OAMag-V7N4-Cover [Converted] - Orient Aviation

C o m m e n tThe airline industry breathed a huge sighof relief as 2000 arrived without anysign of the you-know-what bug. Santa,however, did not deliver any turn of thecentury ‘big bang’ solutions to the issuesfacing carriers in coming years.Everyone remains cautious about growthlevels and there is still a great deal of uncertaintyover the pace of economic recovery invarious parts of the world, including Asia.The volatile path of global stock marketspost January 1 is clear evidence of this. Shareprices soared to record levels as a wave ofY2K relief enveloped investors, then dippedalarmingly before picking up again.Of greater concern is markets everywherereact immediately to the whims of the NewYork Stock Exchange. They do so becausewhat happens in New York underlines thereality that a recovering Asia can have itsprogress severely dented by developmentselsewhere and that they are matters overwhich the region has absolutely no control.These are factors airline managements arelearning to live with. Putting Y2K to rest mustnot detract industry focus from the task ahead,which in many ways is far more formidable.The issues have been well covered inthe pages of this magazine; the pace ofliberalisation, dealing with the challengesof information technology, achieving globalstandardisation on the safety and regulatoryfronts and finding sustained profitability inviciously competitive markets.Also there are regional issues which refuseto go away and have the potential to impactdetrimentally on the smooth development ofairline operations in Asia and beyond.The China/Taiwan question is a perfectexample, as is ongoing friction betweenNorth and South Korea and social unrest inparts of Indonesia. These political issues posea constant threat to regional stability. If theyget out of hand they can do serious damageto business, tourism and airlines.There are internal airline issues too.While it has made extraordinary progress onthe aviation front, Beijing continues to placepowerful official brakes on the expansion andemergence of its carriers.Asia’s airline industry will never be entirelycomplete until mainland operators aretruly immersed in the regional aeropoliticallandscape, with all the freedoms and operationalflexibility their regional counterpartshave.After a horrendous fiscal period in thelate 1990s, incumbent airlines also face newthreats of competition from unexpectedquarters.RECOVERY YES, BUTBIG CHALLENGES AHEADIn Australia, changes to foreign investmentrules will allow a foreign airline, Britain’sVirgin Atlantic, to launch a wholly-owneddomestic carrier in the country.This move takes on added significance forQantas Airways and Ansett Australia, airlineswhich at the same time may have to face twoother start-ups, Impulse and Spirit, on theirprimary trunk routes.In Indonesia, a handful of charter carriersare being given scheduled status to enterthe domestic market at a time when it hasbeen severely depressed by the economicdownturn.The Philippines continues to buck openskies trends through its ongoing battle withTaiwan over direct air routes. None of this maymake sense to many observers, but that doesnot really matter. It is happening anyway andhas to be dealt with.Several IATA ‘report cards’ issued overthe turn of the year clearly show indicatorsfor future industry expansion are mixed andthat these developments are not occurringat a time when airlines are at the peak of aneconomic cycle.While IATA’s Annual Average Growth Rate(AAGR) forecast for scheduled internationaltraffic over the five years to 2003 is estimatedat 5.02%, the figure is down by 0.5 percentagepoints on the passenger forecast from 1998-2002 and 1.5 percentage points lower on the1997-2001 figure.Passenger growth prospects vary significantlybetween regions, driven by differingeconomic expectations. In Asia, traffic growthforecasts are driven by the increasingly evidentupswing in economies such as Thailandand Korea, but also they have been offsetby the continued stagnancy of the JapaneseTURBULENCEBy Tom Ballantyneeconomy.The AAGR for Japan is estimated to be just2.6%, a drop of 1.5 percentage points on the1998-2002 forecast.Economic problems in South America,previously one of the high growth areas ofIATA’s Passenger Forecast, have had a significantimpact on airlines. The five-year AAGRfor traffic to and from Brazil, for example, isprojected at just 3.9% compared with 8.4%12 months earlier.The 1999-2003 Passenger Forecast is derivedfrom IATA’s annual survey of the world’smajor airlines, airports and civil aviation authorities,so it provides a good barometer ofindustry sentiment, representing the consensusopinion of aviation’s leading forecastingand strategic planning experts.On another front, the association’s 1999Corporate Air Travel Survey said growth inthis sector would continue, which is goodnews. It pointed out that in 1997 some 40%of corporate air travellers expected to be usingthe Internet for their travel arrangements by2002. Now, more than 50% expect to be doingso by 2004. In addition, 43% of corporatetravellers used electronic ticketing in 1999, a60% growth from 1997 levels.There is another point the industry needsto make, particularly to those who, in theabsence of Y2K problems, suggest the hundredsof millions of dollars spent on anti-bugmeasures represents money wasted.Maybe we shall never know what mighthave happened if the money had not beenspent, but the exercise has been invaluable.Perhaps for the first time in history it hasshown the global aviation industry and all itsvarious components can work together witha single goal.72 | Orient Aviation | February 2000