The Hindu Business Line : India, China can play key role in future of aviation

In Asia, India and China represent the future because of the size of the aviation market. There is an opportunity for them to take advantage of a new market and see whether they can change the rules of the game.

MR GIOVANNI BISIGNANI, DIRECTOR-GENERAL AND CEO, IATA

Ashwini Phadnis

The Director General and CEO of the International Air Transport Association (IATA) is keen that the emerging markets, particularly India and China, play a key role in changing the rules governing international aviation. During a meeting with Business Line at the IATA headquarters in Geneva Mr Giovanni Bisignani outlined his plans.

Excerpts from the interview:

Why is IATA keen that Asia plays a key role in changing rules governing aviation?

The aviation world has developed in two major continents — the US and Europe. Europe represents 27 per cent while North America represents 36 per cent of the total traffic. But now, the situation is changing. Now these are mature markets and they are not growing at the pace that we see in the West Asia or Asia-Pacific.

With growth, countries also need to take into account the responsibilities that this growth represents. Governments must play a role not just in developing technical frameworks but also to enable the expansion to take place in a safe and environment-friendly way. They must also look at the rules of the game.

Which are?

I am thinking in terms of the leadership changing some of the principles that have been the base of the Chicago Convention or bilateral agreements. What are the two major countries in the development of this new process? You have the countries in the Gulf area. Let us remember that the West Asian region is growing but it is a small part.

In Asia, India and China represent the future because of the size of the market. Asia-Pacific has a roughly 26 per cent share. We believe that Asia will have over 30-32 per cent share in 2012. So we need to look at some of the fundamentals.

The rules of aviation were set 60 years ago. What are the rules of this game? Fares, ownership and bilateral agreements were the basics that were founded. Do you think that these are relevant to the world that is expanding? That you cannot sell your product where the market exists? This is the only place where to have a new flight you need an international treaty approved by the Government and Parliament. It makes no sense.

Countries that are emerging as leaders in the world need to have the opportunity to start thinking in a different way. What exists today does not make sense. It made sense when you wanted to defend your market or at a time when flying was not safe and Governments wanted to take a certain kind of control over the situation.

In the 1950s IATA handled the fares for one specific reason, because when competition started after the First World War, Governments said they had to be very careful that companies were able to remunerate the capital but they also had to invest in order to have safe planes. IATA has not been handling fares for close to 30-40 years. But the other rules had a link with the special environment in which the airlines were functioning, because an airline was still seen as a flag of a country. It was not a global world.

Today if we consider how the world would have to be in the future, we would have to make ownership disappear as a condition. We would have to put bilateral agreements into a museum. Governments, however, would have to remain vigilant in two areas of safety and security. These are national responsibilities.

But there has been little consolidation in the industry. How do you explain this?

There is no reason why we are not able to consolidate in every part of the world. But we are unable to do so and that is the reason we are not able to take advantage of the increased volume. We have around 2,000 airlines in the world. How many car manufacturers do you know? 20-25? It is the same in almost all other industries. You never find a basic industry where you have more than 50 big players around the world.

If you have a free market then you can compete in different markets without barriers to entry. And so we are living in a world where we have to run aviation as a business because now we are quoted on the stock markets, so we have to follow the rules of the game. It is like we are in a 100-metre race but I have two heavy stones in my pockets and I have to race with the others.

This is unfair; we have moved from one system to another. At the beginning, everything was regulated and the Government wanted to take control of everything, from safety to security to prices. Travelling was not safe 50 years ago when there were 9 million passengers and 820 fatalities. Now we have 2.2 billion fliers and lesser fatalities.

We have to have the courage to say that we can handle aviation like any other business with the sole exception of safety and regulations. Countries like China and India have a role to play in this. This is an opportunity for them to take advantage of a new market and to try and see whether they can change the rules of the game.

India for example can become, and logically should become, a world leader. Earlier, India was a sleeping giant in aviation. The current Government came with different views and changed a lot. It took advantage of what was going on in the world and implemented it in India. Low-cost airlines were a great opportunity to develop a new market. But at the same time, a country that has enormous potential needs to give a chance to local carriers to play an important role in the future for the development of aviation.

What kind of role model can India or China provide?

Instead of having leadership and vision for the future we are trying to have a short-term approach supporting local national interests. I think the role of leaders is looking ahead. The US is not doing it because it is very liberal when it affects other countries and conservative when it affects its own market.

How will you find a via media? There are city-states and then there are big countries, like the US and India?

This is an important issue. But let us start this when we have equal sized players. For example, Europe and the US. There is no reason for not having open skies with ownership and everything there as they are two markets of similar size and the same level of technology and development, so there is no excuse not to do it now.

This kind of an approach has to happen between two big regions — India and China, and the US and Europe. Asian countries could take the lead when they have one market and then they can start discussing with India as two blocs.

How does changing the rules help?

The reason Europe is more profitable than other parts of the world is because it changed the rules of the game. You have to have a staged approach as you have to give time to the weaker players to be ready to battle. Europe did this the correct way. And in the last few years Europe has had the highest profits.

But we still have a problem about consolidation. Being a global market it has to expand; you have to have blocs. North America, Europe, India, China and Asian countries are the building blocs of what would be the future of aviation. And among them it is a great opportunity to start seeing a staged approach and setting a new set of goals, or set of rules.

How long do you think the changes are going to take?

This is not something that can be done in one, two or three years. What I am saying is that India or China or Asia or Europe must start to address the problem; to start thinking in a different way about what the situation will be in 10 years. Nobody is trying to imagine the world with a different set of rules. You have to give time but also set targets. We have to start the discussion on the basics.

Why am I saying this about India and Asia? You may say we have a lot of problems but what I am looking for is leaders to start the debate on a new framework in which aviation would develop itself and I hope to see this before the zero emission norms are introduced in aviation. On the other side, I understand that countries that are so involved in developing their internal markets, like India and China, are not keen on opening the debate on something that would happen in 30 years. But I am looking for leaders to start the cultural debate on how aviation would have to be in the future.