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Airport infrastructure is the starting and ending point of every journey
THE Singapore Airshow is a great reminder of the importance of the civil aviation industry.
A quick wander through its halls will impress any visitor with the size and diversity of the supply chain behind modern aircraft. And the orders placed over the next week will indicate the demand for air connectivity in the modern world.
This year about 4.3 billion passengers will board aircraft. Over 60 million tonnes of goods will be transported to market by air. About 60 million people will earn their keep with aviation-related jobs. And aviation and related tourism will generate more than US$2.7 trillion in economic activity. Those numbers are impressive. But they are only the preamble of the aviation story.
Aviation brings people together to learn, to share ideas, to build businesses and to develop global understanding. Air links create opportunities for economies to prosper, communities to develop and people to lead better lives. We all benefit from a successful air transport industry - even if we have never flown. This is why I call aviation the business of freedom.
It should, therefore, not be any surprise that the industry is growing. The world wants, and need, more connectivity. The challenge for governments and the industry is to sustainably fulfil that demand with ever improving safety and efficiency.
One of the most critical success factors is infrastructure - both on the ground and in the air. And, unless we pick up the pace of infrastructure development we are headed for crisis.
The Asia-Pacific is home to some of our most celebrated airports. Singapore, Hong Kong and Seoul are three very familiar world-class examples. It is also home to some bottlenecks. Bangkok, Jakarta and Manila are equally familiar examples.
The challenge for the region is to reinforce the great examples while finding solutions to the bottlenecks.
How do we do that? It begins with consultation. And Iata is a co-host of the Singapore Airshow Aviation Leadership Summit (SAALS), along with the Civil Aviation Authority of Singapore, the Singapore Ministry of Transport and Experia Events. Together we have created a unique forum for industry and governments to focus together on how best to unlock the benefits of aviation.
The theme for this year's Summit is Re-Imagining the Future of Aviation. And aviation growth especially in this part of the world will certainly be a part of the discussion. For sure infrastructure investments will be needed. Already the infrastructure in several markets is struggling to keep pace with demand. It is not, however, just about building more. We need to build better. And for that we must use the best leading edge technologies and processes - including retrofits for existing infrastructure - to maximise our investments. Biometrics, robotics, artificial intelligence and big data all offer important opportunities.
While we need investments in both air traffic management and airports, the most visible deficiencies are at airports. Every traveller immediately senses whether the infrastructure is sufficient or not. And it is no secret that the best airports materialise when they are designed with the needs of their airline customers in mind.
These needs are straight forward. Airports must have sufficient capacity to meet the growing needs of consumers. Airports must be developed in line with global best practices and the technical needs of their airline customers. And they need to charge prices that are affordable.
These needs, however, are challenging to get right. It is particularly difficult when governments are running on tight budgets. Building infrastructure requires handsome investments. And governments face two worrying temptations - seeking private sector solutions or pre-funding public works projects through taxes or charges. I bring a message of caution on both.
We have not seen a privatised airport fully deliver on its promised benefits. To meet the needs of private investors we see two patterns of behaviour: either the charges rise or needed investments are held back. Short-term, this may satisfy the investor. But in the long-run it is the traveller and local community that pay the price in high costs, poor quality or both.
NOT TOO PRIVATE
To be clear, the private sector can play a role in airports by bringing a commercial focus. But effective regulation is needed to balance the interest of the local economy with those of the investor. That's a delicate one to get right. And airlines are frustrated that an effective regulatory model has not been achieved. The genie is out of the bottle and cautioning governments on privatisation is not enough. We also need to put thought into what regulatory structures could be put in place at privatised airports that can preserve the cost-competitiveness of the airport even as it expands to meet new growth opportunities.
The temptation to pre-finance is equally worrying. Airlines have no issue with paying a fair price to use infrastructure that meets their needs. But I don't think that you will find many businesses or individuals willing to pay today for a service that they may or may not use in the future. That's why no government would charge a road toll until the road is in operation. So it is a mystery as to why some governments feel comfortable in applying this practice to airport development.
Governments, through the International Civil Aviation Organization (ICAO) have given the issue some thought. And the ICAO recommendation discourages pre-funding unless no other viable options exist. With very limited exceptions of particularly cash-strapped governments in the developing world, governments have plenty of creative funding options available for infrastructure projects. A quick look at the finances of most major hub airports, for example, generally reveals substantial levels of profitability!
SAALS will look at a broad range of topics - drones, new aircraft technologies, evolving business models among them. The discussion takes place against a background of a fiercely competitive global industry that is earning hard-won sustainable profits by improving efficiency and fulfilling the thirst to be connected globally. But let's remember that, regardless of what or how you are flying, airport infrastructure is both the starting and the ending point of every journey. SAALS promises a good day of discussion. I will be watching for the results.
- The writer is director general and chief executive officer of Iata.