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Fighting creeping protectionism

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November 1st 2018

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When airline leaders met on South Korea’s Jeju Island for their 62nd Assembly of Presidents of the Association of Asia Pacific Airlines (AAPA) last month, they universally agreed air traffic growth was robust but that business continues to be tough. Read More »

Yields are declining and profitability is volatile for many carriers in the region. Fuel cost increases is an issue for the industry as is the U.S./Sino tariff war, perennial infrastructure shortfalls and the technology investment essential for adaption to the digital world.

Despite these challenges, the region’s airline leaders would have been buoyed by the new 20-year International Air Transport Association (IATA) forecast which put the region front and centre of global growth.

To 2037, IATA said, the world’s air traffic would double to 8.2 billion passengers a year and more than half of them would be originating from the Asia-Pacific. The forecast bears out the need for the huge numbers of new aircraft that have been ordered by the region’s airlines for delivery in the coming decade.

But there are riders to the positive forecast. Despite the billions of dollars being invested in infrastructure today, it continues to fall behind in accommodating such huge air traffic growth.

IATA director general and CEO, Alexandre de Juniac, frequently points out that airlines could order as many planes as they want, but if airports, runways, terminals and air traffic management systems cannot process their traffic, those airplanes won’t be utilized to their full advantage.

An additional barrier to growth, de Juniac said, was “forces of economic protectionism that are casting a shadow over world trade”. If the world proceeded towards “reverse globalization” he said, passenger numbers would still grow, but at an annual rate of 2.4% rather than 3.5%. But if globalization wins and the global economy continues opening borders to people and trade, growth could actually reach 5.5% annually.

Clearly, the industry would prefer the latter. To achieve this goal it will require all airlines, both individually and through trade associations such as IATA and AAPA, to renew their focus on lobbying governments and other relevant authorities to raise investment in infrastructure.

It has to be done now as building terminals and runways are five to ten year projects. Airlines must also redouble their efforts to turn these same authorities away from creeping protectionism that is threatening to put the brakes on the growth of aviation.

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