QZ8501 caps grim year for airline industry

Singapore

FRAUGHT with tragedies, 2014 has been a year that the aviation industry will likely close the door on with relief.

The most recent disaster, where Singapore-bound Indonesia AirAsia Flight QZ8501 vanished on Sunday 42 minutes after departing from Surabaya, comes at the tail end of what has been an annus horribilis. As multinational search efforts combed the Java Sea for a third day, Indonesian officials confirmed on Tuesday afternoon that they had found bodies and debris from the missing plane in the waters off Pangkalan Bun. Reports out of Indonesia also said that a shadow, believed to be the Airbus 320-200 aircraft, was spotted on the seabed by an air force plane.

Onboard Flight QZ8501 were 162 people, including a two-year-old Singaporean.

Sadly, it has been a year of airline catastrophes dominating the headlines, starting with Beijing-bound Malaysia Airlines MH370, which disappeared in March carrying 239 passengers and crew. The Boeing 777 aircraft remains missing to this very day with no sign of wreckage anywhere, leaving countless unanswered questions as to what happened on the ill-fated flight. Then in July, the world was equally astounded when MH17 was shot down as it flew over Ukraine, claiming 298 lives.

Reeling from the double whammy, Malaysia Airlines has been taken private by sovereign wealth fund Khazanah Nasional and will be delisted from the Bursa Malaysia on Wednesday. Christoph Mueller, who managed to turn around Irish carrier Aer Lingus, has been tapped to lead the airline as it grapples with deepening losses.

In the very week following the MH17 disaster, a TransAsia Airways flight crashed off Taiwan after encountering rough weather and a Swiftair-operated Air Algerie flight went down in Mali - also due to inclement weather - claiming the lives of 48 and 116 people respectively.

Collectively, this makes 2014 the worst year for loss of life in civil aviation since 2005, according to Aviation Safety Network, although the total number of crashes suggests a record low.

But while 2014 may be a year some will be keen to forget, there are plenty of lessons to be remembered.

MH370 and now QZ8501 impress the need for the industry to improve tracking capabilities, and as swiftly as possible. According to reports, AirAsia had begun using Inmarsat's satellite communications - which would give position updates every two minutes - on some of its A320s but QZ8501 had not been outfitted with the technology.

Meanwhile, MH17 has prompted the study of better communication for aircraft overflying conflict-ridden zones, with the International Air Transport Association (Iata) suggesting a web portal where information can be shared. The International Civil Aviation Organisation (Icao) on its part is trying to improve the content and distribution of Notice to Airmen, which warns pilots of potential hazards along their flight path.

It is also crucial to ensure pilots are well trained and up-to-date with industry best practices, especially as regional airlines expand at break-neck speed and as Asean works towards an open skies policy next year. Asean open skies will essentially liberalise the region's aviation markets, fuelling traffic growth and connectivity, which underlines as well the need for greater coordination when it comes to regional air traffic control.

Financially though, it appears that 2014 will be a solid year for the overall airline industry. Asia Pacific carriers are expected to be the second-best performers this year with US$3.5 billion in combined profits, while US carriers are far ahead of the pack with an expected bottom line of US$11.9 billion, following a period of consolidation and restructuring.

Earlier this month, Iata revised its 2014 global outlook upwards after oil prices took a deep dive, projecting a cumulative record net profit of US$19.9 billion - against a thin profit margin of just 2.7 per cent - up from June's estimate of US$18 billion. Iata has projected an even stronger forecast of US$25 billion for 2015.

With lower oil prices, jet fuel is expected to average US$99.90 a barrel in 2015, down from this year's average of US$116.60 a barrel. But savings from lower fuel prices will take time to flow to the bottom line as some airlines may have locked in hedges at higher prices. Others may even find themselves burnt by wrong-way hedging, analysts have said.

In a challenging year where South-east Asia's carriers wrestled with overcapacity and sliding yields, airport operator Changi Airport Group (CAG) expects to see some passenger traffic growth for 2014 as a whole, although this is expected to be moderate vis-a-vis previous years. External pressures, such as the disappearance of MH370 and political tensions in Thailand, also hit Singapore's inbound tourism hard, forcing some airlines to axe flights on certain routes. Last year, Changi saw a record 53.7 million passengers pass through its doors.

"We are beginning to see a rebound in capacity and frequencies on regional routes over the last few months of the year," said CAG's senior vice-president (market development) Lim Ching Kiat, adding that passenger movements between Singapore and markets such as China and Thailand have started to show signs of recovery. Meanwhile, cargo traffic is expected to be "stable or marginally positive" for the year.

Ground was also broken this month for Changi's mixed-use development Jewel, designed to turn the airport into a world-class attraction and attract greater passenger traffic as competition intensifies in the region.

This year, overcapacity on short-haul routes saw Jetstar Asia curbing capacity growth, while Tiger Airways cancelled the delivery of nine A320s, leased out surplus aircraft and pulled the plug on its Philippines, Indonesia and Australia operations in a bid to turn around Tigerair Singapore. Singapore Airlines (SIA) stepped in to the rescue by bumping up its stake in Tiger from 40 per cent to 55 per cent, a figure which may climb to 71 per cent as it pledges S$140 million in a lifeline to the beleaguered budget carrier via a rights issue.

SIA, which is struggling with challenges of its own such as intense competition and depressed yields, announced this month that Vistara, its joint-venture carrier with Tata, will start operations in New Delhi come Jan 9.

One positive bit of news for Singapore earlier this year was the biennial Singapore Airshow which surprised on the upside through US$32 billion worth of deals in February, narrowly pipping 2012's US$31 billion tally, thanks to commercial orders from fast-expanding regional carriers.

And with 2014 drawing to a close on such a painful note, hopefully 2015 will bring better news for the aviation industry.

*AirAsia QZ8501 plane debris found, some bodies retrieved