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Asia's airlines on the up but concerns about rate of ascent

By Dean Irvine, CNN
updated 12:02 AM EST, Sun February 19, 2012
Rusdi Kirana (R), Lion Air founder, shakes hands with Dinesh Keskar (L) of Boeing at the Singapore Airshow on February 14, 2012.
Rusdi Kirana (R), Lion Air founder, shakes hands with Dinesh Keskar (L) of Boeing at the Singapore Airshow on February 14, 2012.
STORY HIGHLIGHTS
  • Smaller deals and agreements a feature of Singapore air show
  • Event books $31 billion in deals, triple the previous level
  • Indonesia's Lion Air seals deal for 230 next-generation 737s
  • Budget Indian airline Go Air signs agreement worth $1 billion

(CNN) -- Plane makers swooped to conquer at Asia's biggest air show but rather than picking up any huge deals, smaller agreements and partnerships were the order of the day.

The event still saw $31 billion worth of deals announced; triple the total of the previous show in 2010. However, two thirds of that was down to Indonesian low-cost airline Lion Air formally sealing its deal for 230 next-generation Boeing 737s, first reported last year.

"The fate of the commercial aviation industry generally follows the fate of national economies," says Siva Govindasamy of Flightglobal. "The mood generally is a little bit uncertain, but (the outcome from the show) is a little better than expected."

Indonesia's economy is one of Asia's fastest growing -- GDP grew there by 6.5% last years -- and Lion Air also announced another deal this week for a fleet of short-haul planes from ATR for its subsidiary, Wings Air.

Budget Indian airline Go Air joined the billion-dollar deal club by signing an agreement with engine maker Pratt Whitney, worth around $1 billion.

"(These deals) shows a greater trend that developing countries are leading the world in demand (for new planes)," says Govindasamy. "Indonesia is an underdeveloped market; there is no doubt there's great potential in the region."

But on the same day that Air Australia went into administration stranding 4,000 passengers, there is some apprehension that the region could be blighted by airlines with too many planes and not enough passengers to fill them.

"When airlines start to fail that's a bit of a worry. India definitely has over-capacity. Any airline has to be cautious about adding capacity irrationally. Historically the airline industry hasn't done that," says Govindasamy.

AirAsia has found itself in a good position, and perhaps an example to others, says Govindasamy, by building up a good base in its home market before taking on the world.

"If you don't get the base right, you won't succeed in this industry."

The week also saw Chinese plane maker Comac announcing another corporate client (Bank of China) for its yet to be built C919 jet.

But these smaller deals belie the impact China's aviation industry may have in two years' time when the jet is first trialed, believes the Singapore Air Show organizer, Jimmy Lau.

"The market is very dispersed in China, but when the Comac C919 plane goes to market its capability will be stronger," he says.

China's market is unique and Govindasamy believes its airlines are in a good position to not do things irrationally.

"They are doing a lot of things right, but then they are supported by the government and often fulfilling a national need in terms of flying routes that might not be so profitable."

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