Asia-Pacific at Epicenter of Infrastructure Crisis

by Neelam Mathews

 - October 23, 2018, 9:46 AM

As the Asia-Pacific region experiences international air traffic growth of 8 percent per year, unease grows over the likely inability of infrastructure capacity to keep pace with fleet orders in the next two decades. The region, according to Airbus and Boeing, will receive 40 percent of the globally ordered fleet, or more than 16,000 airplanes, “equal to the U.S. and Europe together,” stressed Association of Asia Pacific Airlines (AAPA) director general Andrew Herdman at the group’s recent Assembly of Presidents on Jeju Island, South Korea.

"We are gathered here in search of answers on what can we can do to effectively respond to our rapidly changing environment,” added Korean Air president Walter Cho. “The Asia-Pacific market is driving global aviation growth and is growing rapidly. We have our challenges in the aviation industry with economic fluctuations, shifting political interests, and spread of protectionism. Information technology is convenient but also a threat to safety and security.”

While politically fragmented and diverse, the Asia-Pacific region generates a third of the world’s GDP, thanks largely to a rapidly growing middle-income segment in China and India driving consumption patterns. Herdman explained of the world’s 20,000 flight segments, the 10 busiest domestic routes reside in the region; the route between Seoul and Jeju Island tops the list with more than 200 daily flights.

The International Civil Aviation Organization forecasts that over the next 20 years the world will require 620,000 pilots, 1.3 million aircraft maintenance professionals, and 125,000 air traffic controllers. The Asia-Pacific region alone accounts for 35 percent of those requirements.

However, the industry must address infrastructure planning and funding to sustain the region’s growth patterns, said Herdman. “Who and how this will be funded is a big discussion,” he explained. “Infrastructure planning is critical. It is not a long-term problem but a ‘now’ problem.”

In the future, tough issues include increasing fuel prices, rising competition among airlines, and shrinking profit margins. “Overall, I still expect Asian airlines in aggregate to make substantial profits, but it seems pretty clear that it will be lower than the levels we’ve seen in previous years,” said Herdman. “Even though oil prices are rising, consumers are still getting the benefit of [low] fares. The challenge is how this oil increase will be passed on.”