airport infrastructure keeping up with demand in asia pacific

Airport Infrastructure:Keeping Up With Demand In Asia Pacific

Schedules Flight Status Analytics Cargo Traveller

http://www.oag.com/data

http://www.oag.com/status

http://www.oag.com/insight

http://www.oag.com/cargo

http://www.oag.com/traveller

© 2015 OAG Aviation Worldwide Limited. All rights reserved

Airport Infrastructure: Keeping Up With Demand In Asia Pacific

2

Contents

1 Foreword 3

2 Grappling with Growth 4

3 Conurbations & Crossroads 6

4 Chinese Airport Development 7

5 Capacity Hotspots 10

6 The Scale of the Task 14

http://www.oag.com



3

1 ForewordAn average of almost 300,000 seats every day. That’s how much additional capacity carriers added in the Asia Pacific region last year – a staggering amount. This is not a new phenomenon. The Asia Pacific market has been growing by an average of 8% over the last 10 years; but what of the airport infrastructure and the capability to keep pace with the demand? Aircraft are mobile assets, able to be redeployed on different routes or emerging markets at very short notice, and clearly airports have a different challenge.

There is an abundance of airport projects either planned or already commenced however there has often been a gap between intention and infrastructure delivery. Economic growth, population growth and the further emergence of new low cost carriers continues to fuel the airline capacity in the region. And speaking of fuel, we are now entering a period of very low prices, certainly in comparison to recent years, and that is creating uncertainty – will this further delay some of the intentions to expand? Having the right capacity at the right time is undoubtedly a challenge. Not having the available capacity to handle the demand puts a dent in any economic development plan.

In this report we utilise our extensive analytics tools to assess the capacity growth in Asia Pacific and highlight some of the upcoming challenges for airport operators in the region to satisfy the demand. Not all markets are equal and we offer insight into where and when some of these ‘crossroads’ have to be tackled.

Mark Clarkson Business Development Director – OAG

Mark Clarkson is Business Development Director ASPAC, OAG. Mark has responsibility for the combined JAPAC and China Sales operations, with the core focus to lead, develop and implement the appropriate activities to deliver revenue growth and the expansion of the business in the ASPAC region.Mark was previously Commercial Director at OAG and responsible for all commercial activities including customer relationship management, new product development and strategic partnerships.Prior to joining OAG in 2012, Mark spent six years with consultancy firm Airport Strategy and Marketing (ASM) as Vice President, where he was responsible for delivering client projects including new route development and network strategies. Mark worked with airports and tourism authorities in the Caribbean, Europe, Middle East, Africa and Asia to implement successful strategies in building sustainable air services. Notable highlights were delivering the first LCC airline JetBlue to St Lucia and a new direct Asian service for London Gatwick Airport for Vietnam Airlines.Before ASM, Mark worked at Peel Airports Group for six years, where he was responsible for commercial and marketing functions including route development and airline relations.www.linkedin.com/pub/mark-clarkson/b/27a/379/

http://www.oag.com



4

2 Grappling with GrowthIn 2014 scheduled airline seat capacity to, from and within the Asia Pacific region reached 1.6 billion for the first time, continuing a trend of rapid growth which has seen capacity more than double in the last 10 years. Annual growth has averaged 8% each year for the last 10 years, and in the last 12 months alone carriers have added, on average, nearly 300,000 seats every day.Looking forward, there can be no doubt that the focus of growth in the aviation industry is shifting east. The International Air Transport Association (IATA) confirmed this in October 2014 when they published their first ever 20 year passenger forecast, putting China firmly at the forefront of future demand for air connectivity1. IATA expects that China will overtake the US as the world’s largest passenger market by 2030, with passenger volumes expected to reach 1.3 billion.Whilst propensity to fly (number of air trips per capita) is a standard measure of demand for air travel, seat capacity per capita can also be used as a proxy measure. On average, there were just 326 airline seats per 1,000 head of population available across Asia in 2014. Compare this to Europe where the equivalent figure was 1,482 seats and the US where it was 2,938 and it is clear that airline capacity in Asia could triple or quadruple and individuals would still not be flying at the same rate as in Europe or the US.OAG has generated three scenarios based on changes in Asian airline capacity per capita. The chart below shows what might happen in these scenarios compared to the growth rates recently projected by IATA.

Firstly we consider what happens if Asian capacity growth continues at the rate projected by IATA in their latest passenger forecast, which is 4.9% per annum. This leads to capacity reaching 2.3 billion seats 10 years from now, and 3.7 billion in 20 years’ time, making Asian airline capacity more than two and a half times bigger than today. The number of seats per 1,000 head of population increases to 714 by 2034, from just 326 today.What if capacity per capita were to double? The first scenario considers this and leads to projected capacity of 7.4 billion seats by 2034, five times greater than today. The second and third scenarios consider what Asian air transport capacity would be if Asian travellers were to fly at the same rate as Europeans or Americans. These figures are quite staggering in terms of the potential capacity generated, and well in excess of the levels of capacity which could be accommodated by airport developments in the pipeline.IATA’s forecast passenger growth rate for the region looks modest compared to the actual capacity growth in China, India and Indonesia in 2014. International airline seats to and from China grew by

1 http://www.iata.org/pressroom/pr/Pages/2014-10-16-01.aspx

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

Seat

s (M

illion

s)

2014 2019 2024 2029 2034

Asia: Capacity Projections

Source: OAG Schedules Analyser, UN, IATA

http://www.oag.com



5

9% while domestic capacity grew by 12%. Indonesia and India experienced similar rates of capacity growth. All three economies are growing and the rise in air travel is associated with the growing numbers of middle class consumers in each country, as well as population growth. However the capacity projections in our scenarios are purely speculative, and of more immediate concern is the region’s ability to cope with current levels of demand and short- to medium-term growth.

According to the Centre for Asia Pacific Aviation (CAPA), there are USD115 billion worth of projects planned or in the pipeline and with a good chance of completion in Asia. In China, 10 new airports opened in 2014 and a further 50 to 60 airports are expected to come on-stream in the short-term, adding to the existing 200 airports. But can infrastructure growth keep up with demand across the rest of the region?Both India and Indonesia are lagging behind in infrastructure provision. India opened no new airports in 2014 and there is little in the pipeline beyond capacity expansion at the country’s main airports. Indonesia opened six new airports but is wrestling with the challenges it faces at Jakarta where the airport is operating at more than twice the intended capacity.

http://www.oag.com



6

3 Conurbations & CrossroadsBuilding new airports is not enough to meet demand. Capacity needs to be in the right places and that can mean concentrated capacity in a few large hubs. Large airports attract disproportionate volumes of traffic as passengers, not just because of the cities they serve but because passengers can connect between flights. The benefits to passengers also include having a greater range of flight options – especially important if there are delays and cancellations – more and better airport facilities, and the economies of scale mean that airlines may offer more competitive fares. Asian countries will need to focus particularly on getting capacity right at their major conurbations and crossroads.Across the globe seat capacity is concentrated at a limited number of large airports. In the mature US market the Top 25 airports handle 66% of all scheduled airline seats. In Western Europe the same figure is 54%, in Southeast Asia it is 77% and in China the figure is 76%.Some of the biggest airports in the US handle more than three times the average hourly departures than the Top 25 Asian airports do. Given that these Asian airports will need to handle much of the future demand, it is inevitable that runway utilisation will need to increase.All airports in the Asia Top 25 handled more than 10 million seats in 2014, and the 10 largest airports had 30 million or more seats in 2014.The importance of China as a market is demonstrated by the fact that twelve of Asia’s Top 25 airports are located in China.

http://www.oag.com



7

4 Chinese Airport DevelopmentThere were 200 airports in China with scheduled services in 2014. This was 10 more than in 2013 and 21 more than in 2012. China is the only country in the world adding airports at this kind of volume and pace. Compared to mature markets, this is a huge amount of development but is it enough and is it in the right places?Most of China’s airport development in the pipeline is located in the far west and north of China in provinces such as Xinjiang, Inner Mongolia, Tibet, Yunnan and Heilongjiang. This is in accordance with Chinese government policy which aims to develop western regions economically as has happened in the east of China. It is clear from the domestic Chinese route networks that capacity has grown strongly in the east and along the coast and, understandably, the next wave of airport development will aim to improve connections across the rest of the country.Meanwhile, the route network expands. In 2014, carriers added 204 new domestic routes in China, taking the total to 1,906. The pace of international route development was similar with 151 new

international routes taking the total to 944. This was an increase of 19% versus 2013. Whilst eight out of ten seats are on domestic routes, international capacity is growing faster and is the driver of growth in many other country markets.Chinese airports handled 754 million passengers2 in 2013, up 11%. Aircraft manufacturers estimate that it will take an average of one new plane taking to the skies in China every day for the next two decades to meet the growth in demand. Already major airports are reaching capacity and there is a shortage of slots at Beijing (PEK), Guangzhou (CAN) and Shanghai (PVG).Beijing Capital International Airport (PEK) is currently the world’s second largest airport, in capacity terms, after Atlanta and OAG expects that it will overtake Atlanta during 2015. The airport is currently operating beyond its design capacity of 80 million passengers per annum (mppa) as it reached 83 million passengers in 2013 despite T3 being the second largest passenger terminal in world; only Dubai’s (DXB) Terminal 3 is bigger, and T3 at PEK is 17% bigger than the combined size of all five terminals at London Heathrow. The airport currently has three runways. Passenger volumes are forecast to rise to 113 million in 2015 and 142 million in 2020.There are plans for a second international Beijing airport at Daxing which will operate with eight runways and open with capacity of 40mppa, rising to over 70mppa by 2015 and eventually to 200 million. The new airport is due to open in 2018 and the inclusion of a low cost terminal is being considered.Elsewhere in China, Chengdu – China’s seventh busiest airport in terms of airline seat capacity – is also set to benefit from development. The new Chengdu Airport is due to open mid 2017 with five runways and will have capacity for 80mppa.

Chinese Domestic Route Network – week commencing 24 November 2014

Source: OAG Schedules Analyser

http://www.oag.com



8

Source: OAG Schedules Analyser, CAPA

http://www.oag.com



9

Source: OAG Schedules Analyser, CAPA

http://www.oag.com



10

5 Capacity HotspotsWhile new infrastructure is needed at Beijing, the situation is not as dire as at some other Asia airport hubs.

In this section we look at some of Asia’s other very busy airports. Specifically, Hong Kong, Singapore, Jakarta, Incheon, Taipei, Manila, Kuala Lumpur, Bangkok and Tokyo Haneda. Like Beijing, Jakarta, Bangkok and Manila are all operating beyond capacity and the issue is particularly acute at Jakarta and Manila.

Hong KongAccording to Hong Kong International Airport (HKIA), traffic volumes are running one to three years ahead of the HKIA “Master Plan 2030” and the airport is pressing the case for a third runway which has recently been granted its environmental permit. The design capacity of 420,000 aircraft movements annually is now in sight as there were 370,000 movements in 2013. Even with a new runway in place, the airport states that the planned capacity increases at HKIA and the other four Greater Pearl River Delta airports will leave a shortfall in capacity equivalent to 100 million passenger trips by 2030.

Terminal capacity is less constrained at the moment as there is capacity for 87mppa while 2013 passenger volumes were just under 60 million. However, given that any new terminal will need to be built on reclaimed land, planning has already started but a new terminal would be unlikely to open before 2023.

With this background of increasingly constrained operations, the incumbent carriers have resisted moves by new entrants to gain a foothold. Hong Kong Express, which mainly serves the Chinese mainland, has a cap on slots imposed by the Hong Kong regulators. Jetstar Hong Kong is yet to start operations, and Qantas has lowered its equity stake from 33% to 25% in an attempt to mitigate the financial impact of the delay.

SingaporeLike Hong Kong, Singapore Changi International Airport operates with two runways. The airport handled 343,765 aircraft movements in 2013 and, although traffic growth has been sluggish, there are also plans for a much needed new runway, although it is not expected to open for commercial use until 2020. However, the airport has plans for a fourth terminal which is due to open in 2017. The terminal will be built on the site of the old budget terminal and will increase airport capacity by 16mppa to 82mppa, serving both legacy and low cost carriers. A fifth terminal (T5) is also planned to be ready in the mid-2020s. From its current capacity of 66mppa, the five-terminal and three-runway system will take Changi’s capacity up to 135mppa. In 2013 passengers through the airport numbered 54 million.

http://www.oag.com



11

JakartaAs the capital city for an archipelago of 17,000 islands making up the fourth most populous country in the world, no-one should be surprised that air travel is booming at Jakarta. However, with more than 60 million passengers passing through the Soekarno-Hatta International Airport in 2013, an airport designed to handle just 22mppa, it is also not surprising that the airport is stretched to its limits.The airport operates with two runways but has one of the highest runway utilisation rates. The pressure on the airport is apparent in the average seats per aircraft movement which might have been expected to be low, as 72% of all seats in December 2014 were domestic but in fact, the average number of seats per movement was 156 for domestic routes and 208 for international.Projects to address the capacity shortfall have been delayed or cancelled and the problems get worse. The latest plans include a new runway at CGK, due to open in 2017, but no new terminals, and for a second airport to be built 56km east of Jakarta in West Java with a capacity of 70mppa (to be known as Karawang International Airport). However, that then creates wider issues in terms of surface connectivity.Meanwhile, Lion Air and Garuda have massive backlogs of aircraft orders. In 2013 OAG Traffic Analyser data shows that domestic passenger numbers grew by 8.4% while international passengers grew by 12.4%.Airports are being built elsewhere in Indonesia and 10 new airports were constructed in 2013 and another 15 were due to open in 2014. OAG shows that the total number of Indonesian airports with scheduled domestic air services was 88 in December 2014, up from 81 in December 2013 and 76 in December 2012. New airports are good news but failure to address the situation at Jakarta is not.

IncheonIncheon International Airport opened in 2001 and even then there was a four-stage construction plan. To date phase 1 and 2 have been completed and the airport now operates with 3 runways and a single airport terminal. The Phase 3 construction of Incheon Airport began in September 2013 with work on a new passenger terminal. The terminal is expected to be completed by the end of 2016, in time for the 2018 Winter Olympic Games, taking airport capacity to 62mppa, from 44mppa. A further stage of expansion will be completed by 2020 and take airport capacity to 100mppa. A fourth runway may also be added after 2020.

http://www.oag.com



12

TaipeiTaipei Airport handled 30.7 million passengers in 2013 with two terminals and two runways. However current design capacity is for 32mppa and so the airport is approaching capacity. A third terminal is being planned which will take capacity up to 43mppa and is scheduled for completion by 2020. A third runway is also planned but is not likely to be in place before 2030.

ManilaThe airport at Manila is bursting at the seams. The airport handled 32.9 million passengers in 2013 even though it was designed for a fraction of that but there are no major infrastructure projects underway. While the Philippines government announced plans for a new airport, a major conglomerate, San Miguel Corp, delivered an unsolicited alternative build-transfer-operate proposal in mid-2014. San Miguel Corp is the majority stakeholder in Philippine Airlines and is keen to see action taken soon to address the need for new airport infrastructure. The government plan would re-develop a former US air force base to the south of the city as a 66mppa airport by 2025 while the San Miguel Corp proposal is for an airport to the west of the city. Both would require some land reclamation. A third alternative, at least providing some short-term relief, would be to develop Clark International Airport, perhaps adding a budget airline terminal.As of the end of 2014 none of these proposals were more than just proposals, leaving the capacity issues at Manila as a major problem to be solved in 2015 or beyond.

Kuala LumpurKuala Lumpur International Airport saw 51.4 million passengers through its doors in 2013, well beyond the operating capacity it was designed for. But then in October 2013 the airport completed its third runway followed by the opening of its new low cost terminal– KLIA2 – in May 2014. Adding capacity for 45mppa, KLIA2 enables the airport to handle a total of 70mppa and ensures that the airport is now ahead of most other hub airports in Asia in terms of capacity.The design of KLIA2 evolved through the project and the result reflects the evolving mode of operations of low cost carriers in that it facilitates connecting passenger journeys and is possibly a standard bearer for the future of airport terminal development.

http://www.oag.com



13

BangkokBangkok’s Suvarnabhumi Airport opened in 2006 at full capacity. The next phase of construction is on-going and due to be completed in March 2016. This will increase capacity to 65mppa. Further expansion is planned which will add a second runway and new domestic terminal and take capacity to 125mppa by 2024.The old Bangkok International Airport, now known as Don Mueang International Airport, handled 38mppa at its peak but was closed when Suvarnabhumi opened under a single-airport policy. Following calls for it to be re-opened it has since been creeping back into favour, especially with low cost carriers, and now the government of Thailand is encouraging low cost carriers to move there to relieve pressure at Suvarnabhumi Airport. Terminal 1 can handle 18.5mppa and renovation of Terminal 2 will take capacity at Don Mueang to 30mppa.

Tokyo HanedaTokyo’s Haneda Airport handled more than 68 million passengers on its four runways in 2013, and has a capacity of 90mppa. Extension of one of the runways and expansion of the terminal building has increased slots to 447,000 in March 2014 and further slot increases are planned due to easing of regulations about flight paths into and out of Tokyo. With both Haneda and Narita Airports expected to reach capacity around 2022 or shortly thereafter, and with a government strategy which aims to triple the number of foreign visitors to 30 million by 2030, proposals are already being made for the post 2020 infrastructure needs which might include a fifth runway.

http://www.oag.com



14

This article was written using data and reports from OAG’s Schedules Analyser and Traffic Analyser products. OAG is the global leader in aviation information and analytical services. Its flights status and airline schedules and capacity databases hold future and historical flight details for over 900 airlines and more than 4,000 airports. OAG has been trusted and respected within the aviation industry for over 80 years.

OAG’s team of expert aviation analysts can provide ad-hoc aviation analysis or bespoke reports to exact specifications from one-off projects to regular reporting. For further information contact [email protected]

For media enquiries please contact Esther Molina GHC Asia +86 215 213 3030 or email [email protected]

Usage and attributionThis information can be reproduced either in whole or in part, online or in print, for non-commercial purposes only but must include attribution to OAG and a link to www.oag.com

6 The Scale of the TaskIt is clear that the combination of economic growth, population growth and the emergence of a number of robust low cost carriers (which are finding ways to work with and around the sometimes restrictive regulatory requirements in parts of Asia) is generating massive demand for air travel. Until now, airports have found a way to accommodate this traffic but for how much longer? Certainly new airport capacity is coming on-stream in China and there are plenty of plans in the pipeline in other Asian markets but there appears to be a sizeable gap between intention and infrastructure. Of particular concern is the capacity shortfall at Manila and Jakarta. How long will it be before the lack of airport provision in these countries starts to hold back economic growth as tourists stay away and trade becomes harder? The economic cost of doing nothing will soon be higher than the cost of taking action.

http://www.oag.com

© 2015 OAG Aviation Worldwide Limited.All rights reserved

Contact your local representative now for a free trial to OAG Analyser

Asia Mark Clarkson Business Development Director

6 Shenton Way Tower 2 #15-08, Singapore 068809

[email protected]

+65 6395 5878

China Karen Zhang Vice President – China

#3710B Jingguang Building Hujialou Chaoyang District Beijing China 100020

[email protected]

+86 10 5870 6168

Japan Chiba Takayoshi Sales Manager

Toranomon 40MT Building 9F5-13-1 Toranomon Minato-Ku Tokyo 105-0001

[email protected]

+81 36402 7304

Europe, Middle East & Africa 450 Capability Green Luton Bedfordshire LU1 3LU United Kingdom

[email protected]

T: +44 (0)1582 695050

North & South America 3025 Highland Parkway Suite 200 Downers Grove IL, 60515 USA

[email protected]

T: +1 800 342 5624

http://www.oag.com

http://www.oag.cn

airport infrastructure keeping up with demand in asia pacific

Documents