Encouraging signs of air traffic recovery, but challenges still exist
By Ng Baoying, Channel NewsAsia | Posted: 20 November 2009 2132 hrs

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SINGAPORE: There are encouraging signs that air traffic in Asia is starting to recover, said the Association of Asia Pacific Airlines' (AAPA) director-general, Andrew Herdman.

He was speaking on Friday at the 53rd AAPA Assembly of Presidents, where senior management of member airlines, and government and industry officials met to discuss challenges facing the aviation industry.

However, he added that the operating environment ahead will remain challenging for airlines as the global economy rebalances.

Slightly more passengers travelled on the 17 member carriers of the Association of Asia Pacific Airlines in recent months, after deterioration in traffic throughout the first half this year.

But the association said low yields mean the industry will continue to record losses.

The 17-member group includes airlines like Qantas Airways, Singapore Airlines, and Korean Air.

Andrew Herdman, director-general, Association of Asia Pacific Airlines, said: "In recent months, airlines have seen load factors recover, but low yields mean continuing losses for the industry. And rising oil prices are certainly not helping.

"Asia-Pacific airlines are expected to report further heavy losses this year. This comes on top of the US$4.8 billion losses, aggregate loss, reported by AAPA carriers as a group in 2008. IATA estimates that the global airline industry will lose US$11 billion this year."

So member airlines will have to continue to manage cost going forward. Industry over-regulation could also pose a challenge.

Mr Herdman said: "While airlines grapple with this multiplicity of commercial and operational challenges, I'm sorry to say that governments appear oblivious to calls of industry for less interference and greater efficiency.

"Restrictive policies and unfair taxation are without doubt undermining recovery. In order for the industry to achieve long-term sustainability and growth, it's time for governments to wake up to the idea of removing policies that have inhibited sustainable development for decades."

This will be key for regional carriers to stay competitive compared to those in America and Europe, which have been consolidating.

Chew Choon Seng, CEO, Singapore Airlines, said: "With neither the geographic mass and market size of the US, nor the economic integration of the EU, and 60-year-old prohibition against cross border mergers, how will airlines in the rest of the world, like us, compete with these combinations and their economies of scale and synergies?"

The AAPA also noted that environmental challenges will be one of the key issues going forward. And it wants a global, sectoral approach to aviation emissions. It said current views are split between developed and developing nations.

Looking ahead, the AAPA sees global air travel demand doubling over the next 15 years, led by the Asia-Pacific region. And airlines can tap that by working towards better cross-strait relations.

Mr Herdman said: "If we look beyond the current downturn, global air travel demand is expected to double over the next 15 years. And that will be led by faster growth in the Asia-Pacific region which is set to become the world's largest aviation market.

"Progress towards greater freedom in the movement of passengers and goods within ASEAN, improving cross-strait relations and greater cooperation among APEC economies can only stand this region in good stead."

Singapore's Second Minister for Transport, Lim Hwee Hua, noted that the signing of the ASEAN Roadmap for Integration of Air Travel Sector has gone on to include all ASEAN cities in stages.

She said: "When this is endorsed by ASEAN transport ministers at the end of the year, we will have hit the home stretch towards true ASEAN Open Skies.

"Setting our sights beyond ASEAN, we will be then be well-positioned to engage as a bloc, to liberalise the air services regime with major economic powerhouses such as China and India." - CNA/vm