This is part of the reason why the fortunes of the airline industry vary from region to region. Asia-Pacific and Latin American airlines have generally seen the most dramatic score declines in this year's TPA study, with North American and European airlines not falling as much.
The Asia-Pacific region offers the most stark contrast in performance between the mainline giants and smaller low-cost carriers. For example, Malaysia yields both the top-ranked carrier overall, AirAsia, and the bottom ranked, Malaysia Airlines.
AirAsia is a prime exhibit of an airline finding its sweet spot, and it could be in that zone “for a number of years,” says Terry. The carrier still has good growth opportunities, but it has also shown that it is willing to drop routes if they do not pan out—a sign of good management, says Hamlin. Jenks notes that AirAsia is following a multi-base strategy that is also succeeding for highly ranked smaller airlines such as Air Arabia, Allegiant and Vueling.
SIA once again tops the rankings in the large-airline segment, as it has done for seven of the last eight TPA studies. But its score has dropped by 23.8 points from the previous year (historical scores have been restated to reflect the change to a universal formula). Cathay Pacific has also traditionally been one of the strongest performers, but it declined by 20.4 points this year and has fallen to seventh in its segment.
The problem for SIA is finding areas where it can still expand profitably, says Jenks. Terry points out that many of Asia's traditional leading airlines are running out of organic growth options, which could be one factor behind the increasing number of low-cost subsidiaries and joint ventures in the region.
A major reason for the success of airlines such as Singapore, Cathay and the Taiwanese carriers has been their location on the doorstep of the Chinese market. But now their connecting flights between China and the rest of the world are coming under more pressure, says Jenks. The Gulf carriers have increased their presence in China, and Dyment notes that the Chinese carriers themselves are gaining ground. The region's low-cost airlines are also making inroads.
Another factor hurting Cathay, Korean Air and some of the other Asian majors is that they are more heavily reliant on cargo, says Terry. High fuel costs tend to depress cargo demand more than passenger traffic, so this hits these airlines harder.
There are some larger airlines that are flourishing in the Asia-Pacific region, however. ANA, for example, achieved a score increase that pushed it up to second in the large carrier list.
ANA obviously benefitted from rival Japan Airlines' recent foray into bankruptcy protection, but both carriers are seeing gains from restructuring and extensive cost cuts. “They've rationalized their business models, as airlines in the U.S. and Europe have done, and are doing what most [in their region] are not,” Dyment says. In contrast, other Asian carriers are still more focused on market share than “rationalization and efficiency,” says Jenks.
Latin America is another region where the larger airlines have seen a dramatic decline in TPA scores. These carriers have been hurt by economic weakness in many Latin markets, particularly Brazil's, the region's largest. Aside from domestic headaches, Brazil's carriers find it increasingly difficult to compete with overseas airlines on international routes, says Jenks. For example, China is now Brazil's top trading partner, but the Shanghai-Sao Paulo route is dominated by Emirates, he says.