Politics restricts growth of aviation
Monday, 8 February 2010
Mubashar Hasan
AVIATION has drastically cut down travel time and transportation of goods. It added speed to movement and connectivity. Despite globalisation, 'free trade', the internet and economic integration, technology - the aviation industry, stifled by set of rules, does not allow competition between airlines. As a result, neither passengers nor the shippers get the fullest benefit. An airline differs from most other service-oriented business. As national flag carrier it has national security ramifications. It can symbolise the prestige of a country. In recent years the security ramifications of airline has multiplied.
State-run airlines usually subsidise their domestic operations. Air traffic control, safety and technical standards are addressed by government agencies and regulations for domestic operators, foreign operators in the domestic market, international operators between two states, intermediate stops in third countries, computer reservation system (CRSs) and foreign ownership of domestic airlines.
In contrast, internationally, bilateral air service agreement (ASA) is the main instrument to check market growth and force users to pay a price premium. It creates a series of vested interests. Bilateral air service agreement contradicts the idea of global competition. It restricts emergence of global airlines. A bilateral air service agreement specifies routes, frequencies, passenger entitlements and even fares. Not always equal, the bilateral agreements could be tools to exploit the weaker countries. It means the USA would not conclude the same type of air service agreement with Bangladesh and the UK or Australia. The imbalance fosters a 'status quo', which is comfortable for the strong parties. Historically, the air service agreements produced varying airline alliances.
According to Airline Business Alliances Survey of 2000, there are 579 alliance agreements in place, up from 280 in 1994 when the survey was first conducted. Liberalisation of 320 bilateral agreements would create 24.1 million full-time jobs and generate an additional $490 billion in GDP, which corresponds to an economy almost the size of Brazil, says a report. Despite that, not many countries are eager to go for the reform. An examination of 2000 bilateral air service agreement concluded by 190 countries suggests that a number of countries still value their flag carriers more than the overall welfare of their peoples. It reflects the traditional mindset regarding national carriers. But five major alliances, Star, Oneworld, Qualifyer, SKY Team and Wings account for 60 per cent of all air travel. Alliances create blocks in the aviation industry. It is because of air service agreements that a Dhaka-bound passenger from Islamabad has to fly by Emirates via Dubai. The detour costs more, in both money and time.
The civil aviation market is regulated out of the fear that easier market access would breed excessive price competition, with consequent negative impacts on performance quality and safety. In spite of these regulations, the global civil aviation business is booming. The post-Second World War technological advancement shaped the industry. Now, 1.83 billion passengers fly nearly 3.3 trillion revenue per kilometres. The aviation industry employs 1.77 million people directly. Boeing expects the earning of the aviation industry to reach $2.6 trillion in 20 years for carrying passengers and goods. The total fleet strength will increase to 35,970 aircraft by 2025, up from 17330 in 2005. The growing global economy, it forecasts, would generate 4.9 per cent new passengers and 6.1 per cent of freight in the next 20 years. Relaxing the restriction would boost the potential. But the politics that tend to restrict would not allow the industry to grow as it otherwise could.
(The writer is manager, administration and communications at the Secretariat of the South Asia Network of Economic Research Institutes (SANEI), a regional partner of the Global Development Network (GDN) of the Bangladesh Institute of Development Studies (BIDS). The view are his personal)
AVIATION has drastically cut down travel time and transportation of goods. It added speed to movement and connectivity. Despite globalisation, 'free trade', the internet and economic integration, technology - the aviation industry, stifled by set of rules, does not allow competition between airlines. As a result, neither passengers nor the shippers get the fullest benefit. An airline differs from most other service-oriented business. As national flag carrier it has national security ramifications. It can symbolise the prestige of a country. In recent years the security ramifications of airline has multiplied.
State-run airlines usually subsidise their domestic operations. Air traffic control, safety and technical standards are addressed by government agencies and regulations for domestic operators, foreign operators in the domestic market, international operators between two states, intermediate stops in third countries, computer reservation system (CRSs) and foreign ownership of domestic airlines.
In contrast, internationally, bilateral air service agreement (ASA) is the main instrument to check market growth and force users to pay a price premium. It creates a series of vested interests. Bilateral air service agreement contradicts the idea of global competition. It restricts emergence of global airlines. A bilateral air service agreement specifies routes, frequencies, passenger entitlements and even fares. Not always equal, the bilateral agreements could be tools to exploit the weaker countries. It means the USA would not conclude the same type of air service agreement with Bangladesh and the UK or Australia. The imbalance fosters a 'status quo', which is comfortable for the strong parties. Historically, the air service agreements produced varying airline alliances.
According to Airline Business Alliances Survey of 2000, there are 579 alliance agreements in place, up from 280 in 1994 when the survey was first conducted. Liberalisation of 320 bilateral agreements would create 24.1 million full-time jobs and generate an additional $490 billion in GDP, which corresponds to an economy almost the size of Brazil, says a report. Despite that, not many countries are eager to go for the reform. An examination of 2000 bilateral air service agreement concluded by 190 countries suggests that a number of countries still value their flag carriers more than the overall welfare of their peoples. It reflects the traditional mindset regarding national carriers. But five major alliances, Star, Oneworld, Qualifyer, SKY Team and Wings account for 60 per cent of all air travel. Alliances create blocks in the aviation industry. It is because of air service agreements that a Dhaka-bound passenger from Islamabad has to fly by Emirates via Dubai. The detour costs more, in both money and time.
The civil aviation market is regulated out of the fear that easier market access would breed excessive price competition, with consequent negative impacts on performance quality and safety. In spite of these regulations, the global civil aviation business is booming. The post-Second World War technological advancement shaped the industry. Now, 1.83 billion passengers fly nearly 3.3 trillion revenue per kilometres. The aviation industry employs 1.77 million people directly. Boeing expects the earning of the aviation industry to reach $2.6 trillion in 20 years for carrying passengers and goods. The total fleet strength will increase to 35,970 aircraft by 2025, up from 17330 in 2005. The growing global economy, it forecasts, would generate 4.9 per cent new passengers and 6.1 per cent of freight in the next 20 years. Relaxing the restriction would boost the potential. But the politics that tend to restrict would not allow the industry to grow as it otherwise could.
(The writer is manager, administration and communications at the Secretariat of the South Asia Network of Economic Research Institutes (SANEI), a regional partner of the Global Development Network (GDN) of the Bangladesh Institute of Development Studies (BIDS). The view are his personal)