Story ID: 353
Asian Carriers Face a Bumpy Flight Path
By: Gregory Polek
Caption: Singapore transport minister warns of deteriorating economic conditions 
Word Count: 468
Singapore minister for transport Khaw Boon Wan warned of a darkening economic outlook and its potential for slowing air transport growth during Monday's Singapore Airshow Aviation Leadership Summit at the Raffles City Convention Center. Even collapsing oil prices, which on its face might seem to benefit the region’s airlines, reflect the highly volatile economic environment and could portend a slowdown in travel demand, he suggested.

Nevertheless, the minister predicted a good long-term outlook for aviation growth, which in itself raises challenges to air navigation service providers (ANSPs), for example. The number of passengers within ASEAN has tripled in the last decade, while the number of routes has grown by almost 40 percent to more than 1,500 city pairs, he noted.

Still, the industry continues to lag in profitability, noted IATA general director Tony Tyler. Even though fuel prices have fallen, the rise of the U.S. dollar by some 20 percent over the last 18 months has significantly limited the positive effect, Tyler said. Second, while Asia Pacific accounts for some 40 percent of the world’s air cargo market, “business has never been so tough” in that sector, he added. After peaking at $67 billion a few years ago, air cargo revenues will fall to some $50 million, projects IATA. Finally, the region’s competitive environment in general continues to grow more intense. At the regional level, low-fare carriers now control 54 percent of the market—the highest in the world.

Meanwhile, so-called “super connectors” of the Persian Gulf have increased competition in the Asia Pacific carriers’ traditional markets from Europe to Asia and down to Australia.

For Wan, the region’s reaction must involve so-called air service liberalization.

“Externally, ASEAN is working with partners such as China, the EU and others to conclude liberal air service agreements,” said Wan. “The EU and ASEAN are exploring a comprehensive air transport agreement, following the EU-ASEAN Aviation Summit at the sideline of the last airshow.”

Wan also cited the need to harmonize aviation regimes, share information and collaborate. “This is not just across governments, but increasingly government and industry also need to work hand-in-glove. Industry has the technical expertise, while governments set the rules of play.”

On the issue of safety, Wan cited the proliferation of unmanned aircraft and their potential threats, as well as heightened security threats from terrorist groups such as ISIS.

“Air traffic volumes are rising, especially on the back of the growing middle class in emerging economies,” said Wan. “However airport capacity cannot increase overnight, and the volume of airspace for aircraft to operate is finite. And we will need to share this volume of airspace with unmanned aerial systems. Safety is an increasing challenge for Air Navigation Service Providers in such an environment.”