It's the end of 2017 so this will be the last article we publish this year. Today, we'll share with you audience stats (of loyal readers like you) and highlight the best read articles of 2017. Let's get started.
In our growth markets series, we covered China, Turkey, Australia, Indonesia and South East Asia Aviation. Today, we take a look at Thailand.Last year, Thai Airways announced it was axing the Bangkok-Los Angeles route, in a move that put an end to 35 years of service to the US. Rome and LAX were two loss-making routes reported to be costing the airline $3 million a year. After a net loss of $445 million in 2014, Thai Airways’ debt skyrocketed to $5.9 billion, the highest among Southeast Asian airlines.
Once admired for its dream of competing with the likes of Singapore to become Southeast Asia’s global hub, Thailand has seen things changing fast. From the delivery of its flag carrier’s first A380 to the red stamp received by ICAO last year, Thailand seems to have lost its edge. Or has it? After all, Thailand’s airports have doubled traffic in six years, and carriers are ramping up with aggressive plans for expansion.
South East Asia Restructuring
Even excepting Malaysia Airlines, whose financial troubles were exacerbated by two major aircraft losses less than five months apart, Thai airlines are far from being the only ones to be in or near the red.
Cathay Pacific – whose shares reached a 7-year low this October - is the latest of these to acknowledge that massive restructuring will be needed if it wants to survive. In a post I wrote last year, I counted “less than five profitable LCCs (low cost carriers) in the region (for 24 actors), and barely ten FSCs (full service carriers) out of around 40 players”.
Even South East Asia’s flagship Singapore Airlines caught attention last year when it sent a scary message to investors:
SIA’s future is grim if it doesn’t change the way it do business. The days of Singapore and SIA being the long-haul hub for the ASEAN region is over.
- Mohshin Aziz, Associate Director of Equity Markets (Research) at Maybank Investment Bank
From this point of view, Thai Airways could be heading in the right direction. Its situation worsened in 2014, but now the airline appears to be in safe hands and its executives look confidently towards the future. After routes and staff cuts, the airline is now working on a 10-year expansion plan. All this is when its competitors are preparing bitter plans.
According to a Bangkok-based financial analyst quoted by Bloomberg, Thai’s “high costs, old fleet and inefficiency” kept the airline lagging behind budget and other FSCs in past years. But its management is convinced that "the worst is over".
Low Cost Takes All
Low cost carriers and Middle East carriers are usually blamed for the poor relative performance of legacy airlines in South East Asia. For sure, Bangkok is one of Middle East carriers’ top destinations. It is served by four daily flights each from Qatar Airways and Etihad, two from Turkish Airlines, and six flights a day from Emirates – as many as London Heathrow!
In 2014, Emirates carried 1.3 million passengers to Bangkok, making it the carrier’s second busiest destination. Thailand has also attracted long-haul LCCs Eurowings and Norwegian. That underlines how challenging it has been for Thai airlines to keep fares reasonably high and costs competitive, even with excellent offers. FSC Bangkok Airways, which once had plans to go for long haul cancelled its twin aisle jets orders long ago, and has since focused on profitable growth.
This is also the bet taken by Thai Airways when launching Thai Smile, a medium haul subsidiary launched to operate all single-aisle flights for its mother company. Thai Smile has lower operation costs - despite offering full service - and has allowed the group to keep expanding in Asia without hurting profitability.
Indeed, Asian medium haul traffic has been equally challenged by another kind of player: LCCs. Thailand has one of the highest low cost penetration rates in the world, comparable to Malaysia. On domestic routes, low cost penetration in Bangkok has grown from 40% in 2011 to 67% in 2016. Meanwhile, LCCs have a market share close to 30% for international routes out of Thailand.
As a result, in 2015 more than a third of passengers out of Bangkok are flying on an LCC. In Thailand, LCCs managed to stay relatively healthy, being either profitable (Thai AirAsia) or close to it and with positive margins (Nok Air). Nok Air would likely be profitable if the domestic market had not declined in 2014 following political instability.
In 2013, Thailand’s political unrest along with bombings in Bangkok made headlines. These had an impact on tourism, but despite that arrivals have consistently increased, more than doubling since 2009 with the exception of 2014 where tourist flows dropped severely. And although arrivals grew 11% on average in the past decade, still it is believed that some domestic and international routes have overcapacity.
About a year ago, following the fall of the previous government, ICAO downgraded Thailand’s aviation safety rating, after audits reported breaches and lapses. As a consequence, the US-based FAA as well as Japan and Korea are restricting Thai airlines from opening new routes. The FAA also prevents Thai airlines from expanding codeshares with US partner airlines.
Safety concerns could also have impeded the expansion of Thai airlines to internal destinations, but it is fair to say that the restrictions did little damage to Thai Airways: the airline has mostly cut routes these past years to reduce losses.
However, Thai Airways executives have confirmed that the airline will be looking for expansion soon. Getting the Thai civil aviation regulatory body back up to standards will be critical in making sure the airline can easily ramp up business on markets untouched during restructuring. The government is said to be working hard to restore the appropriate level of safety, allowing Thai airlines to expand on safer grounds.
Bangkok Airports Handle 80+ Million Passengers
Bangkok is an impressive aviation capital. With 83 million passengers flying in and out in 2015, the city is the 12th busiest aviation system in the world. Suvarnabhumi, the main gateway to Thailand, reached its full capacity of 45 million passengers five years ago.
Suvarnabhumi airport has been known to impede aviation growth in Thailand, and this year IATA CEO Tony Tyler called for the country to accelerate expansion and fix key issues. However, Airports Of Thailand (AOT) hopes to progressively double capacity to 90 million passengers by 2021 and has already taken "the first step in Suvarnabhumi Airport becoming an Asian hub," according to the Minister of Transport.
Construction work to expand the airport began this year. The first phase, to be completed in 2019, aims at increasing current capacity by 30%, to 60 million passengers. Two other expansion phases are planned that include the addition of a third runway and a second terminal.
When Suvarnabhumi airport first opened in 2006, it was to replace Don Mueang international airport, Thailand’s former international gateway. Don Mueang was closed in September 2006, after all operations moved to Suvarnabhumi.
Don Mueang Airport Reopened
But Don Mueang reopened shortly after following technical problems at Suvarnabhumi that reduced the airport’s capacity, and issues with high airport charges. By 2012, the Thai government ordered all LCCs to be moved out of Suvarnabhumi, in an attempt to reduce congestion.
It is important to recognize that 2012 was already a critical year for Suvarnabhumi Airport: it handled 53 million passengers - like in 2015 - despite its capacity of 45 million. Since then, Don Mueang has grown at the same rapid pace as LCCs carriers in Thailand. More than 30 million passengers passed through the airport in 2015, making it the world’s biggest LCC airport. Aided by the growth of carriers like Air Asia and Nok Air, Don Mueng airport reported a 21% year on year growth in September 2016. In less than five years, Southeast Asian LCCs have grown so fast they have saturated a 30 million-passenger airport reopened solely for low cost traffic.
Thailand’s biggest airports (Bangkok Suvarnabhumi, Don Mueang, Phuket, plus regionals Chiang Mai and Hat Yai) are operated by Thai public company Airports of Thailand (AOT). Most other Thai airports are operated by the Thai department of civil aviation. AOT’s six airports accommodate most of the country’s passengers and account for 110 million passengers (21% growth in 2015).
Thailand is also one of the few countries where private airlines operate airports. Bangkok Airways operates three airports at Koh Samui, Sukhothai, and Trat. Sukhothai and Trat are small airports, but Koh Samui handles 2 million passengers a year, making it the country’s seventh busiest airport; authorities have been weighing the construction of another airport there for a long time. Bangkok Airways built the airport several decades ago before Koh Samui became a busy tourist destination. Now, the authorities want to build a new publicly-owned airport to ensure that all airlines benefit from fair landing rights and competitive fees.
As this article was being written, freshly-released September 2016 figures show double-digit growth in almost all areas. A tough market, sometimes affected by political unrest, has troubled a few airlines in Thailand, but agile LCCs have managed to keep Thais travelling.
Most carriers are now focusing on restructuring and profitable growth, both domestically and internationally. Infrastructure will likely remain a concern as it is difficult for capacity growth to catch up with flight growth. But Thailand looks to be doing better than many of its ASEAN counterparts on this point.
The conclusion is that with an improved infrastructure and airline profitability, Thailand will likely soon be back on its way to becoming a major aviation hub in the region.
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The liberalization of ASEAN’s aviation sector will be a major catalyst for the region’s economic growth by 2030 - Liow Tiong Lai, Malaysian Minister of Transport
The Malaysian Minister of Transport’s thoughts are backed by strong arguments as aviation plays a vital role in developing business, trade, sales, innovation, investments and tourism, all facilitating economic growth. With South East Asia being one of the most dynamic areas in the world, a boost in tourism and trade should have astonishing effects and bring countless opportunities - and challenges - for all aviation players. Latest news indicate that the Single Aviation Market (SAM) is due to be signed by this year.
South East Asia Aviation Market
The Association of South East Asian Nations (ASEAN) is a political and economical organization gathering ten countries and about 9 percent of the world’s population or 625 million people. Taken as a whole, ASEAN would rank 7th in terms of GDP, before Brazil and India.
ASEAN’s core countries are Indonesia, Thailand, Malaysia, The Philippines, Singapore and Vietnam and are home to the biggest airlines in the region. Among them are rather large full service carriers (FSCs), most being under restructuring, like Garuda Indonesia followed by Singapore Airlines as ASEAN’s biggest. But ASEAN's aviation market is being dominated by low cost carriers (LCCs), the major being Air Asia Group and Lion Air Group, both on their way to reach a milestone of 50 million passengers carried per year.
Despite ASEAN's capacity growth shrinking from 30% in 2013 to 13% in 2014 in light of overcapacity concerns, LLCs account for about 60 per cent of the market and are growing faster than their full service carrier counterparts. Even if astonishing growth rates might get lower as markets get more mature, Southeast Asian carriers account for 15% of global aircraft orders (almost 2000 airplanes). In other words, nobody plans to leave the battlefield, no matter how large the cake will grow, and airlines have faith in their ability to grow and compete even beyond their borders.
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Contrary to Europe and the US where LLCs mostly emerged after full liberalization (in 1978 with the Airline Deregulation Act in the US, and in 1997 in Europe), ASEAN airlines’ ability to expand beyond their borders is still very much government-regulated. A major step was taken in 2008, when airlines based in a country member of ASEAN were granted the right to fly between the region’s capitals without restrictions. And in January 2011, this right was extended. Airlines of any of the ten countries were granted the right to continue to an extra destination of the country’s capital they are flying to (fifth freedom).
For airlines, it was not enough. To fulfill their desire of expansion in other countries, foreign airlines had no choice but to create local companies in joint venture with local partners, and to gain a national airline operating certificate (AOC) in the respective country. This allowed competition to develop even more rapidly, as shown for instance by Malindo, Indonesia’s Lion Air subsidiary in Malaysia which launched in March 2013. Malindo claims a 10%-market share on the Malaysian domestic market (versus 45% for rival AirAsia and 38% for Malaysia Airlines), where it operates 13 domestic routes and 13 international routes. Thus, despite various forms of protectionism observed in the past, airlines have been able to significantly expand beyond their borders. For Air Asia, which initiated this trend, international operations are now larger than its historical activity in Malaysia.
But this has come at the price of enormous complexity. Presently, there are 24 LLCs in Southeast Asia, 8 of which are affiliated to AirAsia and operate in more than 17 hubs in five countries. With a single aviation market, these local entities would no longer be needed, nor would be a local partner and AOC. Carriers could be more agile, hence opening new routes. As an example, the number of routes between Japan and Taiwan increased 5 times since an open skies agreement between Japan and Taiwan was signed three years ago, and in the European Union, the number of routes have been multiplied by more than five in twenty years of deregulation.
New ASEAN Competition
Beyond the opportunity of reuniting all local subsidiaries with their parent company with full ownership, an opened market will open doors for mergers and acquisition. This already started in the Philippines with the purchase of Tigerair Philippines by Cebu Pacific. Similarly, the strongest carriers in the region could take the lead and grab the opportunity to become bigger through external growth. But there aren't many. One can count less than five profitable LCCs in the region (for 24 actors), and barely ten FSCs (roughly 40 players). Some like AirAsia, which has only its Malaysian and Thai subsidiaries profitable, initiated a paradigm shift from growth to profitability. FSCs like Thai Airways are also undergoing cost cuts, while others are working hard to develop their low cost subsidiaries (currently six in the region). To say the least the airline industry in the region is not in its best health to welcome an increased level of competition. Yet, with liberalization, the possibility given to carriers to open new routes, and to easily switch planes to their most profitable markets, could help raise profitability and diminish fears of overcapacity. There are also underpenetrated markets like Myanmar. It has a low cost penetration rate of 27% and the country’s tourism is booming, which make it an easier market to conquer. The extra competition will not come without opportunities for the region’s carriers, even though the outcome (with airlines that could as well be stronger, even more aggressive and reluctant to cut capacity as fuel costs slump) will be interesting to watch.
An airline industry massively losing money is not the only matter to monitor as the Single Aviation Market arrives. Infrastructure use, including airport, runway, or air traffic systems capacity will feel a more intense pressure, while being extremely saturated in some countries already like in Indonesia. Lack of safety will be a worse bottleneck than national regulation and protectionism now.
Recently, Air Asia CEO repeatedly said that a change in mindset regarding infrastructure management in ASEAN is needed urgently. Tony Fernandes reminded everyone that his airline attempted to invest in infrastructure several times over the past years, but was always blocked by authorities. The creation of regional aviation regulatory bodies could help make things move forward, otherwise airport space and slots could be used as traffic rights, as Jetstar CEO recently warned.
ASEAN and Asia aviation in general are already among the world’s most competitive markets with 75% of the routes operated by more than three carriers. Besides enhancing direct competition and making air travel more affordable, open skies agreement deals in the past have enabled a huge increase in terms of city pairs flights. This is key to unlock new markets, and LLCs will probably fiercely want their slice of the cake. LLCs play a vital role in allowing a growing part of these countries’ middle class to fly. While most LLCs are losing money, the demand will stay strong: 7.7% on average for the coming 20 years.
With a single sky market, airlines can strategically choose their operational bases, and increase competition between national infrastructure providers. All in all, this matters a lot in this deal: with a single market comes the need for all the ASEAN countries to collaborate.
Hopefully, there will be a regional answer to current infrastructure problems. And other outcomes, such as the opening of bilateral negotiations to increase competition on long haul markets (which stand far behind competition levels seen on the regional market) will follow.
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As 2014 wraps up, I want to share with you a few things.
We are proud to be referenced on the 21st of December in FinanceAsia.com, paragraph before last. The only thing, they referred to us as an airline magazine.
Further, here are the 3 most read articles, all time. No. 3 Australia Airports Build: The Other End of the Line by Dan Parsons No. 2 Incheon Airport South Korea Evaluates European A-CDM by Kris de Bolle No. 1 Introduction to Airport Planning: The Master Plan by David Ruiz-Celada
And here are the links to all the articles we have published, by category: U.S. Aviation by Greg Principato A-CDM by Kris de Bolle Australia Airports Build by Dan Parsons Airport Wildlife Risk by Dan Parsons Safety Assurance by Dan Parsons China Airports Build by Guillaume Dupont Turkey Airports Build by Guillaume Dupont Indonesia Airports Build by Guillaume Dupont Planning and Development by David Ruiz-Celada New Airport Insider news by Jinan Alrawi
Last but not least, the New Airport Insider team wishes your family and you a warm holiday and a superb 2015!
Thank you for being here and we will back with a new post on the 14th of January 2015.
Photo credit: by Marianne DeSelle via Flickr
New Airport Insider missed its first birthday, can you believe it? We published the first post on 4 October 2013 but forgot to celebrate our 1 year of existence. Today, 30 airport articles later, we want to share with you a bit of the journey with a few words from each of the team members.
"On first hearing of the New Airport Insider concept, I was excited. Not only about the opportunity to write for a global industry audience but for the chance to read about the experiences of my colleagues.
New Airport Insider was the destination I had been looking for - an insider's perspective on the airport industry. The material already up on the site and in the pipeline represents the views and approaches of those in the fold.
Whether the material provides a bird's eye view of an area's development or a frontline view of birds on an airport, New Airport Insider helps airport insiders widen and deepen their understanding of their field." Dan
Kris de Bolle
"I wouldn’t call it a passion, but I have always loved writing. Be it a book review on Google Books, or even a dull meeting report; always in a good mood when I can write about something.
Imagine the excitement when about a year and a half ago, I was contacted by Ms Jinan Alrawi to check if I would be interested to start a series of articles for a brand new blog concept by airport pro’s for airport pro’s, on what definitely ís a passion of mine: Airport Collaborative Decision Making.
Writing blog articles quickly proved to be a different ball game than writing meeting reports and book reviews. Lots of ‘meta stuff’ to take into account: keywords, lay-out, subtitles, pictures, credits… and deadlines! For God’s sake, what was I thinking!
And indeed, the learning curve was steep, but I loved (well, about) every minute of the ride up until now. And we’re not running on empty yet: the initial idea of writing 3 short articles on A-CDM, has evolved in an ongoing series of 7 blog posts with evergreen content on airport data sharing in Europe, enjoyed now by over 180 hi-end subscribers. And know what the funny thing is? That I started off by panicking about how will I ever manage to write three 750 word articles about A-CDM…
So I invite you to take that leap of faith, join the New Airport Insider Team, write about YOUR passion and share it with the world of airport professionals!" Kris
"The New Airport Insider adventure started for me in late 2013 when I joined this tiny community after being contacted by Jinan Alrawi, the founder. The idea is to create an online magazine for airport professionals. And that is a good idea. There are many sites focusing on airlines, manufacturers, or other aspects of the aviation industry but very few cover airports. Over the past year, I wrote 5 articles, along Dan Parson and Kris de Bolle, the two main writers. And as I like to understand both causes and consequences, my articles always feature an overview of the market and the airlines’ landscape, which happen to be highly appreciated by our readers.
Of course it is really motivating to know that experts, people interested in aviation or curious spirits will read our analysis and learn, criticize, compare, or share. And this from all over the World. At New Airport Insider, we look at countries from all over the World. Our team is made of five different nationalities, and our readers way more than that. The main reason why I love aviation is because it a world of innovation, of extreme competition and without boundaries. And still, each country has its culture, its way to deal with things, and its economic realities. In my articles, I try to explain this essential background.
As the curious writer that I am, working with New Airport Insider has allowed me to learn a lot about how fast aviation is changing, everywhere. This is probably the best source of motivation for me.
Since October 2013 we strive to produce quality content for airport professionals. I think New Airport Insider shows unique points of views and analysis, and I hope our readers all appreciate that. Although it is not easy to grow, I wish that during our second year of existence, other writers will want to join our group. We will also start to collaborate with companies which might want us to focus on an area where they are particularly active. As you can see, started from scratch one year ago, we still have ambitious plans to boost New Airport Insider. Want to be a part of it? You can contact us!" Guillaume
Also, Greg Principato is joining New Airport Insider to help us grow. Many of you may know him as he is the former President of ACI-NA. We are very excited to have Greg on board. He will also write for New Airport Insider.
"Although I have worked on aviation policy issues in one form or another for my entire 35 year career, I became especially immersed in aviation policy when I was tabbed to serve as executive director of a presidential aviation commission in 1993. Though much has changed in aviation over those years, one thing remains clear: aviation discussions and debates rarely change much. The issues don't seem to change, nor do the solutions. People in aviation have become comfortable with their traditional ways of thinking.
In 2005, I was named President of Airports Council International - North America (ACI-NA). I had never worked at an airport before, and now I was sort of a "new airport insider" if you will. What I had observed as an outsider involved in aviation policy was confirmed by my new view as an insider. Once I had been there long enough to have gained some credibility, I began to actively and vocally push for new thinking and new ways of doing things. It was a hard slog.
Making it even harder is the fact that many aviation publications and forums for debate do not stimulate new thinking. We much prefer stories about how wonderful we already are, rather than the new future we ought to work to build.
That is why I am excited about the birth of New Airport Insider. If ever there was an industry in need of fresh thinking, it is aviation. And if ever there was an industry in need of a fresh new forum for that thinking it is aviation. New Airport Insider fills an important void. I congratulate it on its first anniversary and look forward to contributing to its mission in the coming years." Greg
"One day I "met" airports, then thought how can we create a community for airport professionals to meet, to share knowledge, expertise and to collaborate. The answer was easy: the Internet and technology. Use these to bring a community together online. This is how it started more than a year ago.
It has been a bigger challenge than I realized to launch, to build and to grow New Airport Insider. But along this short path, I've learned more than I could have ever imagined and this at a fast pace.
Looking forward, we are growing the team, the topics we cover and we will bring you content in more formats. Also, we are merging DC Design Tech with New Airport Insider to form only one entity: New Airport Insider. Further, we will have a new logo but most importantly we will migrate to a more powerful platform in the coming months to optimize your experience.
Lastly, I want to say big thank you to the team and to you our readers for subscribing to New Airport Insider." Jinan
China is now renowned for building hundreds of airports throughout the country. Having 90% of the Chinese population living less than 100 km from an airport by 2020 is one of the many ambitious targets found in the government's five-year plan. We covered these in our first article China Airports Build. Also mentioned are China's three megalopolis of Shanghai, Guangzhou, and Beijing which account for one third of the country's air passenger traffic. These cities already have well-developed air transport systems serving roughly the three cities' 60 million inhabitants. Yet, Beijing’s Capital Airport (BCIA), the second busiest airport in the world, has exceeded its capacity while handling 83.7 million passengers in 2013.
Capital airport’s capacity was raised to 82 million passengers per year in 2008 with the opening of Terminal 3. It increased capacity by 50 million passengers after a 4-year extension. At this occasion, a new runway was built, as well as a shuttle train that makes the airport reachable from Beijing subway in 15 to 20 minutes.
The idea of a new airport for Beijing actually came up in early 2000, though an expansion of the current airport was preferred at the time. But aviation has been growing fast and 6 years later it is more than time to move forward.
2 Beijing International Airports to Meet Demand
Traffic at Beijing Capital is expected to reach 90 million passengers per year in 2015. And Beijing-based Air China will receive 113 airplanes during the next three years. All-in-all, Chinese airlines should operate 4200 aircrafts at the end of the decade, twice more than today. Back in 2011, the Civil Aviation Administration of China was already warning:
It is now impossible to add even one more flight to the tight daily schedule of the capital airport
Proposed in 2008 and approved in late 2012, Beijing Daxing airport work started this month and it should be four years before it opens. 14 years after the opening of Shanghai’s second airport in PuDong, Beijing will soon have its second international airport. Together, Shanghai airports handled 83 million passengers in 2013, approximately the same amount than Beijing Capital.
Beijing Daxing Airport: How Modern Is It?
Like Beijing Capital's airport express, a brand new 37km-rail link to the city will be built in order to move passengers from Beijing South Railway station (and then Beijing subway) to the airport. But Daxing airport could also feature quite unprecedented ideas in China. First, the airport will not only serve Beijing but also nearby’s Megalopolis of Tianjin or cities in Hebei. Meanwhile, Tianjin airport experienced a double-digit growth in 2013, then handling more than 10 million passengers. The provinces and cities are working together to coordinate the work, and the government is looking at building new highways or rail links in the area. That seems like a huge change in China’s policy - building new airports everywhere (again, see our China Airports Build: Too Many Too Fast?). This example brings the hope of having fewer airports but better integrated in the hole transport network. Beijing New International Airport will then incorporate a “Ground Transportation Center” to enhance air-ground public transport connectivity.
Secondly, with the creation of a low-cost terminal under consideration, Beijing’s new airport could be another significant step in favor of the development of low cost carriers in the country. The new airport will also have a dedicated runway for military use, and will replace Beijing Nanyuan, a semi-military base and hub of China United Airlines due to close once Daxing airport is completed, having its flights moved to the new airport
New Beijing Airports
Among the two major airports, traffic will be split by alliance. Air China will stay in Capital - remaining will be the base of Star Alliance, and Skyteam (thus including China Eastern, China Southern and Xiamen airlines) and oneworld airlines will be moved to Daxing. Since 2013 Beijing allows a 72h visa-free transit that will help passengers needing to connect between the two airports.
Beijing Daxing is expected to handle 45 million passengers per year on its four runways when it opens. More unaligned carriers will move when the latter expands, the second traffic target being 72 million passengers in 2025. According to its designer NACO, Beijing Daxing could handle up to 130 million passengers with its eight plus one runways. Yet, the current Beijing Capital Airport will stay the biggest one for at least some years after the opening.
The location selected will leave room for numerous expansions. 11 villages must be relocated to clear up to 3000 hectares of land. Undoubtedly such a large project will completely transform the region, and accelerate the development of the area. 500 000 jobs could be involved with Beijing's new airport.
Beijing is a major city where having 2 airports makes sense. The government understands the benefits of an integrated transport network, and selected a strategic area that has room for growth. Assuming an 8% yearly growth, Beijing Daxing would be fully used when it opens in 2018, having to cope with about 50 million passengers. Yet, the growth has been slowing down over the past years in several major Chinese airports, and is expected to be slightly slower, though liberalization measures could change the story.
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Indonesia’s 230 airports are as active as the ones serving its capital, and sadly busy in the same proportions. The 25 Indonesian airports managed by state-owned company PT Angkasa Pur (which includes the country’s busiest such as Surabaya, Jakarta, Makassar and Bali Denpasar) handled 111 million passengers in 2010, although their combined capacity barely reached 58 million. Bali airport is running at twice its capacity but the in progress-expansion will make it ready to handle 20 million passengers in 2017 – versus 14 in 2012. That would make it ready to cope with the growing traffic until 2017, officials said. The capital of Sumatra North Medan also saw its situation changing for the best in 2013 when its new Kuala Nanu International Airport finally opened. The former Polonia airport closed last July while it was handling 8 million passengers for a capacity limited to 1. Indonesian airlines did not wait long before jumping on it, mainly for its most valuable asset: room.
Yet, despite having a brand new and roomy airport, a key item has been forgotten. The airport’s only road connection to the city is tortuous and tiny, because no road extension have been included to the project. Medan though is the first airport of the country to have rail transport integrated, even though the capacity is low. “Kuala Namu was meant to be a showcase, reassuring foreign investors and Indonesians frustrated by decades of under-investment in roads, airports and power plants” The Financial Times reports (Infrastructure failings clip the wings of Indonesian airport - FT.com ), “But instead, it has become a potent symbol for the poor planning, land acquisition problems and lack of co-ordination that have undermined the drive for progress with many other crucial infrastructure developments across Indonesia”.
In the coming year, 45 airports are to be built or relocated, including 24 airports by 2017. 14 airport extensions and several involving the country’s busiest will be completed by 2015. Yet, the figures given for Bali Ngurah Rai’s expansion point to other hidden issues. Indeed, with a 15% growth, Bali is expecting to handle more than 24 million passengers in 2016. One could wonder why an airport that has just been expanded would still lack capacity even before it is completed. A possible explanation that as a matter of fact stands for many airports in the country is the lack of available land to expand. For instance, Lion group had to set up maintenance facilities in nearby Singapore because “there is no space in Jakarta”.
The current expansion plans look like an emergency response to the overcrowding situation. But nevertheless, it will be hard to get out of years of under investment, lack of leadership and delays. Jakarta’s first extension, which should be completed next year, would raise its capacity to 62 million in 2015. Assuming a 15% growth, Soekarno would see its traffic rising from 58 million in 2012 to 88 million in 2015. In other words, even if the expansion is completed on time, Soekarno would struggle to handle 40% more passengers than it should when 2015 is here.
Contrarily to other countries, such as China which plans infrastructure investments far ahead, Indonesia has not succeeded to update its aviation infrastructure and is now doomed for overcrowding. The demand is simply growing too fast for infrastructure to keep up.
It is now more than ever urgent to change. ASEAN is poised for open-skies in late 2015, and the number of flights in Indonesia is very likely to increase by then. On the other hand, infrastructure is not only crowded but experience safety issues, as shown last August when a cow was hit by a Boeing 737 on a runway in Gorontalo airport. The aircraft consequently skid off the runway. And with most of Indonesia's airlines blacklisted in the European Union, Indonesia has been criticized for the poor efficiency of its civil aviation authority when it comes to safety checks, partly due to its lack of resources. “You can imagine that with traffic increasing by 20 percent a year for the last five years and you have less than 200 safety inspectors? What do you expect?”, president of the Indonesian transportation society said. And Lion 904’s crash in Bali last year was Lionair’s 6th landing accident of the decade, mostly blamed on poorly trained pilots. And with air traffic radar systems also running at twice their capacity, in a country where weather is strong and fast changing, who knows what could happen next.
“The importance of the airline industry to Indonesia’s economy is massive”, analysts say. While the government attempts to create an environment to democratize air transport through liberalization and increased competition, these efforts are meaningless if there is not enough room for flights to land safely.
This is part 2 of 2 in a series written by Generation Y and focused on airports in Indonesia. In part 1, we looked at Jakarta airports.