Leadership Challenges for Asian Aviation

The International Air Transport Association (IATA) has urged Asia to take a greater leadership role in shaping the global aviation industry. “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,” said Giovanni Bisignani, IATA’s Director General and CEO.

Speaking at the Asia Pacific Aviation Media Association’s (APAMA) Aviation Lecture in Singapore, Bisignani identified three opportunities for Asian leadership in the aviation industry (1) technology, (2) policy and (3) the environment. He also announced the revised industry profit forecast of US$3.8 billion for 2007. In the three major regions, this breaks down as follows:

North America: US$ -600 million (+4.4 bill if restructuring costs are excluded)

Europe: US$ +2.4 billion

Asia Pacific: US$ +1.7 billion

Technology: While labour costs have traditionally been a competitive advantage for Asian carriers, European and North American carriers have reduced their labour costs over the years. Labour now accounts for 27% of costs for European and US carriers, and 15% for Asian carriers. “As the labour cost gap narrows, technology is the key to competitiveness,” said Bisignani. He highlighted electronic ticketing, which will save the industry US$3 billion. While China is at 95% ET penetration, well above the global average of 78%, the rest of Asia is the same level as Africa at 68% due to the slow uptake of ET in Japan and Malaysia. “We will make our 100% target by the end of this year, but it will require a major effort by some carriers to catch up,” said Bisignani.

Bisignani also suggested better use of technology to simplify passenger travel and improve air traffic management. While some Asian countries are already using biometrics for immigration processing, these programmes are targeted at 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,” said Bisignani. 

He also urged Asia to lead air traffic management by implementing cost-effective technologies that are in line with global standards. Focusing more on aircraft capabilities, we can reduce the need for expensive and labour intensive ground based facilities, while improving both safety and efficiency, thus increasing airspace capacity.

Policy: Bisignani called on Asia to develop a regional policy approach to industry issues, such as safety and liberalisation.

“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 programmes in order to drive the accident rate down,” said Bisignani. 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. But the industry target is a 25% improvement by 2008.

Airlines need commercial freedom to operate as true businesses. “The future is yours to shape,” said Bisignani. “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 liberalisation that can keep pace with the needs of a dynamic industry.”

Environment: The average age of the Asian aircraft fleet is 10 years compared to the global average of 12, making Asia’s aircraft more fuel efficient and environmentally friendly. “The challenge for Asia is to avoid the crisis in Europe and 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,” Bisignani added.

See other recent news regarding: Travel News Asia, IATA