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WORLDS AIRPORTS STILL HOPEFUL ON THE FUTURE

Airports are adapting their infrastructure for the 21st century: Everywhere in the world airports are expanding, being rebuilt or built from scratch. This is happening despite the Asia crisis and even though less growth in passenger numbers is forecasted now. The true challenge to airports is privatisation.

The Marketing lady at Inchon Airport smiles and says with conviction, "Of course it will be built as planned." Of all new construction projects for airports Inchon in South Korea is one of the most ambitious ones. The new Super-Hub is being constructed on an artificial island in the sea, almost 50 km off the capital Seoul's old Kimpo Airport. The new Asian technical miracle is supposed to cope with up to 100 million passengers. Estimated construction costs: DM 10 billion.

Not quite two years ago the Airline Association IATA warned of overcrowded airports and airspace brought on by Asia's aviation boom. However, nobody talks now about unlimited growth and the predicted eight per cent increase in passengers. The economic crisis in Asia has the region - apart from a few exceptions - in a stranglehold. Because tickets are getting more and more expensive, most of the flights are empty.

Airlines and airports are suffering a tremendous loss of customers. The consequences are especially bad for airlines: Asia's carriers are heading for bankruptcy. Hardest hit, are the development countries like Thailand and Indonesia. Indonesia's Sempati has already given up and others are about to. Even respectable airlines in highly developed economies like Japan, Hong Kong or Singapore have stumbled. "In 1997 the market value of Singapore Airlines was about half of the 1995 value," an industry source states. The situation at Cathay Pacific is similar. South Korea's the two biggest carriers Korean Air and Asiana have also been hit badly.

New more pessimistic passenger forecasts are going round. IATA has adjusted its predictions and forecasts the growth rate of travellers in Asia up to 2010 at 4.4 per cent now. The Airports Lobby ACI estimates a growth of around 4.7 per cent. In its latest study "Airports 2015", the British market research institute JRA guarantees a growth of only 2.7 per cent for the former boom region. A horrifying estimation indeed, since this is even less than the global average.

Since air traffic is a global business, the Asia crisis also hits the world's other regions to a certain degree. However, while carriers are cutting employee numbers, cancel routes and postpone aircraft orders, the airport industry seems rather unaffected by the economic crisis. Construction and expansion projects to the tune of billions of Marks are progressing unreduced. Munich, New York or Singapore - Business as usual. There is no evidence of suspension of building work or revised planning, neither in Asia or anywhere else. Only the new Bangkok International Airport in Thailand, which will open in 2004, will see a capacity cut from 30 to 20 million passengers a year.

The reason for this sitting-out strategy: The Asia crisis is more and more seen as a passing economic fluctuation. It might all be over in a few years. Therefore the motto is hope instead of alarm. Furthermore it is hardly possible for airports to react to short term fluctuations in demand. What really counts is a long-term perspective.

However, Mitsuo Sato, Head of the Asian Development Bank warned ACI members in Sydney to be over optimistic, "The crisis is not over yet." But there were "encouraging" signs of recovery. According to management consultant Alan Carroll the crisis had been a shock, because there had been a continuous upward trend in this region over the last 25 years. Carroll develops three different scenarios for further possible developments in the crisis: Worsening, easing and something in between. Carroll thinks that there is an 85 per cent likelihood of the third option coming true. "The trick is to be alive." This means keeping your head above water for the next three to five years.

Does that mean, wait and see? According to experts the true challenge for the airport industry is privatisation. Most airports are still owned by local authorities, the state is still seen to be responsible for a functioning traffic infrastructure. However, the classic distribution of roles well known in times of regulation, seems to give way to more flexible structures. A lot of money is at stake here. The ICAO (International Civil Aviation Organisation) estimates that airports will need 350 billion US Dollars for legitimate expansion to their infrastructure. But everywhere the world over, public coffers are empty, another source has to be found for the necessary capital. This suits some governments and some local authorities: In this way their airport shares can be sold off to private investors. So they will be freed of the commitment to invest billions. Furthermore a lot of money is to be made by selling shares. And in times of financial crisis the public budget will need money more than ever. Bob Manning, President of ACI-Pacific claims that, "The economic downward trend will open the door to airport privatisation."

The process to privatise airports has started in many countries. Experts say that commercially orientated airports are what is needed, supervision of the state is out of place. But in many cases the process is progressing slowly. The fact that operating an airport is still a flourishing business, which guarantees the partners a good return on investment, has long been noticed by public shareholders. This is the reason why many states are still reluctant. What is more is that the paths of political decisions are often long and not always straightforward - especially in Germany. Ex Aerospace Co-ordinator Norbert Lammert confirms that the authorities of German airports behave with the mentality of allotment-holders.

From page 26 of FLUG REVUE 2/99