Aviation Industry Take Flight Again, Says Frost & Sullivan

SINGAPORE, Jan. 31 /PRNewswire/ -- The turmoil surrounding the aviation industry is finally expected to calm and prepare itself to soar once again. The past two years have been a tremendous challenge to the industry and all its stakeholders. Escalating fuel prices followed by the economic downturn has pushed the aviation industry to revisit their business and financial models just to sustain their presence in the industry.

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According to Frost & Sullivan's Asia Pacific Research Analyst of Aerospace & Defense Practice Cheong Chern Wai, passenger traffic statistics clearly indicate the significant decline across the globe, with 2% growth in 2008 against a high of 8% growth in 2007.

He continues, "The first half of 2009 saw traffic declined even further, bringing a negative growth to the industry. As the economy began its slow ascent to recovery, passenger traffic also followed the same path to recovery with the fourth quarter showing much improved growth. The regions of Middle East, Latin America and Asia Pacific are the first regions to show positive signs of recovery."

Tourism is one of the key factors that have sustained the aviation industry as business traffic suffered most during the two year period. Relationships that have developed between both airlines and airports have strengthened as all are emphasizing on sustainability to weather this storm.

"Alternative revenue streams, code sharing, route optimization, collaboration, green initiatives, innovative fuel saving techniques are all strategies employed by industry stakeholders to remain afloat. However, there have been casualties as well for those that were unable to overcome the challenges," adds Cheong.

Moving into 2010, airlines will continue to thread carefully, looking at profitable routes and reorganizing their network to drive growth in their business.

"Both the point-to-point and hub-to-hub network will continue to be key factors as they cater to the different travel needs across the globe. The important role of low-cost carriers have contributed to the growth of passenger traffic especially in Asia Pacific and is expected to be the pillar in pushing the aviation industry forward, once again imparting confidence in travelers to take to the skies again," says Cheong.

He adds, "With airlines spearheading the aviation industry from the skies, the pillars fixed on the ground are the airports. Unlike airlines, airports have managed to sustain their business differently by seeking alternative revenues especially from their landside business."

"Non-aeronautical revenues are contributing even higher percentages of the total airport earnings as airports are no longer merely transportation hubs but a whole experience by itself. Airport cities, developed around the airport as the center will be the key to the aviation growth in the coming years," he continues.

Airport development has not dwindled but has continued to support to the industry moving forward. According to Cheong, despite the slowing economy, some airports have continued to show growth in their traffic and revenues.

"Strategic implementation of best practices in optimizing cost, seeking alternative revenues, developing their landside businesses and investing in green initiatives have enabled airports to continue to move forward with confidence to drive the aviation industry back to its glory days," he says.

In Asia Pacific, airport development in South East Asia, China and India are staging the scene for future growth and expansion of the travel network bringing the world closer to one another. Frost & Sullivan estimates potential spending of almost US$100 billion in airport development and expansion within the next 10 years. It is also estimated that there will be over 300 airports to be developed within the next 10 years in China and India alone.

Security in airports has been one of the most discussed issues in recent times, with the latest being the terrorist attempt near the end of 2009. Many technology implementations have been developed to create a safer environment for passengers, since the tragedy that befell the world on September 11, almost a decade ago.

Cheong says, "There have been many types of airport security technologies over the years like x-ray detection, metal detection, fingerprint, CCTV and more. Over the next ten years, more technologies will be implemented to maintain a higher level of security and confidence of passengers that are traveling by air. Electronic passports, face detection technologies, digital IP-based surveillance, and nanotechnology sensors are some of the potential technologies that will see its implantation at airports around the world."

In term of industry specifics, the cries of environmental activists have given rise to green initiatives across the air travel and transportation industry which contributes about 2% of the total carbon emissions globally.

According to Cheong, "In the past 15 years, airlines have shown decreasing usage of aviation fuel, indicating increased fuel efficiency and new technologies being introduced to improve the usage of fuel in aircrafts. This trend is expected to continue over the next 10 years as bio fuel and other alternative fuel is being research and developed to support the industry."

Overall, 2010 is expected to be a better year for the industry. The major push factor for the aviation industry to see brighter skies this year would be the World Cup and Commonwealth Games that will be held this year in Africa and India respectively. The demand for air travel during these periods will escalate, driving growth for the aviation industry across the world.

"Being touted as major global sporting events, the World Cup and Commonwealth will definitely be a driving factor in the aviation industry, increasing passenger traffic and revenues for both airlines and airports," Cheong says.

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SOURCE Frost & Sullivan