ASIA’S CONGESTION CONTAGION

Talk air traffic congestion to an Asia-Pacific airline boss and the mood will darken. A combination of timid political will at some aviation authorities, varying capital resources in emerging economies and widespread planning procrastination have created an infrastructure shortfall that is lagging far behind airline growth.

by CHIEF CORRESPONDENT, TOM BALLANTYNE  

October 1st 2015

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Welcome to the new normal at airports across the region where escalating air traffic congestion is choking up gateway hubs and confining network expansion across the region.

Cathay Pacific Airways director service delivery James Ginns, told Orient Aviation last month: “To give you an indication of the impact,” he said, “about 30% of our Cathay Pacific and Dragonair flights to Mainland China were delayed during the first half of this year.

“Extensive flow controls for flights to and from Mainland China have had a significant impact on operations and the workload of our operations teams. Flight delays or disruptions are having a knock-on impact on aircraft rotation, which means that flights to non-Mainland China destinations are also being affected.”

Hong Kong’s problems, it has to be said, have not been helped by the implementation problems of the airport’s new Air Traffic Control system, Raytheon’s Autotrac III, which was planned to be operating in 2012, but will not be fully functional until next year.

And Cathay Pacific Airways and Dragonair are hardly alone in their struggle to ensure their customers board flights that depart and arrive on time. But like their counterparts across the region, Ginns and his teams are facing the fact that keeping a commitment to on time performance is becoming tougher by the day at Asia-Pacific airports.

And China, the originator of most delays into the Pearl River Delta air traffic zone, is not the only choke point in the region’s congestion chain. In Indonesia, the Philippines, Thailand,Vietnam and elsewhere, gateway airports are operating at, or well above, their planned capacity levels.

In the air too, as low-cost carriers continue their unprecedented growth, airways are becoming more clogged, leading to increased aircraft holding, reduced gate and taxi-ing capacity and the burning of more fuel.

“To put things in perspective, said Vinoop Goel, the International Air Transport Association’s (IATA) Asia-Pacific regional director for airports, passengers, cargo and security, “the region is already home to one-third of global air traffic and traffic is forecast to double in the next twenty years.

“If you compare these figures with the contemporary state of aviation infrastructure, both on the ground and in the air, and the announced plans for airport and air traffic expansion, we see a significant gap.

“For us, it is a gap so big that we need governments and airports in this part of the world to really work on developing master plans and implementing them.”

James Ginns, Cathay Pacific Airways director of service delivery: Initiatives are underway aimed to ensure the long-term stability of flight operations and to allow for expected continued growth

As examples of the problem, Goel said Manila, Jakarta and Bangkok’s Suvarnabhumi airports come to mind. “But when you go down even further, to secondary airports the problem is pretty substantial across the region. That’s why governments need to focus on this problem to capture the potential growth out there.”

The Civil Aviation Administration of China (CAAC) has reported the average on-time rate for China’s domestic airlines this year was down to 65%, from 68% in 2014. In June, it dropped below 60%. A passenger flying on a Chinese airline experiences a flight delay in one of every three trips. Chinese carriers are among the least punctual airlines in the world.

A report from Civil Aviation Data Analysis, a Chinese organization tracking the on-time performances of 103 major global carriers, found Guangzhou-based China Southern Airlines was a poor 86th with an on-time rating of 70.45%.

Beijing-based Air China was 93rd with 66.41% and Shanghai-based China Eastern Airlines was 94th, with only 64.46% of its flights on schedule. Airports in Beijing, Shanghai and Guangzhou have to deal with at least 90 take-offs and landings per hour. The average amount of traffic on the country’s busiest air routes exceeds 1,100 planes a day, which is double the aircraft managed by air traffic managers in Europe and the U.S.

The CAAC has attributed some of the blame for the worsening flight delays to increasingly extreme weather conditions in the last year. Before 2009 more than 80% of flights in China were on time. Their on time performance has fallen every year since 2010 and is now at a record low.

China’s chronic delays – often up to six hours at Shanghai Pudong International airport – have an impact well beyond the country’s borders. “These ATC delays are not only affecting airlines such as Cathay Pacific and Dragonair,” said Ginns. “Congestion, both at airports and air traffic control, is an increasingly major feature across Asia.”

Particular issues, due to the extremely rapid growth of flights within, to and from Mainland China, cause even greater delays during times of bad weather, which in most of Greater China is in the summer holiday season

“Importantly, it bears a potential significant impact on Hong Kong’s standing as the premier gateway to China, a major aviation hub in Asia and, ultimately, a top tourist and business centre globally. Aviation and affiliated industries contribute about 8% of Hong Kong’s GDP, and any downturn in industry will ultimately hurt the city’s economy,” Ginns said.”

Just how much this is costing Cathay and other airlines is difficult to assess. No comprehensive data is available yet, although a recently released study by a German consultancy provided an indication of the gravity of the problem.

In April, Frankfurt-based aviationexperts published its second annual on-time performance study, which also attempted to calculate delay costs. It examined 130 carriers worldwide and found airline delays amounted to an astonishing $25 billion in 2014.

By region, the 33 North American carriers were the worst performers, with delays costing $14.4 billion. Delay costs for 34 airlines in Asia were $7.5 billion, with 38 European airlines incurring delay costs of $3.3 billion and four Middle East operators $520 million.

As long ago as 2006, an investigation of airspace congestion in the Pearl River Delta Region of Southern China was done by the Aviation Policy and Research Center at Hong Kong’s Chinese University. The study found airport and ATC delays were costing airlines about $80 million a year, a figure certain to have skyrocketed in the following nine years.

“It’s not only airlines,” pointed out IATA’s Goel. “If you look at all the costs, the cost of fuel, pilot time, cabin crew time, passenger time and the productivity lost in terms of GDP. The cost is substantial.”

While many of the region’s major airports have expansion plans, they are not expected to be ready in time to avoid an Asia-Pacific congestion crisis. Have governments been caught by surprise by the growth?

“No,” said Goel. “For example, expansion has been planned at Bangkok since they opened Suvarnabhumi. There was always a plan for a mid-field terminal, a third runway and maybe a second terminal. Its necessary to develop robust master plans and actually implement them. In Bangkok we have seen plans made and revised, then revised again

“But we have seen very little action on the ground. It’s the same in Manila and Indonesia. Some governments and some airports have got it right, like Changi, Kuala Lumpur and Hong Kong. Yes, they are going through their approval processes, but at least they have a plan and they are working on it.”

Some budget carriers are so concerned by capacity issues at several regional airports they are willing to invest in terminal infrastructure to improve on time performance and aircraft rotation.

AirAsia Group chief executive, Tony Fernandes, told delegates at an airport conference in Bangkok last month that the budget carrier group could invest, or become a joint venture partner, in airport development.

“Such partnerships could be an answer if capital requirements are an issue,” he said. “We’re big enough, and I don’t see why we should not have our own (passenger) terminals.” AirAsia has long nurtured a desire to have its terminals, but its bids to invest in such facilities in Malaysia and Indonesia have been turned down by airports and their regulators.

At the same conference, Fernandes said Japan needed to find a solution for congestion at its airports because of the country’s rising number of tourists. “Japan has to have solutions for Tokyo. Low-cost carriers don’t really have a strong home there and Haneda/Tokyo airport is too full,” he said.

There is a long list of airport expansion plans, but in most cases, completion is years away. Beijing Capital International Airport, the busiest airport in China, announced last month it would start building another runway to ease the heavy burden on existing facilities and improve flight punctuality.

The airport’s three runways handle about 1,600 flights each day, more than their intended capacity. Luo Liang, head of the airport’s planning and development department, said the runway would be completed before the end of 2017 and would increase the airport’s handling from 86 million passengers a year by above eight million. Beijing’s second airport, south of the city and reported to cost $13.11 billion, will open in 2109 at the earliest.

The region’s most congested airport, Jakarta’s Soekarno-Hatta International, recently announced it had set aside $240 million for a third runway, but it has yet to acquire the necessary land. It also intends to expand its terminal space, but no completion dates have been announced for the project. The capital city airport handles more than 60 million passengers annually, nearly three times its design capacity of 22 million.

Manila is almost as bad. The country’s Department of Transportation and Communications (DOTC) is working with the Japan International Cooperation Agency (JICA) to plan and construct an international airport by 2025. It is still at the feasibility study stage, with estimates it will cost between $10 billion and $13 billion when, and if, it is ready in 2025.

As recently as July, IATA identified Manila’s gateway airport as a high-risk airport in the region because of its unresolved safety issues. IATA said airlines routinely reported problems at the Ninoy Aquino International Airport (NAIA) due to air traffic management, including extended holding, delays and non-standard air traffic control procedures.

Vinoop Goel, IATA’s Asia-Pacific director airports, passengers, cargo and security: Governments need to focus on congestion to capture the potential growth out there

In Thailand, Bangkok’s second airport, Don Mueang (essentially an LCC facility) is designed to handle a maximum of 18.5 million passengers annually but it is now processing 22.5 million budget airline travelers a year and the numbers are rising by the month.

Airports of Thailand (AoT) president, Nitinai Sirismatthakarn, said the first half of this year saw a 50% surge in passenger traffic compared with the same period last year. Work on a new Terminal 2 has been speeded up to be completed in November .

Meanwhile, the board of AoT has approved the construction of a reserve runway and a new passenger terminal at Suvarnabhumi airport, worth a combined $1.3 billion, with the runway to be operating in 2017 and the terminal in 2019.

Then there is the issue of efficiency. “In a lot of areas in the region we are not using the infrastructure as efficiently as we possibly could,” said IATA’s assistant director safety and flight operations, Dave Rollo. “Some of the processes and procedures, such as separation, are not at the best practice levels you would expect in Europe, the U.S. and Australasia. This restricts capacity as well.”

To a degree, China has a special status as an ATC hot spot because of the power of its military to shut down air traffic pathways at any time. The impact of this control over ATC in the north/south corridor between Beijing, Shanghai and the Pearl River Delta was clear for all to endure when China’s air force closed a large swathe of the country’s air space on September 3, a special public holiday declared to celebrate the 70th anniversary of China’s war time victory over Japan.

Goel said China had a “very robust” airport development plan. “But one of the issues is air traffic conditions. A fundamental cause [of these conditions] is the control of airspace that lies with the military in China,” he said. “Airlines have to fly around the airspace blocks that are controlled by the military. We recognize you have to strike the right balance. In China they are investing in ATC systems but it is a work in progress. Yes, we would like to see more and we are hopeful that things will change over time.”

Each country in fact has different issues to manage when building airports to feed demand. After decades of opposition from residents affected, the Australian government has approved funding to build a second airport west of Sydney, but it won’t be finished for at least a decade.

Singapore Changi’s three passenger terminals and runways are expected to run out of capacity in 2018 but, in contrast to many other locations, it will have opened Terminal 4 and an expanded Terminal 1 by then, increasing its handling capacity from 66 million passengers a year to 85 million. Changi has joined with British public/private partnership UK air navigation provider, NATS, to increase the number of flights it can handle in Singapore.

While airlines are increasingly concerned about the congestion situation, Goel pointed out that infrastructure development is a complicated balancing act. “Master planning to implementation can be a very lengthy process, especially in places like Hong Kong or Japan where you are looking at reclaiming land and letting it stabilize to build runways,” he said.

“So if you take that into account, yes, they should have looked at doing something faster. But you don’t want to build too far in advance because then you might have a ghost terminal or a ghost airport that ends up costing governments, airports and passengers a lot more.”

While he said there is an urgent need to develop master plans and implement projects, in the short term governments and airports need to focus on maximizing the throughput and potential of the existing infrastructure with new technologies and processes such as Fast Travel.

“Regulatory approvals need to be given for e-immigration, mobile boarding passes and home printed bag which reduce the infrastructure burden at airport,” he said.”

Airlines across the region stressed they are doing everything possible to minimize disruption for passengers and are working with authorities to find solutions. But Cathay Pacific’s Ginns said many delays and cancellations are beyond the airline’s control. “We have been consolidating flights and upgrading our aircraft, as the circumstances demand, to minimize the impact.

“However, the situation is deteriorating rapidly and requires immediate attention. We are working closely with all the concerned authorities regarding these delays. A number of initiatives are underway, which are aimed to ensure the long-term stability of flight operations in this area and, at the same time, allow for expected continued growth,” he said.

Cathay believed the limited number of available slots should be put to better use by giving priority to airlines who want to launch destinations and increase frequencies to cities with major trade and business relationships with Hong Kong - to maximize the economic value of these scarce resources.

Another issue is that the industry is concerned that some governments don’t understand the economic importance of aviation to their economies and the negative impact congestion has on growth targets.

Said IATA’s Goel:“from our observations and discussions with governments, many see the link between increased traffic growth and the benefits of aviation. Most of them do get it.

“But we see a failure in policy in that the link does not exist in some countries. Governments say they want tourists and understand the benefits tourists bring to their countries’ economies.

“But when you ask ‘well OK what are you doing to increase tourism?’ Are you expanding your airport capacity? Are you making the commercial environment more airline-friendly? Are you improving your facilitation processes?’ You end up with a whole bunch of question marks.”

To address the wide range of government responses to crowded skies and airports, IATA has developed the Value of Aviation initiative, tailored to meet the needs of different parts of the world and staffed with different teams.

“In the Asia-Pacific, we are working to link the value aviation brings to the need to invest in infrastructure and develop policy. In Africa, it is more about airline commercial freedom,” said Goel.

“In Europe, it is focusing on Single Skies.”

In reality, said Goel, some governments don’t have the capability to make billion dollar investments. “In that case PPP (Public, Private Partnerships) or participation by private equity are options.”

But there is a caveat to these funding options. “Governments must make sure they are not selling the country’s “crown jewels”. Secondly, to ensure they are protecting the interests of aviation, they should resist resorting to higher taxes on international aviation,” said Goel.

“You can kill the goose that lays the golden egg. If you make the gateway to your country expensive, it will have a long-term impact on the competitiveness of the airport and the country. It has to be remembered the Asia-Pacific is home to a third of the world’s airline business, but it has two-thirds of the global population.

“If Asians have the same propensity to travel as the rest of the world, you are looking at a potential four fold increase in air traffic. It is a very sobering thought.

To cater for that growth you need airports. You need the right ATC infrastructure and procedures. You need the right human capital - pilots, flight attendants and mechanics.

“You need to have the right policies on taxation and commercial and economic regulation. A whole series of policy and planning steps need to happen. Governments really need to get their act together and get going.”