Southeast Asia is expected to buy 10% of the world’s new jets over the next two decades, at a time when regional airports are already buckling under the strain of record flight volumes.
US aircraft manufacturer Boeing forecasts the seven biggest markets – Indonesia, Thailand, Malaysia, Singapore, the Philippines, Brunei and Vietnam, all members of the Association of Southeast Asian Nations (Asean) regional grouping – would need 4,210 airplanes, from a total global demand of 41,030, over the period.
The projected combined acquisition cost at 2017 prices: US$650 billion.
Boeing projects passenger and cargo growth of 6.2% a year in that time, the fastest of any region. In 2016, the company forecast demand for 3,750 planes costing US$550 billion. About 75% of jets are for regional airline expansion and the rest for replacement.
Demand could be even higher, as the European Airbus consortium expects 7% annual passenger growth in Southeast Asia over the next 20 years. It, however, has not released a breakdown of projected aircraft orders.
Low-cost Indonesian carrier Lion Air has the biggest outstanding order book for more than 400 airplanes split between Boeing and Airbus. It is currently the biggest buyer of planes worldwide. State-owned competitor Garuda Indonesia has 90 jets on order.
In Malaysia, budget airline AirAsia has about 300 new planes in the pipeline and Malaysian Airlines almost 60, with 41 of the latter classed as firm orders.
A memorandum of understanding was signed with Boeing in early September, diplomatically coincident with Malaysian premier Najib Razak’s visit with US President Donald Trump at the White House, for the carrier’s latest batch of 16 aircraft.
Vietnamese budget carrier VietJet has more than 200 airplanes on order, though there are reports that some could be rescheduled. Local rival state-run Vietnam Airlines is waiting for eight new planes, with 11 others already delivered, and its budget subsidiary Jetstar Pacific, which is 30% owned by Qantas, has 10 aircraft on order.
Thai Airways will take delivery of almost 30 replacement aircraft over the next five years as part of a fleet modernization program. Singapore Airlines announced in February it would buy 39 Boeing wide-body planes to meet future growth and replace older jets.
The Malaysian, Thai and Vietnamese orders are believed to have been in part political gestures, aimed at smoothing tensions over their respective countries’ mounting trade surpluses with the US. Trump has prioritized narrowing bilateral trade deficits in his Asia policy.
Finding somewhere to put all these new planes, however, will not be easy. Every gateway airport in the region other than Kuala Lumpur will face either runway gridlock or saturated terminals by 2020, and there are even doubts that enough aircrew will be available: by 2035, Asia-Pacific airlines alone will need to hire 245,000 pilots.
Runways at Singapore’s Changi Airport, which handled 58.7 million passengers in 2016, will have reached maximum capacity by 2019. Manila is already at that point, and now limits aircraft movements to only 40 per hour.
Terminal buildings at Bangkok’s main Suvarnabhumi International airport (56 million passengers in 2016), Jakarta (54.1 million) and Manila (39.5 million) are also at full capacity. Bangkok’s former gateway at Don Muang was reopened to take some of the load, mostly by shifting low-cost services, but both facilities are clogged again.
Tan Son Nhat Ho Chi Minh, Vietnam’s busiest airport, handled 32 million passengers in 2016, up 28% on 2015, but is designed for only 25 million. Hanoi has a capacity of 25 million and took 20.5 million passengers in 2016; with projected 20% passenger growth, it, too, will be tested.
The only major airport with ample capacity is Kuala Lumpur, used by 52.6 million passengers in 2016, which has three runways and can handle 70 million following a terminals expansion in 2014.
Every gateway airport in the region other than Kuala Lumpur will face either runway gridlock or saturated terminals by 2020, and there are even doubts that enough aircrew will be available
Delays are taking a heavy financial toll, mostly on carriers with scheduled services that have less flexibility to switch routing. Philippine Airlines said last year it was losing US$60 for every minute a plane was held up – an annual revenue gap of US$40-US$45 million.
Diverting more low-cost flights to secondary airports would help ease the burden on gateways, but few are equipped to handle the passenger volumes being generated by carriers like AirAsia and VietJet. The larger hubs will continue to attract most expansion related investment.
There are 18 major airport projects in the regional pipeline with a total value of US$34 billion, including seven in Vietnam and four in Indonesia. One of the Vietnamese projects, at Long Thanh near Ho Chi Minh City, has been put back two years and financing difficulties could also affect works in Indonesia and Malaysia.
Billions of dollars more will be needed to improve transport links to airports and upgrade handling and communications systems. A temporary option, currently being explored by the Philippines, is to boost capacity by making the existing facilities more efficient.
Airlines have admitted they were caught out by the explosion in air travel, though they probably shouldn’t have been. Southeast Asia has a swelling middle class of around 200 million, expected to double by 2020, with lots of disposable income and a travel itch.
China has 784 million people with enough funds to tour and is now the biggest source of tourists for destinations like Thailand and Malaysia. Most arrive on budget airlines that are capitalizing on an ‘Open Skies’ policy liberalizing air routes.
The choke point will come once discount carriers, which now offer predominantly short-haul services to smaller destinations, begin offering international flights to major cities. AirAsia has spread its wings across Asia, and VietJet and Lion Air aren’t far behind.
One obvious solution is to upgrade more secondary gateways to international standard and provide fast transport connections to the hubs. Thailand and Indonesia are already moving in that direction, but the infrastructure is still on the drawing board.
In the meantime, long queues at airport check-in counters and flight delays will become part of the travel experience in Southeast Asia, even as passengers are offered a bigger range of destinations and airline options than ever before.