It may come as a surprise amid recent headlines of plunging profits for carriers in Singapore, Malaysia and Australia, but airline experts expect soaring earnings for the industry globally.
Collective earnings are expected to hit US$18 billion (S$22.7 billion), the highest in at least a decade, with profit margins at 2.4 per cent - the fattest in four years - the International Air Transport Association (Iata) said in its latest June forecast.
Iata's prediction comes as Asia-Pacific airlines reel as competition hots up, be they low-cost carriers or flagships such as Singapore Airlines (SIA). This is prompting a relook at airline consolidation in Asia, until now a problem in such a politically and economically varied region.
Indeed,in what may be a signal of a new era to come, SIA is set to launch Vistara, a new joint-venture New Delhi-based carrier, with Indian conglomerate Tata.
So is it the best or worst of times for the industry? It's both, aviation analysts say.
Two weeks ago, Australian flag carrier Qantas reported a A$2.8 billion (S$3.2 billion) loss for the year to June, its largest ever.
A day later, rival Virgin Australia unveiled a A$356 million net loss for the same 12 months.
Malaysia Airlines, which was already in bad shape before a flight disappeared in March and another crashed in July, is cutting 30 per cent of its 20,000 headcount.
Here, SIA's profits plummeted 71 per cent to $35 million in the three months to end-June, battered by competition, which forced yields down.
Global profits are rising
BUT when looked at industrywide, airlines are in a better place today than in the last few years, said Iata chief executive officer Tony Tyler at its annual meeting in Qatar in June.
"We are increasing profitability even with jet fuel prices above US$120 a barrel (since 2011)," he noted. "For the first time, the global load factor (the percentage of seats filled per aircraft) looks like it will average over 80 per cent for the year. And fuel efficiency continues to rise."
While overall industry health is improving, the Asia-Pacific is not doing so well.
Iata projects that SIA, Cathay Pacific and other Asian carriers will earn a collective profit of US$3.2 billion this year which, while higher than last year's US$2 billion, is a per passenger profit of just US$2.98.
With the exception of Africa, all other regions are expected to do better. North American carriers lead the pack with an estimated profit per passenger of US$11.09.
So what ails carriers in Asia, the world's largest air travel market?
Overcapacity, especially for intra-Asian travel, is a big problem, says a think-tank, the Centre for Asia Pacific Aviation.
This has been fuelled mainly by low-cost carriers that have expanded aggressively, prompting full-service airlines like SilkAir to also add capacity.
In South-east Asia alone, the low-cost carrier fleet grew by about 19 per cent last year to 485 aircraft and is expected to grow by another 20 per cent this year, the think-tank says.
Asia now has about 45 low-cost carriers - almost the same as Europe and the United States combined.
The impact: Too many airlines operating too many flights, and not enough people to fill seats.
Carriers are forced into price wars which then lead to low yields and, in extreme cases, losses. This is what happened to Qantas and Virgin Australia, said Associate Professor Terence Fan of the Singapore Management University.
SIA is now offering discounts as high as 40 per cent - including return fares of $218 to Bangkok, $328 to Hong Kong, $688 to Sydney and $1,388 to London.
Outside Asia, the aggressive expansion of Middle Eastern carriers Emirates, Etihad Airways and Qatar Airways has had a big impact on Asian carriers in long-haul premium markets.
A prolonged weakness in the global air cargo sector is another problem for Asian carriers, which account for almost 40 per cent of the global air freight market.
Air cargo demand has been in the doldrums since 2010, due mainly to an "unusual weakness" of world trade related to a trend of companies onshoring production, Mr Tyler said in Doha.
While demand is expected to pick up this year, freight rates are expected to fall 4 per cent this year compared with last year.
Long-term solutions for Asian carriers
TO COPE with falling yields and other challenges, Asian carriers, including low-cost airlines, have started applying the brakes on fleet and network expansion.
In Singapore, Tiger Airways has shrunk, while Jetstar Asia has stopped growing.
This is a good short-term move that should give airlines pricing power to increase yields and profit margins, said aviation experts.
For long-term viability, though, Asia's aviation sector needs a major overhaul. Airlines must be allowed to merge freely across borders.
In many countries, Singapore included, airlines must be majority-owned and funded by locals and home-based firms. This is to prevent foreign control of national carriers.
In the United States, industry consolidation - starting with the Delta Air Lines-Northwest Airlines merger of 2009, followed by the mergers of United Airlines-Continental Airlines and American Airlines-US Airways - helped pull the carriers from the edge of bankruptcy to profits, said Prof Fan.
In Europe, KLM and Air France joined hands, as did British Airways and Iberia.
While such tie-ups are no doubt more complicated in diverse Asia, the wheels of consolidation have started to turn.
Mr Mark Carlson, Asia-Pacific business development director at industry consultancy OAG, said: "What we can expect to see in this part of the world is the rise of a few dominant brands like AirAsia with subsidiaries in the different markets."
Within the 10-member Asean grouping, the push for integration and open skies, which has picked up pace in the last five to six years, has led to fewer flight restrictions for carriers from member countries and the opening of new routes and markets for travellers.
Asean's ultimate goal - though no date has been set yet - is a single aviation market which will mean that the longstanding walls that now prevent an airline from holding a majority share in a carrier in another Asean country will come down. Airlines in the region will then be free to merge across borders if it makes business sense to do so.
To fly high in a region where the demand for air travel is expected to continue to soar in the coming years, Asian carriers must do more than just suspend or slow growth and undercut each other. Industry consolidation and integration is a must.