Asia may be seeing the strongest airline passenger growth, but its carriers are struggling to eke out profits, dented by overexpansion.
"We're seeing an awful lot of capacity," Timothy Ross, head of transportation research for Asia Pacific at Credit Suisse, told CNBC. "It's highly competitive and that has seen Asian profits, both as a proportion of global totals and in absolute terms, probably trend down for the last three years,"
Asian airlines' struggle to keep profits aloft has come as their U.S. counterparts are seeing some of their most profitable years since the mid-1990s and the European market's pricing is becoming less competitive, he noted.
It's not for a lack of passengers. The region's passenger traffic is forecast to rise at a 5.7 percent compound annual growth rate (CAGR) over 2013-2017, compared with expectations for 2.2 percent CAGR in the U.S., according to data released in December by the International Air Transport Association (IATA). It expects traffic within the Asia-Pacific region will account for nearly 32 percent of all air-travel passengers by 2017, outpacing Europe and North America's around 23-24 percent.
"There's more natural demand growth. There's more area for demand to grow as people get wealthier and want to travel," Ross said. But he noted that Europe's experience with budget carriers suggests Asia could face a protracted battle with overcapacity and low shareholder returns.
Others also noted that Asia's airlines face a challenge balancing growth and profitability.
"Some of the challenges that they're having are how do they expand and how do they expand in a financially sound way," Jonathan Galaviz, partner at Global Market Advisors, told CNBC.
"The return of equity, which is really the measurement of how to build long-term stockholder value, is very low for many of these airlines because they're focused on growing, they're focused on getting distribution in Asia, but the question is, can they do so in a manner that's financially sustainable and also able to deliver the returns to investors as they go along that path?"
Asia's airline market is certainly competitive: 75 percent of its routes are flown by at least three carriers and 27 percent have at least five carriers, according to data from the Association of Asia Pacific Airlines. By comparison, in Europe, 45 percent of routes are served by only one or two airlines, AAPA said.
The European and U.S. markets met the capacity challenge by consolidating, but that's not as likely to happen in Asia, Ross said.
"It's made difficult by national ownership rules and that's always the stumbling block that's made it easier in Europe and easier in the U.S.," Ross said.
But some believe capacity in the region may begin to ease.
"I see really strong light at the end of the tunnel," Tony Fernandes, CEO of Malaysia-based budget carrier AirAsia, told CNBC last week.
For one, he expects Malaysian Airlines will rationalize its service. Reuters reported Tuesday, citing sources, that about 25 percent of Malaysia Airlines' 20,000 staff will likely be retrenched as routes are cut under a fresh restructuring plan for the money-losing, disaster-stricken carrier.
In addition, "we're seeing rational behavior in Indonesia for the first time, probably in my period as a CEO," Fernandes said. "We're now down to three airlines in Indonesia. I think some of the exuberance has been taken out and some realism is coming in, which bodes well for AirAsia."
But at the same time, AirAsia itself is still adding capacity in fresh locations. AirAsia India began flying in June.
"The prize is huge because there are one billion people," Fernandes said.
—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1