Developing Air Linkages to Sustain Tourism among the OIC Member States

Transcription

1 Ff Standing Committee for Economic and Commercial Cooperation of the Organization of Islamic Cooperation (COMCEC) PROCEEDINGS OF THE 4 TH MEETING OF THE COMCEC TRANSPORT AND COMMUNICATIONS WORKING GROUP Developing Air Linkages to Sustain Tourism among the OIC Member States COMCEC COORDINATION OFFICE October 2014

2 Standing Committee for Economic and Commercial Cooperation of the Organization of Islamic Cooperation (COMCEC) PROCEEDINGS OF THE 4 TH MEETING OF THE COMCEC TRANPORT AND COMMUNICATIONS WORKING GROUP ON DEVELOPING AIR LINKAGES TO SUSTAIN TOURISM AMONG THE OIC MEMBER STATES (September 11 th, 2014, Ankara, Turkey) COMCEC COORDINATION OFFICE October 2014

3 For further information please contact: Mr. Murat KUTLUKSAMAN Expert Mr. Nihat AKBALIK Expert COMCEC Coordination Office Necatibey Caddesi No: 110/A Yücetepe Ankara/TURKEY Phone : Fax : Web : E mail : comcec@comcec.org nakbalik@comcec.org

4 TABLE OF CONTENTS Introduction Opening Remarks The COMCEC Transport Outlook 2014 Revised Edition Developing Air Linkages to Sustain Tourism among the OIC Member States... 6 A Understanding the Relationship between Air Transportation and Tourism Global Trends and Policies Links between Air Transport and Tourism Situation Overview in Member Countries B Case Studies and Policy Recommendations Current Incentives and Barriers in the OIC Member States Conclusions and Policy Recommendations Member Country Presentations a. Morocco b. Turkey c. Iran d. Jordan Private Sector Perspectives on Developing Air Linkages a. Air Arabia: A Case Study on Low Cost Carriers (LCCs): Air Arabia b. ATM Dalaman Airport: The Role of Infrastructure in Air Transport Development: The Experience of Dalaman Airport c. Turkish Airlines: Critical Policy and Regulatory Issues Affecting the Air Transport Sector and Policy Recommendations Roundtable Discussions on Policy Advices Utilizing the COMCEC Project Funding Closing Remarks Annex 1: Agenda of the Meeting Annex 2: Program of the Meeting Annex 3: List of Participants... 44

5 Introduction The Fourth Meeting of the COMCEC was held on September 11th, 2014 in Ankara, Turkey with the theme Developing Air Linkages to Sustain Tourism among the OIC Member States. The Meeting was attended by the representatives of 14 Member States, which have notified their focal points for the Transport and Communications Working Group namely; Afghanistan, Benin, Djibouti, Egypt, Indonesia, Iran, Jordan, Morocco, Malaysia, Niger, Senegal, Saudi Arabia, Turkey and Uganda. Representatives of COMCEC Coordination Office, Islamic Development Bank Group (IDB), Statistical, Economic and Social Research and Training Centre for Islamic Countries (SESRIC), Turkish Airlines, Air Arabia, ATM Dalaman Airport and ICF International have also attended the Meeting. The Meeting has considered two Studies. The first one was the Study entitled Developing Air Linkages to Sustain Tourism among the OIC Member States commissioned by the COMCEC Coordination Office which aims at describing and assessing the state of affairs of air linkages in the OIC Member States and provides policy recommendations for enhancing cooperation among the Member States in this field. The second one was COMCEC Transport Outlook 2014 Revised Edition prepared by the COMCEC Coordination Office which provides a general overwiev of transport sector in the Member Countries. Delegates and representatives found opportunity to share their experiences and good practices. During the meeting, the representatives discussed the economic impact of air transportation, global trends affecting linkages between air transportation and tourism, and situation in the member states as well as current incentives and barriers in this regard. The discussions were also enriched by the presentations from the private sector. During the Meeting, the participants had the opportunity to consider the current situation of their countries in terms of air linkages and tourism capacity and evaluate the practical recommendations relatively. The need for strong cooperation among the Member States for improving air linkages among the member states was highlighted during the Meeting. The strong relatinship between developing air linkages and the volume of tourism revenue was also emphasized in the Meeting. 1

6 1. Opening Remarks The Meeting started with a recitation from the Holy Quran. At the beginning, Mr. Mehmet Metin EKER, Director General of the COMCEC Coordination Office shortly introduced the COMCEC and its activities. He informed that the COMCEC is the abbreviation of the Standing Committee for Economic and Commercial Cooperation among OIC Member Countries and it has been serving since 1984 for almost three decades. It is the highest decision making body in economic and commercial cooperation in the OIC family. It is a ministerial level committee which gathers in İstanbul every year to discuss the common development challenges and issues of the Member Countries. The 4th Extra Ordinary Islamic Summitheld in 2012 has adopted a new cooperation framework document which is called COMCEC Strategy. He expressed that the COMCEC Strategy aims at achieving the active participation and involvement of the member countries. For ensuring this, two important instruments are envisaged by the Strategy which are the COMCEC Working Groups in six main cooperation areas namely Trade, Transport and Communications, Agriculture, Financial Cooperation, Tourism and Poverty Alleviation, and COMCEC Project Cycle Management (PCM). Regarding the first instrument, Mr. EKER noted that the Working Groups aim at bringing together the relevant experts from the Member States in a regular manner to share experiences, achievements, best practices and consider obstacles. Main aim of the Working Groups is to produce and disseminate knowledge regarding the common challenges and so provide policy approximation among the OIC member countries. The second mechanism is the PCM which presents clearly identified procedures and financial framework for the implementation of the soft projects to be developed by the member states in line with the objectives of the Strategy. The common objective of this mechanism is to ensure the member countries participation at a more practical level and facilitate the cooperation among the member countries. He informed the participants that the second project call has started at the beginning of September, Mr. EKER explained that the Styrategy s main aim regarding transport and communications is to improve functioning, effectiveness and sustainability of the transport and communications sector among the member countries. He said that the Strategy outlines the importance of the sector by referring to how pivotal transport and communications is for economic growth and development, and how it helps to enhance the production capacity and trade, and how it facilitate access to the basic public services such as education and health. He also underlined how transportation and communications sector helps integrate domestic market to the international ones and to increase tourism revenue. In order to highlight the the importance of the aviation sector, he expressed that, needless to say, air transport is a fast growing industry. According to the International Civil Aviation 2

7 Organization, the world airlines carried a total of approximately 200 million passengers in 1963, while the figure skyrocketed to 3.1 billion passengers in 2013, reflecting an increase of more than 15 fold over five decades. Currently, more than 50 per cent of international tourists are transported by air, and 8.5 million persons are working directly in the air transport industry while 47.5 million employees are working in aviation and related tourism activities. This indicates how much vital the air transportation is for the tourism activities and overall economic well being of economy of a country as well. Furthermore, he stated that for many OIC countries, tourism and aviation sectors are vital to economic development. Among the 3 billion passengers carried by airlines across the world in 2012, million passengers were in the OIC Member States. Mr. EKER continued his speech with introducing the research report titled Developing Air Linkages to Sustain Tourism among the OIC Member States which is specifically prepared for this Meeting. He stated that in the research report; Open Skies Agreements, PPPs in airport infrastructure and Opening the Domestic Markets to the Low Cost Carriers (LCCs) are highlighted as some of the key policy areas. he expressed that the participants will have an opportunity to discuss all these issues for coming up with some policy recommendations in this regard. Lastly, Mr. EKER introduced the programme of the Meeting and expressed his wishes for successful deliberations. Mr. Zuhair HATTAR, Director, Land Transport Regulatory Commission of Hashemite Kingdom of Jordan was elected as the chairman of the Meeting. Mr. Zuhair HATTAR welcomed the participants to the Fourth Meeting of Transport and Communications Working Group and expressed his thanks to attendants for electing him as the chairman. He expressed his gratitude to the COMCEC Coordination Office for the efforts to organize such Working Group Meetings. 2. The COMCEC Transport Outlook 2014 Revised Edition Mr. Murat KUTLUKSAMAN, Expert at the COMCEC Coordination Office, presented the COMCEC Transport Outlook 2014 Revised Edition. At the outset, he emphasized on how much transportation is an important topic under the COMCEC umbrella by stating that enhancing mobility is one of the three principles of the COMCEC Strategy. 3

8 In his presentation, Mr. KUTLUKSAMAN underlined five dimensions of transportation covered by the Outlook namely, transportation and trade, transportation infrastructure, transportation privatization, transport and environment, and transportation movements. He expressed that transportation and trade, and transportation infrastructure topics are directly related to the air linkages. With respect to transportation and trade, Mr. KUTLUKSAMAN demonstrated the relationship between the Logistics Performance Index (LPI) Scores developed by the World Bank and total exports of goods (excluding oil) by the member states. The member states having higher LPI scores have higher exports and are better engaged in global trade such as Malaysia, Turkey, Saudi Arabia and Lebanon. He demonstrated a similar relationship between the LPI scores and Global Competitiveness Index Scores. In terms of this relationship, member states, such as UAE, Malaysia, Turkey, and Saudi Arabia, with higher LPI scores tend to be more competitive. Furthermore, he demonstrated the change in total fleet by flag of registration for the period In this regard, he noted that almost 90% of total global trade is realized through maritime transportation however, the OIC member countries outperformed the world averages in period. He also demonstrated the change in the liner shipping connectivity index and the burden of custom procedures by OIC Sub regions in the period. Mr. KUTLUKSAMAN shared some figures in transportation infrastructure in the member states. Regarding the quality of transport infrastructure in different modes such as road, rail, maritime, and air transport, the OIC performed below the world averages. Within the Subregions of the OIC, OIC MENA seems to be the best performing among the OIC Sub regions. Concerning the transportation privatization, Mr. KUTLUKSAMAN informed the participants on the timeline of the initial transport PPI (private participation in infrastructure) projects in the OIC Region. He underlied that the first PPI project in the OIC Region was realized in Indonesia in 1990 and followed by Malaysia (1991), Mozambique (1993) and Turkey (1994). Regarding the PPI projects distributed to the transport infrastructure, road transport accounts for nearly 50 percent. For the transportation privatization issue, he mentioned about the following requirements for a successful implementation of a PPP/PPI project, Political and economic stability Sound legal framework Institutional capacity Political commitment and support Transparent and competitive tender procedures free from corruption An organized and developed domestic private entrepreneurship (including financial institutions and construction companies) Public acceptance and support, 4

9 he expressed that the OIC member countries, on average, could not yet achieve most of these preconditions. Regarding the relation between transportation and environment, Mr. KUTLUKSAMAN shortly thouched upon the GHG (Greenhouse Gas) emissions by sources in the OIC member countries. Furthermore, Mr. KUTLUKSAMAN gave some information on transportation movements in the OIC Member Countries. He presented the figures related to the air passengers carried in the OIC Member Countries in Then, he noted that Turkey in OIC MENA, Nigeria in OIC Sub Saharan Africa and Indonesia in OIC Asia are the countries which have the highest passenger level in each OIC sub region. Then, he shared some data concerning the rail passenger and rail freight carried in the OIC sub regions between as well as container port traffic between Underlining the great diversification in transport sector among the member countries and considerable potential for cooperation in the transport industry, Mr. KUTLUKSAMAN concluded his presentation with emphasizing the following factors required for the development of the transport sector in the member countries: Having a sound policy framework, Right cooperative approach, Institutional capacity and human resources development and Accumulation of expertise. Comment (s): The delegate from Turkey made some comments on the Logistics Peformance Index (LPI) and PPPs models mentioned in the presentation. He underlined the need to develop air passenger movement performance index. This index may include visa regimes, security controls at the airports etc. Concerning the PPPs models, he expressed that Turkey has made remarkable progress in terms of PPPs models implemented in aviation sector owing to the long political stability and confidence in the country, and its geographical location. However, for some countries which are not located on the transit routes and have small population in terms of market size, it becomes difficult to attract the private sector attention. What can be done in these countries is to ensure more involvement of government in that sector by providing more incentives and facilities to the private sector to attract their interest. 5

10 3. Developing Air Linkages to Sustain Tourism among the OIC Member States A Understanding the Relationship between Air Transportation and Tourism 1 Global Trends and Policies Mr. Jared HARCKHAM, Vice President of the ICF International, the consultancy company based in New York, USA, made a presentation on the developing air linkages to sustain tourism among the OIC Member States. At the outset, he emphasized that the air transportation industry is so dynamic and fast moving in the world. Therefore, looking best practices is always useful to increase air transportation capacity. He also underlined that if there is a good commercial opportunity in a place, airlines will fly there. The real role of the government is to facilitate the air transport process. By the way, there are some challenges in this regard. Growing tourism and bring new airlines to a country may create conflict with the interest of national airline. A country which really wants to grow air services needs to organize a quantitative and deliberative air service development programme. Mr. HARCKHAM expressed that the study is composed of four components namely; Global Trends Affecting Linkages between Air Transport and Tourism, Situation Overwiev in the Member Countries, Current Incentives and Barriers in the Member States, and Policy Recommendations. With regards to the first part he explained that air transport is by its very nature a global industry. It has seen unprecedented change during the last 20 years, driven by emerging business models, new technology, and social change. The following major factors have triggered this growth: - Growth of the global economy which relies heavily on air transport - Growth of the tourism industry which is shifting more and more to air transport - The advancement of technology which makes aircraft and flying substantially safer and more cost efficient He underlined that there are important differences in the pattern of aviation activity by region. The most important factors determining the actual level and type of air traffic in a given region are: - Economic characteristics of the region (e.g. level of GDP, income distribution, and type of economic activities) - Geographic characteristics (e.g. island nations and mountainous areas) - Availability of alternative modes of transport (e.g. high speed rail) - Characteristics of population (e.g. density, distribution, and age) - Political factors (e.g. existence of air traffic rights, and level of security) 6

11 Within this context, aviation has become a significant mode of transport. He expressed that due to its speed, it is now the most preferred mode of transport in comparison to others for long distance personal travel. He continued that the overall growth in global air traffic has been driven by regional growth in emerging markets as well as explosive growth in the Gulf and Middle East. He also said that currently, the largest aviation markets of the world are Asia Pacific, Europe, and North America, which collectively represented 84% of Revenue Tonne Kilometres (RPKs) in He also emphasized that historically, North America and Europe have accounted for the bulk of global aircraft demand, but this market dominance is slowly decreasing. Furthermore, Mr. HARCKHAM argued that fuel price has had a significant effect on air transport growth, as fuel prices directly affect the cost base of airlines and therefore fares. For 2013, it is estimated that airlines returned a global net profit of $10.6 billion and that this will increase to $20.3 billion (projected) in This increase can be partially attributable to the fluctuations and decreases in jet fuel prices as well as improvements and efficiencies in the industry s structure. Mr. HARCKHAM continued his presentation with providing information on development of the aviation markets. He stated that since the late 1970 s, there has been a trend towards liberalizing international aviation markets. Often, this process has started with the loosening of regulatory controls applied to domestic air services which was then extended to international services. In almost every country where air transport liberalization has occurred, new airlines have been created focusing on short haul, point to point markets where dramatically lower fares can stimulate significant market growth. In order to respond these developments existed in the international aviation market, incumbent carriers firstly lower their own fares then establish low cost subsidiaries to increase their competitiveness. He also explained that bilateral air service agreements (ASAs) remain the primary vehicle for liberalizing international air transport services. The liberalization and expansion of these agreements have gained momentum in the past decade. However, many OIC member states maintain the traditional bilateral regime of international traffic regulations. Current bilateral ASAs are protective of domestic carriers and do contain rigorous restrictions on freedoms of air, as well as frequency and number of designated airlines. Afterwards, Mr. HARCKHAM touched upon the increasing number of low cost carriers (LCCs) in the aviation sector worldwide. He emphasized that one of the most prominent changes in the last 20 years in the aviation industry has been the emergence of low cost carriers (LCCs). The LCC business model focuses on offering lower fares. Significant additional revenues are 1 IATA Economics 2014, Industry Financial Forecast Table 7

12 raised through the sale of ancillary items such as in flight food or local hotel accommodation. The rise of LCCs has been principally enabled by a combination of air transport liberalization, labour market liberalization, development of internet, and availability of cheap aircrafts. Furthermore, he explained the evaluationary S curve which shows the maturing trend of the LCCs market. This evolutionary S curve is shown on the exhibit below. The Maturing Trend of the LCC Market Segment Source: ICF SH&E Mr. HARCKHAM poited out that aviation supports over 58 million jobs worldwide and is a major driver of the global economy, contributing USD 2.4 trillion to global GDP 2. Specifically, air transport allows countries (including individual businesses) to expand their access to global markets and improve productivity by enhancing their ability to serve foreign markets, increasing the speed of delivery, and sourcing cheaper or higher quality inputs. Global Employment and GDP Generated by Air Travel Impact Direct Areas of Impact On site airport (retail, car rental, customs and immigration, etc.), airlines, air navigation on site airport work, airlines, air navigation Employment Generated (millions) GDP Generated (USD billion) 8.7 $606 2 Data as of 2012, the latest year for which information is available for all countries 8

13 Indirect Induced Suppliers to the industry; examples: aviation fuel suppliers; construction companies that build airport facilities; suppliers of subcomponents used in aircraft; manufacturers of goods sold in airport retail outlets Activity supported through employees in the industry (whether direct or indirect) that use their income to buy goods and services for private consumption 9.8 $ $324 Tourism Hotels, Restaurants, Cultural Institutions, etc $807 Total ,533 Source: ICF SH&E He also expressed that the economic impacts of new air services are measured in terms of jobs, labor income or business sales, and are classified into three categories: 1 Direct economic effects are the changes that occur in a local economy as a direct consequence of the operation of the new air service. 2 Indirect economic effects include the economic activity that occurs when on airport and off airport businesses that benefit from the new air service purchase goods and services from other businesses in the area. 3 Induced economic effects occur when workers that are the direct beneficiaries of new air services re spend their incomes Concerning the global trends and policies in aviation sector, Mr. HARCKHAM lastly touched upon the centers of gravity in terms of economic activity and air traffic over the world. He said that the link between GDP growth and air transport can also be seen in the eastward shift of the World s economic and aviation centres of gravity. For most of the last century the world s economic centre of gravity was firmly in the Northern Hemisphere between North America and Europe. Since the 1960s, however, the economic centre of gravity has begun to shift eastward and southward, reflecting the rise of emerging markets, particularly China. This economic shift has taken place with a similar eastward shift of the air traffic centre of gravity. 2 Links between Air Transport and Tourism Mr. HARCKHAM informed the participants that air transport and tourism are inextricably linked; an increase in one often accompanies an increase in the other. Increased air links allow 9

14 tourists to more readily access a destination; demand by tourists to arrive at a destination leads to enhanced air service. Mr. HARCKHAM mentioned that, as indicated in previous studies which have examined the relationship between air transport and tourism, the links between aviation and tourism are tangible, but countries often pay greater attention to promoting tourism, due to its direct and highly visible impact upon the local economy. Limitations upon air transport, regulatory or otherwise, often create a negative externality on tourism growth. Countries can effectively increase tourism levels by making changes within the local air transport industry. The drivers of airline profitability may not align with optimal tourism economics. As a country develops, environmental impacts of air transport become more visible and must be considered when making policy. The growth of global tourism continued its momentum in 2013, achieving a new record of 1.1 billion international tourist arrivals. He also expressed that it is generally the case that increasing one also increases the other even though the causality is often indeterminate or unknown. 3 Situation Overview in Member Countries Mr. HARCKHAM underlined that the OIC member countries have been grouped into three groups in this research study based on the offering of the tourism sector. Established Emergent Future Countries with established tourism sectors have significant tourism infrastructure and active marketing campaigns. In the emergent cathegory, tourim constitutes less than 10% of GDP. Countries with future tourism sectors are those with underdeveloped tourism markets mostly due to their inadequate infrastructure and security concerns. As previously stated, the OIC s combined traffic is in excess of 600m passengers. The established group has increased significantly over the past 20 years as the number of airlines increase as barriers to entry are lowered. Concerning the air traffic by country pair, Mr. HARCKHAM informed that ten country pairs accounted for 11.7% of the OIC s total passengers with 602.6m, including both tourism and non tourism travel. 10

15 Top OIC Member States Pairs by Passenger Traffic Source: ICF SH&E Analysis, IATA Futhermore, he expressed that since the late 1990s the established market has greatly increased its global market share. Emergent markets have seen slightly faster growth than Established markets. He expressed that the Future markets need to begin to recover as national carriers start to increase their capacity. He also stated that there is generally a close correlation between growth in hotel stocks and growth in tourist arrivals. With regards to the tourism source markets, Mr. HARCKHAM underlined that for the OIC member states, the vast majority of inbound visitors come from three key markets; Europe, East Asia and North America. The European market is the main source for international tourism throughout the OIC Member States. Lastly, he mentioned about the general state of the modes of transportation used by international tourists in Established and Future group countries. He stated that for Established markets, the vast majority of international tourists arrive via air transport. The Future tourism nations attract few tourists via air than the Established and Emergent counterparts. Land is chosen by 45% of arrivals in Future tourism countries due to the lack of variety in air transport. Comment (s): The Chairman of the Meeting expressed that due to the the strong relationship between transport and tourism sector, there should be strong cooperation between Ministry of Transports and Ministry of Tourisms in the member countries in order to achieve a comprehensive outlook on these sector simultaneously. Mr. HARCKHAM also made a comment. He underlined that during the project, it has been observed that there are many huge markets to be explored by aviation sector both in the OIC member countries and in the world. 11

16 Question (s): Mr. Kağan AKDOĞAN, Expert at CCO, raised a question with regards to the remarks about the convergence of the LCCs models and traditional business models. In this recpect, he asked that what would be the possible impact on air fares. Does it mean we are coming the end of low air fares? Answer (s): Mr. HARCKHAM stated that there are some fixed costs which LCCs can not avoid to cover like fuel costs and he continued that recently some LCCs have added business clases in their cabins and also there are some companies that hold the fares very low but ancillary services expensive. Therefore, it can be said that the companies different price policies cause a convergence of the fares in the aviation sector. B Case Studies and Policy Recommendations 1 Current Incentives and Barriers in the OIC Member States Mr. HARCKHAM started the second part of his presentation with underlining the numerous reasons why aviation and tourism thrive in some countries and not in others. He said that this section explores some of the most common reasons, including some best and worst practices from both member states and from other countries around the world. He stated that barriers to developing aviation can take many forms and be the responsibility of many different stakeholders. He listed most common barriers as followings; - Safety and security levels - Airline operation and ownership - Aviation infrastructure - Visa costs and procedures - Fares - Taxation - Airport rates and charges - Bilateral Air Service Agreements He also emphasized that in addition to formal government policies, a major barrier to aviation in many the OIC member states is political instability. In many cases, unrest makes a country a non desirable destination for tourists and airlines cancel their services due to lack of demand and safety concerns. Case Study: Saudi Arabia Religious Tourism and Market Liberalization Concerning the Saudi Arabia Mr. HARCKHAM pointed out that from , passengers at Saudi airports grew by 7.9% while real GDP grew 6.0%. In 2012, there were around 14m 12

17 inbound trips to the Kingdom of Saudi Arabia driven by religious purposes which accounted for 78.5% of the inbound trips. The Kingdom of Saudi Arabia aims to capitalize on religious tourism to develop its tourism industry and further strengthen the economy. It has particularly encouraged religious tourists to extend their stay in order to pursue more leisure activities around the country. Saudi Arabia is currently following the move towards more air market liberalization by opening its airspace, upgrading its domestic regulations and promoting private sector participation. He continued his presentation by underlining the incentives in terms of aviation sector in Saudi Arabia such as bilateral agreements, decreased regulation, private sector involvement, investment in infrastructure. He gave some examples in this regard as follows; Privatisation of Saudi Arabian Airline: the national carrier began selling off a number of business units, starting with its catering division in late 2007; followed by its cargo and ground handling businesses. An additional four business units are expected to be sold in Airport Privatisation: GACA awarded Germany based Fraport and Singapore s Changi Airports International (CAI) US$ 155m in 6 year management contracts for its three busiest airports in 2008 (Jeddah, Riyadh, and Damman). Then in 2012, Madinah Airport was completely privatized to a consortium led by TAV Airports Holding. Infrastructure Investment: Saudi Arabia has built dedicated aviation infrastructure to cater to temporary increased passenger flows. The nature of the Hajj pilgrimage is such that all Hajj tourists arrive in Saudi Arabia before the first passengers depart. On the other hand, he also touched upon the barriers in aviation sector such as visa restrictions, and the protection of flag carrier. The concrete examples are listed as follows; Restrictive visa policy: Visa numbers are tightly controlled by the Ministry of Hajj, primarily as the capacity of the Holy sites is limited. Hajj visa issuance has the particularity to be capped: we understand that it was agreed at the Muslim Conference in 1984 to apply an annual quota of one Hajj visa per thousand Muslim habitants in each country. Case Study: Morocco LCCs and Royal Air Maroc (RAM) hub Mr. HARCKHAM shared the findings of the analytical study with the participants regarding the Morocco. He highlighted the incentives as high tourism prioritization, open skies with EU, and the RAM hub strategy. He stated that the rise of LCCs has brought a new era of air service to Morocco and helped increase the volume of flights and visitors. Their entry also encourage the 13

18 home carrier, RAM, to look for a new strategy, which further grew the network of markets served. Mr. HARCKHAM emphasized that in 2006 Morocco implemented an open skies policy with the European Union countries and the stage was set for an increase in air service. RAM developed a strategy of concentrating on its hub at Casablanca that has enabled it to survive the wave of LCC competition. The hub serves several purposes. For instance, it connects Casablanca to cities in Europe, Morocco, North Africa/Middle East, Sub Saharan Africa and North America and serves as a major conduit for travel from Europe to French speaking Central and West Africa. He said that after this development RAM leaves many Morocco Europe routes to the LCCs and instead concentrates on serving business and connecting passengers. Lastly, Mr. HARCKHAM expressed that while the open skies policy was not without some problems, it clearly served to open Morocco to competition and grew its air service dramatically. LCC flights between Europe and Morocco jumped from almost nothing in to 158 weekly flights in 2007 and to 348 in Case Study: Turkey High Prioritization of Tourism (Established) Regarding the Turkey, Mr. HARCKHAM mentioned firstly about the incentives in terms of air transport sector in Turkey. He enumerated the incentives as strong air service connectivity, air transport infrastructure, government prioritization of tourism, and visa procedures. Concerning the latest developments in the aviation sector, he expressed that Turkey has established itself as one of the world s top tourist destinations. In 2012, Turkey was the 6th most visited country with 35.7m international arrivals. The number of visitors to Turkey has grown at a fast pace in the last decade, more than tripling between 2000 and Turkey ranks highly on the air transport infrastructure indicator at 29 out of 140 countries. Istanbul serves as the country s primary international gateway and is the primary hub of the country s flag carrier, Turkish Airlines. He continued that Turkish Airlines has built an extensive and truly global network at İstanbul Ataturk Airport with destinations in Europe, Africa, Asia, the Middle East, and increasingly North America. He also touched upon the third airport project in İstanbul which is planned to be the largest in the World (capacity for 100m annual passengers). Regarding the tourism sector in Turkey, Mr. HARCKHAM informed the audience that the government of Turkey has taken an active role in the development of the tourism industry. In its Tourism Strategy of Turkey 2023, the government aims to boost cooperation between the public and private sector in promoting and developing tourism. The Strategy proposes a 14

19 long term vision for planning and investment in tourism, with the goal of Turkey becoming hone of the five most visited countries in the world by He went on to emphasize the achievements of the Turkish Airlines by saying that average weekly seats at the İstanbul Ataturk Airport have grown rapidly in the last decade at rate of nearly 14 % annually, thanks to the rise of Turkish Airlines. Although the airport is served by 57 carriers, Turkish Airlines currently accounts for roughly 76 % of seat capacity. The number of destinations served from Ataturk airport has more than double in the last decade. 207 of the 240 destination served in 2014 are to international destinations, spanning over 90 countries. Aside from the incentives, Mr. HARCKHAM underlined the barriers as well. He stated taht while Turkey enjoys excellent air service connectivity in terms of both international and domestic travel, ground transportation infrastructure could be improved, particularly rail and ports. Turkey currently ranks 52nd out of 140 countries in terms of ground transport infrastructure. Case Study: Afghanistan Prohibitive Security Situation Regarding Afghanistan, Mr. HARCKHAM mentioned some barriers in aviation sector of Afghanistan such as safety and security, and ground transport infrastructure. He also underlined that the main incentive is air service to major hubs. He continued that Afghanistan has seen few tourists in recent years. Tourists range between 15,000 20,000 visitors annually. Afghanistan has a rich history that has left behind castles, forts, and other archaeological sites dating back 5,000 years. Afghanistan s natural beauty and rich historical culture hold promise for the development of tourism. Mr. HARCKHAM also emphasized that Afghanistan is reasonably well connected via air service to Dubai and İstanbul, major hubs for Emirates and Turkish Airlines, respectively, offering onestop service to points in Europe, Asia, and increasingly North America. Therefore, average weekly seat capacity at Kabul İnternational Airport has grown steadily since Conclusions and Policy Recommendations At the last part of his presentation, Mr. HARCKHAM shared the conclusions of the analytical study which constituted the main input for the meeting and expressed some policy recommendations for development of aviation sector in the OIC member countries. He cathegorized the practical steps that member countries can take i as eliminating or modifying basic obstacles through targeted policy actions, and planning and implementing comprehensive air service development campaigns. 15

20 Policy Actions by Group Travel and Tourism Infrastructure Air Service Visa Requirements Develop long term aviation activity forecasts to ensure existing airport infrastructure has the capacity to meet future traffic projections Modernize airport infrastructure, particularly at tourism centers and regional locations Depending on the current level of air service, establish an air service development program (see next section) for regional/secondary airports Allow visa applications to be submitted online Streamline the documentation and forms required, shorten approval time and make cost reasonable Grant tourist visas at the airport upon arrival Implement transit without visa (TWOV) schemes, which allow passengers to pass through an airport without obtaining an entry visa Implement a visa waiver program for a list of specific countries Develop long term aviation activity forecasts to ensure existing airport infrastructure has the capacity to meet future traffic projections Invest in new or modernized airport infrastructure, particularly at tourism centers and regional locations Invest in supporting infrastructure including access roads, hotels/restaurants, and tourism facilities Offer financial incentives to airlines Establish an air service development program (see next section) for primary international gateway Allow visa applications to be submitted online Streamline the documentation and forms required, shorten approval time and make cost reasonable Grant tourist visas at the airport upon arrival Implement transit without visa (TWOV) schemes, which allow passengers to pass through an airport without obtaining an entry visa Implement a visa waiver program for a list of specific countries Invest in new or modernized airport infrastructure, particularly at tourism centers and regional locations Invest in supporting infrastructure including access roads, hotels/restaurants, and tourism facilities Offer financial incentives to airlines Establish an air service development program (see next section) for primary international gateway Allow visa applications to be submitted online Streamline the documentation and forms required, shorten approval time and make cost reasonable Grant tourist visas at the airport upon arrival Implement transit without visa (TWOV) schemes, which allow passengers to pass through an airport without obtaining an entry visa 16

21 Implement a visa waiver program for a list of specific countries Government Prioritization of Tourism Regulatory Environment Ensure aviation authorities are a key stakeholder in the tourism development strategy and incorporate input from business groups, tour operators, restaurant and hotel associations, etc. Remove regulation of air fares Develop tourism website that includes information regarding tourism sites, visa requirements, and links to hotels, restaurants, and airlines serving the country Establish a long term vision for planning and investment in tourism; create development strategy and action plan in conjunction with both aviation and tourism authorities Remove regulation of air fares Develop tourism website that includes information regarding tourism sites, visa requirements, and links to hotels, restaurants, and airlines serving the country Establish a long term vision for planning and investment in tourism; create development strategy and action plan in conjunction with both aviation and tourism authorities Remove regulation of air fares Remove foreign ownership limits Consider airport and carrier privatization Cultivate a favourable investment climate for private sector Remove foreign ownership limits Consider airport and carrier privatization Cultivate a favourable investment climate for private sector Remove foreign ownership limits Consider airport and carrier privatization Air Service Development Mr. HARCKHAM explained that Air Service Development is a formal process that concentrates on attracting airlines to new markets, in order to increase passenger and cargo traffic. It is an ongoing and iterative process with frequent reviews, re adjustments and constant interactions with the client airlines. These strategies and plans generally look forward for three years. Air service development can be done at the individual airport level, region or province or at the national level. 17

22 Within this context, Mr. HARCKHAM underlined that market research, analysis, and forecasting including the traffic stimulation are definitely expected from new air services. The air service development team must create a holistic approach that includes, but is not limited to, Market research, analysis and forecasting including the traffic stimulation to be expected from new air service Matching the market opportunities to specific airlines strategies, networks and fleets Creating quantitative business cases for airlines for specific routes based on a standard industry methodology Providing introductory material about the destinations and their attractions and infrastructure Regular contact with airlines at route development conferences, tourism conferences, and in private meetings. Ongoing relationships must be established with airline planners Talk to airlines in their own language using their same data and analytical methodologies Establishment of route committees consisting of the important stakeholders in the development of new air service: airports, tourism ministries, hotel associations, chambers of commerce and others A comprehensive package of incentives and financial support for new air service. Airports and countries today are competing with other destinations for scarce aircraft resources. Airlines respond best to a unified effort by the destination. The above described efforts often require the participation of an outside specialist, to develop and maintain an on going air service development program, particularly for the analysis of airline operations and route case forecasts. Mr. HARCKHAM touched also upon the elements of air service development strategy as well. Then he cathegorized the factors into those affecting the demand for airport services and those affecting the supply of airport services: Demand factors: Historical, current and forecasted future levels of traffic including the market stimulation that occurs with new nonstop air service Characteristics of the market 18

23 Market sizes Seasonality Point of sale/origin Attributes of the destination Beach, Nature, History, Religious, Shopping Supply factors: Regulatory characteristics Visa policy and cost Bilateral air traffic rights Fare regulations and taxation of industry Operational characteristics Airport Infrastructure Runway characteristics Operating Hours Slot or gate constraints Incentives Discounts on airport charges Advertising Support Revenue Guarantee Agreement Strategies of the airlines Route network and hubs Target customer base Fleet size and range Mr. HARCKHAM informed the participants also about the timeframe of an air service development programme. He said that a typical division would be: Short term strategy to cover 6 12 months ahead. This is typically the planning period of small and regional airlines that do not require lot of planning to start up a route Mid term strategy to cover 1 3 years. This is typically the planning period of bigger airlines that fly longer distances, rely on fleet plans, need to obtain slots, need to build up sales strategies etc. 19

24 Long term strategy to cover more than three years. This is to target markets that currently do not show enough potential, but eventually might mature to sustain services and/or for which an airline might need to acquire an aircraft. At the end of his presentation Mr. HARCKHAM emphasized that a marketing strategy shall be built on the following elements and activities: Data and statistics. These provide the basis for traffic forecasting and market segmentation. They are kept up to date and revised frequently. Some of the most important sources of such information are: The airport s own traffic statistics The statistics of the local Civil Aviation Authority, tourism ministries and other parties Commercially available market data such as: Market analyses. These analyses process the data and statistics and create a coherent and realistic image of the market. This image is then used to identify the gaps in service and the future growth of the market. An important part of the analyses are the traffic forecasts which predict the future size of the market. Strategic goals. These are decisions taken by the airport identifying which market opportunities it will pursue. The goals must match the strategies, route networks and fleets of the airlines being targeted. Is the proposed destination a fit? Marketing activities. The delivery of the marketing strategy encompasses many different activities such as: Attending industry conferences. Meetings with the carriers. Contacting the embassies of foreign countries. This is especially useful if bilateral agreements limit air services between the two countries and the other country s government has substantial influence over that country s airline. Contacting government organizations. Contacting economic development organizations for funding. Constructing route scenarios to present in business cases. Formulating offer packages. The airport can put together a package of incentives to make the operation to the airport financially more attractive to the selected airlines. Such packages typically include discounts, rebates and/or financial 20

25 contributions to the airline s efforts to market the route. In some countries laws regulate such subsidies to airlines. Elements of an incentive package can include: Landing and parking fees Check in counters and office space Security screening Rebate of passenger user fees (in some cases) Discount of fuel mark up (in some cases) In airport advertising Marketing plan. The plan collects and arranges the different activities into a coherent stream. If compiled and executed correctly, the different activities will reinforce each other creating synergies and better results. Critically, the plan can and should include marketing fund (for advertising) from local stakeholders. Airlines have come to expect this support, especially in tourist destinations that are characterized by lower air fares. Question(s): The delegate from Egypt asked that what will be the impact of the facilitation of the border formalities and procedures between OIC member countries on increasing the number of tourist? Mr. HARCKHAM replied that there will be huge positive impact in terms of number of tourists and tourism revenue for OIC member countries. 4. Member Country Presentations a. Morocco Mr. Nabil LAKHEL, Director of Air Transport, Ministry of Equipement, Transport and Logistics made a presentation on his country s experiences in the field of air transport and tourism. Mr. LAKHEL started his presentation by explaining the liberalization process of the air transport in Morocco. He stated that in 2001 a vision document namely Vision 2010 was produced in order to start the liberalization process of the air transport in Morocco. The aim was to have more aggressive and liberalized air transportation system to reach international markets especially European Union market. Another implication of the Vision 2010 Document was to attract at least ten millions tourist into the Morocco by In 2004, liberalization process of the air transportation sector continued extensively, and some local carriers dedicated to only touristic 21

26 destinations were created and therefore the strategy of the Royal Air Maroc (RAM) was reviewed accordingly. In 2006, Open Sky Agreement was signed with the EU and so some regulations were put into practice. In this regard, he showed the participants the Air Services Agreements concluded by Morocco til today. Mr. LAKHEL carried on his presentation by giving some information on the strategy of development of air transport of Morocco. He expressed that the strategy is consist of five themes namely; Pole of Development of the air transportation Institutional pole Pole of Safety, Security and Quality of Civil Aviation Training Pole Pole of airports capacity and airspace Moreover, Mr. LAKHEL touched upon the general overview on the market of air transport in Morocco. In order to indicate the speed of the evaluation process of the air services in Morocco, he said that against 22 carriers in 2003, today 44 regular airlines (including 14 LCC) are operating flights towards Morocco (IATA summer season 2014). Of these 44 airlines, 3 are Moroccan campanies (RAM, RAM Express, Air Arabia Maroc), 12 carriers from non European countries, and 29 carriers from European countries including Turkey. In this regard, Mr. LAKHEL expressed that due to the Open Sky Agreement in 2006, commercial air passenger traffic in Morocco has experienced an overall positive upward trend despite of difficult international context marked by the global financial crisis, the events of the Arab Spring in 2011 and the increase of the crude oil price. He also said that Morocco is planning to reach 20 million tourists in To do so, the number of frequencies in aviation sector needs to be increased. Additionally, he highlighted that during the summer season of 2014, 1,277 weekly flights have been scheduled. Morocco is currently connected to 51 countries and 112 foreign airports via regular routes. Furthermore, Mr. LAKHEL briefed the Meeting on some important points in the air transport and tourism sector in Morocco. He pointed out that the airline industry is a major leverage for the tourism development and a fundamental tool for improving the socio economic integration of the regions. Tourism occupies a prominent place in the economic and financial structure of the country and represents a major lever for accelerating socio economic growth. Tourism impacts virtually all areas of economic activity in Morocco and has a great influence on other sectors of the economy. To give an example, he said that one tourist does not spend less than 400 Euro in Morocco. When this monetary value is multiplied by 16 million tourists, it becomes huge income for Morocco. Therefore, tourism sector is very important for Maroccan economy. With regards the innate linkage between air transportation and tourism, Mr. LAKHEL brought some concrete statistics into consideration. He stated that during 2013, 10 million tourists 22