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ture – if you want to call it that – manpower,  But then there are many airlines that are struggling to be profit-
        pilots, air traffic controllers, mechanics, flight  able. And if they do not succeed in restructuring then the finance
        attends.  AAPA is drawing attention to it and we  dries out or they go bankrupt. We see examples of this right now
        are pulling together from other people’s esti-  in India. The market is growing graphically but in the last year or
        mate of what the projected growth and demand  so, all the airlines are struggling to make money. Jet Airways is in
        is. Some productivity improvement but still we  desperate need of additional financing and is negotiating to have a
        are going to need more people – that means  new capital injection. In the meantime, it’s facing a lot of pressure.
        training requirements. It has implications for  Even the most successful airlines like IndiGo and Spice Jet which
        education in the country’s national curriculum  have been profitable are now breaking even.  It’s a reminder that
        and so on. We are trying to emphasize that  growth itself doesn’t deliver profitability. India is the fastest growing
        aviation is a growing sector. One that creates  market and yet the profits are non-existent. It’s a reminder of just
        high-value job. A lot of them being technical  how challenging the industry is.
        related.
                                                     What needs to be done to meet the projected
        One thing we are very conscious about is     passenger growth?
        encouraging women think of themselves as     We talked about infrastructure. The key thing is do people want
        pilots and mechanics and other opportunities.   to travel or is it just a wishful thinking on the part of the industry?
        There are a lot of opportunities in aviation and   If you look at Boeing and Airbus aircraft forecasts, it seems to be
        we are trying to convey that message to the   correct. The market is growing at that pace. The demand for travel
        government that it is a growth sector where   is increasing. It seems to be a universal human trait to wanting to
        and there needs to be a thinking, for creating   travel and wanting to explore the world and that is regardless of
        more jobs. Tourism is another aspect that has   political background or geography.
        a lot of opportunities. So, the opportunity to
        modernise, earn foreign currency because of   The limiting factor is income. But there is an aspiration to fly and
        inbound tourist creates good job for people   as soon as people reach a particular threshold, air travel begins
        and some of those jobs are high-value added.
                                                     to take off. That dynamic is going to continue and reflects on the
        What are the challenges towards              increasing demand. The issues therefore is infrastructure. If we
                                                     don’t provide the infrastructure, it degrades the service to the
        sustainability and in maintaining            existing customer base and makes them less willing to travel or
        long term profitability?                     travel more.  And if you really don’t provide the capacity, people who

        Sustainability is primarily environmental    do want to travel face challenges. In some parts of the world this
        sustainability. There are other issues too – infra-  situation does exist – there aren’t enough runways, aren’t enough
        structure, noise etc. You mentioned profitability.   terminal capacity. So that’s the key strategic challenge.
        This is a very competitive industry and profit-
        ability even in good years is modest. A typical   Building runways isn’t easy. Only governments can give planning
        profit margin is 5 per cent, which compared to   permissions. People want to use airports near where they live.
        some other industries is a very modest profit   On the other hand, airports cause some noise. So, it’s a tradeoff
        margin. And, not all airlines are profitable. The   between the convenience of access versus the environmental
        American carriers have been enjoying several   impact.  The problem is a lot of airports were built out of town in
        years of good profits and have had higher profit   the open county side but the development happened around it. It’s
        margin.                                      a paradox. No one wants to live near an airport and a lot of people
                                                     want to work around the airport because of lucrative business
        For Asian carriers, European carriers, it’s a   opportunities.
        mixed  picture.  Within  different  areas,  even   Long-term growth is the big challenge. It has to be airlines, airports
        within Europe, you will see a lot of variety –   and governments, who have to work together to coordinate the
        some being very successful, some less so and   decisions. The funding can be from private sector or government
        some airlines failing and going bankrupt and   funding but you will always need the government to mastermind
        being taken over.  The same in Asia. We see   the coordination.
        a wide range of performance level. In Asia the
        profit margin is about $5 to $6 per passenger.   What is your outlook for the Asia Pacific
        Which is pretty modest compared to what is  region in 2019?
        involved in delivering. We joke that how much   It’s reasonably optimistic. There would be about 3-4 per cent growth
        money did people make selling tea and coffee!   for air cargo. Passenger would be much stronger. Although it got off
        You have to work very hard to have a profit   to a slow start, I would still expect to see a little bit of growth in air
        margin of 5 per cent. If you are very success-  cargo, say about 3 to 4 per cent growth. But nothing as dramatic
        ful you will have a 10 per cent or 15 per cent   as 2017. Probably slower than last year. We also have to keep a
        margin. And some airlines are making that sort   look out on the global trade issues.
        of margins.


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