Aviation grows 283% in Asia: Why is the region fast becoming the most important hub for the industry?

The low-cost carrier business model, which focuses on offering affordable airfares with fewer frills – such as Europe’s now largest airline, Ryanair – is rapidly growing in popularity in Asia, drawing in significant investment from the private sector. As the Indian carrier, IndiGo placed the largest order of aircraft ever recorded at the most recent Paris Air Show, aviation expert and Managing Partner of AIP Capital – a leading global aviation asset management and investment firm – Jared Ailstock, is available to discuss why the Asia-Pacific region is crucial to the growth of the global aviation market and is now positioned as a prime investment market.

As of March 2023, 22.1% of global air travel was recorded in the Asia-Pacific region, according to the IATA. Although this represents a smaller share of the global market compared to North America and Europe, Asia-Pacific airlines had a 283.1% increase in March 2023 traffic compared to March 2022, more than four times larger than the next fastest growing market. Meanwhile, capacity rose 161.5% and the load factor – the measure of capacity filled by passengers – increased 26.8 percentage points to 84.5%, the second highest among the regions.

Low-cost travel now accounts for 50% of the region’s total market share – consisting of 1.42 billion passengers in 2019 – up from 14% only a decade ago. Privately owned airlines such as IndiGo, which was only founded in 2006, carried roughly 75 million passengers in 2022 – marking a significant market shift for the sector. Low-cost carriers (LLC’s) in Asia provide hybrid services at lower costs compared to full-service carriers, making them an attractive investment opportunity. Very competitive markets such as South Korea, where eight LCC’s are battling for a share of the pie, serve as testament to the importance of these for the future of the Asian aviation sector.

AIP Capital, the aviation asset management arm of U.S.-based private equity firm 777 Partners, has closed a minority investment and joint venture agreement with Korean consulting and investment firm Dreamstone Aviation Partners, giving AIP a 30% share in Dreamstone and a seat on its board of directors. This move comes amid the recovery of Asian airlines from the pandemic, driven by pent-up travel demand.

Launched in May 2023, AIP Capital has already built a $1.6 billion portfolio encompassing 30 aircraft, with another 68 Boeing 737 Max models on order. Its activities include aircraft management, operating and acquisition finance, and private credit investing, and currently has an additional $2.6 billion of capital deployed in investment grade, high-yield and distressed aviation credit. The AIP Capital team has a successful track record of leveraging relationships and a unique investment approach to deliver outsized returns on assets, with previous aircraft investments totaled approximately $5 billion across 119 assets.

Jared Ailstock and Mathew Adamo, Managing Partners at AIP Capital, are available to discuss the following:
The importance of the Asia-Pacific region for the global aviation sector
Low-cost carrier earnings and future prospects
The role private investors have in improving competitiveness within the aviation industry
AIP Capital’s role in democratising aviation
The affiliate airlines AIP Capital will be collaborating with
How AIP Capital is originating new investment opportunities within the aviation space

Jared Ailstock, Managing Partner at AIP Capital has commented on why investors are increasingly turning to aviation:

“There is a lot of really different and attractive ways to get yield in the environment we are living in right now. I think a lot of people have looked at different parts of that market and said ‘Well, the risk/return in X, Y, Z investment is way better than aviation’, and I think some of those participants wouldn’t have said that a couple of years ago.

“Where we have seen success are folks that have either been coming into the space for the very first time, because they view the entry point as being a lot more attractive today because there isn’t as much equity in the space, or guys who have been able to weather the storm and they view aviation as a core part of their strategy and they will continue to deploy equity throughout various cycles.”

See more: Chinese companies splash $5B on Nvidia AI chips

See more: Huawei, bKash combine for Bangladesh inclusion drive

See more: Foxconn tipped for $500M India parts factory move