Asia Pacific Update

China continues to lead growth in the Asia Pacific region. (Wangwei)

Tom Allett presents a round-up of news and views from the Asia Pacific region.

China continues to lead growth in the Asia Pacific region. (Wangwei)

Like everywhere else on the planet, the aviation industry in the Asia Pacific region has suffered as a result of the current economic downturn, but is it set to recover faster than most?  Statistics say that in terms of airline seats available it is now recording the strongest worldwide growth.
Earlier this year when predicting international airline performance for 2010, ICAO forecast that: “Asia Pacific airlines will experience the highest growth, especially China and Asia, while the Middle East, Africa and Latin America regions will also enjoy higher traffic growth as economic conditions improve.  North American airlines will grow slower than the world average because of lingering economic weaknesses.  With expectations of more than 4% annual growth of the world economy for the next three years, world traffic should grow at 4.7% and 4.9% for 2011 and 2012, respectively.”
On June 7, the positive statements referring to the Asia Pacific area were underlined by the International Air Transport Association (IATA) which said that the region’s carriers: “continue to benefit from strong regional growth.”
OAG added that: “against a global GDP growth expectation of 2.9%, the Asian economy (excluding Japan) is expected to grow by 7% this year.  China will outpace that with an expected 9.9% GDP expansion.  As a result, the region’s carriers are expected to deliver the largest profit at $2.2 billion.  This is more than double the previously forecast $900 million in March and a major reversal from the $2.7 billion loss in 2009.”
In July, OAG FACTS (Frequency and Capacity Trend Statistics) reported that scheduled airline seat capacity within, and to and from the Asia Pacific region: “has the highest growth this month and year-to-date.”  Its figures show that the number of seats within the region scheduled for July increased by 10% or 8.5 million, bringing the total to 93.5 million; seat capacity to and from increased by 9% or an additional 1.2 million to a total of 15.3 million seats.
OAG states that the upturn in China is: “symbolized by significant changes in the ranking of the world’s largest [busiest] airports.”  It also points out that Beijing Capital International Airport (BCIA) has moved up in the worldwide ranking from third to the second largest airport, (measured by airline seats), thereby ‘leapfrogging’ London Heathrow; and explains that increasing travel to, from and within China adds to the country’s strong growth, with Beijing, Guangzhou and Shanghai airports all now in the world’s top 20.
In terms of passenger numbers, ACI statistics say BCIA’s passenger numbers achieved an increase of 16.8% in 2009, exceeding the 65 million mark for the first time, making it the world’s third busiest and the only airport amongst the top ten to report growth during what can be politely described as a challenging year.  BCIA’s annual design capacity is stated as 78 million.
These figures reveal that its passenger traffic is up 170% on 2001 and BCIA says it now looks certain to exceed Heathrow’s passenger numbers this year.  It could even overtake Atlanta as the world’s busiest airport as early as 2012, if recent trends are maintained and sufficient airspace capacity can be provided.
The CAAC has since confirmed its plans to complete the city’s second airport by 2015, thereby easing traffic pressure at BCIA.  According to the airport’s GM, Dong Zhiyi, it will reach maximum capacity within about three years.  However, in March, China Eastern Group Secretary, Li Jun, urged the government to seriously consider expanding BCIA, noting that additional capacity is required in the year up to the opening of the second airport in the Daxing district to the south of the city.  The new Beijing airport is reported to have a maximum annual passenger capacity of 60 million, which when combined with BCIA’s 85 million, will give the Chinese capital a total capacity of 145 million, putting it in line with Dubai’s two-airport capacity plans.
Only seven of the world’s 30 busiest airports reported growth last year (of these, Beijing reported the strongest, while Jakarta and Guangzhou also reported double-digit increases).  Hong Kong (45.6 million) was positioned 13th, while Guangzhou Airport was ranked 22nd worldwide in 2009, handling 37.0 million passengers.
Overall, 14 mainland Chinese airports reported annual traffic of more than ten million passengers in 2009, with all the major airports – those with annual passengers of over 5 million – reporting solid year-on-year growth.
The smaller airports of Chengdu, Changsha, Sanya, Harbin and Guiyan all reported increases of above 30%.
On March 10 the Shanghai Airport Group opened Terminal 2 at Shanghai/Hongqiao ahead of the Shanghai World Expo that took place in May.  The new facility has a daily capacity of approximately 1.1 million passengers, and is four times larger than the existing Terminal 1.
The new 3,875,007 sq ft (360,000m2) building, located on the West side of the current terminal building, raises the airport’s annual passenger capacity to 40 million, and this is expected to be reached by 2015.  The airport handled 25 million passengers in 2009, predominantly on domestic services.
Shanghai International Airport Co (SIAC), operator of both Shanghai Pudong and Hongqiao Airports, said that of the 40 million passengers anticipated to pass through the airport by 2015, three-quarters are expected to use the new, four-level terminal.  More than 90% of the flights have already transferred services to T2.
Shanghai has invested US$2.2 billion on construction projects at Hongqiao Airport, which is located in the western part of China’s second largest city, 35 minutes from the city centre via an ultramodern travel hub that links metro and high-speed rail networks.  Pudong Airport is Shanghai’s main gateway for international operations, while Hongqiao is used mainly by domestic airlines.
The SIAC is expected to handle 70 million passengers in 2010, a 27% year-on-year increase, thanks to the boost provided by the city’s World Expo.  To meet continuing rising demand, Shanghai Pudong will reportedly construct a fifth runway by 2014 on land it will reclaim from the sea.
In the south east, Guangzhou Baiyun International Airport (GBIA) opened a bonded logistics centre on January 28 this year.  The airport as a whole reported a US$110.7 million operating profit in 2009 with a 12.0% increase in net profits in the period, to US$79.6 million, as the airport’s 7.7% increase in operating costs (to USD301.5 million) were exceeded by a 8.4% gain in operating revenues to USD484.1 million.  Monies earned by GBIA’S aviation services represented 57.8% of total revenues (at US$279.9 million, an 11.9% year-on-year increase), with non-aeronautical revenues contributing 42.2% of the total, at US$204.1 million (+4.0% year-on-year).  The airport is set to see a surge in traffic due to the 16th Asian Games that will take place in Guangzhou this November, followed by the inaugural Asian Para Games in December.
In terms of China’s cargo traffic Hong Kong and Shanghai Pudong were recorded as being the world’s second and third busiest (after Memphis) handling 3.4 million and 2.5 million metric tonnes, respectively.  Of ACI’s top 30, Guangzhou (FedEx’s hub in the Asia Pacific since Feb 2009) was the only airport to report double-digit freight growth, of 39.3% year-on-year in 2009, to 955,271 tonnes, to become the 21st largest cargo airport in the world, rising from 26th place in 2008.  Six other airports in China also reported double-digit freight increases, including the smaller airports of Sanya, Guiyang, Changhsa, Jinan, Wuhan and Hangzhou.
According to the CAAC, in terms of operating revenue China’s airports reported earning CNY34 billion ($US5bn) last year, down CNY500 million ($US73m) against 2008, with profits of CNY30 billion ($US4.4 bn) in 2009, according to the CAAC.  During this year the CAAC was reportedly planning to invest CNY90 billion ($US13 billion) in 25 airport expansion projects, which includes the previously mentioned construction of a new Beijing Airport, plus those for Kunming New Airport and Hefei’s new airport.  Upgrades are said to be taking place at Shanghai Hongqiao, Shenzhen Baoan and Hangzhou Xiaoshan airports.
This follows the building of new airports for Tuofeng, Batang, Lindu, Saertu and Shadi last year plus improvement work at 14 others as part of the country’s $US586 billion stimulus package.
In summary, the rise in size and global importance of China’s airports looks set to continue, with the CAAC still forecasting double-digit growth for passenger and freight traffic this year.  Director Li Jiaxiang expects passenger numbers to rise to 700 million passengers per year by 2020 and to double that to 1.5 billion by 2030.  As a comparison, a forecast by the US Federal Aviation Administration (FAA) covering the American market for a similar period illustrates the differences between mature and developing markets.  US enplanements reached 704 million last year, eleven years before China is expected to get there, but when you look at the respective growth rates you see a different story.  The FAA’s 20-year forecast covering 2010-2030 estimates domestic passenger enplanements will rise by only 0.5% in 2010 but then only achieve an average growth of 2.5% a year through to 2030; a much poorer performance than that suggested in Chinese predictions.
This backs up the long-held view that Chinese traffic is on course to exceed that of the US, making it the world’s largest commercial aviation market.
A positive outlook has also been put forward for India.  The most obvious example of good news is the recent opening of the much-needed Terminal 3 at New Delhi’s Indira Gandhi International Airport (see pages 11-15 for more details).
On a broader prospective, a White Paper from the Centre for Asia Pacific Aviation (CAPA), in association with IT specialist SITA, forecasts that: “by 2020 Indian domestic air traffic will reach 160-180 million passengers per annum and international traffic will exceed 80 million.”  However, today, it is still estimated that less than 2% of the Indian population flies even once a year.
In forecasting substantial growth over the next ten years, the report notes that India’s domestic air travel market is currently just 20% of that of China and, in order to meet predicted increases over the next ten years, airlines will need to invest US$120 billion in new aircraft and a further $20 billon in the airport sector.
In a company statement about airport infrastructure within the Asia Pacific region, Kapil Kaul, CAPA CEO, South Asia said: “In terms of the drivers for investment in IT, the survey element of the report found that the airport sector is primarily concerned with compliance and efficiency measures, aimed at reducing costs.
“There is as yet lesser emphasis on deploying technology as a point of differentiation or to enhance the customer experience with a view to generating incremental revenue.  However, the feedback indicates that mobile technologies, self-service kiosks and biometrics will be key areas of investment in future for airports.  We also found that airlines appear to be further advanced than airports in their embrace of technology as a strategic tool rather than as a support mechanism.”
CAPA says that looking ahead, airlines have indicated that self-service is the way forward, with respect to future products such as kiosks for lost baggage reporting, flight disruption management, flight transfers, bag drop and automated boarding gates.
Low-cost carriers (LCCs) are described as being: “more aggressive than full-service airlines in using IT to drive their business,” and that: “LCCs’ investment in IT is more strategic in nature and they do not see IT as mere support functions as is often the case at full-service or legacy carriers.  LCCs have a greater level of readiness to adopt newer solutions that both redefine the customer experience and cut costs.”
On the Border Management front, the survey indicates biometric identification is a high priority initiative, to be followed by electronic documentation such as e-visas and e-passports.
The White Paper also highlights what it describes as a: “remarkable sea-change that has overtaken the industry”.  It notes that since the arrival of the first low-cost carriers in 2003; dramatic reforms have included an open domestic skies policy; the introduction of airport modernisation with the privatisation of Delhi and Mumbai; and the upgrading of 35 non-metro airports and green field developments.
Congestion at airports, on the ground and in the air, is also adding to the cost burden on Indian airlines.  And a shortage of skilled personnel is another area that needs to be addressed, according to the report.
In June, Airport Fiji Limited (AFL), the country’s air navigation service provider, successfully commissioned its new Advanced Message Handling System (AMHS)/Air Traffic Navigation (ATN) and Airfield Information Service (AIS) solutions from  Germany’s Comsoft. The advanced message handling solution AIDA-NG is equipped with the company’s CADAS AIS system that manages Fiji’s NOTAM and OPMET related information.  With Fiji’s strategic location in the South Pacific it plays a vital role as a boundary ATN site, interconnecting the ICAO regions of Northern America and Asia-Pacific.  Also, Fiji is one of the five designated Asia/Pacific Regional OPMET data banks responsible for the management of OPMET bulletins thereby making its role of the upmost importance.  As an additional benefit, with CADAS the new Fiji AIS is already prepared for an upgrade to a fully integrated AIM solution on the basis of the emerging AIXM 5.1 standard.  AIXM 5.1 combines static and dynamic AIS data and therefore is a compulsory prerequisite for the support of future digital NOTAMs.
New Zealand
On July 7, Auckland International Airport Limited (AIAL) and Queenstown Airport Corporation Limited (Queenstown Airport) announced that they have formed a strategic alliance to boost tourism into the Queenstown Lakes District.

Auckland has entered into a strategic alliance with Queenstown. (KEY-Tom Allett)

The strategic alliance commits both airport companies to work together to drive more tourist traffic into New Zealand and through the two airports.  The airport companies say they will also: “pursue operational synergies and benefits in other areas such as aeronautical operations, retailing activities and property development.”
Through the strategic alliance, Queenstown Airport expects to achieve an additional 176,000 annual passenger movements within five years, over and above existing strong growth forecasts.  Based on average spend rates, these additional visitors would be worth well in excess of NZ$150 million (US$109m) annually to the local Queenstown economy.
As part of the strategic alliance, Auckland Airport is investing in a 24.99% shareholding in Queenstown Airport by subscribing for new shares at a total consideration of NZ$27.7 million (US$20m), funded from existing cash resources.  Queenstown Airport, following approval from Queenstown Lakes Council, may exercise an option for Auckland Airport to increase its shareholding to 30-35% at any time up to June 30, 2011.
Auckland Airport’s Chairman, Tony Frankham, said: “Through this strategic alliance, the country’s number one travel gateway and our premier tourist destination will work closer together to grow New Zealand tourism.
“Our shared goal is to grow passenger volumes at both Auckland and Queenstown airports through strengthened air services development and dual-destination tourism promotions.  The alliance will leverage Auckland Airport’s resources in a co-ordinated effort working with airlines and the travel industry.  The aim is to create value for the Queenstown community and at the same time add value to Auckland Airport.”
Queenstown Airport’s Chairman, Mark Taylor, said the strategic alliance made perfect sense as 70% of New Zealand’s international tourists enter the country through Auckland International Airport.
He said the new share capital from Auckland Airport would allow Queenstown Airport to fund growth of the airport’s operating capacity without increasing financial risk through borrowing more extensively.
Queenstown is currently New Zealand’s fastest growing airport.  In the 12 months ended June 2010, the airport recorded approximately 811,000 passenger movements, with 704,000 domestic and 107,000 international.
Jim Boult, CEO of Christchurch International Airport Ltd (CIAL) says the newly announced Auckland – Queenstown alliance will boost New Zealand’s South Island economy by increasing tourism numbers.  He said: “We’re pleased Auckland Airport is following our lead in developing tourism numbers to the South Island, which will further enhance the work CIAL has done with South Island tourism over the last few years.  It’s a positive sign that Auckland Airport is making a commitment to invest the money and resources that we know is necessary to further lift the South Island’s profile for visitors.
“Christchurch airport has led the way in actively developing South Island tourism and we work successfully with many regional tourism organisations, including Nelson-Tasman Tourism, Destination Queenstown, Wanaka Tourism, Tourism Dunedin, Christchurch Canterbury Tourism, Tourism West Coast and Mt Cook-McKenzie.
“At the moment 92% of all international tourists to the South Island come through Christchurch Airport, and we still deliver the majority of tourists to Queenstown,” said Boult.  “I don’t see this reality changing.  We have developed a leading position in this area, as evident by the four national and international marketing awards won by Christchurch Airport last year.
“We have a strong relationship with both Queenstown airport management and their local council, and we will continue to work with the Lakes District tourism organisations.  We don’t see that this alliance will change our relationship with Queenstown, or our future plans or growth opportunities.”
Mr Boult stated that he didn’t believe there was a need to take an equity stake in other airports to facilitate route development.
“CIAL supports all initiatives that grow tourism as a whole for New Zealand.  “We understand that as Queenstown continues to grow, so will Christchurch Airport as a key gateway into New Zealand.”
Just days after the Alliance announcement, AIAL revealed that it will further delay the construction of a planned second runway.  The airport company says the decision: “follows extensive consultation with the airline industry and a review of capacity management on the existing runway.”
Earthworks on the second runway commenced in late 2007 but construction was suspended in August 2009 due to a fall in air travel demand from the global economic downturn and the uncertain regulatory framework.
Auckland’s Simon Moutter said that since then, by working closely with Air New Zealand and the Board of Airline Representatives (BARNZ), more effective means of managing peak-time capacity on the existing runway have been agreed which meant it could handle expected growth for a few years longer than earlier envisaged.  Additionally, although passenger volumes were now rising again, the upward trend was still behind where it was anticipated to be when construction of the second runway began.
“A second runway has been part of the Auckland Airport master plan since the 1960s and will definitely be needed before too long,” Mr Moutter said.  “However, by working with our airline partners to improve existing runway efficiency, we can defer significant capital expenditure for a few more years.  This will reduce cost pressures on our airline customers and on travellers using Auckland Airport.  This is a sensible outcome for everyone.”
Mr Moutter added: “This move is also consistent with our focus on cost efficiency and capital productivity, which is a key element of our strategy to drive growth in shareholder value.”
Auckland’s Chief Operating Officer, Tony Gollin, said a second runway would ultimately be essential to New Zealand’s long-term boost in travel, trade and tourism.  “Auckland Airport is committed to ensuring the runway is ready in time to deliver that long-term growth.
This decision is a matter of responsible and sensible infrastructure delivery timing.  We have been very focused on increasing the utilisation of existing airport infrastructure across the business and this decision is consistent with that focus.”
Mr Gollin said the decision to further delay construction was also influenced by the uncertainty relating to the future regulatory environment, as currently proposed by the Commerce Commission in the Draft Determination on a new regulatory regime for New Zealand’s major airports.
“Investing in any large-scale essential New Zealand tourism infrastructure requires confidence in the return.  The development of a second runway is an enormous investment which can only be justified if there is sufficient confidence that our shareholders can achieve a reasonable return on that investment.  The Commerce Commission’s draft approach, in particular to the issue of land held for second runway use, may increase the risk that a fair return will not be commercially achievable.”
Auckland Airport will continue to closely monitor both the evolving regulatory environment and growth and demand trends in air travel.  As substantial foundation and earthworks have already been completed for the second runway (to the north and parallel to the existing runway), construction could be accelerated fairly quickly when justified by commercial returns, and economic circumstances, Mr Gollin said.
On July 19 the Civil Aviation Authority of Singapore (CAAS) announced it had concluded Open Skies Agreements (OSAs) with Barbados, Brazil, Jamaica and Rwanda, at the International Civil Aviation Organisation Air Services Negotiation Conference 2010 (ICAN 2010), held in early July in Montego Bay, Jamaica.  The OSAs with Barbados and Jamaica are the first between Singapore and the Caribbean Community.  The Singapore-Brazil OSA comes on the back of the Singapore-Peru OSA, which was concluded in 2009 together with the establishment of Air Services Agreements with Colombia and Ecuador.  The OSA with Rwanda is Singapore’s second with an African country, after the Singapore-Zambia OSA that was concluded in 2008
Without restrictions on capacity, frequency or routing, OSAs allow carriers the full flexibility to introduce services when market opportunities arise.  Carriers are also able to tap into traffic to and to from other countries to improve the commercial viability of their operations.  Direct air links with Singapore will allow businesses in Africa, Latin America, and the Caribbean to access more markets by tapping into Singapore’s connectivity to the Asia Pacific region.  There are currently no direct flight connections between Singapore and Latin America or the Caribbean.
Apart from sealing OSAs with the four countries at ICAN 2010, Singapore and Fiji also concluded an open skies framework for cargo services and expanded traffic rights entitlements for passenger operations between and beyond both countries.
CAAS Director-General Mr Yap Ong Heng welcomed the recent developments, saying: “Airlines operate in a challenging environment with dynamic markets.  It is thus critical for countries to proactively put in place air services frameworks that enable airlines the commercial freedom to respond to market opportunities.  The Open Skies Agreements that Singapore and these countries in Africa, the Caribbean and Latin America have concluded recognise the benefits that they can bring to airlines, the travelling public and the wider economy through increased trade, tourism and people flows.”
Singapore now has OSAs with over 40 countries, including the four new ones.
Meanwhile, at Changi, Singapore Airlines has adopted the ARINC VeriPax Passenger Reconciliation System (PRS) to enhance its passenger handling.  It provides high-speed processing of passengers in real time, using information from the 2D barcodes printed on boarding passes.
Singapore Airlines becomes the second major Asian carrier to deploy VeriPax, joining Cathay Pacific Airways which helped develop the technology with ARINC and Changi Airport.
“Passengers today are increasingly embracing self-service options,” said Changi Airport Group’s Director, Airport Operations, Yeo Kia Thye.  “The VeriPax PRS simplifies the airport processes, benefitting both airlines and passengers with a more user-friendly experience.”
VeriPax processes the information from the 2D barcodes on self-printed boarding passes, allowing rapid validation by the airlines’ Departure Control System databases, the airport’s FIDS system or operational database before passengers proceed to the airside of the terminal.
The VeriPax solution especially benefits frequent flyers without checked luggage, who can bypass the check-in counters at Changi Airport and proceed directly to any VeriPax PRS station with their home- or self-printed boarding passes.  This reduces passenger processing times, shortens queues and hopefully enhances the travel experience.
Introduced in 2009, VeriPax technology has recently been upgraded to comply with IATA’s Bar Coded Boarding Pass (BCBP) standards for messaging with airline departure control systems.