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DECEMBER 2018

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Propping up flag carriers recipe for failure

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December 1st 2018

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It has been a challenging 12 months for Asia-Pacific airlines but as another year draws to a close there has been some recent good news. Read More »

Oil, which peaked at US$76 per barrel in October, dropped below $60 in November. It is does not approach the price of $40 in 2016 and $52 in 2017 and whether it is a trend in the volatile cycles of oil pricing is anyone’s guess.

The downward shift in the oil price highlights the fact there are so many factors that challenge the ability of airlines to make a profit.

In 2018 those challenges were much the same as past years: increases in fees and charges, flight delays because of cramped, overloaded and ill-equipped airports and ATM systems, expensive investment in information technology and the cultural changes necessary to win and keep customers.

In this world successful Asia-Pacific airlines, whether privately owned or operated at arms length from government owners, have settled management teams that enjoy the confidence of their boards.

Most of the region’s struggling carriers have their governments involved at a much deeper level of decision-making. In Malaysia, Thailand, Indonesia, India and Sri Lanka the performance of state-owned airlines has been poor.

There is a discussion to be had about the long-term viability of airlines rescued by governments and therefore usually controlled by those governments. For an airline to succeed, airline leaders must have the freedom to complete their transformations without being removed half way through the process because government owners don’t like what they are doing.

Reputable forecasts point to a rich future for the region’s carriers, both full service and low cost, but unless competent management teams are permitted to turn failing airlines around without outside interference, many of today’s flag carriers will be no more.

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