Growing economies, bigger cities and increasing wealth will see more people flying, driving the need for larger and more efficient aircraft. Airbus has forecast that growing incomes and the explosion of low-cost carriers (LCCs) will lead to a sharp demand for 10,000 new aircraft from airlines in the Asia-Pacific region in the next 20 years.

Asian LCCs will play an increasingly important role in global aircraft clusters as the number of routes served by them rises. The number of routes in Asia has grown sixfold in the past 10 years.

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The main beneficiaries of this will be tier-two and tier-three producers of products such as on-board avionics, electronic components and engine accessories. Singapore, for example, is now Asia’s leading aviation hub.

Yet while Asia’s airlines made a net profit of $3bn in 2012, the International Air Transport Assoc­iation (IATA) reported that these profits have become increasingly thin due to soft cargo markets, high fuel prices and slower economic growth in China. Additionally, most of Asia’s ground transport infrastructure is weak. Regional challenges also include regulatory and safety challenges.

Despite such challenges, the long-term outlook is one of sustainable growth, with China leading the way and India close behind. Boeing experts reported that China’s commercial aircraft fleet would grow to 5980 by the end of 2031, compared with 1910 at the end of 2011. Additionally, more than two-thirds of the world’s airports under construction last year were in China. 

Honeywell also reported that India’s aerospace industry is a booming commercial aviation industry with rising technological capabilities. Add to this increasing market liberalisation, and it is evident that India’s aerospace industry is poised for take-off. As a consequence, it is clear to see why IATA reported that 15 megacities in Asia promise further substantial network developments in the coming decades. 

Lawrence Yeo is CEO and principal consultant of AsiaBIZ Strategy, a Singapore-based management consulting firm providing Asia market research, market entry and expansion strategy and export/FDI promotion services. www.asiabizstrategy.com