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Sun, Apr 08, 2007

Asian Aviation Faces Leadership Challenges

IATA Urges Asia's Greater Leadership Role In Shaping Global Aviation Industry

The International Air Transport Association (IATA) Friday urged one of the major players in the aviation world, Asia, to take a greater leadership role in shaping what is now a global aviation industry.

Said IATA Director General and CEO, Giovanni Bisignani, "Asia is a big part of the aviation world. By 2010, intra-Asia traffic will be the largest market in the world, accounting for one third of the world's traffic. Critical mass comes with leadership responsibilities."

At the Asia Pacific Aviation Media Association's (APAMA) Aviation Lecture in Singapore, Bisignani identified three opportunities for Asian leadership:

  • Technology
  • Policy
  • The environment

Bisignani also announced a revised industry profit forecast of $3.8 billion for 2007, with North America $-600 million (which would be $+4.4 billion excluding restructuring costs); Europe $-2.4 billion; Asia-Pacific $+1.7 billion.


Labor costs have traditionally given a competitive advantage to Asian carriers. However, noted Bisignani, European and North American carriers have reduced those costs over the years: Labor now accounts for 27% of costs for European and US carriers versus 15% for Asian carriers. 

"As the labor cost gap narrows, technology is the key to competitiveness," said Bisignani. 

Electronic ticketing (ET), he said, will save the industry $3 billion. While China is at 95% ET penetration - well above the global average of 78 percent - the rest of Asia is the same level as Africa, 68 percent, because of the slow growth of ET in Japan and Malaysia. 

"We will make our 100% target by the end of this year," said Bisignani, "but it will require a major effort by some carriers to catch up." 

Bisignani also suggested better use of technology to simplify passenger travel and improve air traffic management. 

While some Asian countries already use biometrics for immigration processing, they focus on local residents and are not linked systematically. 

"Effective systems are needed to handle the additional 250 million passengers passing through Asian airports in 2010. Asian governments have an opportunity to link their systems to make Asia a world model for a new way of travel," he said. 

Bisignani also urged Asia to lead air traffic management by implementing cost-effective technologies in line with global standards.

"Focusing more on aircraft capabilities, we can reduce the need for expensive and labor intensive ground based facilities, while improving both safety and efficiency, thus increasing airspace capacity."


Bisignani also called on Asia to develop a regional policy approach to industry issues.

"Governments are responsible for safety. However, not all governments in Asia are at the same level in safety oversight. Global standards need to be maintained by all. Asia's governments need to start incorporating the IATA Operational Safety Audit (IOSA) into their safety oversight programs in order to drive the accident rate down." 

The 2006 accident rate for Asia Pacific carriers was on  a par with the global average of 1 accident for every 1.5 million flights. The industry target is a 25 percent improvement by 2008.

He also recognized that airlines need the commercial freedom to operate as true businesses. 

"The future is yours to shape," he said, speaking at the APAMA Aviation Lecture. "Don't repeat the short-sighted mistakes of Europe and the US. While the recent US and Europe open skies agreement was a step in the right direction, it fell short of the fundamental change that the industry needs. They have lost the vision that made them natural industry leaders. It's Asia's turn. But you must think bigger and faster to implement a staged approach to liberalization that can keep pace with the needs of a dynamic industry."


With the average age of the Asian aircraft fleet at 10 years, compared to the global average of 12, this makes Asia's aircraft more fuel-efficient and environmentally friendly. 

"The challenge for Asia is to ... communicate more effectively on the environment, and to continue to invest in fuel efficient technology as the industry grows. Asia also needs to join the rest of their industry partners in pushing governments for more efficient infrastructure; manufacturers for more efficient equipment; and oil suppliers for research into alternative fuels,' said Bisignani. 

"Asia's growing importance is clearly defining a new leadership role in all aspects of the industry. Asia must develop a leadership framework to drive a common regional approach with innovation on all fronts: from the technical issues to fundamental policies. Aviation is the world's most exciting industry and Asia is the region that is going to drive it forward," he said.



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