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June 15, 2008

Asian airlines better off: Analysts

As airlines in the US and Europe scramble to cut routes and ground aircraft to mitigate the impact of higher fuel cost, Asian airlines can afford to take a step back and plan their next move, according to industry analysts.

OSK Research Sdn Bhd associate director Chris Eng told Malaysian newspaper Business Times that Asian airlines were better off because they benefited from their stronger currencies as well as the region's growing markets.

"American airlines, for example, do not have the benefit of currency appreciation, so they suffer the brunt of the oil increase and need to make the most effort to mitigate its effects, like grounding their planes," Eng said.

Jet fuel prices have soared 93 per cent from a year ago to $168.1 (549.7 ringgit) a barrel this week, according to data on the International Air Transport Association's website.

A stronger ringgit, for instance, makes it cheaper for local carriers to pay for jet fuel, which is sold in US dollars.

According to Aseambankers Malaysia Bhd senior analyst Khair Mirza, airline chief executive officers agree that pockets of opportunities will emerge despite the industry's pressing challenges.

National carrier Malaysia Airlines, for one, is not in a hurry to cut routes because it wants to fill the gap that may arise as rivals cut their routes.

The airline has opted instead to reduce the frequency of flights for certain routes, cut down on discretionary spending and freeze recruitment for the time being.

Meanwhile, budget carrier AirAsia and the United Arab Emirates' Etihad Airways are not even pausing for breath in their expansion drive.

"So far, there are no plans to reduce flights or cut routes. Our commitment has always been to grow the market," AirAsia deputy chief executive officer Datuk Kamaruddin Meranun said.

He added that the key thing for the budget airline was to absorb the fuel price shock by refining its business model and growing revenue through an increase in ancillary income.

This would include selling more in-flight meals and services like priority boarding.

Etihad Airways intends to continue with its capacity expansion for the Abu Dhabi-Kuala Lumpur route.

"Of course, at this point, we are re-evaluating everything and some changes may be made later in the year. But it would be in the form of charges rather than anything else," its country manager W. Lindsay White said.

India's Jet Airways also plans to take stock of the impact of high fuel price in the next two months before reviewing operations.

"At this point in time, we will be maintaining our frequency and flights out of Kuala Lumpur," Jet Airways country manager Kavin Martinus said.

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