AFA - Aerospace Forum Asia

SPEAKER'S CORNER
Article submitted to SCMP June 03 by Elizabeth Bosher, recently elected D.G. of the Aerospace Forum Asia

Last month’s unexpectedly early lifting of the WHO travel advisory, followed in short order by the Airport Authority’s announcement of cuts in landing fees, have certainly been a shot in the arm to Hong Kong’s beleaguered airline industry, but it would be a serious mistake to think that a return to positive cashflows is just around the corner. In a statement welcoming the lifting of the travel advisory, as a major step in the battle for industry recovery, the International Air transport Association (IATA) nonetheless cautioned that: “Efforts to restore public confidence in travel will continue to require the coordinated efforts of the entire industry for the foreseeable future.”

Perhaps as a result of the dramatic surge in profit, announced by Cathay just before the SARS crisis hit, there is an air of dangerous complacency around town that Cathay – and Dragonair’s - pockets are deep enough to soldier on alone indefinitely.

Taking a different view, a recent report by JP Morgan Equity Research, downgrading Cathay Pacific from ‘Neutral’ to ‘Underweight’ argues forcefully that the markets themselves are woefully underestimating the seriousness of the current situation. It states: “ We believe that consensus earnings has yet to fully adjust to the harsh realities facing Cathay Pacific and its associates…..Having … recently toured around Hong Kong International Airport we were overwhelmed by the empty halls ..which represents an excruciating level of pain within the company, but also the tough job Hong Kong faces of rebuilding its reputation as an aviation hub.” [ JP Morgan Asia Pacific Equity Research, Hong Kong 14 May 2003]

Recognizing that overseas visitors are not going to start streaming back to Hong Kong as soon as the WHO advisory is lifted, Cathay CEO David Turnbull’s stark warning to staff was: “Our number - one priority must be to make our money last long enough so that we have a chance to fight another day.” The message has clearly got through: the vast majority of staff have accepted the necessity of severe belt tightening including the taking of one-month’s no-pay leave between now and September.

Senior management in Cathay have said firmly they do not seek or expect the sort of financial propping up which, for example, US air carriers have received from their government since 911. But I’m sure they wouldn’t be averse to a little more help from their friends, not just to ease short term pain but promote an earlier return to long term gain. While I’m sure it wasn’t deliberate, there was next to nothing in the Government’s $11.8 billion relief package of particular short term help to the aviation sector. Measures to support a recovery in the tourism industry will eventually get more bums back on aircraft seats but do nothing, immediately, to staunch the on-going cash haemorrhage, estimated by Cathay Pacific to be nearly USD 3 million a day.

So maybe its time for a bit of lateral thinking and for looking at ways to achieve sustainable long term reductions in the cost of operating air services out of Hong Kong.

For example, what about a waiving for one year of excise duty on aviation fuel or a deferral in payment of Government air traffic control charges ? The latter would be helpful to the cashflows of the Airport Authority as well as the airlines. What about the Government and other public sector organizations promoting a “Fly Hong Kong” policy for duty travel and the carriage of mail? Frankly now is not the time to be coy about supporting the home team, our competitors certainly have no such inhibitions.

Addressing a lunch gathering of the Aerospace Forum Asia, last October, the Director General & CEO of IATA: Giovanni Bisignani estimated that current air traffic control arrangements are adding around 60 nautical miles to journeys and costing airlines up to USD 400 million a year ! So, looking even longer term, an agreement between the Hong Kong and Mainland authorities, to enable aircraft to enter and leave Mainland airspace at lower altitudes, would significantly shorten the approach and departure flight paths at Chek Lap Kok and produce major savings in travel time and fuel costs.

I am sure there are plenty of other possibilities out there, but they will only be realized if the key stakeholders in Hong Kong’s aviation industry start truly to recognize just how much they all depend on each other to be profitable and efficient. In this connection Singapore has, once again, succeeded in projecting overseas a top quality image of Government, airport authority and airlines, working as one to reassure the travelling public and take every possible measure to protect their health and well-being. Despite a lot of effort on all sides this image of solidarity, shared purpose and partnership is still sadly lacking here.

The Aerospace Forum Asia is a non-profit association which brings together representatives from all sectors of the aviation and aerospace industries in Hong Kong, as well as regionally. A key part of our mission is to promote partnership amongst the various players in this highly-interdependent and vital sector of the Hong Kong economy.

Hong Kong will succeed in re-building its position as Asia’s leading aviation hub, but it won’t happen overnight. When the time is right to re-launch Hong Kong to the international community the aviation industry will be right out there as usual playing its part, but the ability of the airlines, for example, to go on and on providing free tickets, concessionary fares and add-ons etc. etc. must not be taken for granted. Even in Hong Kong’s uniquely successful aviation environment the coffers are not bottomless. Genuine teamwork, partnership and a sharing of the pain is the only way through.

Liz Bosher has been supporting the development of the Hong Kong aviation industry, in various capacities, for over 12 years. From 1990 – 95 she was a senior government policy maker with responsibilities spanning civil aviation, inter-governmental air services negotiations and the planning of the new Hong Kong International Airport. In 1995 she was seconded to the then Provisional Airport Authority Hong Kong. Appointed the Authority’s Planning Director in 1996 she supported the final stages of planning and commissioning of the new airport in mid 1998.

Liz has been Managing Director/Asia Pacific for Landrum & Brown (L&B) since early 1999, responsible for the company’s regional business development. L&B is the leading independently owned aviation consulting practice in the US. In the past 5 years she has been an active member of the Aerospace Forum and looks forward to supporting continuing growth in its role and stature in the regional aviation community.