AIR TRAVEL AND ITS POTENTIAL FOR DEVELOPMENT OF THE SAARC REGION

AIR TRAVEL AND ITS POTENTIAL FOR DEVELOPMENT OF THE SAARC REGION Amal S. Kumarage Professor of Civil Engineering, University of Moratuwa Chairman, National Transport Commission Sri Lanka Seminar, University of Wollongong, Australia 21 st August 2007

The SAARC Region Nepal Bhutan Bangladesh India Sri Lanka Maldives

SAARC in Perspective Nearly 1/4 th of the total world population, but 5% of the land area. And only 2.1% of world GNP and 1.2% of world trade. But has one of the fastest economic growth rates -avg. 5.1% p.a. (East Asia at 5.8% per annum is the fastest growing) Total intra-regional export trade in SAARC to total exports is only around 5.0%

SAARC a region of diversity Indicator Bangladesh Bhutan India Maldives Nepal Pakistan GDP in US $ billions 51.9 0.7 600.6 0.7 5.9 82.3 18.2 GDP per capita (US $) 376 835 564 2,441 237 555 948 Sri Lanka GDP per capita (PPP$) 1,770 2,120 2892 n/a 1,420 2,097 3,778 HDI value 0.52 0.54 0.60 0.75 0.53 0.53 0.75 HDI rank 139 134 127 96 136 135 93 Total Population (mln) 2003 136.6 0.635 1,070.8 0.3 26.1 151.8 20.4 Population below national poverty line (%) 1990-2002 49.8 31.7 28.6 n/a 42 32.6 25 Share on income: richest 20% to poorest 20% 4.6 n/a 4.9 n/a 5.9 4.8 5.1 ODA received (US $ millions) 1,393.4 77 942.2 18 466.7 1,068.4 671.9 Exports and Imports of goods & services (as % of GDP) 34 65* 30 151 46 40 78

Development of Transport Networks Jean-Paul Rodrigue, The Geography of Transport Systems, 2006, Routledge

SAARC during & after British Colonial Rule Had an expansive rail network covering most of SAARC now it is 77,000 kms Has 3.82 million road kms at present. Had road and rail connections to maritime connections for international travel Partitioning of India led to disintegration of the transport system and consequently lack of regional trade and travel.

Air Transport Even though air transport has seen growth over several decades, the SAARC region lags behind many other regions in terms of its usage of air travel. Historically, the SAARC region developed its air travel links with Europe and more lately with East Asia and the Middle East. It did not develop the intra-regional corridors or a regional network in the same manner.

Aviation Traffic Flows

Comparison of Regional Aviation in SAARC with other Regions Region Intra Regional Passengers Carried (million) Regional Trips Per 1000 Capita Africa 6.3 11 Asia/Pacific 47.6 13 Europe 125.4 133 Middle East 10.3 21 North America 125.4 381 South America & Caribbean 19.0 34 TOTAL 334.1 52 SAARC (given within Asia/Pacific) 2.3 1 Comment regarding travel within SAARC region Only 0.5% ; 1 in 200 of World wide regional traffic Lowest aviation use in the world, lower than sub- Saharan Africa. Even though Air transport is correlated with increase in income, the extremely low indicators of use shows that aviation within SAARC is one of the least developed modes of transport particularly for intra-regional mobility.

20 airports with international flights

Airport Traffic Levels SAARC SAARC International Passenger Freight Passenger Regional Regional Trip Ends Ton Moves Trip Ends Sri Lanka Colombo 1,305,386 12,204 4,676,946 India Delhi 488,798 3,249 4,694,582 India Chennai 453,662 3,053 2,346,019 Maldives Male 353,777 5,400 1,432,967 BangladesDhaka 316,106 2,741 3,102,708 Pakistan* Karachchi 258,706 2,948 2,203,949 India Mumbai 187,505 1,930 5,499,862 Nepal Kathmandu 423,176 1,810 1,500,000 India Trivandrum 187,822 1,642 872,516 India Kolkotta 225,061 818 607,555 India Bangalore 106,730 288 678,206 Pakistan* Lahore 34,780 256 1,307,881 India Cochin 48,345 174 1,006,072 India Hyderabad 26,288 129 749,072 India Tiruchrarapal 84,876 18 Bhutan Paro 27,920 24 52,522 India Varanasi 34,907 - India Calicut 22,192 80 BangladesChittagong 11,264 0 396,919 India Buddhagaya 4,808 - SAARC Total 4,602,102 36,762 31,127,776

From Dhaka Paro Delhi Mumbai Colombo Passenger Movements in selected Corridors Flights per week (One way) % Increase of passengers 2001-2004 Aircraft kms operated 2004 Passenger kms Carried 2004 Distance To (km) Delhi 2 169 887 184,496 31,852,170 Mumbai 2 76 1,171 243,568 19,786,387 Kolkata 23 2 146 349,232 24,395,359 Kathmandu 7-34 415 302,120 12,910,235 Karachi 4-5 1,464 609,024 95,303,472 Delhi 3 32 1,344 419,328 12,910,464 Kolkata 5 108 550 286,000 5,411,725 Kathmandu 3 56 488 152,256 4,135,312 Kathmandu 31 19 893 2,879,032 236,060,978 Karachi 3 29 1,064 331,968 66,766,000 Lahore 6 33 457 285,168 15,894,232 Colombo 7 83 2,444 1,779,232 198,956,264 Male 1 Kathmandu 2-25 Karachi 5-16 870 452,400 67,404,120 Colombo 7 156 1,530 1,113,840 115,093,485 Chennai 36 42 668 2,500,992 303,045,882 Trivandrum 12 3 360 449,280 38,765,700 Bangalore 7 806 586,768 74,868,534 Trichy 10 105 440 457,600 37,345,220 Cochin 11 502 574,288 24,268,939 Hyderabad 7 1,160 844,480 30,493,500 Male 27 31 829 2,327,832 225,486,342 Karachi 5 17 2,403 1,249,560 86,550,053 Kolkata 3 69 643 200,616 23,704,838 Bangalore 2-5 Kathmandu Karachi 2 Trivandrum Male 3 15 671 209,352 53,773,605

Air Travel within the SAARC

Passengers Inter-regional air travel has recorded a healthy growth of 12% per annum, well above the projected averages for any region made by ICAO, the maximum of which is 6.9% for Europe and for Asia/Pacific. Some corridors have been subject to increased competition and have shown annual growth rates of over 30%. The freight traffic has also grown at a lesser rate of 7.5% per annum during this period. The largest corridors, namely Colombo - Male and Colombo Chennai, have recorded around 10% growth rates, which indicate the potential for rapid growth in freight traffic as frequencies increase.

Cargo movements in selected Corridors From To Growth rate % 2001-2004 Distance (Km) Tonne kms 2004 Total Cost US$ per ton Freight Rate US$/Ton km Dhaka Delhi 139 887 1,273,289 510 0.57 Mumbai (8) 1,171 1,090,201 355 0.30 Kolkata (36) 146 208,634 130 0.89 Kathmandu (27) 415 124,500 500 1.20 Karachi (49) 1,464 2,029,104 520 0.36 Paro Delhi 13 1,344 12,096 2,000 1.49 Kolkata 71 550 7,975 1,000 1.82 Kathmandu 300 488 11,712 1,000 2.05 Delhi Kathmandu 32 893 2,448,160 480 0.54 Karachi 48 457 221,417 - - Lahore 171 2,444 1,250,407 500 0.20 Mumbai Male - - 1,990 Kathmandu 31 - - - Karachi 99 870 1,348,065 210 0.24 Colombo Chennai 40 1,530 9,342,945 955 0.62 Trivandrum (15) 140 Bangalore 668 373,412 280 0.42 Trichy (29) 360 12,960 155 0.43 Cochin 806 280,488 240 0.30 Hyderabad 502 129,516 275 0.55 Delhi 80 1,160 1,526,560 975 0.84 Mumbai 188 - - 1,145 Male 31 829 8,138,293 335 0.40 Karachi 37 2,403 5,489,654 1,020 0.42 Kathmandu Kolkata (44) 643 123,071 310 0.48 Bangalore 33 - - - Karachi 132 - - - Trivandrum Male 19 671 659,258 325 0.48 TOTAL of all Corridors 26 36,171,784

Freight Very low utilization of aviation for freight Freight tonnes carried on all international routes - 23,000 million tonnes; the movements within SAARC 36.6 million tonnes (0.15%). The heaviest freight flows centered on Colombo (> 50%) of the intra-regional freight movements. Colombo - Male corridor, Colombo Chennai - flows between 50 to 100 tons per week (both ways) per week. Average freight load is 2 tonnes per aircraft movement.

Freight The freight traffic has grown at a lesser rate of 7.5% p.a. during this period. The largest corridors, namely Colombo - Male and Colombo Chennai, have recorded around 10% growth rates, which indicate the potential for rapid growth as frequencies increase. Sri Lanka s projected freight growth rate of 12.2% per annum for the period 2005-2009 has been cited as the 3 rd fastest in the world by ICAO.

Issues Facing Development of Aviation in SAARC Regulated Markets In adequate Airports Inadequacy of Skilled Persons Non-Competitive Fares External Barriers Affordability & Low-cost carriers Lack of Hubbing Operations

Flights allowed and utilized (Regulated) Number of flights/week allowed in the present ASAs Country B desh Bhutan India Maldives Nepal Pakistan Sri Lanka Bangladesh 2 60 X n/a n/a 3 Bhutan 0 49 X 7 X X India 29 8 40 60 24 7*5 (metros) others unlimited Maldives X X 4 X X unlimited Nepal 7 3 41 X n/a X Pakistan 4 X 14 X 2 unlimited Sri Lanka 0 X 107 27 X 5 Weekly number of flights in operation at present

Directness Only 15 direct flights out of 28, among the top 8 of the corridors (Colombo, Delhi, Chennai, Mumbai, Male, Dhaka, Karachi and Kathmandu) (Directness Index 54%) Only within the top 4 aviation corridors (Colombo, Delhi, Chennai and Mumbai) there are direct flights between all of them. (Directness Index 100%) Only 9 connections between the 7 SAARC capitals, of a possible 21 direct connections are operative. (Directness Index 43%). The direct connectivity between the capitals in particular is extremely deficient.

Access to Airports SAARC has 20 airports handling international travel. This works out to around 1airport per 60 million persons. In Northern America and Europe and more recently in some countries in Eastern Asia and the Middle East, the number of airports has increased drastically. Europe has 91 airports of a significant size, while Northern America has nearly 100. This means that eventual saturation requirements would be around one airport per 5 million persons. There are in fact 22 airports in the Middle East and 30 in Sub-Saharan Africa indicating a greater accessibility to airports in those regions when compared to SAARC.

Skilled Persons for Aviation Industry Because of the rapid development of the aviation industry, there is a need to develop regional training facilities for all grades of skilled persons. Airline pilots, flight engineers, ATCs, managers and logistics experts will be required to manage the expanded systems.

Fares & Rates From Dhaka Paro Delhi Mumbai Colombo Kathmandu Flights per week Distance Return Economy Fare per To (km) Fare($) km US$ Delhi 2 887 $455.50 $0.26 Mumbai 2 1,171 $509.00 $0.22 Kolkata 23 146 $134.00 $0.28 Kathmandu 7 415 $224.00 $0.27 Karachi 4 1,464 $546.00 $0.19 Delhi 3 1,344 $630.00 $0.23 Kolkata 5 550 $380.00 $0.35 Kathmandu 3 488 $488.00 $0.39 Kathmandu 31 893 $300.00 $0.17 Karachi 3 1,064 $247.00 $0.12 Lahore 6 457 $163.00 $0.18 Colombo 7 2,444 $570.50 $0.12 Male 1 Kathmandu 2 Karachi 5 870 $200.00 $0.11 Colombo 7 1,530 $387.50 $0.13 Chennai 36 668 $175.00 $0.13 Trivandrum 12 360 $130.00 $0.18 Bangalore 7 806 $174.00 $0.11 Trichy 10 440 $139.00 $0.16 Cochin 11 502 $156.00 $0.16 Hyderabad 7 1,160 $300.00 $0.13 Male 27 829 $220.50 $0.13 Karachi 5 2,403 $325.00 $0.07 Kolkata 3 643 $260.00 $0.20 Bangalore 2 Karachi 2

Fares & Rates Freight Rate Vs Distance 2.50 cos st US$ per tonne-km 2.00 1.50 1.00 0.50 0.00 0 500 1,000 1,500 2,000 2,500 3,000 Distance kms (one-way) cost US$/km $0.45 $0.40 $0.35 $0.30 $0.25 $0.20 $0.15 $0.10 $0.05 $0.00 Economy Fare Rate Vs Distance 0 500 1,000 1,500 2,000 2,500 3,000 Distance kms (one-way)

Model : Economy Fares Vs Distance Fare US$ US$ (Economy- Return) 700 600 500 400 300 200 Observed 100 0 1000 2000 3000 4000 5000 Linear Distance (Km) Economy Fare = 58.9+0.009D+251*(Bhu)+141*(Bangla) D= Distance (kms), Bhu = Bhutan, Ban = Bangladesh

External Barriers for the Growth of the Aviation Industry Need for streamlining of visa procedures and Removal of trade barriers.

Lack of Hubbing Operations Presently, travel between those SAARC countries in the south of the region, namely Maldives and Sri Lanka, and those in the northern part of the region, such as Bangladesh, Nepal and Bhutan, is most often done through a hub located outside of the SAARC region such as Bangkok, Doha or Dubai.

Sri Lanka and the Hub status What does it take to be a hub? A modern hub : A commercial center, a place to which goods and information are brought for distribution. Business information, news, connections, market intelligence, practical experience, relationship networks, business contacts. Uniqueness of a hub Being geographically placed (link regions with other locations of the world.) Have the right capabilities, expertise, technical and support services

Hubs pull resources (goods, financial resources, scientific excellence) from outside into them (if they do not possess them abundantly themselves) and use their own expertise and special environment to distribute them to the world economy and add an extra value to them. In the world economic geography the phenomenon of agglomeration is important. A hub should be a transport centre A high influence of foreign and multinational agents in these locations. Examples; London, New York and Tokyo as important international financial centers.

Present concerns for development Essential to promote development of land locked countries; Nepal and Bhutan. Essential to enhance connectivity of Island states; Maldives and Sri Lanka with the rest of SAARC (Maritime and air transport). Concerns Very low connectivity in terms of direct flights. High cost of travel Deficiency of investment in relation to the provision of modern terminals and additional runway capacity. Regulatory barriers Lack of strong hub operations for efficient regional transfers.

Location of Least Developed Countries

Modern Concepts of Hubs A modern hub has been defined as a commercial center, a place to which goods and information are brought for distribution. This is related to business information, news, connections, market intelligence, practical experience, relationship networks, business contacts. Singapore for example wants to become a knowledge hub, which is reflected in its aim to attract ten of the world s top universities up to 2010. Hubs have to have the expertise of preparing, reformulating, applying and distributing resources. They have to add value. All these examples show that one of the special characteristics of hubs is that they pull resources (goods, financial resources, scientific excellence) from outside into them (if they do not possess them abundantly themselves) and use their own expertise and special environment to distribute them to the world economy and add an extra value to them. The spatial scale of these activities can be expressed in terms like global, regional, national hubs. A feature of hubs is that generally there is a high influence of foreign and multinational agents in these locations. Source: http://www.chamber.org.hk/bus_suite/speech/9912027.htm.

Requirements for Aviation Hubs There should be a strong airline that can develop hub operations; There should already be several well-developed regional corridors from this airport; The locations should be such that international to regional flight transfers can be made frequently and cost effectively; and The airport must have capacity for expansion. Some Potential Airports Colombo, which has the largest amount of turnover of international and regional passenger combined and is the base for Sri Lankan Airlines; Delhi, which has the largest number of all passengers movements, including a wide network of domestic corridors and is the home to Jet Airways and Sahara Airlines; and Mumbai, which handles the largest number of international passengers in the region and has a strong domestic network and is home to Indian Airlines that is now to be merged with Air India, the airline that serves domestic and regional routes.