is the subject of my Trade Tripper column in this Friday-Saturday issue of BusinessWorld:
One interesting aspect in this globalized world we have today is
that the airline industry has, for some reason, been taken for granted.
Perhaps to blame for it is its previous successes, whereby its very
ubiquity have made people think nothing of its state and future, whether
it be globally or even locally.
However, the airline industry is not exactly flying high these days (and, yes, I couldn’t resist the puns for this article, mea maxima culpa). Qantas, for one, has seen its profits dip. As reported by The Observer
("Airline industry faces grim year as Gulf carriers take over the
world"; 17 June 2012), "Earlier this month, Qantas shares fell below A$1
for the first time since the carrier was privatized 17 years ago,
following a profit warning blamed on a combination of hard-up Europeans
cancelling their holidays and sharply rising fuel costs. Attempts to
restructure the airline last year led to a dispute that saw the entire
fleet grounded. Qantas’s biggest problem is the ever-more competitive
environment."
But Qantas is not alone, as The Economist pointed out ("The
American Airlines bankruptcy," 12 May 2012), "AMR Corp., the parent
company of bankrupt American Airlines, announced that it will consider
merging with another airline as part of a plan to emerge from
bankruptcy. Most outside observers have expected this for some time --
United Airlines, which absorbed Continental, and Delta Air Lines, which
merged with Northwest, are now significantly larger than American."
Competitiveness among the different airlines certainly has something to
do with it. But the uncertainties in the global economy, along with
insecurities in safety due to terrorists and other such problems, have
contributed to increasing airplanes’ empty seats. As the WTO recently
reported, "Slowing global output growth has led WTO economists to
downgrade their 2012 forecast for world trade expansion to 2.5% from
3.7% and to scale back their 2013 estimate to 4.5% from 5.6%."
But assuming it’s true that the Philippine economy is poised for a
take-off anytime soon (which, in no small part, is attributed to the
Philippines’ young population; thus putting the lie for a need for an RH
Bill), a significant part of that development will have to do with
services and, specifically, tourism. As I wrote, however, previously ("A
cloudy open skies," 20 January 2011), "Considerably, our tourism
industry needs more than additional plane seats to get going: they need
better airports and an efficient infrastructure. Both of which, we don’t
really have. Such also needs careful and coordinated planning. None of
which is being done effectively. We have a Category 2 rating from the
International Civil Aviation Organization due to deficient aviation
infrastructure and safety standards. All these are beyond the purview of
local airlines. But they do fall squarely within the responsibility of
the government. Traffic, peace and order, pollution, sanitation? These
are not the responsibility of the local airlines. These are
government’s. So why put the burden squarely on the shoulders of our
airlines?"
And the need for emphasis in putting method and coordination for our air
industry is highlighted by the fact that while Europe’s airline
industry is not doing so well due to "rising tax regimes, inefficiencies
in air traffic management, and the high cost of complying with poorly
thought-out regulations," nevertheless, "IATA has also revised its
forecast for Asian airlines’ profitability down from $2.3 billion to $2
billion, due mainly to weaknesses in the cargo industry." (The Economist, "The sick man of Europe," 11 June 2012)
IATA (International Air Transport Association) should know, what with
its 60-year industry experience and a network that encompasses around
84% of total air traffic. It also assisted Oxford Economics in making
the 2011 report "Economic Benefits from Air Transport in the
Philippines". In it, the stakes are detailed on how important it is that
we get our air industry right: "Improved connectivity gives
Philippine-based businesses greater access to foreign markets,
encouraging exports, and at the same time increases competition and
choice in the home market from foreign-based producers. In this way,
improved connectivity encourages firms to specialize in areas where they
possess a comparative advantage. Where firms enjoy a comparative
advantage, international trade provides the opportunity to better
exploit economies of scale, driving down their costs and prices and
thereby benefiting domestic consumers in the process. Opening domestic
markets to foreign competitors can also be an important driver behind
reducing unit production costs, either by forcing domestic firms to
adopt best international practices in production and management methods
or by encouraging innovation."
So while trade agreements and laws do matter, nevertheless, the little
details matter more. St. Augustine was right: if you want to aim high,
go deep and build better foundations. If we want our economic and
tourism numbers to rise, our airplanes fly, we better take the time (as
we’ve been saying for some time already) to see that matters on the
ground are going right as well.
