To accommodate the market, 1,834 new aircraft were ordered last year. Although that order was lower than the record 2,057 in 2005, it was still high.

The International Air Transport Association (IATA) predicts that Asia-Pacific will account for over one-third of new orders and Chinese airlines alone will account for 15 per cent.

Fuelling the growing orders is the further expansion of low-cost carriers, which now account for 30 per cent of the US and intra-Europe markets. Budget airlines are growing rapidly in other regions including Asia, where they now have a 6-per-cent share. Low-cost airlines accounted for 28 per cent of orders for new aircraft last year.

High fuel prices and operation costs now account for more than 25 per cent of an airline's expenses, providing an incentive to replace older aircraft with new, more fuel-efficient planes. Large new orders demonstrate the strong confidence in the future prospects of the global airline industry. However, there are also increased risks of excess in some areas or routes.

Based on a close analysis of the current order and fleet level, there are positive signs but also risks.

The delivery schedule will be well managed. New aircraft as a percentage of the current fleet will still be less than the peak reached between 1991 and 1999.

Delivery will focus on the fastest-growing markets, particularly China and India, where the great potential for growth could absorb new capacity additions. New aircraft will replace older ones.

The IATA said India and China were both growing 8-10 per cent each year. China is now the world's fourth-largest economy. Excluding Japan, Asian economic growth was 7 per cent - double the world average of 3.5 per cent.

The organisation expects growth in Asia to be above the global average. Passenger traffic is expected to grow at 6.5 per cent and cargo traffic at 8.5 per cent until 2009.

Asian carriers led profitability with US$1.5 billion (Bt51.81 billion). Even within Asia, it is a mixed picture. Some carriers are among the most profitable. Others are struggling. Operating margins averaged less than 2 per cent, still the best performance in the world.

But there are some threats that could potentially reduce even this small profit.

While low-cost carrier competition is new to this region, Asian network carriers are better prepared than many of their US or European counterparts. The supporting growth of new markets like India is one reason. But the fuel crisis is another. Modern aircraft consume 3.5 litres per 100 passenger kilometres. The A380 and Boeing 787 will take this below 3 litres. This is good for the environment and good for airline economics.

Suchat Sritama

The Nation