Lanka aviation growth to be on par with Asia in '07

Shirajiv Sirimane

Growth: Sri Lanka's passenger and freight growth momentum is expected to be on par with the growth of the Asain countries in the region for the year 2007.

According to a forecast by Manager, Corporate Communications, Asia Pacific International Air Transport Association, Albert Tjoeng, international passenger traffic in Asia is projected to grow at an average annual rate of 5.7% between 2006 and 2010.

International freight in Asia Pacific is expected to lead global freight growth with an Annual Avarage Growth rate (AAGR) of 6.0% over the same period.

For Sri Lanka, the AAGR for international passenger and freight traffic is 6.9% and 7.4% respectively. "Thisis a very healthy growth."

"Globally, international passenger traffic will grow at an AAGR of 4.8%, while freight will grow at 5.3%.

The forecast points to a more cautious approach to capacity deployment over the five-year forecast period," he said.

It is estimated that Pakistan (8.2%), China (8.1%) and India (7.9%) will lead passenger growth in the region. Asia Pacific will lead freight growth with an AAGR of 6.0% over the period. Seven of the top ten freight markets fall within the region: China (11.6%), Pakistan (8.8%), Korea (8.2%), India (8.2%), Sri Lanka (7.4%), Thailand (6.3%) and Indonesia (5.8%).

Asian carriers are expected to make USD 1.2 billion in profits in 2007, lower than the USD1.7 billion for 2006. The lower profits are due to the increased competition in the region as a result of liberalisation, aircraft deliveries and new entrants.

European carriers will make the most profits of USD 1.5 billion; US carriers will make profits of USD200 million, while African carriers will lose USD500 million. All in all, the industry will make a USD2.5 billion profit in 2007. Nonetheless a profit margin of 0.5% on USD450 billion of revenues is still insufficient to cover the cost of capital of 7-8%.

Strong revenues resulting from the rapid growth of passenger traffic and high load factors have contributed to the improved profitability of the industry.

However, the revenue growth has peaked and is expected to slowdown to 4.5% in 2007 from 8% in 2006. While Asian and European economies are still expanding at an increasing robust pace, the slowdown of the US economy will soften the demand for air travel and the pricing power.

"IATA traffic forecasts are based on a comprehensive survey of airline expectations for major route areas. The international passenger traffic growth in Asia Pacific is boosted by strong GDP growth, along with significant new capacity and new routes," he said.