Regional airports must diversify to meet demands

Regional airports must diversify to meet demands

SINGAPORE (AFP): Airports in the Asia-Pacific region must privatize and diversify in order to meet the growing demands of carriers and travelers, but face major regulatory hurdles, industry experts said on Monday.

Air traffic in the region is projected to double to 870.6 million passengers annually by 2014, putting countries under pressure to build new airports and expand existing facilities, as well as cater to a host of passenger and airline demands.

With governments scrimping on public spending, the burden now falls on the private sector to finance the infrastructure building binge, they said at a conference on Asia-Pacific Airport Development organized by Dutch Bank ABN-AMRO.

Andrew Johnston, an aviation expert with London-based Jane's, cited a World Bank estimate showing East Asia alone needs 1.5 trillion US dollars in infrastructure investment in the decade to 2004.

The private sector should play a "pivotal role" in mobilizing these funds, he said.

Ranjit Murugason, head of global transport at ABN AMRO, told delegates that airports must shed their traditional role as mere "landlords" and diversify into other fields such as retail to increase their non-aviation related source of revenue.

"The development of these supplementary revenue streams is important to airport profitability," he said.

Current estimates show that most airports still derive the bulk of their revenue from aviation-related services such as the fees for the use of the runways as well as ground handling charges.

For some more developed airports, revenues from non-aviation businesses account for 60 percent of total earnings, he said.

Murugason, however, said governments, which traditionally operate these airports, must privatize these facilities to allow for private sector expertise.

He cited the British Airports Authority, which increased its revenue from non-aviation businesses from 66 percent in 1999 to 71 percent in 2000.

"Why do we see a trend toward commercialization of airport revenues? Part of the answer lies in the diversification strategies undertaken by airports," he said.

"To realize the full business potential of airports requires strong commercial focus and a range of business and facilities management skills," he added.

The Asia Pacific aviation industry still has big room for growth, accounting for only 16 percent of global passenger traffic. North America snared 44 percent and Europe 31 percent, he said.

Only three of the region's airports are listed among the world's top 25 airports in terms of passenger traffic -- Haneda airport in Japan which handles 56 million passengers, Seoul's Kimpo airport with 37 million and Chep Lap Kok in Hong Kong with 33 million, he said.

Nine airports in the region service more than 20 million passengers annually.