Press Release No.:
Date: 18 February 2008
The Race for Industry Leadership Opportunities and Challenges for Asia
Singapore - The International Air Transport Association (IATA) called on Asia to join in the race for industry leadership. “Asia has over 50% of the world’s population, and will be our largest single market by 2010. Asia needs to be part of the race to lead the industry with sound policies and innovation, along with the commercial race for market share,” said Giovanni Bisignani, IATA’s Director General and CEO in his keynote address at the inaugural Singapore Airshow Aviation Leadership Summit.
Bisignani identified the case for industry change in Asia based on three challenges - (i) Middle East competition, (ii) shortage of skilled personnel, (iii) declining profitability. At the same time, Bisignani pointed too three opportunities for Asian leadership to push forward an industry agenda for change - (i) liberalisation, (ii) security and (iii) environment.
- Middle East Competition: “Everyone wants a piece of the growth pie. The Middle East is spending US$38 billion on infrastructure to position itself as a global air hub. Dubai now handles nearly as much traffic as Singapore, and is connected to 37% more destinations. And plans for a super airport at Jebel Ali will be the world’s biggest, handling up to 140 million passengers a year,” said Bisignani.
- Skilled Personnel Shortage: “Finding skilled personnel will be a challenge. 17,000 new pilots need to be trained a year to operate the 16,000 new aircraft needed by 2020. That is 40,000 more than current capacity. With the fast growing markets in Asia, there will be a large requirement for all licensed personnel – pilots, mechanics and cabin crew,” said Bisignani.
- Declining Profitability: “The profitability of Asian carriers has gone from US$1.7 billion in 2002 to US$700 million last year. The 40% capacity expansion over the same period has seen yields decline, as well as profit margins - from 4% to less than 1%. Asian capacity set to expand 8.8% in 2008, and demand expected to grow by only 6.4%. This is not a recipe for long-term health,” said Bisignani.
Bisignani identified three opportunities for Asian leadership to effect industry change.
- Liberalisation: The archaic bilateral system requires governments to negotiate international markets, resulting in a fragmented industry. The largest airline represents only 5% of total traffic. And in Asia 13 airlines compete for 50% of the market. “ASEAN’s decision to liberalise traffic between capital cities in 2008 is a step in the right direction. But we need bolder leadership that will set the industry on a completely different course. If Asia acts as a region, it can balance the traditional leadership of the US and Europe, bringing a bolder approach and exploring new ways of doing business,” said Bisignani. He also suggested the formation of a new and unique regional institution for coordination of air policy issues involving both government and industry.
- Security: “The industry is much more secure than in 2001. But the system is still an uncoordinated mess. We have not harmonised measures across borders. Singapore took a major step and signed an agreement with the EU to harmonise the security of duty-free items. But why was it not an agreement that covers Asia with mutually recognised standards? Our passengers deserve much better leadership than the patchwork of different standards and procedures we have today. Asia should be thinking of a regional security area with harmonised rules and tools using the best modern technology,” said Bisignani.
- Environment: “Aviation is 2% of global carbon emissions. Our vision is to achieve carbon neutral growth, leading to a carbon-free future. And Asia can play a leadership role in this vision. With an average fleet age of 9.8 years - two years younger than the global average of 11.8 - Asia has a head start. But the leadership vision must be broader - bringing greater harmonisation of air traffic management, setting regional efficiency targets and providing positive economic support for research into alternative fuels and radical aircraft design,” said Bisignani.
“Asia is our industry’s present and its future. Running an airline is tough business, and Asia has done well. The race for market share and growth has been won. Now we need a unique race for leadership that involves key players from the region from fast developing China and India, to more traditional players like Japan, Singapore or Australia, and everyone in between. The leadership vision is needed to build an industry that is even safer, more secure, and delivering an industry that is financially sound and efficient, said Bisignani.
Notes for editors
- IATA represents some 240 airlines comprising 94% of scheduled international air traffic.
- IATA has aligned the industry with a four pillar strategy to address climate change: (1) invest in new technology, (2) fly planes effectively, (3) build and operate efficient infrastructure and (4) call for positive economic incentives to encourage improved fuel efficiency and a reduction in CO2 emissions. This strategy, along with a target to improve fuel efficiency 25% by 2020, was endorsed by the States of the International Civil Aviation Organization at their Assembly in September 2007.
- Full text of Bisignani’s speech