Asia-Pacific is the leading region in aviation traffic, accounting for around 40 per cent of global total passenger traffic prior to the advent of Covid-19, and will likely continue contributing a significant portion of passenger traffic after the industry has recovered from the pandemic. Airports Council International estimated the total passenger traffic in Asia-Pacific will grow around 4.7 per cent annual until 2040. This growth has been driven largely by high economic growth, burgeoning middle class and propensity to travel by air. Even though Covid has impacted airport traffic and some of the projects have been delayed, Asia still remains the leader in new airport and terminal development. Its projects are not only among the biggest but are also the most advanced and state of the art.

At a recent conference on Airport Development in Asia, organised by Southeast Asia Infrastructure and India Infrastructure, Stefano Baronci, Director General, Airports Council International, Asia-Pacific, delivered keynote remarks and talked about the trends in traffic in light of Covid-19, capital expenditure plans and needs across the region, the potential of contactless technologies, specific steps towards zero emissions and the outlook going forward. Excerpts…

Trends in air passenger traffic

Air passenger traffic in the world as well as in the Asia-Pacific region have shown a consistent trend. At the start of the pandemic, the Asia-Pacific region performed better but April 2020 onwards, the recovery has not surpassed more than 45 per cent of the 2019 level. The world has progressively performed better in May 2021. Considering a sample of major and medium sized airports depending on domestic and international traffic in June and July 2021, Asia-Pacific passenger traffic declined by about 81 per cent on a weekly basis compared to 2019 levels. However, it showed a slight recovery of 11 per cent when compared to 2020 levels. Passenger traffic has recovered much faster in Europe because of higher vaccination rates and higher consistency of national travel policies. Up to the last week of July, only 1.1 billion people have been fully vaccinated which constitutes 14 per cent of world’s total population. The distribution is very uneven as only 1.1 per cent of the population in low-income countries has been vaccinated so far. Europe and North America are vaccinating their population at a faster rate, whereas, Africa and the Asian regions are lagging behind. As of July 25, 2021, Japan has vaccinated 24.89 per cent of its population whereas in India, only 6.77 per cent of the population is fully vaccinated. According to a ACI World’s 7th Economic Impact Assessment published in July 2021, there will be decline of 1.6 billion passengers in 2021, that is, 46 per cent of total passengers in Asia-Pacific alone.

One of the major risk factors is passengers losing their confidence because of complexities in terms of travel procedures. The test requirements and duration of quarantine depends on country rules and regulations. In the short term, airports are also prioritising investments on technology facilitation to ensure efficiency in airt ravel.

Towards zero emission levels

The aviation sector is responsible for 2-3 per cent of the total carbon emission, with airports accounting for approximately 2 per cent of that portion. Considering the enormous levels of emissions as per a Global Infrastructure Hub forecast, there will be a $530 billion global investment gap between 2016 and 2040. The social and economic impact on the aviation sector is crucial in the Asia-Pacific region. The sector supports about 46 million jobs, which is 2.5 per cent of whole jobs in the region and 944 billion according to ATAG’s latest reports in terms of economic activity, which is approximately 3 per cent of the total GDP in the region. The rise in income in the positive economic dividend in some key aviation markets is reaching the peak of economic dividend and many emerging markets will do so in 10-25 years. There is strong relation between macroeconomic factors, GDP growth and air passenger traffic. Presently, airports in the Asia-Pacific region face the most difficult challenge with respect to achieving net zero carbon emissions by 2050. Globally, decarbonisation of the electrical grid is absolutely essential since around 90 per cent of the emissions come from electricity airports rely on. The issue can only be effectively addressed if airports are given proper support by the states. The recent ACI’s recent Global Outlook of Capital Expenditure study indicates the inverse relationship between capex premium for net zero and the level of grid decarbonisation. The additional capex premium for accomplishing net zero carbon emission in the case of brownfield airports is 14 per cent while greenfield airports is 8 per cent. The Indira Gandhi International Airport in Delhi, India, is a notable example of an airport investing in onsite renewable energy to ease reliance on grid decarbonisation in the journey to net zero.

Future outlook

By 2040, 45 per cent of global traffic is expected to pass through airports in Asia-Pacific and traffic will more than double the 2019 levels. During 2019-40, the Middle East and Asia-Pacific regions are expected to grow at the fastest rates in terms of total passenger traffic. Of the additional 10.6 billion passengers that are forecasted to be added globally, 4.2 billion are estimated to be welcomed by airports in Asia-Pacific, including China, India, Indonesia, Vietnam and Thailand only.

Airports require long-term investments. Most of the countries in the Asia-Pacific region have confirmed their capex plans despite Covid challenges. Though there are some exceptions – Singapore, New Zealand, Malaysia and Indonesia. The capex needs to meet unconstrained demand as well as the Sustainable Development Goals.

The tremendous amount of annual capex towards airports in the Asia-Pacific region between 2015 and 2019 clearly distinguishes Asia-Pacific from the other regions. Countries including China, Hong Kong, India, Japan and Australia are the top countries with the highest annual capex during 2015-19. In the coming years, Asia-Pacific is projected to spend a record-breaking $1.3 trillion. This represents nearly 54 per cent of the overall capex requirements across all continents. Of this 44 per cent of the investments would be made in the construction of greenfield airport projects and the other 56 per cent in the expansion and modernisation of existing airports. This is required to welcome 8.9 billion passengers by 2040. Failure to address the capacity requirements to fulfil passenger demand will result in about 3.6 billion potential foregone passengers by 2040. The profound consequences do not limit to losses in GDP and jobs but also airport congestion and damage to the environment. It is estimated that for every one million foregone passengers due to airport capacity constraints, the air transport industry would support 14,100 fewer jobs and $237 million less in GDP in Asia-Pacific alone.

The way forward

According to industry experts, travel restrictions coupled with the other indicators in the Asia-Pacific region are signalling no recovery in the year 2022. It is quite essential that the states with the help of industry should adopt models based on the concept of risk mitigation. In order to achieve net zero emissions by 2050, the partnership with states is indispensable. The government could offer an array of key incentives to airports ranging from supporting the transitioning to a decarbonised electrical grid, facilitating airports’ access to green finance, supporting the development of renewable energy to incentivising the development and usage of negative emission technologies such as adoption of electric vehicles and air capture carbon storage. Going forward, the year 2022 is going to be a challenging one.