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Aviation Industry Looks to China, India for Growth

Asia's aviation industry is likely to be tested in 2008 by the slowing United States economy and high fuel costs. But as Ron Corben reports from Bangkok, industry leaders remain upbeat, because they expect strong demand in India and China to keep profits strong.

Asia's airlines are expected to lead the world's travel industry in growth this year.

But travel executives worry about the slowing U.S. economy and possible increases in fuel costs.

The International Air Transport Association, IATA, forecasts that global airline profits last year fell because of high oil prices and tighter credit in economies such as the United States.

Singapore Airlines Chief Executive Officer Chew Choon Seng hopes the regional industry will be only moderately harmed should the United States go into a recession, causing growth to slow around the world.

"If the global economy pulls through the present turmoil caused by the sub-prime crisis and the credit crunch resulting thereof - if energy prices do not go up any further - that's a lot of 'ifs'," he noted. " Then I think 2008 will be very much along the same lines as 2007 - meaning demand for air transportation will remain strong."

Singapore Airlines - like other carriers - hopes China's booming economy will fuel growth. Travel experts also say rising demand in India and other Asian countries will help keep profits aloft.

And there is evidence that hope may be valid.

For China, 2008 should prove to be a boom year because of the Summer Olympic Games in Beijing. Both Shanghai and Beijing have built additional airport capacity to meet both the expected rising demand this year and for the future.

In 2007 Shanghai's airport saw passenger traffic jump 12 percent from the previous year, to more almost 52 million passengers. By 2010, when Shanghai hosts the World Expo, the airport is expected to handle 70 million passengers.

The widening reach of two major airlines - Air China and Shanghai Air - was evident in December when both joined the Star Alliance airline network.

Indian airlines, too, are expanding their global reach as passenger demand takes flight. Air India also has joined Star Alliance.

Vasudevan Thulasidas is Air India's chairman and managing director.

"India is one of the most viable markets for aviation," Thulasidas said. "Perhaps the fastest growing market in the world for aviation and I believe the largest alliance in the world there naturally has to have an important place in India."

Even European and U.S. airlines are looking to Asia for growth. Wolfgang Mayrhuber, the chairman of Germany's Lufthansa airline says the economic energy and drive of the Asia region is drawing travelers and cargo to the region.

"Coming to Asia - coming to China looking at India and the other parts you see that the development in this region is just enormous. Connecting this market with the United States, with Europe and actually all continents is the desire of the world population," Mayrhuber said.

Both India and China are pushing to expand their airport capacity to cope with rising demand.

In March, the Indian state of Hyderabad will open a new airport with an initial capacity of 12 million passengers. A 17-million passenger capacity airport opens in Bangalore a few weeks later. And the Indian government is upgrading 50 airports around the country.

China, now the world's second-largest air travel market, is spending $62 billion on building 97 new airports by 2020, up from about 147 airports now.