Thursday, September 22, 2011

Budget airlines may revive Macau International Airport

As the local aviation industry begins to claw back some lost ground, low cost carriers may be the solution to revive the airport, said the Centre for Asia Pacific Aviation

If a few months ago the Macau International Airport was heading for a ‘perfect storm’, the future now looks less gloomy as interest in Macau is picking up again, said the Centre for Asia Pacific Aviation (CAPA), a provider of aviation market intelligence, analysis and data services.

According to the latest report, low cost carriers (LCC), especially those emerging in North Asia, particularly Korea and Japan, may be the answer officials have been looking for to revive the local airport.

“Foreign LCCs and Macau-China Mainland traffic is now driving traffic. The Jetstar Group has even identified Macau as a potential hub option,” CAPA says, adding that “2011 is expected to be a year of stabilisation for Macau, as it begins to claw back some of the lost ground of the past few years”.
“However, growth will likely remain moderate for the foreseeable future,” it warns.

Five months ago CAPA had said the local airport would face “more serious challenges” this year, amid a timid recovery of the aviation industry after a downturn. In the April report, the centre stressed that these challenges were out of Macau International Airport Company’s (CAM) control, calling it a ‘perfect storm’ of external events and strategic shifts in the industry.

“Macau’s aviation market has struggled since 2007 under a strategic, political and operational stalemate, which has seen the collapse of one [Viva Macau] of its two airlines and a sizeable contraction in air passenger and cargo numbers,” CAPA says in this week’s report.

But air traffic is picking up again as for the third consecutive month the number of passengers handled by the local airport increased on a year-on-year basis in August. “The three-month rising trend follows 10 consecutive months of year-on-year declines between August 2010 and May 2011.”

Optimistic forecast

While exact figures are yet to be released, the airport handled around 396,000 passengers last month, an 8.8 percent year-on-year increase.

The comeback began last June, when passenger traffic increased 5 percent to 343,000, with growth of 6.3 percent in July to more than 379,000 passengers.

However last month’s figures are still a far cry from the highs recorded in April 2007, the only month in which the airport handled more than 500,000 passengers.

Macau International Airport reported a 16.8 percent year-on-year decline in revenue in 2010, handling 4.1 million passengers (-4% year-on-year), 52,000 tonnes of cargo (stable) and 37,000 aircraft movements (-8.7%) during the year.

According to CAM, the airport expects to handle 4.2 million passengers, 53,000 tonnes of cargo and 39,000 aircraft movements in 2011.

“Passenger levels are down by 5 percent in the first seven months of 2011, so the full year target could be optimistic,” CAPA said.

“If achieved, it would represent a return to passenger levels last seen in 2005, though freight levels are expected to be around half of the volume handled in 2002.”

The airport’s Master Plan, finalised last July, includes an expansion project slated to accommodate 5.6 million passengers in 2015 and 15 million in 2030, amid plans to further integrate Macau in the Pearl River Delta.

But former airport director José Carlos Angeja, who left the post on September 11, called the project “extremely ambitious”, questioning whether it is really essential, since “the majority of tourists, 80 to 85 percent, don’t use the airport and come to Macau by land.”

He also said he believes that the MSAR airport may not survive regional integration. “Macau’s air space is small, congested and I think these factors can be taken into consideration and that may radically change the plans for the airport,” Angeja said.

Challenges ahead

The most significant and most permanent factor affecting traffic to Macau has been the liberalisation of cross-Strait services between Mainland China and Taiwan.

“Over the past 12 months, there has been a further 19.5 percent slump in weekly capacity between Taiwan and Macau,” the report pinpoints.

Japan-Macau capacity has also declined heavily, by 37.4 percent year-on-year, as a result of the overall decline in demand following the March earthquake and tsunami.

Services between Macau and the Mainland have meanwhile increased strongly, by 35.7 percent, with China overtaking Taiwan as the largest aviation market for Macau.

Within this plan, Air Macau has expanded strongly to the Mainland, as it diverts capacity away from Taiwan.

Capacity to Singapore has expanded over the past 12 months, by 25.1 percent, and also to the Philippines by 13.7 percent, according to the report.

While the outlook is improving, “the challenge - and opportunity - for aviation interests in Macau, is to attract more visitors to the city from outside the day-trip catchment that can access its leisure/gaming facilities by the ground-transportation network,” the report said.

Tourism experts have said Macau should invest more in family-oriented facilities in order to become a global tourism and leisure centre and increase visitor’s length of stay.

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