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Fri, Nov 10, 2006 - Page 10 News List

Asia region must liberalize airline industry: experts

AFP , SINGAPORE

Asia should further liberalize its airline industry to unleash the region's full growth prospects or risk losing billions in unrealized potential, industry experts said yesterday.

"We need one more revolution and that's from the government ... liberalization," said Peter Harbison, executive chairman of the Sydney-based Center for Asia Pacific Aviation (CAPA).

The airline industry has enjoyed unprecedented growth in recent years, weathering the shocks from skyrocketing oil prices and avian flu outbreaks in parts of Asia, thanks largely to booming econ-omies in India and China, industry players said at the regional Aviation Outlook Summit.

But they said Asia must now face the reality that further opening up - -- for example by reducing restrictions on which carriers can fly certain routes -- is needed for continued growth.

"I think the greatest challenge that we face is to make enough money," said Brian Pearce, chief economist at the International Air Transport Association, which groups 260 airline companies.

"Asia has been the most consistently profitable part of the world but even in Asia, the returns on capital are less than five percent," Pearce said, adding that that is only half what it should be for long-term financial viability in a liberalized, commercial industry.

He said the region still lagged behind the EU and the US in loosening restrictions on its aviation sector and is losing "billions" of dollars as a result.

"We have seen progress, we have seen good progress in a number of areas but in many ways, Asia is playing catch-up to what we have already seen in Europe and the US," he told reporters on the sidelines of the conference.

Harbison, of the Sydney CAPA aviation consultancy which organized the conference, also pressed the need for more deregulation.

"In this environment, the whole basis for tight regulation of international markets, or protectionism, just does not really exist," Harbison said.

He cited the case of Malaysian low cost carrier AirAsia whose phenomenal success in opening up the domestic market has shown authorities that the industry does not need subsidies or protection to be commercially viable.

Harbison said that when AirAsia entered the market, it expanded "quite dramatically in ways which didn't require subsidy and in ways which stimulate traffic."

"The outcome, well just about everybody wins," he said, adding that the emergence of AirAsia has forced flag carrier Malaysia Airlines to try to improve its performance, which is ultimately good for the industry.

AirAsia was launched as a budget carrier in December 2001 with just two aircraft but now offers more than 100 domestic and international flights around the region.

Andrew Herdman, director general of the Association of Asia Pacific Airlines, said liberalization would benefit all carriers, not just low-cost entrants.

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