ABSTRACT
This chapter examines the impact of the Asian economic crisis on the airlines and the responses being pursued by airline management and governments. It focuses on long-term impacts of the Asian economic crisis on cost competitiveness of Asian carriers and on the regulatory environment. Informal business networks, close relationships between financial institutions and their borrowers, and low interest policy loans backed by governments were mechanisms that facilitated rapid growth in Asia, but the financial sector became exposed to risky investments. A lack of control over lending practices and inadequate disclosure and reporting requirements have been pinpointed as fundamental weaknesses of the Asian economies. The economic recession in several major Asian countries including Japan and South Korea had a major impact on air travel demand. Far from being a flight back to protection, the Asian economic crisis appears to have shifted air transport policies of Asian governments far more to the direction of liberalization.
