results signaled difficult times ahead for the 4.7%, 2.6% and 3.8%, year-on-year respectively, to 1.112
industry. billion in September 2008, 1.192 billion in October 2007
and 1.161 billion in November 2008. The results reflected
Sector Performance the steep drop in air cargo traffic to and from Hong Kong,
due to sluggish demand for exports, particularly to North
Passenger Services America, Europe and South East Asia, amid the economic
slowdown.
Cathay Pacific and Dragonair saw a slide in the number of
passengers carried in September 2008 and in November Leading Companies
2008, reflecting a tightening of corporate travel policies
and reduced travel for both business and leisure. They Airlines in Hong Kong faced weakening revenues, due to
carried 1.878 million passengers in September 2008 and the worsening travel environment and contracting cargo
1.978 million passengers in November 2008 — a decline volumes. Many have scaled back their operations, reduced
of 0.7% and 2.2%, year-on-year respectively, from the their expenditures and increased cost effectiveness in
corresponding months a year earlier. Demand from anticipation of continued global economic turmoil. Cathay
premium travelers continued to fall, buffeted by negative Pacific shocked financial markets with a rare net loss of
Table 8: Cathay Pacific/Dragonair Combined Passenger and Freight Data
September October November

% % %
2008 2008 2008
Passengers carried 1,878,080 -0.7 2,091,339 2.6 1,978,264 -2.2
Revenue passenger kilometers (‘000) 6,867,498 4.5 7,452,479 4.3 7,130,837 1
Available seat kilometers (‘000) 9,497,746 14.2 9,869,414 11.6 9,425,461 7.4
Freight carried (tonnes) 141,570 -7.3 144,466 -7.4 131,758 -15.4
Cargo and mail tonne kilometers (‘000) 739,226 -8.2 785,628 -6.7 748,495 -11.1
Available cargo and mail tonne
1,111,691 -4.7 1,191,836 -2.6 1,160,850 -3.8
kilometers (‘000)
Source: Cathay Pacific Airways
Note: Figures in % are in comparison with the corresponding months of the previous year
Country Profile - Hong Kong
HK$663 million (US$85.55 million) in the half year ended

June 30, 2008, compared with a net profit of HK$2.58
billion (US$332.89 million) in the corresponding period
a year earlier. The net loss was mainly due to high fuel
prices, falling demand and a HK$468 million (US$60.39
million) provision to cover a proposed settlement with the
US Department of Justice in its investigation into price-
fixing in the international air cargo market.
Analysts believe that airlines will face the pressure to

freeze or cut their staff’s wages this year, to ease their cash
flow problems. Cathay Pacific and its subsidiary Dragonair
announced on November 19, 2008 that they will cut the
year-end bonus for their Hong Kong-based staff, due to
the current difficulties they are facing. However, they will
raise the salary of all eligible Hong Kong-based staff by
an average of 2% and make an ex-gratia payment of half
a month’s salary or at least HK$8,000 (US$1,032.23) to
them this year. The salary increment, which took effect on
January 1, was less than the four to five percent increase
in 2008.
Market Outlook
The tough operating environment, softening in the Hong

Kong corporate market and poor traffic performance as
a result of the global recession will force airlines to cut
their capacity or put on hold their expansion plans. Cathay
Pacific has grounded three of its freighters, effective
January, to cut costs as demand falls. The airline also plans
to delay deliveries of its Boeing aircraft and postpone the
construction of its HK$4.8 billion (US$619.34 million)
cargo terminal in Hong Kong. Last December, Cathay
Pacific registered a 24% year-on-year decline in the amount
of cargo and mail carried to 115,232 tonnes. This trend
is expected to continue in the first three months of 2009,
as trade activities continue to shrink across the board. In
January, Cathay Pacific warned of disappointing 2008
earnings due to weak revenue and potential fuel hedging
losses of about HK$7.6 billion (US$980.62 million).
Country Profile
Japan
Sector Overview
Japanese airlines downsized their fleets, restructured their to 66.031 billion, due to ongoing route restructuring and
routes and slashed thousands of jobs to restore health, in aircraft downsizing.
the face of sluggish demand and an economic slowdown.
To attract more business and remain competitive in this The five airlines within the ANA Group carried 24.616
increasingly difficult operating environment, Japan has million passengers in the first half ended September 30,
progressively eased its strict air services regime. Last 2008, a decrease of 3.3% from 25.46 million in the first half
September, it forged a more liberal bilateral agreement ended September 30, 2007. Of these, 22.281 million were
with Singapore. The two countries have agreed to nearly domestic passengers and 2.335 million were international
double the number of passenger flights that can be operated passengers. ANA Group airlines flew 3.3% fewer domestic
to and from Tokyo and allow unlimited passenger and cargo passengers, due to stiffer competition from other airlines
flights between Singapore and all other cities in Japan. and the shinkansen bullet train. Food scares in China
The new agreement, which will take effect in 2010, will and the US sub-prime crisis resulted in a 3.7% decline in
allow Japanese airlines to operate passenger flights beyond international passengers across the network. The group’s
Singapore to India and the Middle East, thus boosting their RPK retreated by 3.3% to 29.918 million during the six-
international presence. month period, and its ASK dipped by 2.5% to 44.679
billon.
Sector Performance
Leading Companies
JAL and its subsidiaries flew 27.478 million passengers
in the first half ended September 30, 2008, down by Japanese airlines have cut back on unprofitable routes,
2.1% from the corresponding period a year earlier. The introduced smaller, more fuel-efficient aircraft and
number of international passengers carried tumbled by increased their product competitiveness, to cope with
9.4% to 6.076 million, due to weak tourism and business high energy prices in the first three quarters of 2008. Last
demand. Demand on China routes was affected negatively August, JAL announced plans to scrap flights on 15 routes
by reported food-related scares and demand on Oceania and cut the number of flights on another four routes. JAL’s
and Guam routes decreased significantly. Demand on consolidated net income rocketed by 401.4% to ¥36.6 billion
US, Europe and South East Asia routes were also weak. (US$403.15 million) in the half year ended September 30,
On the domestic front, individual passenger demand was 2008, compared with ¥7.3 billion (US$80.41 million) in
stagnant but group passenger demand increased from the the corresponding period a year previously, thanks to an
year-earlier period. Overall, the group’s ASK fell by 3.3% increase in special profits and a decrease in special losses.
Table 9: JAL Group and ANA Passenger Traffic Statistics
JAL Group ANA

st st st
1 Half ended 1 Half ended 1 Half ended 1st Half ended
Sept 30, 2008 Sept 30, 2007 Sept 30, 2008 Sept 30, 2007
Number of passengers (‘000) 27,478 28,074 24,616 25,460
of which : Domestic (‘000) 21,402 21,371 22,281 23,036
: International (‘000) 6,076 6,703 2,335 2,424
Revenue passenger kilometers (millions) 43,777 46,660 29,918 30,931
Available seat kilometers (millions) 66,031 68,296 44,679 45,811
Sources: Japan Airlines International Co Ltd, All Nippon Airways Co Ltd
Country Profile - Japan
However, its operating income plunged by 46.6% to ¥30.2

billion (US$332.65 million) during the six-month period,
due to high fuel costs and a tough economic climate.
The ANA Group, which consists of airlines, travel and

other businesses, posted a consolidated net profit of ¥22
billion (US$242.33 million) and a consolidated operating
profit of ¥49.8 billion (US$548.55 million) in the first
half ended September 30, 2008, a decrease of 79.1% and
25.7%, respectively, from ¥105.5 billion (US$1.16 million)
and ¥67 billion (US$738.01 million) in the first half ended
September 30, 2007. Hit by increased competition from
other airlines and the railways and flagging passenger
numbers, revenue from its domestic air transport business
dipped by 2.3% to ¥372.5 billion (US$4.1 billion). On
the international front, ANA’s business travel demand
to Europe and the US fell, due to turmoil in the world’s
financial markets and the sudden slowdown in economic
activity.
Market Outlook
The stagnant growth of air transport demand will continue

to trouble airlines. JAL reported last November that its
operating revenue is expected to plunge by ¥91 billion
(US$1 billion) to ¥2.093 trillion (US$23.05 billion) and
its operating income is expected to fall by ¥22 billion
(US$242.33 million) to ¥50 billion (US$550.75 million)
in the year ending March 31, compared with its original
forecast of ¥2.184 trillion (US$24.06 billion) and ¥50
billion (US$550.75 million), respectively. Airlines will
continue to tighten their belts to gain further cost reductions
and improve their profitability by better matching aircraft
capacity with demand. Last September, ANA announced
that it would revise the retirement schedule of its present
fleet and introduce nine Boeing 767-300ERs in fiscal years
2010 and 2011, to cover its capacity needs in the interim.
The airline expects to receive its first Boeing 787 this
August, 15 months later than originally planned, due to
production delays at Boeing.
Country Profile
Malaysia
Sector Overview
Competition intensified in the Malaysian aviation industry venture, but denied reports that they were in merger talks.
late in 2008, thanks to liberalization of air services Meanwhile, a Malaysian newspaper, The Star, reported
between capital cities in South East Asia. Besides the that AirAsia is in talks to merge with Jetstar. A merger
busy Singapore-KL route, the sector between Singapore would help the carriers cope with the impact of slowing
and Kota Kinabalu, Kuching and Miri has been opened demand worldwide, but is likely to be fraught with political
up. Jetstar made its maiden flight from Singapore to Kota hurdles.
Kinabalu on December 2, 2008; Tiger Airways’ inaugural
flight landed at the Kuching International Airport on AirAsia’s profit after tax plummeted by 94.9% to RM9.418
November 20, 2008, and SilkAir made its maiden flight million (US$2.72 million) in the second quarter ended June
from Singapore to KLIA on October 26, 2008. 30, 2008, from RM185.05 million (US$53.37 million) in the
corresponding quarter a year earlier, mainly due to a RM77
Malaysian airlines, faced with slower passenger growth, million (US$22.21 million) translation loss resulting from
fierce fare competition and a weakening economy, have the weakened ringgit. In the following quarter, it swung to
made adjustments to their capacity and cut costs in the a loss after tax of RM465.526 million (US$134.26 million)
form of reduced facilities, ground and in-flight services — its first loss since its listing in 2004 — from a year-earlier
or products, in efforts to sustain their operations. Some profit after tax of RM179.977 million (US$51.9 million).
have either abolished or lowered their fuel surcharges to This was due to foreign exchange translation and hedging
stimulate demand, while others have cut their fares. AirAsia losses through Lehman Brothers Commodity Services, a
became the first airline in the world to scrap its fuel levy subsidiary of Lehman Brothers Holdings, which filed for
on November 11, 2008 and domestic rival Firefly followed bankruptcy on September 15, 2008.
suit on December 16, 2008. These moves are likely to help
push up sales. AirAsia managed to secure a US$336 million financing
package for eight Airbus A320-200s last November, but its
Leading Companies major shareholder, Tune Air Sdn Bhd, was unable to secure
financing to fund the privatization of AirAsia, due to the
National carrier MAS has customized its product offerings tight credit market conditions. At the end of June 2008,
to the different market segments, broadened its distribution AirAsia had debts of about RM4.3 billion (US$1.24 billion)
channels and revved up corporate sales, in efforts to and cash reserves of RM1.1 billion (US$317.24 million).
grow its market share. It has also streamlined routes and There have been concerns that AirAsia, though expanding
improved its revenue management. The airline booked a rapidly, may not be able to generate enough cash flow to
net profit of RM198 million (US$57.1 million) in the nine pay its debts going forward. Its net gearing ratio, which
months ended September 30, 2008 and RM38 million stood at 1.9 times in November 2008, is expected to rise
(US$10.96 million) for the third quarter ended September with additional borrowings to fund its aircraft purchases.
30, 2008. Its third quarter 2008 revenue was sustained by
its operating performance and non-fuel expenses which Market Outlook
decreased significantly by 13.7% year-on-year to RM2.173
billion (US$626.69 million). Airlines are likely to keep fares competitive in this period
of diminished consumer confidence. MAS cut its one-way
As of September 30, 2008, MAS had about RM4.8 billion fares for the Singapore-KL route to RM199 (US$57.39)
(US$1.38 billion) in cash in its balance sheet. Its strong ex-KL and S$89 (US$25.67) ex-Singapore for travel in
balance sheet and low debt position puts in a favorable December 2008, in a bid to retain market share. It also
position to form strategic partnerships and cooperative slashed fares for 66 domestic and international destinations
agreements with other airlines. Last December, MAS said under its “all-inclusive low fares” campaign. The MH
that it and Qantas were in talks on a joint maintenance Value Fares program which MAS launched last December
Country Profile - Malaysia
is expected to boost ticket sales and improve load factor of

various routes. The airline aims to push its corporate sales
to hit 10% of total sales by the end of 2009.
The low-cost carrier sector is set to expand, despite

the slowdown in the global economy. The Malaysian
Government has approved the construction a of new RM1.6
billion (US$461.44 million) low-cost carrier terminal in the
southern state of Negeri Sembilan that will have the capacity
to handle 25 million passengers a year. AirAsia anticipates
stronger passenger growth this year, as it adds new routes
and planes. Firefly will continue to service the Malaysia,
Indonesia and Thailand markets, luring the public masses
with low fares and more destinations. Last December, it
offered unsold tickets at zero fare, to encourage people to
travel during off-peak periods to regional and domestic
destinations.
Country Profile
Singapore
Sector Overview
Singapore in the latter half of 2008 continued to pursue a regulatory body that will oversee the city-state’s airports
more open bilateral agreements, in efforts to boost its and an airport company that will be put under state investor
aviation sector. As of November 28, 2008, it had concluded Temasek Holdings, according to Singapore’s Transport
open skies agreements with more than 30 countries. Minister Raymond Lim.
Singapore expanded air services with Japan in September
2008 and concluded three separate open skies pacts with SIA flew 9.634 million passengers in the first half ended
Romania, Zambia and Kuwait in November 2008, to allow September 30, 2008, an increase of 2.4% from 9.404
full flexibility on air services. Flag carrier SIA will begin million passengers in the corresponding period a year
four-times-weekly service to Kuwait from March 15, using earlier. Systemwide, its capacity grew by 8.5% to 60.691
Boeing 777-200 aircraft. This year, Singapore plans to cut billion, ahead of a 5.4% increase in RPK to 47.295 billion.
landing fees at Changi Airport and provide discounts of This led to a 2.4 percentage point passenger drop in load
approximately S$150 million (US$104.36 million). The factor to 77.9%. SIA Cargo carried 1.7% less cargo (3.956
move is expected to spur traffic at the airport and help ease billion load tonne kilometers) during the period, while
airlines’ operating costs in this period of global recession. systemwide cargo capacity expanded by 0.3%, resulting
in a 1.2 percentage point decline in cargo load factor to
Sector Performance 61.1%. This was mainly attributed to weaker economic
conditions and a reduction in demand for goods to be
Changi, one of Asia’s busiest aviation hubs, is served by moved by air freight.
82 airlines, which connect Singapore to 189 cities in 60
countries, via 4,470 weekly scheduled flights. The airport Leading Companies
registered some 9.32 million passenger movements in the
first quarter of 2008, an increase of 6.7% year-on-year, Hit by high fuel costs and a slowdown in traffic growth,
based on the latest available data from CAAS. On the SIA’s net profit attributable to equity holders tumbled by
cargo front, CAAS reported that more than 466,000 tonnes 36.2% to S$323.8 million (US$225.28 million) in the
of airfreight was processed during the quarter, up by 4% quarter ended September 30, 2008, from S$507.8 million
year-on-year. By July, Changi will split into two entities — (US$353.29 million) in the corresponding quarters a year
Table 10: SIA Operating Statistics
1st Half 1st Half

Change (%)
ended Sept 30, 2008 ended Sept 30, 2007
Passenger:
Passengers carried (‘000) 9,634 9,404 2.4
Revenue passenger kilometers (millions) 47,295.2 44,882.9 5.4
Available seat kilometers (millions) 60,690.7 55,914.3 8.5
Passenger load factor (%) 77.9 80.3 -2.4P
Cargo:
Cargo and mail carried (million kilograms) 661.3 650.9 1.6
Cargo load (million tonne kilometers) 3,955.7 4,024.9 -1.7
Gross capacity (million tonne kilometers) 6,477.5 6,456.1 0.3
Cargo load factor (%) 61.1 62.3 -1.2P
Source: Singapore Airlines
Country Profile - Singapore
earlier. The group’s operating expenditure soared by 20.3%

to S$4.1476 billion (US$2.89 billion) during the quarter,
ahead of a 10.4% growth in revenue to S$4.3793 billion
(US$3.05 billion). As a result, its operating profit plunged
by 55.3% to S$231.7 million (US$161.2 million). Despite
the challenging market conditions, budget carrier Tiger
Airways, which is partly owned by SIA, reported net
profits of S$37.8 million (US$26.3 million) for the year
ended March 31, 2008.
To cope with the economic downturn that had crimped

corporate and leisure air travel, SIA has reduced costs
through pay adjustments and by cutting routes and flights.
However, the airline announced in November 2008 that
it has no plans to cut staff salaries or reduce headcount,
unlike many airlines in Europe and the US. Separately, on
December 22, 2008, Australia’s competition watchdog,
the ACCC, sued SIA Cargo for unspecified penalties and
costs for its involvement in international price-fixing of
fuel surcharges and security surcharges between 2001 and
2005; this is likely to dent its profits in the quarter ending
March 31.
Market Outlook
Airlines in Singapore will continue to adjust their capacity

and flight frequencies, in response to falling demand. SIA
plans to reduce the number of flights between Singapore
and several cities in Asia including Bangalore, Chennai,
Ho Chi Minh City, Osaka, Penang and Seoul. Starting
February, its flights to Amritsar in India will be withdrawn.
SilkAir, which flies to cities in India, Taiwan and Indonesia,
has trimmed expansion plans for the fiscal year to March
31 to between 5% and 7%, down from between 8% and
10% previously. Meanwhile, Tiger Airways has dropped
plans to set up a low-cost airline in Korea, due to continued
regulatory uncertainty in Korea and the recent global
economic situation.
Currency Conversion Table
Currency exchange rates as of December 31, 2008
Currency Unit Units per US$ US$ per Unit
Australian Dollar (A$) 1.433 0.697975
Chinese Renminbi (RMB) 6.824 0.146542
Hong Kong Dollar (HK$) 7.750 0.129029
Indian Rupee (Rs) 48.58 0.020585
Japanese Yen (¥) 90.78 0.011015
Malaysian Ringgit (RM) 3.467 0.288397
Singapore Dollar (S$) 1.437 0.695733
South Korean Won (KRW) 1,265 0.000791
Thai Baht (THB) 34.72 0.028801
UK Pounds (£) 0.684 1.461527

Source: Federal Reserve Bank of New York
The Scope Of This Report

This report looks at the aviation industry in the Asia-Pacific, with a focus on Australia, China, Hong Kong, Japan,
Malaysia and Singapore. Two core industry segments are examined, namely: passenger airlines and freight and courier
services. This report aims to paint a picture of the current environment and industry developments in a number of industry
segments using available data and examination of key public companies in each segment whose core services fall into the
above categories. Some reported key financial results are presented in the comparative data tables on proceeding pages.
Research analysts draw on a range of credible industry and company data sources as well as news and information
services to research and analyze the current trading environment, industry landscape and market trends and outlook for
a particular sector. Primary sources are used, unless otherwise indicated, and include company data, e.g. annual reports
and company financial results; macroeconomic and trade data; data and information from global and country regulatory,
industry and trade bodies; government data; and reports from industry organizations and private research organizations.
Industries covered by the industry reports are defined by standard industry classification systems and leading companies
are identified on this basis. SIC codes relevant to the industry include: 4581 (Air Traffic Control, except Government);
4512 (Air Passenger Carriers, Scheduled); 4522 (Air Taxi Services); 4513 (Air Courier Services); 3721 (Aircraft-
Manufacturing); 3724 (Aircraft Engines and Engines Parts and Internal Combustion and Jet Propulsion-Manufacturing);
and 3728 (Aircraft Power Transmission Equipment Manufacturing).
Key References
Global
International Air Transport Association (IATA)

IATA is the trade association of the world’s airline industry. It represents some 250 airlines comprising 94% of the
international scheduled air traffic.
http://www.iata.org
The International Air Cargo Association (TIACA)

TIACA supports and assists progressive liberalization of the global market and easier, enhanced trade between developing
and developed economies.
http://www.tiaca.org
Association of Asia-Pacific Airlines (AAPA)

Represents the interests of 17 international airlines based in the Asia-Pacific and provides a forum for all members to
exchange information and views on matters of common concern.
http://www.aapairlines.org
International Civil Aviation Organization (ICAO)

ICAO is an agency of the United Nations, established to ensure the safe and orderly growth of international civil aviation
throughout the world, develop standards for international air navigation and promote the development of all aspects of
international civil aeronautics.
http://www.icao.int
Australia
Aviation Australia
Aviation Australia is a training organization established by the Queensland Government to support the development and
growth of the aviation and aerospace industries in Queensland and in the Greater Asia-Pacific region.
http://www.aviationaustralia.net.au
Bureau of Transport and Regional Economics

The bureau operates under the Department of Transport and Regional Services to provide information and analysis as
well as improving the understanding of the economic factors influencing the transport sector and regional Australia.
http://www.btre.gov.au
China
China Air Traffic Management Bureau

The bureau is responsible for the development of aviation infrastructure and services.
http://www.atmb.net.cn
Civil Aviation Administration of China (CAAC)

CAAC is the regulatory body responsible for administrating civil aviation.
http://www.caac.cn.gov
Hong Kong
Civil Aviation Department

Regulates civil aviation activities in Hong Kong.
http://www.info.gov.hk/cad/
Airport Authority of Hong Kong

The Airport Authority is a statutory corporation wholly-owned by the Government of the Hong Kong Special Administrative
Region which is responsible for the operations and development of Hong Kong International Airport.
http://www.hongkongairport.com/
Japan
Civil Aviation Bureau

The bureau is responsible for the planning, implementing and maintaining of air navigation.
http://www.mlit.go.jp
Malaysia
Ministry of Transport – Aviation Division

Ensures the planning, building and maintenance of air transport systems is in accordance with specified standards.
http://mcsl.mampu.gov.my
Singapore
Civil Aviation Authority of Singapore (CAAS)

A statutory board under the Ministry of Transport that represents the government in the negotiation of air services
agreements and which advises on matters related to civil aviation.
http://www.caas.gov.sg/caas/index.jsp
Comparative Company Data | ASIA-PACIFIC Industry Report - Aviation - February 2009
Company Name Country Ticker Exchange Primary SIC Other SICs
Japan Airlines Corp Japan 9205 TSE 4512 4522 4581 4725 4724
All Nippon Airways Co Ltd Japan 9202 TSE 4512 4581 4724 7011 6531
Qantas Airways Ltd Australia QAN ASX 4512 4513 4731 4725
Singapore Airlines Ltd Singapore SIA SGX 4512 4581 4725 8711 7211 2038
Korean Air Lines Co Ltd South Korea 3490 KSE 4512 3728 3724 4141 7011
Cathay Pacific Airways Ltd Hong Kong 0293 HKSE 4512 4731 4789 4725 7375 6531
China Southern Airlines Co Lt China 600029 SSE 4512 4513 4522 4581 4731 7538
Air China Ltd Hong Kong 0753 HKSE 4731 4581 3728 8711 4724 5812
Thai Airways International Pu Thailand THAI SET 4512 4513
China Eastern Airlines Corp China 600115 SSE 4512 4513 3728 7699 7011 7319
Company Name Total Revenue - FYE - 1 Total Revenue - FYE - 2 Total Revenue - FYE - 3 EBITDA - FYE - 1 EBITDA - FYE - 2 EBITDA - FYE - 3
Japan Airlines Corp $22,379,567,255 $19,497,912,930 $18,694,772,313 N/A N/A N/A
All Nippon Airways Co Ltd $14,928,571,356 $12,617,851,649 $11,634,731,884 N/A N/A N/A
Qantas Airways Ltd $12,881,216,291 $10,140,295,139 $9,565,378,977 $2,051,726,335 $1,475,919,713 $1,761,736,957
Singapore Airlines Ltd $11,575,953,820 $9,552,128,641 $8,255,886,630 $2,705,827,115 $2,142,414,657 $1,515,207,773
Korean Air Lines Co Ltd $9,687,780,440 $8,950,303,623 $7,721,435,601 $675,754,719 $1,006,911,148 $702,638,586
Cathay Pacific Airways Ltd $9,663,524,485 $7,834,324,713 $6,565,531,519 $1,512,658,707 $1,166,197,292 $993,812,212
China Southern Airlines Co Lt $7,479,122,745 $5,962,471,982 $4,744,987,719 $1,439,503,874 $926,929,235 $537,657,058
Air China Ltd $7,004,521,808 $5,753,346,526 $4,735,507,409 $1,633,448,375 $1,358,756,836 $1,160,502,339
Thai Airways International Pu $6,041,343,191 $4,751,942,273 $3,958,941,777 $848,878,617 $751,791,544 $561,690,790
China Eastern Airlines Corp $5,903,942,584 $4,874,594,557 $3,432,346,400 $1,002,039,947 $376,025,744 $572,306,880
Company Name Net Income - FYE - 1 Net Income - FYE - 2 Net Income - FYE - 3 EPS - FYE - 1 EPS - FYE - 2 EPS - FYE - 3
Japan Airlines Corp $169,782,075 -$137,786,386 -$401,565,496 $0.06 -$0.06 -$0.20
All Nippon Airways Co Ltd $643,598,585 $276,623,090 $227,136,998 $0.33 $0.14 $0.13
Qantas Airways Ltd $611,203,126 $356,305,116 $524,790,529 $0.31 $0.18 $0.28
Singapore Airlines Ltd $1,548,702,815 $1,451,430,078 $810,359,231 $1.22 $1.14 $0.63
Korean Air Lines Co Ltd $39,797,390 $413,981,966 $184,780,804 $0.19 $5.84 $2.76
Cathay Pacific Airways Ltd $924,573,523 $550,618,350 $447,254,185 $0.23 $0.15 $0.13
China Southern Airlines Co Lt $282,698,574 $26,128,722 -$228,742,781 $0.06 $0.01 -$0.05
Air China Ltd $564,233,497 $423,323,343 $306,111,372 $0.05 $0.03 $0.03
Thai Airways International Pu $199,516,791 $239,226,783 $165,109,621 $0.12 $0.14 $0.10
China Eastern Airlines Corp $33,472,469 -$442,236,952 -$54,363,956 $0.01 -$0.09 -$0.01
Total Current Assets - Total Current Assets - Total Current Assets - Long-Term Debt - Long-Term Debt - Long-Term Debt -
Company Name
FYE - 1 FYE - 2 FYE - 3 FYE - 1 FYE - 2 FYE - 3
Japan Airlines Corp $8,130,525,553 $5,991,120,131 $5,842,202,942 $7,561,929,687 $7,082,747,113 $9,180,008,408
All Nippon Airways Co Ltd $4,750,998,341 $3,574,873,597 $4,508,178,955 $5,765,205,681 $5,003,593,148 $5,923,471,441
Qantas Airways Ltd $4,785,322,971 $3,673,208,824 $2,820,530,209 $3,576,591,498 $3,960,034,443 $4,263,266,395
Singapore Airlines Ltd $6,025,004,032 $5,436,140,767 $3,674,804,295 $1,159,008,630 $1,190,061,948 $1,128,995,328
Korean Air Lines Co Ltd $2,372,553,429 $1,836,530,094 $1,871,885,127 $7,928,469,099 $5,594,431,579 $5,995,578,610
Cathay Pacific Airways Ltd $4,348,060,255 $3,241,327,310 $2,663,664,342 $5,170,815,279 $4,376,590,987 $3,578,162,447
China Southern Airlines Co Lt $1,203,351,313 $855,971,822 $894,773,361 $3,002,491,581 $2,859,430,035 $3,122,475,271
Air China Ltd $1,345,777,455 $1,370,792,187 $934,360,360 $4,099,264,025 $3,067,541,723 $2,589,966,784
Thai Airways International Pu $1,871,797,870 $1,215,946,849 $1,075,650,587 $3,414,722,636 $2,687,930,974 $2,609,691,998
China Eastern Airlines Corp $1,348,303,672 $1,154,486,327 $745,626,005 $3,460,325,548 $2,707,659,942 $2,224,186,879
Company Name Return on Equity (Most Recent Yr) Profit Margin (Most Recent Yr) Date FYE - 1 Date FYE - 2 Date FYE - 3
Japan Airlines Corp 3.78 0.76 31-Mar-08 31-Mar-07 31-Mar-06
All Nippon Airways Co Ltd 15.18 4.31 31-Mar-08 31-Mar-07 31-Mar-06
Qantas Airways Ltd 11.63 4.74 30-Jun-07 30-Jun-06 30-Jun-05
Singapore Airlines Ltd 14.13 13.38 31-Mar-08 31-Mar-07 31-Mar-06
Korean Air Lines Co Ltd 0.85 0.41 31-Dec-07 31-Dec-06 31-Dec-05
Cathay Pacific Airways Ltd 14.26 9.57 31-Dec-07 31-Dec-06 31-Dec-05
China Southern Airlines Co Lt 16.86 3.78 31-Dec-07 31-Dec-06 31-Dec-05
Air China Ltd 13.14 8.06 31-Dec-07 31-Dec-06 31-Dec-05
Thai Airways International Pu 9.20 3.30 30-Sep-07 30-Sep-06 30-Sep-05
China Eastern Airlines Corp 8.08 0.57 31-Dec-07 31-Dec-06 31-Dec-05
Notes to Comparative Data

- All figures are in United States dollars. - N/A = Data Not Available.
- All figures are as reported by the company. - Companies ranked by total revenue for the full year most recently reported.
Definitions
- Total Revenue = All revenues, including net sales, operating revenues, interest income, royalties, excise taxes etc. - Long Term Debt = Debt due to be paid at a date more than one year in the future.
- EBITDA = Earnings before interest, taxes, depreciation and amortization. - Return on Equity = The company’s earnings divided by its equity (book value).
- EPS Cont Operations = Earnings Per Share as reported by company excluding extraordinary items. - Profit Margin = The company’s net income as a percent of revenues.
- Total Current Assets = All assets expected to be realized within the next year, includes cash, accounts receivable and inventories.
Notes Industry Report - Aviation - February 2009
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Industry Report - Aviation - February 2009

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months. Mergent, Inc., a leading provider of

Table 1: Stock Performances of Selected Asia-Pacific Airlines

Closing Share Price as of

Airline Stocks Cargo and Freight Services

Table 2: International Scheduled Services of 17 Asia-Pacific Airlines

cash injections from the Government, to help ease their

Mergers and Alliances

Rising costs combined with slowing demand and

In India, private carrier Kingfisher Airlines revealed that

Rank Airline Group Billion Y-O-Y %

Group/Airline Employees Fleet Size

Table 5: Top Ten Airports in the Asia-Pacific Ranked by Revenues, 2007

Singapore and Japan agreed last September to expand air

Market Trends & Outlook

Market Trends & Outlook

Air Travel Gets Cheaper

The slowing economy, falling demand and weakening

Table 6: Qantas Group’s Operational Statistics

July-September 2008 July-September 2007 % Change

Country Profile - Australia

Business and first-class travel at Qantas is expected to drop

Country Profile - China

listed A shares to its parent at RMB3.87 (US$0.57) each, in

Last November, China successfully flight tested its first

The slowing economy and rising joblessness in China

Table 8: Cathay Pacific/Dragonair Combined Passenger and Freight Data

September October November

Country Profile - Hong Kong

HK$663 million (US$85.55 million) in the half year ended

Analysts believe that airlines will face the pressure to

The tough operating environment, softening in the Hong

Table 9: JAL Group and ANA Passenger Traffic Statistics

JAL Group ANA

Country Profile - Japan

However, its operating income plunged by 46.6% to ¥30.2

The ANA Group, which consists of airlines, travel and

The stagnant growth of air transport demand will continue

Country Profile - Malaysia

is expected to boost ticket sales and improve load factor of

The low-cost carrier sector is set to expand, despite

Table 10: SIA Operating Statistics

1st Half 1st Half

Country Profile - Singapore

earlier. The group’s operating expenditure soared by 20.3%

To cope with the economic downturn that had crimped

Airlines in Singapore will continue to adjust their capacity

Currency Conversion Table

Currency exchange rates as of December 31, 2008

Currency Unit Units per US$ US$ per Unit

Australian Dollar (A$) 1.433 0.697975

Chinese Renminbi (RMB) 6.824 0.146542

Hong Kong Dollar (HK$) 7.750 0.129029

Indian Rupee (Rs) 48.58 0.020585

Japanese Yen (¥) 90.78 0.011015

Malaysian Ringgit (RM) 3.467 0.288397

Singapore Dollar (S$) 1.437 0.695733

South Korean Won (KRW) 1,265 0.000791

Thai Baht (THB) 34.72 0.028801

UK Pounds (£) 0.684 1.461527

The Scope Of This Report

International Air Transport Association (IATA)