Asia Pacific will be a leader in worldwide airport hub growth over the next 20 years – with significant opportunities to be had. How can filling the current ‘gaps’ in Asia’s hub network potentially reshape the whole travel industry?
This edition of Issues & Trends reviewed Asia’s most important hubs and their impact on travel and tourism. We identified some 45 hubs or soon-to-be hubs in Asia, with the largest of these being Hong Kong SAR, Beijing, Bangkok, Singapore, Jakarta and Seoul. An analysis of the number of scheduled daily flights offered in January 2007 showed that the number of flights on offer by the airport’s main user – either an airline or an alliance – ranged between 100 and 300 compared to 300 and 900 for an airline or an alliance in Europe. The enormous difference reveals that considerable scope remains for expanding existing hub operations in Asia or to create new hubs.
Over the last decade, the Asia Pacific region enjoyed some of the highest growth rates worldwide and is expected to continue to lead this growth over the next 20 years. The Air Transport Action Group (ATAG) forecasts that 870 million passengers will be travelling to, within and from the region by 2014 – more than double the number in 1999. By 2022, eight of the top ten airports using large aircraft will bein Asia and nine of the top ten large aircraft routes will serve Asia, according to the ATAG.
Table 1: Passenger traffic forecast in Asia
MULTIPLE FACTORS AFFECTING HUB STATUS
The historical development of air transport in most Asian countries has in fact never seriously taken into consideration the issue of connecting people beyond their own boundaries until very recently. Over the last three decades airports and airlines were developed to serve point-to-point relations. Connectivity meant only transferring passengers from domestic to international flights or vice-versa. Even today some air gateways in Asia have yet to qualify as major international hubs, mostly due to a lack of international flight connections by their respective main carriers.
Many factors underline this position e.g:
- For many nations, a sense of ‘uniqueness’ helped the development of economies based on ‘nationalistic considerations’. Consequently those countries felt little need for connectivity to other countries as they felt they could survive within their own boundaries. Air transport evolved accordingly, serving mainly the national carriers and domestic routes.
- Air transport policy has been set up to foster national integration and internal economic development. Until recently, most of the air links in the region have been driven by stiff bilateral agreements, which were often used by governments to protect the rights of their national airline. They restricted seat capacities and the range of available fares as well as eventual traffic rights beyond national territories (mostly concerning fifth and sixth freedom traffic rights).
- Many airlines in the region are still state enterprises. Consequently the state plays a strong role in the national carrier’s strategic decisions. Many air transport policies are still governed by a sense of protecting the national carrier, even to the possible detriment of other activities such as tourism.
Many travel and tourism experts are already convinced of the untapped potential for air transport in Asia. Geographically, the Asia Pacific region provides ideal conditions for strong growth in air transport. A presentation dating from 2005 released by the Sydney-based Centre for Asia Pacific Aviation highlights that there are 235 cities located in the region which have a population of at least 500,000 inhabitants. Among them, 130 have already reached the million population mark.
Relatively long distances and a slow development in alternative ground transportation such as high-speed trains make air transport the easiest means of travel on the continent. As Asia’s living standards rise rapidly, air travel for both leisure and business purposes becomes standard practice for an increasing number of Asian citizens.
Another historical evolution of Asian air transport has been the build-up of hub-and-spoke airport systems in the capital cities. If this move sounds logical – as the capital is generally the centre of population concentration, major business, political and international activities – it also tends to often neglect other important urban centres that are also commercial and tourism centres.
Of Asia’s air transport giants many analysts argue that only China (PRC), Japan and India have multiple hub systems. Japan records three major hubs in each of Tokyo, Osaka Kansai and Nagoya; China (PRC) has four major hubs in each of Beijing, Shanghai, Guangzhou and Chengdu, while India is seeing the emergence of hub-and-spoke operations in Mumbai, New Delhi, Hyderabad and Chennai. On the other side of the coin there appear to be notable exceptions in Asia including, for example, Indonesia which has two major gateways in Jakarta and Denpasar; Vietnam where the most important airport is located in Ho Chi Minh City, the country’s economic capital; and Cambodia, where
Siem Reap airport will overtake the capital Phnom Penh’s airport in importance in 2007.
Indeed, air connectivity looks to have significant latent opportunity in many of Asia’s large urban areas. Take Indonesia as an example; even with dozens of cities of more than a million people, the level of international air connectivity still remains at a relatively low level. Medan, with over 4 million passengers a year and some four million inhabitants in its metropolitan area is only connected to Malaysia and Singapore, despite a wealthy Chinese population. So far, there are no existing connections from Medan to the northern part of Southeast Asia (Bangkok) or Northeast Asia (Hong Kong SAR or Guangzhou). Surabaya – Indonesia’s primary port and second largest city – only has flights to Malaysia, Singapore, Brunei, Hong Kong SAR and Taipei. Australia, mainland China, Korea (ROK) and Thailand would almost certainly be welcome additions. From a wider tourism perspective, flights from Indonesia and Thailand to, for example, Cebu in the Philippines as well as non-stop flights from Japan to Phuket and Krabi could also be welcome additions to the regional air network.
OPEN SKIES COULD BE ONE SOLUTION
Surprisingly even mature markets and some well-established hubs still show potential gaps in their network coverage. Bangkok for example is considered by many as the main air gateway to Indochina, a view supported by the fact that it is connected by 226 weekly departures to nine Greater Mekong destinations, including a new route from Bangkok Airways to Pakse, in Southern Lao PDR (April 2007). However, a number of gaps remain in the overall Indochina network, especially to Vietnam, a market with significant future potential. To date Vietnam only has international access to/from three airports – Danang, Hanoi and Ho Chi Minh
City – although more airports are slated to soon open to regional flights (Dalat, Nha Trang, Hue and Phu Quoc). Other important cities such as Bagan and Mandalay in Myanmar, Battambang and the new resort area Sihanoukville in Cambodia would also perfectly complement the existing Indochina network and offer worldwide access.
Beyond Indochina, Bangkok for example, could reinforce its dominant position by considering the opportunities inherent in increasing frequencies to ASEAN destinations – especially to Indonesia (currently three daily flights) and the Philippines (currently four daily flights, to Manila only), to China (PRC) linking to cities such as Chongqing, Lhasa,Nanning,Shenyang and/or Xian as well as to Japan.
Singapore of course is often cited as a perfect example of an efficient hub. Singapore profiles itself as Indonesia’s largest international gateway as it is connected to 15 cities of the archipelago by 281 weekly departures. In addition the Singapore government may soon replicate that hub strategy on the dense, and profitable, Singapore-Kuala Lumpur route. It is apparent that both governments recognise the need to speed up a liberalisation of capacities between both countries. That would certainly open up connections to a number of secondary cities across Malaysia.
Even Singapore’s network still has opportunities in terms of connection however. It is interesting to note that the city-State is currently linked only to four Japanese cities, has no connection to Pusan in Korea (ROK) – despite being the country’s second largest city and an important port – and has virtually no connections to Central Asia.
ASEAN’s framework for a complete open skies system in the region will almost certainly have a positive impact on networks. As capacities will be freed from most controls, rapid growth in traffic can be expected in countries such as Indonesia, the Philippines and Vietnam, countries currently with significant and growing populations (and therefore expected strong latent demand) but at the moment at least with a limited international air network.
Table 2: Improving air connectivity in Asia: international routes from selected cities in Asia and a European city comparison
IN NORTHEAST ASIA: THE CONTINUING POTENTIAL OF JAPAN
Japan’s current traffic pattern appears to show significant opportunities. Tokyo is officially recognised as a hub by the Oneworld and Star alliances as each of them integrate a Japanese carrier (JAL for Oneworld and ANA for Star Alliance). But as operations are split between two airports, Haneda and Narita, Tokyo looks to have positioned itself as a niche hub between North America and the rest of Asia.
Figure 1: Possible impact of air transport liberalisation within the ASEAN region with Bangkok operating as a hub to Indochina
Figure 2: Possible impact of air transport liberalisation within the ASEAN region on Singapore operating as a hub to Indonesia/Malaysia and East Timor
Narita, which opened in 1978,was clearly designed to serve as Japan’s international air gateway – though not necessarily as a hub. But Narita’s location 60 km away from Tokyo, meant that even from its early days it faced the issue of distance from the city and that may well – inter alia – have limited its positioning on the domestic route network. In February 2007, for example, Narita was linked by 160 daily departing flights to the rest of Japan with All Nippon Airways offering 90 frequencies and both Japan Airlines and Ibex Airlines (which has a cooperative agreement with ANA) providing 35 frequencies each day. By comparison, Haneda was linked in February by 3,141 daily departures to other Japanese cities, including 1,452 frequencies from All Nippon Airways and 1,261 flights from Japan Airlines.
For any number of reasons – valid strategic ones included – Japan does not yet have non-stop connections to Indochina – despite being Cambodia’s third largest incoming market in 2005 and the eighth largest in Lao PDR. Interestingly, large cities such as Hiroshima, Sapporo or Sendai have relatively few, if any, direct flights to Southeast Asia despite high living standards, a high propensity to travel for the Japanese and the presence of important trade business in most cities. GDP per capita in Sapporo, Fukuoka and Sendai for example, is higher than that in many countries in the Asia Pacific region and that, coupled with
the respective population bases there would certainly have some analysts eyeing the air connectivity potential there.
BORNEO: ANOTHER POSSIBILITY
Returning to Southeast Asia, it certainly appears that there is potential for the rapid growth of regional hubs across the sub-region. In Indochina, Ho Chi Minh City is well positioned to become a major hub between Northeast and Southeast Asia, once its new terminal opens to the public. Phnom Penh or Siem Reap, both centrally located in the Greater Mekong Sub region, can also aspire to become regional Mekong hubs particularly if an appropriate carrier was to implement a national air transport strategy.
In Indonesia, Surabaya and Medan, both with huge populations and strong economies, have the potential to become secondary hubs, alongside Jakarta.
Another seemingly often overlooked opportunity in the region could also be attributed to Brunei. Bandar Sri Begawan is currently the only truly intercontinental airport on Borneo island and for the BIMP-EAGA bloc. Created in 1994, the BIMP-EAGA (or simply EAGA) stands for the Brunei Darussalam Indonesia Malaysia the Philippines – East ASEAN Growth Area. It is Asia’s largest regional grouping, spanning 16 territories and States of four ASEAN countries.
The EAGA area covers roughly 1.54 million square kilometres and is home to over 50 million people. Already, there are 45 million passengers flying from and to the BIMP-EAGA airports with over 35 million just for Borneo. Brunei could in theory at least, become an efficient hub linking most of the cities of the BIMP-EAGA to the rest of the world. Brunei is the only airport in that region to offer a network stretching as, far as Europe or Australia/New Zealand.
Figure 3: The Tokyo-Narita position
Example of a Star Alliance connecting bank (February 2007),showing Narita’s connecting hub position on the Asia-North America axis. 17 arriving flights from North America can potentially connect to 15 Asian flights and 9 Japanese frequencies.