The message from new AAPA director general Andrew Herdman is continuity. But the same questions about the Asia Pacific airline association remain: is it really representative of its region? Is it relevant? And when will Chinese carriers be included?
In some respects, andrew herdman, the new director general of the Association of Asia Pacific Airlines (AAPA) could not be more of a contrast to his predecessor, Richard Stirland.
Although both are UK nationals who spent much of their respective careers in various roles with Swire Pacific, the parent of Hong Kong's Cathay Pacific Airways, Herdman chooses his words far more carefully than the sometimes controversial Stirland. His flamboyant predecessor is well known for speaking his mind, often to the frustration of the party facing his wrath, while Herdman is much more of a diplomat.
Herdman recently took over as director general of the 17-member association, the secretariat of which is headquartered in the Malaysian capital Kuala Lumpur. Stirland, after 10 years at the helm, has retired and is in the process of relocating to the Indonesian island of Bali, where he has built a house.
But while the two may have different styles, the message the AAPA sent at its annual gathering of member airline presidents late in November is one of continuity. Herdman says there will be no great changes in direction for the group.
"In terms of the direction we are headed, there is common agreement among the membership and that is to promote aviation," Herdman said in an interview in Singapore days after his first Assembly of Presidents in Taipei, where he met some of the AAPA membership for the first time. "We are all unified on that, and with partners in the travel and tourism industry, we are all committed to the same thing. So that sense of direction hasn't changed, won't change, and shouldn't change."
What does change regularly, however, are the issues the membership faces, and "to some extent the agenda is driven externally", says Herdman.
In 2003, for example, the agenda was largely based around helping member airlines deal with the effects of the SARS outbreak, which devastated passenger demand between March and July. The AAPA, calling it the "worst-ever crisis" for Asian carriers, pressed airport authorities to reduce fees and worked to convince the public that air travel is safe.
A question often asked is how representative the association is. One of its failings, say some, is that it does not include members from China, where air travel is growing rapidly. The AAPA has said it wants Chinese airlines to join, but such wishes have been expressed by the group for around a decade.
"A firm yes," says Herdman, when asked whether the AAPA is representative of the region from which it bears its name. "The AAPA is representative of the lion's share of traffic, particularly international traffic, from areas throughout the region. The Chinese carriers have been growing very rapidly, particularly with their domestic operations and regionally, [although] at this stage they still have modest long-haul international activities. As far as Chinese carriers being welcomed as new members, they certainly would be welcome. The fact that they have not chosen to join is their decision. We are happy to continue to talk to them about their becoming members, and as and when they wish to join we would be happy to welcome them."
Herdman adds: "My own experience in dealing with China in a number of different industries is while you may be able to predict the direction in which things are headed, the time it takes to move forward sometimes disappoints outside observers. I am not unduly concerned about that. Certainly, we are paying close attention to issues relating to China because that is an area of rapid growth and our members are expanding their services - both cargo and passenger services. The Chinese are also travelling in much greater numbers now."
Is it relevant?
Another often-asked question about the AAPA is whether the association is even relevant, given that its members are already members of IATA, which regularly lobbies over the same issues. AAPA members include Air New Zealand, All Nippon Airways, Asiana Airlines, Cathay Pacific, China Airlines, Dragonair, EVA Air, Garuda Indonesia, Japan Airlines, Korean Air, Malaysia Airlines, Philippine Airlines, Qantas Airways, Royal Brunei Airlines, Singapore Airlines, Thai Airways International and Vietnam Airlines.
Says Herdman: "It is right to make the comparison because we are engaged in doing many of the same things that IATA does on a global scale through its much larger membership. But on the other hand, there are issues that have a regional dimension to them. There are issues that arise from the region, that IATA maybe doesn't tackle as it tends to focus on global issues. AAPA has a role in focusing on those issues, whether it is a regional regulatory issue, or crises and challenges that are affecting us here that may not be affecting other parts of the world."
The other way in which AAPA members may have a particular interest is the type of business they are in. "Our members tend to be, compared to most IATA carriers, more skewed toward international as opposed to domestic operations," Herdman says. "Cargo is also a significant part of the business. And if you look at the fleets here they are very skewed towards large widebodies."
Technical priorities
Herdman says that when prioritising technical regulatory issues, AAPA members put a high priority on topics relating to large widebodied aircraft, whereas "if you look at the US industry they are still dominated by narrowbody single-aisle aircraft. But we do work closely with IATA. We are mindful of the need to avoid unnecessary duplication. AAPA is a member of various working groups together with IATA, and we work closely with them as we do with ICAO. We provide input from an Asia-Pacific perspective."
The issue of government travel advisories is one example, he says, where AAPA members are often generally more affected than airlines in some other parts of the world. During the 2003 SARS outbreak, many governments issued advisories warning against travel to affected areas in Asia. Indonesia, the Philippines and Thailand are also occasionally the subjects of security-related travel advisories by foreign governments.
Herdman has taken over as AAPA director general at a time when things are going well for Asia-Pacific airlines. Despite high fuel costs, many of the region's carriers have been reporting record passenger and cargo traffic growth, and most are reporting healthy profits. And while new low-cost carriers are starting to have an impact on some short-haul routes operated by certain AAPA members, which are all full-service "legacy" airlines, the new-starts still account for only a tiny percentage of intra-Asian travel. But that does not mean there are no concerns, says Herdman, who suggests there is a need to publicly support and sometimes defend the business model so the full-service airlines are not perceived in a negative light.
"Sometimes legacies are good," he says. "The argument that legacy is somehow a pejorative phrase, I don't think we should allow that to pass. The Asian carriers don't suffer from the severe structural inefficiency that you see in the USA and to a lesser extent in Europe, so in that sense we are better positioned, but that doesn't mean we are complacent. The member carriers are all looking hard at how they continue to improve their own productivity and efficiency. That is within themselves as carriers, but it affects the whole industry."
Herdman sees Asia-Pacific airlines becoming more influential globally, perhaps when it comes to consolidation. While Herdman does not foresee much true consolidation occurring soon, he believes that when it does, the region's airlines will be well placed to seize opportunities.
"In some ways it would be great to foresee a future where the industry behaves like other industries, where cross-border mergers and cross-border takeovers are part of building up large global brands. I don't think we are going to see that play up any quicker than was ever the case, but I think inevitably that is the way it will go. In that sense the Asian carriers do have strong global brands. Previously, Asian carriers were viewed perhaps unfairly as being smaller players with well-established brands and good service reputation, but not of a scale. What has been happening is the Asian carriers have been growing and prospering, and the relative share of those airlines on the global stage has kept on rising and growing, and I see that continuing."
Key components
He believes some major Asian airline operators with global reputations are going to be a significant factor, already shaping the global alliances. "In the long run you will see them as key components of the shape of the future industry." he says. "The perception is that the US industry is the biggest, and Europe is together and is big in size, and Asia is smaller. But of the top airlines worldwide and the top airports worldwide, look at how many of those are in Asia. The Asian carriers, and Asian aviation in general, are a very significant part of the global picture and that will be more widely perceived in future. But it takes time to change perceptions, particularly from Europe or the USA."
| Asia-Pacific airline system results – fiscal years | ||||||
| Measure | Units | 2003/04 | 03/04 | 02/03 | 01/02 | 00/01 |
| Revenues | $million/change | 53,841 | 4.5% | 7.9% | -10.3% | 10.6% |
| Passenger | $million/change | 38,974 | 2.4% | 5.8% | -8.8% | 11.9% |
| Cargo | $million/change | 9,352 | 8.3% | 13.5% | -15.5% | 5.8% |
| Op results | $million/margin | 1,348 | 2.5% | 4.3% | 1.8% | 6.5% |
| Net results | $million/margin | 490 | 0.9% | 4.0% | -1.7% | 2.3% |
| Unit costs | /ATK/change | 39.8 | 5.5% | 0.0% | -6.0% | 5.5% |
| Traffic | RPKbillion/change | 426 | 2.0% | -2.6% | -5.1% | 12.0% |
| Yields | /RPK/change | 6.1 | 6.1% | 0.3% | -6.0% | 4.6% |
Note: System wide results from 15 AAPA member:BI, BR, CU, CX, GA, JL, KE, MH, NH, PR, PX, QF, SQ, TG, VN. Excludes KA and NZ. Years=financial years to March adjusted for compatibility. Passenger traffic for 02/03 and 03/04 are calculated from monthly traffic releases. RPK=revenue passenger km ATK=available tonne km1 mile=1.609km Source: AAPA Annual Report
REPORT BY NICHOLAS IONIDES IN SINGAPORE
Source: Airline Business
