Associated Press

Singapore, January 24:

Air travel in Asia showed strong growth in 2004, but this year the region’s airlines face tough challenges ranging from high fuel prices to competition from low-cost carriers and a shortage of trained personnel, industry groups said on Monday.

Asia-based airlines made $3 billion (euro2.3 billion) profit in 2004 — up sharply from losses caused by a near travel shutdown in the first half of 2003 due to the SARS outbreak — said Peter Harbison, managing director of industry group Center for Asia Pacific Aviation.

Airline share prices rose by up to 35 per cent last year, while airport stocks also grew strongly, especially in China, Harbison said at a conference in Singapore organized by the center. China and India were the chief growth engines, with outbound travel from China rising to 40 million passengers last year from 10 million in 2001, he said.

China has also helped push forward airline market liberalization, and the privatization of up to 20 Chinese provincial airports this year will boost investment in regional infrastructure. “To have a $3 billion (euro2.3 billion) profit in a year when the U.S. industry is in such turmoil is a stunning achievement,” Harbison said.

However, he and other conference speakers predicted slower growth this year, and warned that jet fuel prices, which have almost doubled to around $1.50 in (euro1.15) in recent months, will eat into profits.

Asian airlines also face a potential shortage of 100,000 skilled employees in coming years, as expanding fleets and higher demand raise staffing requirements, and baby boomer-era employees retire. China, for example, needs 2,000 new pilots each year but can produce only about 900, forcing airlines to send trainees to the United States or elsewhere. Low-cost airlines will also challenge established carriers. Asia has 11 cut-rate airlines now, and will have 32 in 2006, Harbison said. “This is a volatile business.” “This is not something that will happen without causing waves,” he said.

Airlines should respond by increasing the productivity of planes and staff while hedging against high fuel prices, but must guard against affecting safety, Harbison said.

The 17 major carriers in the Association of Asia Pacific Airlines posted a combined profit of $500 million (euro382 million) on $54 billion (euro41 billion) in revenue last year, said the association’s director general, Andrew Herdman.

Passenger numbers grew by 22.5 per cent and freight by 12.9 per cent in 2003, but such growth is unlikely this year, he said.