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To the New Chairman of Sri Lankan Airlines

To meet the challenges posed to foreign carriers by the ASEAN Open Skies Agreement, a key consideration for Sri Lankan would be to align its aviation policy and approach towards global trends. 


by Dr Ruwantissa Abeyratne
Sir,
( November 16, 2017, Nassau – The Bahamas, Sri Lanka Guardian) This is neither  strategic advice nor  a strategic plan on how to run Sri Lankan Airlines.  Presumably, you were chosen for your proven ability to do just that with the assistance of your Board and your CEO.  Besides, I am no expert on running a successful business venture, which your airline ought to be. Neither am I an expert on debt servicing, which I understand is the primary concern for your airline now.  I just thought of offering my perspective of where the world is headed over the next 20 years generally, and what is going on in key places in the air transport world your airline flies to, which could affect the success of your mission as Chairman.  Debt servicing aside, you will no doubt start with focusing on whether the route structure of your airline, the appropriate fleet, and the pricing factor of your service are in place.  These three would be profoundly impacted by what’s going on in the world.

Firstly, there are the megatrends – large, transformative, global forces that affect everyone in the world – which are emerging as compelling drivers of our existential world, affecting, among many other human endeavours, the development of air transport.  To begin with, global balance of power as a megatrend is the first to be addressed in the context of aviation.  More importantly, one must consider the shift of the global economy from the West to the East. Climate change and the scarcity of resources; hyper-connectivity; accommodating growing individuality and individual empowerment; harnessing technology; the exponential rise of the middle class; social mobility and decreasing inequality; big data analysis and privacy; digitization; globalized public demand for better services; technological innovation; medical advances; artificial intelligence and super computers; and game changers are other megatrends that would affect aviation.
Secondly, and in particular in the context of  the aviation industry (and the world) would be that by 2020 the global middle class will number 3 billion people, and we (including the aviation industry) will be able to connect with them all through the smart devices in their pockets. By 2020, 21 billion network devices will be in use – up from two billion just a decade ago. Mobile technology, cloud computing, data analytics, biotech and genomics, and artificial intelligence are all advancing rapidly. Consequently, one could expect growth opportunities related to aircraft digitization and new high-performance materials, as well as for hybrid engines and 3-D printing.
All this is second nature to your closest neighbour and soon to be the largest air transport market in the world – India. Air transport in India is at the cusp of an unstoppable forward march towards reaching eminence in the aviation industry in the years to come. Aviation in India supports 8 million jobs and provides an overall output of US $ 8 billion. More importantly, to recognize that India is one of the most progressive countries in the world when it comes to air transport policy and regulation is a reality one cannot deny. Available data show that in the first quarter of 2017, international traffic flowing to and from India grew by 7.5% and domestic traffic increased by a phenomenal 21.77% during the period 2016/2017. The International Air Transport Association (IATA) recognizes that India would become the third largest aviation market in 2026 next to the United States and China.
You will have to figure out how your airline could adapt to this looming phenomenon and survive  while being juxtaposed to this giant.
Then there is China.  China and India – neighbours separated by borders – are the two most populous countries in the world with China having 1.379 billion people while India has 1.34 billion.  Both countries have an emerging class of business entrepreneurs focusing on high technology with a global outlook.  Both countries together are responsible for 40% of the world’s trade.  Both countries have taken the path of liberalization. Although China lags behind India in terms of passenger carriage, its airlines are progressing fast and will be a threat to airlines worldwide, once they build a viable and competitive route network.
Against this backdrop it is noteworthy that China and India have maintained strong trade ties with each other.  In 2004-2005, China was the third largest importer of India’s goods next to the US and United Arab Emirates.  Both countries have shown a proclivity to regional agreements rather than multilateral agreements.
Fourth on your list would be the ASEAN Region. As you are aware, The Association of South East Asian Nations (ASEAN) is comprised of ten countries which came under an Open Skies Policy (OSP) under the ASEAN Single Aviation Market (ASAM) in 2015.  The ASEAN Economic Community (AEC) , which has as one of its aims the creation of a  region fully integrated into the global economy, and which in turn is reflective of an economic integration plan in the region, considers air transport as a critical and significant thread in the transport fabric of the region. The implementation of ASAM would hinge heavily upon the disparity of the political and economic nature of ASEAN member States.  One of the key factors in this equation is the differing priorities accorded by each State to air transport.
To meet the challenges posed to foreign carriers by the ASEAN Open Skies Agreement, a key consideration for Sri Lankan would be to align its aviation policy and approach towards global trends. The first step would be to embrace competition and the way forward towards connectivity on competitive terms.
Then there is The United Arab Emirates and the rest of the Middle East.  Here, the lesson would be in the philosophy of the three most successful carriers: Emirates; Etihad and Qatar Airways.  The lesson they give  is that that governments in the UAE understand that connectivity in air transport can be key drivers of their economies and in pursuance of this approach they have created a business-friendly environment for air transport with low taxes and superior infrastructure.
Finally, on your watch will come a United Kingdom detached from the European Union. As you are aware, After March 2019, The UK will be independent of the EU’s common aviation market.  This would mean that the UK would be negotiating bilateral air services with all countries it has air transport relations with, including with Sri Lanka.  We must bear in mind that Brexit would present the air transport industry of the UK with an opportunity vis a vis the market outside the EU.  Aviation authorities in the UK could well capitalize on emerging markets by forging bilateral air services agreements advantageous to the UK with other States without being shackled by restrictive EU laws and rules which bound the UK as an EU member.
In conclusion, the success of Sri Lankan Airlines would vastly depend on the priority the Government accords to air transport an engine of growth and the support it gives the airline. Without this support, and the mindset that the economic success of the airline is the economic success of the country, the airline would surely plod along.  For this objective to be achieved, there has to be a stringent focus on connectivity, and the ability of the airline to connect people across key strategic routes.
With every good wish for success.

The author is former Head of International Relations and Insurance, Air Lanka and former Senior Legal Officer at the International Civil Aviation Organization.  Currently, he is Senior Associate, Air Law and Policy, Aviation Strategies International.  This article was written while on an ICAO mission as Legal Consultant to The Bahamas Civil Aviation Authority.    

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