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Asia abound

Over the past decade, the Asia-Pacific region has become the fastest-growing in the world for airline activity. Alan Dron rounds up the latest developments

The Asia-Pacific’s huge population, and the percentage of that population that now has enough disposable income to make air travel a viable proposition, means that for well-run airlines in the region, success is there for the taking. Asia is expected to account for approximately 40% of future airliner production.

However, there are some factors that may hold back this growth. A lack of infrastructure, inconsistent regulation and environmental pressures all potentially conspire to negatively affect airline development.

Firstly, however, to expound some of the positives:

“We’re in the fortunate position that air travel has been growing at above the trend rate for the past five years, and that continues,” says Andrew Herdman, Director General of the Association of Asia Pacific Airlines (AAPA), speaking to Low Cost & Regional Airline Business shortly after his organisation’s 61st Assembly of Presidents in Taipei, in late October. “Cargo,” he adds, “after some difficult years, in the last 18 months has picked up quite strongly.”

Within the huge Asia-Pacific region, China is almost a story of its own in terms of its sheer scale. The International Air Transport Association (IATA) predicts that by 2036 the country will be producing an additional 2.1 billion travellers a year – more than double today’s volumes. That accounts for more than half of the projected growth for the entire world.

Perhaps unsurprisingly, given this rising surge of traffic, Chinese carriers have exploded in size over the past decade. Some 20% of future airliner production is predicted to be heading for the country, and the Chinese market, both domestically and internationally, is huge. In the past year, approximately 130 million of outbound travellers were from China, a figure that would have been unthinkable just a decade ago. And that number seems certain to continue to grow.

That growth brings problems with infrastructure. One of the major themes at the AAPA conference was the infrastructure challenge – runways, terminal capacity and airspace management.

This situation, of course, is not unique to Asia. All around the world, airports and airspace are becoming increasingly congested. And the extremely long lead times for major infrastructure projects, together with their capital-intensive nature, mean that this congestion is not easy to remedy swiftly.

“In China, they’ve got a lot of airport capacity, but even so, the major airports are congested at peak times of the day, and airspace within China is congested because of the rapid growth of commercial air travel,” Herdman states.  

“Elsewhere in the region, developing markets like Vietnam, the Philippines and Indonesia are other examples where market growth has outpaced expectations. You have capacity problems at major airports. There are some projects underway, but it’s often a case of ‘too little, too late’ and there have to be more ambitious plans.”

In his speech to AAPA in Taipei, IATA’s Director General, Alexandre de Juniac, emphasised these points and noted that in India, its experience in funding airport development with private capital had eased congestion, but burdened the industry’s development with high costs.

De Juniac said that from his experience in Europe, privatised airports might be extremely well-run, but there remains a question as to whether they are motivated to be efficient and to control costs. Herdman added: “The private sector is encouraged to bid high to get the project in the first place and they have to recoup that. Once established, they have a degree of market power and are in a very strong position to negotiate.” In many cases, they are effectively monopolies: “Airports aren’t really competing with each other.”

IATA’s experience over the past three decades has been that airports perform better in public hands, noted de Juniac, adding that privatisation has been “largely disappointing”.

“We have some of the world’s best airports,” adds Herdman. “Some are government-owned, or government-owned, but run by a corporation. There’s a role for the private sector finance but there’s a problem if the government is conflicted as to whether it’s selling the assets or reaping the rewards.  You need a balance between the needs of the users.” >>

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