recent development in north east asian air transport ... · recent development in north east asian...
TRANSCRIPT
SangYong Lee (Shawn) Ph.D.
International Biz 2 Group, Incheon International Airport Corporation, Incheon, 400-
700 Republic of Korea
Recent Development in North East AsianAir Transport Markets &
Their Impacts on Incheon Airport
CV
Education
Korea Aerospace Univ.,
Aviation Traffic & Logistics Ph.D.
Helsinki School of Economics EMBA
Korea Univ. Mechanics Bachelor/Master
Career
Incheon International Airport Corporation
AOC, Commercial/Airline Marketing,
Corporate Governance, International Biz Group
LG Electronics Co. Research Lab.
Major Area
Research, Analysis, Marketing, Planning
SangYong Lee (Shawn Lee)
: 2005~2010
: 2003~2004
: 1987~1993
: 1999~
: 1993~1999
Contents
Incheon International Airport
Factors Related to Air Transport
in North East Asia
Impacts on Incheon AirportⅢ
Ⅰ
Ⅱ
Incheon Airport1
Cargo Terminal Area
Airport LogisPark
Runway ③
Concourse A
Control Tower
Main Passenger Terminal
Residential Area
Overview of Airport Facilities
IIAC HRAcademy
Runway ③
Shuttle Train
Runway ①&②
5
Grand Opening
OpratingCAT-IIIb
(1st in Asia)
Korea’s No.1 Gateway of import/Export
2001 2003 2005 2006~7 2008
• Best Airport Worldwide
• Cumulative
100 million PAX
• Best AirportWorldwide
• 10th in int’l PAX
• 2nd in int’l Cargo
• Cumulative 10 million
tons of cargo
• a million accident-free
flight
• 2nd phase
Grand Opening
• 15% PassengerTransfer rate
• Best Airport
Worldwide
2009
• Best Airport Worldwide
in ASQ for 5Consecutive
years
Best Airport Worldwide by ASQ for 5 Consecutive years
2nd in Cargo handing and 12th in passenger volume
Initiation of overseas business - Consulting
agreement with Erbil Airport in Iraq
Key Facts & Figures
2010
• Consulting Agreement
with Erbil Airport in Iraq
• Best Airport Worldwide• 18.5% Passenger
• Transfer rate
• 5 million Transfer
Passengers
6
Traffic Figures
2004 2005 2006 20072008 2009 2004 2005 2006 20072008 2009 2004 2005 2006 20072008 2009
149
160
182
211 211
198
2,408
3,1222,997
2,855
213215
223
256242
231
2,605
2,819
7
Gateway to Northeast Asia
35 Cities in China 30 Cities in Japan
66 Airlines, 168 destinations worldwide in 48 countries
including 65 destination in China & Japan (as of July 2010)
73
13
9
41
[ Passengers per continent]
ASIA
AMERICA
Europe
Oceania Africa
5324
22
1
[ Cargo per continent]
ASIAEurope
America
Oceania
(Unit : %)
8
Financial Figures
Liabilities
Capital
Asset
4,129.8
3,794.1
7,923.9
2006
4,227.7
4,213.8
8,441.6
2007
3,593.43,442.7
3,062.32,615.5
6,655.66,058.2
3,137.3
3,129.8
6,267.2
200820052004
(Unit : US$ million)Asset/Capital/Liabilities
Sales Net income(Unit : US$ million) (Unit : US$ million)
2004
2005
2006
2007
2008
681.3
789.0
942.6
1,042.2
818.8
2009 1023.8
3,185.2
3,752.2
6,937.5
2009
2004
2005
2006
2007
2008
144.5
123.4
156.3
222.2
117.1
2009 230.2
9
2in North Eastern Asia
Factors related to Air Transport
11
Economic Recession & Recovery
World Trend
12
Recession
North East Asian Market
[ Total Demands of China, Japan and S.Korea ]
Economic Recession & RecoveryG
row
th R
ate
of P
AX
s
-30%
-20%
-10%
0%
10%
20%
30%
40%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
China
Japan
Korea
Preliminary
CA
GR
Preliminary
CA
GR
Recession
[ Each Demand of China, Japan and S.Korea ]
Gro
wth
Rate
of P
AX
s
13
Open sky in North East Asia
Open Sky between S. Korea and Shandong region
of China
Full Open Sky by 2010 (Planned)
Agreement to expand regions of Open Sky in China
. PAX : 33 routes, frequency 204 a week
→ 43 routes, frequency 401 a week
. Cargo : 7 → 9 routes, frequency 24 → 36 a week
S. Korea and China : Agreement (2006.6.14)
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
Before After
Nu
mb
er
of
PA
X a
year
25.7%
[ Summary]
[ Increased Demand between S.Korea & China ]
14
Open sky in North East Asia
S. Korea and Japan : Agreement (2007.8.2)
No limitation of ACMs and routes
Tokyo is excluded due to the restriction of capacity
Increase of the flights with 5th and 6th freedom via
Japan to America (frequency 3 → 7 a week)
Improvement to notify air fare the government from
“Permission” to “Report”
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
10,000,000
11,000,000
Before After
Nu
mb
er
of
PA
X a
year
5.5%
[ Summary]
[ Increased Demands between S.Korea & Japan ]
15
The change of the structure of the license in Air transport business from regular and irregular to
domestic, international and small business
The diversification of air transport service, the change of the structure of the license, and the
appeasement policy of the condition for a market entrance to promote the participation of new
airlines
The vitalization of Air Taxi business through the introduction of new system for the business
of small airlines with below 19 seats
The abolition of the condition to restrict new entrants in international routes
Before : more than 2 year operations in domestic routes without any casualty & incident
After : more than 1 year operations in domestic routes without any casualty & incident
Deregulation in S.Korea
1st Deregulation for new entrants to international routes (2008.7.11)
2nd Deregulation through revising Civil Aeronautics Law (2009.9.10)
16
Region2004 2014
CAPA Airbus Airbus
U.S.A. 27% 23% 35~40%
Europe 19% 16% 30~40%
Asia 9% 3% 15~20%
Oceania - 35% 45~50%
※ Source : CAPA, Airbus 2005
Rapid Growth of Low Cost Carrier
The prospect of the growth
17
1217
20
2931
35
41
45
51
58
66
Exc. downturn
Inc. downturn
0
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
1,300
+5.2%
+11.5%
17161514131211100908070605040302
IATA forecast recovery
to the original trend after
3~5 years of down turn
2001 02 03 04 05 06 07 08 09 10 2011
+22%
+13%
Resource: ACI Global traffic forecast 2007-2027
PAX demand in Northeast AsiaAnnual number of passenger, million
Prospect of international travel in ChinaAnnual number of passenger, million
Air Traffic Demand in Northeast Asia
18
Expansion of Major Airports
-
-
Chinese government set up and fostered Shanghai Pudong airport,
Beijing capital airport, Guangzhou Baiyun airport as the three international hub
Airports in 10th 5-year plan- Shanghai Pudong : 500K ACMs, 60M PAXs, 5.5M Tons a year
- Beijing capital : 780K ACMs, 82M PAXs, 1.8M Tons a year
Japanese government increased the capacity of Haneda airport (34%),
declared it as a 24 hour operation airport, and fostered it as international hub
airport
The number of international passengers in Haneda is expected to increase from 2 million
in 2008 to 35 million in 2011 if the increased capacity is applied for only international service
The 2nd phase construction in Incheon airport was completed in 2008 and
a new expansion plan has been initiated to catch future demands.
2nd phase : 410K ACMs, 44M PAXs, 4.5M Tons a year
3rd phase : 410K ACMs, 62M PAXs, 5.8M Tons a year (2009~2015)
3 Impacts on ICNin North Eastern Asia
Prerequisites of Hubbing
Countries in North East Asia initiated deregulations as America and Europe
experienced in 1980s and 1990s, which brings in the reconfiguration and
concentrations of networks in hub airports.
Open Sky
Deregulation
Others(Economy,
Populations, etc.)
S.Korea China Japan
China still focuses on the
domestic demand.
Japan is not proactive.
(N/W is structured mainly for
the demand of local province)
S.Korea is ready to move
toward the future in terms of
network evolvement.
20
Airports in North East Asia have strengthened their networks through increasing
frequency as well as the number of cities
- ICN comparatively pursued to enhance the coverage to all over the world which could weaken
the market power in close markets.
2000
2002
2004 2006 2008 2010
2.0
3.0
4.0
5.0
20 40 60 80 100 120 140 160
Fre
qu
en
cy (
AC
M/C
ity
a d
ay)
Cities
PVG
PEK
CAN
ICN
NRT
Network Evolvement
21
Source: InterVISTAS-ga, „the economic impact of air liberalization
Flight frequencyPer city per day
4.0
3.5
3.0
2.5
2001801601400
FCO
MXP
BHX
HAM
GVA
ZRH
2.0
1.5
1.0
0
Destination cityThe number of cities
320300280260240220
VIE
CPH
LHR
FRA
CDG
AMS
Circle‟s diameter: Total
PAX▪ Resulting from the open
sky agreement in 1987,
the most of the
international flight
regulations in EU were
relaxed or removed.
▪ Therefore, European
airlines could conduct
business beyond their
own national hub with
almost non-restriction
▪ This liberalization lead
the fierce competition
of airlines and airports,
so as to make some
airports grow or some
airports decline
“ Regional hub airport”▪ Both roles as a feeder airport of mega hub
airports, and a hub airport for specific
region
▪ 2nd hub for European major airlines or main
hub for minor airlines
“ Regional
spoke airport”
▪ Short-haul
feeder role of
the mega and
regional hub
airport
“Mega hub airport”
▪ Main hub role for European major
airlines
▪ Covers most of the world with a
developed aviation network, based
on the major cities of Europe in
terms of population and business
Network Evolvement (example)
22
0
50
100
150
200
250
300
2000 2002 2004 2006 2008 2010
Inte
rnat
ion
al A
/C M
ove
me
nt
a d
ay
PVG PEK CAN ICN NRT
ICN could have relative competitiveness in international routes because of different
policy by Countries in Northeast Asia
- Japan focused on the demand of internal travelers, which induced several regional hub airports
- China currently does everything to fulfill domestic demand.
23
Network Evolvement
Hubbing; Growth of Transfer PAXs
0
1
2
3
4
5
6
7
8
PVG PEK CAN ICN NRT
Nu
mb
er
of
tran
sfe
r p
assen
gers
(M
illio
n)
2008 2009 2010
* The data in 2010 are provisional. (They are forecasted based on the data of half year)
ICN has to increase the number of transfer passengers as well as O&D passengers
because it does not have many population compared with Chinese airports.
24
Hubbing : Competition in Top 10 Transfer routes of ICN
NRT has relative competitiveness at top 10 transfer routes of ICN and there are no
strong competitions between ICN and Chinese airports in terms of transfer.
0
100
200
300
400
500
600
700
800
900
Nu
mb
er
of
Tra
nsfe
r P
AX
(X
1,0
00)
ICN
NRT
PVG
PEK
CAN
25
Hubbing : Transfer PAXs by Region at ICN
ICN has a geological advantage between North America (NA) and South East Asia
(SEA) in terms of transfer and as a result it has many transfer passenger from/ to NA
The routes of Japan, Europe and China are conspicuous in the aspects of the growth
of transfer passengers. - Recently increased small body planes are good contributorㄴ to attract many transfer passengers
in transfer routes between Japan and China
0
100
200
300
400
500
600
700
800
900
Japan China SEA NA Eu Aus etc
Nu
mb
er
of
Tran
sfe
r P
AX
(X
1,0
00
)
0%
20%
40%
60%
80%
100%
120%
Japan China SEA NA Eu Aus etc
Incr
eas
e o
f Tr
ansf
er
PA
X f
rom
20
05
to
20
09
26
Hubbing : Transfer PAXs by transfer route
0
50
100
150
200
250
300
350
400
450
1.J
apan
_Jap
an
2.J
apan
_Ch
ina
3.J
apan
_SEA
4.J
apan
_NA
5.J
apan
_Eu
6.J
apan
_Au
s
7.J
apan
_etc
8.C
hin
a_Ja
pan
9.C
hin
a_C
hin
a
10
.Ch
ina_
SEA
11
.Ch
ina_
NA
12
.Ch
ina_
Eu
13
.Ch
ina_
Au
s
14
.Ch
ina_
etc
15
.SEA
_Jap
an
16
.SEA
_Ch
ina
17
.SEA
_SEA
18
.SEA
_NA
19
.SEA
_Eu
20
.SEA
_Au
s
21
.SEA
_etc
22
.NA
_Jap
an
23
.NA
_Ch
ina
24
.NA
_SEA
25
.NA
_NA
26
.NA
_Eu
27
.NA
_Au
s
28
.NA
_etc
29
.Eu
_Jap
an
30
.Eu
_Ch
ina
31
.Eu
_SEA
32
.Eu
_NA
33
.Eu
_Eu
34
.Eu
_Au
s
35
.Eu
_etc
36
.Au
s_Ja
pan
37
.Au
s_C
hin
a
38
.Au
s_SE
A
39
.Au
s_N
A
40
.Au
s_Eu
41
.Au
s_A
us
42
.Au
s_et
c
43
.etc
_Jap
an
44
.etc
_Ch
ina
45
.etc
_SEA
46
.etc
_NA
47
.etc
_Eu
48
.etc
_Au
s
49
.etc
_etc
Nu
mb
er
of
Tran
sfe
r P
AX
(X
1,0
00
)
Transfer PAX at ICN in 2009
- Strong competitiveness between NA and SEA (or China) has been constructed thanks to
geological advantage and home carriers‟ operation.
- FSCs comparatively have pursued to enhance the coverage to all over the world which weakens
the market power in close markets.
27
128.6%
28
-18% 10% 6% 18% -1%-24%
PAX decreased due to SARS
Korean LCC launched in 2005
Others
Korean Air (KE) &Asiana Airline(OZ)
2.1% ’03~’09
CAGR
-0.9%
8.7%
LCC market share in S.KoreaAnnual number of passenger, million
24%
7.4
(11.9%)7.2
(15.1%)
8.9
(23%)
11.3
(26.5%)
13.4
(25.4%)
16.1
(28.8%)
14.9
(22.5%)12.2
(18.7%)
54.8
(87.8%)40.0
(84.4%) 29.7
(76.5%)
31.1
(73%)
37.9
(71.9%)
37.1
(66.4%)
47.3
(71.8%) 44.5
(68.2%)
0.2
(0.3%)
0.2
(0.4%)
0.2
(0.6%)
0.2
(0.4%)
1.4
(2.7%)
2.7
(4.8%)
3.7
(5.7%) 8.6
(13.1%)
2002 03 04 05 06 07 08 2009
47.4
38.8
42.6
52.7
55.8
LCCs
65.965.362.4
North East Asia
Development of LCCs at ICN
Development of LCCs at ICN
Thanks to the revision of Civil Aeronautics Law in which no conditions for the
operation of international routes are required, LCCs could start their new
international routes from 2009.
0
10
20
30
40
50
60
0 2 4 6 8 10
Inte
rna
tio
na
l A
CM
s a
we
ek
(o
ne
wa
y)
Cities
Airline Code Airport City ACMs
Jin Air LJ BKK BANGKOK 7
Cebu Pacific 5J CEB CEBU 7
Citilink GA CGK JAKARTA 5
Citilink GA DPS DENPASAR 4
Jin Air LJ GUM GUAM AGANA 7
Cebu Pacific 5J MNL MANILA 7
Jeju Air 7C KIX KANSAI 7
Jeju Air 7C BKK BANGKOK 7
Jeju Air 7C KKJ KITA 3
Airline Code Airport City ACMs
Cebu Pacific 5J CEB CEBU 7
Citilink GA DPS DENPASAR 5
Cebu Pacific 5J MNL MANILA 7
[ LCCs‟ operation in 2008 ]
[ LCCs‟ operation in 2010 ]
2006
20072008
2009
2010
Deregulation;
▪ Civil Aeronautics Law
secures small body aircrafts
and LCCs‟ operation
Circle‟s diameter: ACMs
29
30
03
20%
80%
529
04
24%
76%
2002
13%
576
05
28%
72%
605
06
32%
68%
645
07
35%
87%
664
2008
65%
469
17%
83%
490
+6%
1.1%
24.5%
-1.6%
3.4%
05
29%
71%
912
06
23%
77%
03
919
2002
25%
75%
27%
885
25%
75%
931
04
26%
74%
940
73%
932
07
28%
72%
900
2008
-0%
CAGR
LCC
Others
Unit : Available seats, mn.
Europe and United States
CAGR
LCC market share in EuropeAvailable seats per week, million
LCC market share in the United StatesAvailable seats per week, million
Development of LCCs (Examples)
Strategy for Growth
ICN needs the Integrative Strategy not only to pursue the best hub airport in the
North East Area but also to boost potential demands by LCCs
- Strong Home Carriers
- Geological Advantage
- Open Sky Agreements
- Deregulated Environment
Strength Weakness
Opportunity Threat
- Relative Flexibility among
Countries in NEA
- Plentiful Air Traffic
Demands in Catchment
- Growth of Chinese Economy
- Decentralized N/W of Japan
- Many LCCs (Candidates)
- Insufficient ACMs in short
and medium hauls
- Insufficient O&D demand
- A Slowdown in Economic
Growth
- Insufficient N/W
- Huge Investment to Chinese
Airports
- International ACMs of
Kimpo airport
- New Foreign LCCs
Plentiful Demands
Open Sky / Deregulation
Insufficient N/W
31
Kimpo Airport
0%
5%
10%
15%
20%
25%
30%
35%
ICN SIN KUL HKG NRT FRA CDG MAD AMS DFW LAX DEN ORD ATL
Perc
en
tage o
f p
ass
en
ger
flig
hts RA LCC
▪ Hub airports in America leverage
LCC independent networks,
attracts transfer passengers and
reaches a 30% level of passenger
flights
(ATL leverages both RA and LCC)
▪ Hub airports in Europe are
characterized by a cooperative
system between RA and FSC with
RA transfer rates reaching 30~40%
levels
▪ In Asia, SIN attracts transfer
passengers through RA, KUL uses
LCC independent networks and
HKG uses cooperation between
LCC networks and FSC to attract
transfer traffic
▪ Incheon will have to attract
transfer passengers like ATL and
HKG leveraging both LCC and RA
at the same time
2
0%
10%
20%
30%
40%
50%
60%
70%
80%
ICN SIN KUL HKG NRT FRA CDG MAD AMS DFW LAX DEN ORD ATL
Tra
nsi
t ra
te
Asia Europe America
Asia Europe America
1) Regional Airlines: airlines operating mostly nearby distances2) Based on data from Feb, 2007, major LCC/RA of airports are LCC/RA는 SIN(TR/MI), KUL(AK), HKG(KA), FRA(EW), CDG(YS), MAD(YW), DFW(SY),
LAX(WN), DEN(F9), ATL(FL/EV)
Strategy for Growth ; Options
32
Strategy for Growth ; Options
33
Challenges ; Optimum Network & Key Drivers
KE
OZ
Sky team &
Star Alliance
As is
Two big home carriers are good for hubbing?
Optimum Network Sizefor China & Japan Markets?
KE
OZ
Sky team &
Star Alliance
+
Option1
RAKE & RAOZ
RAKE
RAOZ
KE
OZ
Sky team &
Star Alliance
+
Option2
LCCs
KE
OZ
Sky team &
Star Alliance
+
Option3
RAKE & RAOZ & LCCs
RAOZ
LCCs LCCs
RAKE
Feeding/ Defeeding
Good for hubbing but Potential demand byLCCs ?
More demand by LCCs
Competitions among FSC & LCCs
Feeding/ Defeeding &More demand by LCCs
Economic of Scale atone airport
Conclusions
Recent Development in North East Air Transport Markets
- Air traffic demands in North East Asia (NEA) have been recovered from 2008
- S.Korea came to an agreement of partial Open Sky with China in 2006 and
of full Open Sky Japan in 2007
- S.Korea government initiated the deregulation by revising the Civil Aeronautics
Law; the abolition of any conditions to restrict market entry
- LCCs in NEA are in the initiation stage of market growth curve,
but there is rapid growth in S.Korea (LCCs‟ market share 8.6%)
Network Evolvement in North East Air Transport Markets
- Networks in NEA are expected to grow like Europe and to be segmented to Hub,
Regional Hub, and Spoke
- ICN gains a competitive edge in international ACMs among Airports in NEA
- It is expected to increase more O&D demand rather than Transfer demand in 2010.
34
Conclusions
Impacts on ICN
- ICN takes the advantageous position first with the policy of deregulation & Open Sky
- Main transfer origins (or destinations) of ICN are NA, SEA and China, and
the growth rates as transfer PAXs to (or from) Japan, China and SEA are
conspicuous thanks to the recent increase of short haul operations
- ICN is currently competing with NRT, but ICN is expected to have an edge through
the dense concentration of network
- The operations of LCCs at ICN have been initiated from the middle of 2000s, and
now it is forecasted to explode from 2010
- ICN needs to develop an integrative strategy not only to pursue a Hub airport but also
to secure the potential growth by LCCs
35
Thank youSangYong Lee (Shawn) Ph.D.
International Business 2 Group
Incheon International Airport Corp.
+82 10 4627 0242