FACE-TO-FACE: Andrew Herdman, AAPA
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TDA Face-to-Face: Andrew Herdman, Director General of the Association of Asia Pacific Airlines (AAPA)
1) What rates of traffic growth are we seeing in the region and how does this compare to other markets?
After a strong recovery in 2010, prospects for further growth in air travel demand remains broadly positive, although the recent earthquake in Japan has added a degree of uncertainty to the outlook for 2011.
2) What are the primary driving forces behind this growth?
Asia Pacific economies are generally achieving faster growth than developed markets in North America, Europe and Japan. Rising incomes and living standards are key drivers of travel demand, for both business and leisure.
3) What are the limiting factors to growth in aviation and are they specific to the region, or more reflective a general development pattern seen in other, more mature markets?
Meeting the expected growth in travel demand requires ongoing investments in airline fleets and related airport and air navigation infrastructure. In addition, suitably qualified staff have to be recruited and trained to meet growing demand, with a particular emphasis on skilled personnel, including pilots, engineers and mechanics, air traffic controllers and regulatory inspectors. Failure to keep pace with the underlying growth in demand could constrain future growth, and therefore requires careful monitoring and coordination amongst the various stakeholders.
4) We are now four years away from ASEAN Open Skies coming in 2015. Are the partners on track and is this likely to happen on time?
ASEAN has set some ambitious targets, although realistically the pace of implementation will likely vary amongst the participating states. Overall, however, things are moving in the right direction, opening up new opportunities and contributing to the successful development of regional aviation. In addition, ASEAN is engaging with other states within the region, encouraging further progressive liberalisation of bilateral agreements.
5) What are the implications of an Open Skies agreement for the airlines and the passengers within ASEAN?
Consumers will benefit from access to a wider range of products and services, whilst airlines have the opportunity to broaden their regional networks.
6) With the growing trend towards consolidation in Europe and the US, are we likely to see a similar trend in the Asian market?
The airline industry is inherently global in its scope. However, compared to other global industries, aviation is still highly fragmented, with hundreds of international airlines competing for a share of the market. Unlike other industries, we have yet to see significant consolidation taking place amongst international airlines. This reflects the peculiar nature of some of the rules governing international aviation, including traffic rights which are still negotiated under bilateral government to government negotiations. Such rules make it extremely difficult to complete cross-border international mergers amongst airlines.
It will take fresh thinking and political will before further steps can be taken towards broader international consolidation. In the meantime, Asia Pacific airlines are not standing still, but are continuing to compete aggressively for business. Asia Pacific airlines, building on a well deserved reputation for customer service leadership, are steadily increasing their share of the global aviation market, which is also reflected in the fact that the capital market valuations of leading Asian carriers already match those of the newly enlarged competitors in both the US and Europe.
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