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Turbulent forecast for Asia's airlinesReport predicts crunch time for region
 Malaysia Airlines will face increasing pressure for a costly restructure. BUSINESS TRAVELLER
YOUR SAY
YOUR E-MAIL ALERTS(CNN) -- A sustained period of boom for Asian airlines has been forecast to hit turbulence in 2006 with the next 12 months likely to be a make or break time for key players. The Center for Asia-Pacific Aviation (CAPA) said in its annual outlook report that, despite bold expansion plans among many carriers, global uncertainties could undermine future operations. CAPA's gloomy prediction could indicate that the region is finally buckling under market pressures that have forced several major Western airlines, including American and Northwest, and numerous budget carriers to the brink of bankruptcy. It could also impact on business travelers who rely on the expanding regional air network to connect to Asia's emerging powerhouse economies. Unlike elsewhere, Asia's airlines have been enjoying rapid growth in recent years, ordering an unprecedented number of aircraft for 2007 delivery. But the Sydney-based research group said the next 12 months were likely to prove the "quiet before the storm" with a predicted rise of pilot shortages and industrial tensions as airlines resort to outsourcing and wage cuts to trim budgets. "As we enter 2006, there is a higher than usual level of unpredictability, as the still-unknown impact of higher fuel costs continues to flow through consumer spending," CAPA's executive chairman Peter Harbison said. He said the coming year would be a time of consolidation as the region's airlines counted the cost of factors including high fuel costs, bird flu, Severe Acute Respiratory Syndrome and global terrorism. "If, for whatever reason, their efforts are thwarted, it places in jeopardy strategic development plans which are essential to their medium term futures and, in some cases, to survival," Harbison said. He said China's ongoing economic growth would make it a cornerstone of Asia's air industry, while India's aviation reform program and moves towards greater liberalization in Southeast and North Asia would be influential factors in 2006. CAPA said the pilot shortage would hit hard in China, where airlines would fall deeper into debt to pay for fleet upgrades. 'Significant changes'"This offers difficult choices for the administration, anxious on one hand to ensure economic viability of its three major airlines, while constantly being pressured to admit new independent entrants," the report said, Hong Kong would see the most significant changes with the emergence of new airlines forcing local operators to rethink their policy towards budget carriers. The report predicted continued frictions in Singapore as low-cost airlines expanded further, while intense regional competition from no-frills outfits like AirAsia would force Malaysia Airlines to restructure. "The airline will face a watershed year in 2006 as the government's patience runs low and AirAsia continues its growth pattern," it said. Air New Zealand and Japan Airlines were both expected to face problems as they cut costs either through lower salaries, redundancies or by decommissioning ageing aircraft. "It is improbable that these changes will be introduced without upheaval," it said. 
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