Governments ‘must not see Asia Pacific’s rapid growth as a cash cow’

The growth outlook for the aviation industry in the region is tremendous, but governments must ensure they promote and enable airlines rather than taxing them.

Despite considerable challenges in many parts of the world, Asia Pacific is expected to continue to lead global economic growth with an average forecast GDP of 3.9 percent annually over the next 20 years. And its aviation market is following suit.

According to IATA, in seven years’ time China will become the number one passenger market on the planet, overtaking the US; in eight years India will move to number three; and in 20 years Indonesia will be the number five in the rankings.

The State of the Industry panel at Routes Asia 2018 in Brisbane heard from Caroline Wilkie, chief executive of  Australian Airports Association; Conrad Clifford, regional vice president for Asia Pacific at IATA; and Venggatarao Niadu, head of network and regulatory at AirAsia X.

Wilkie said the capacity growth in Australia, alongside terminal improvements, offered reasons to be very optimistic about the country’s market.

“We have a lot of on the ground capacity and there’s a greater focus on improving facilities for customers,” she adds. “More broadly, we have a stable regulatory environment and that is important.”

Clifford said the expansion of the Asia Pacific market presents obvious challenges as well as opportunities: “The growth is tremendous and will mean the region becomes the world’s biggest aviation market in the near future.

“One of the major opportunities is that we’re seeing a lot more city pairs becoming connected than ever before. Many airports that haven’t previously had international connections are now getting international flights coming into them.

“That is happening across the entire region and it is being driven by the growth in the market, but also by the lack of infrastructure within the existing stable of airports.

“We looked at 100 airports around the word with 20 million or more passengers and about 94 percent don’t have enough capacity for the next ten years. There’s a tremendous challenge for the industry to increase airport capacity.”

On the regulation side, Clifford stressed that ensuring stability is crucial. He said IATA has seen lots of governments trying to add taxes in the tourism and aviation industries. “We have to lobby hard against it,” he added.

He also said that airlines in Asia Pacific are doing well but the profitability is nowhere near as good as some other regions, such as the US, because capacity is coming in ahead of demand.

“Despite this, the future for aviation in this region is very rosy so long as we can keep the regulators and governments promoting and enabling tourism and airlines, rather than taxing them.”

Niadu agreed that the future is very bright thanks to the rapid growth, but airport infrastructure presents a challenge. He added that some governments are introducing regulatory hurdles to airline growth in the region.

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