Although Hong Kong International Airport (HKIA) had its third runway approved last year, the International Air Transport Association (IATA) is concerned about the airport’s capacity crunch.

Last year, the HK government announced that the construction of a third runway for Hong Kong International Airport would begin in 2016 with a completion target of 2023.

“There is a capacity crunch, however, even now,” said IATA CEO, Tony Tyler at a recent Round Table event held in Hong Kong. “For the immediate future, runway movements are limited to the current 68 per hour – and capped well below that level during the night.

“Even before the three-runway system becomes operational we all need to find ways to improve utilization of capacity, both runways and airspace.”

On the airspace front, efforts are under way to ease congestion in the Pearl River Delta, adds Tyler. “This includes re-assigning some destinations to less congested routings, the development of a new bi-directional route to Shanghai, and increasing route options by converting more provisional routes to being permanently available.”

IATA says there is an even bigger efficiency issue—that of delays on Mainland China air routes. With traffic growing in the 11% range year-on-year, managing growth in air traffic management capabilities is a major challenge. “If you have flown in China recently, there is a good chance that you would have experienced delays,” says Tyler.

As previously reported, IATA expects 7bn passengers by 2034; 3.2bn more travellers than the association expects this year. Of these, nearly half (1.8bn) will be in Asia-Pacific—the vast majority on routes linked to China.

“Traffic continues to grow,” says Tyler. “We have not seen any indication that the market turmoil in China has impacted travel. And the refocusing of the Chinese economy on consumption is having a positive effect on demand for travel.

“The competition for that business, of course, is ever more intense. There is expanding budget carrier competition at the regional level. And the Gulf hubs are changing the game for long-haul traffic to many destinations.”

IATA expects airlines to deliver a $36bn profit in 2016, for a 5.1% net margin this year. However, on a per passenger basis airlines are making less than $10 for each passenger carried.
The majority of the industry’s profits are being generated in North America – $19.2bn. On a per passenger basis they will retain over $21. Asia-Pacific airlines are expected to generate a $6.6bnprofit which equates to just over $5 per passenger.

“You might be surprised that Asia—on aggregate—is lagging in profitability,” says Tyler. “We have long been saying that the industry’s centre of gravity is shifting eastward. And that is true. Carriers in this region are growing fast and making travel accessible to more and more people.”

IATA expects 3.8bn passengers in 2016 —about 34% of them will be in the Asia Pacific region. “That will grow to 42% by 2034. China, which is already an aviation powerhouse, will be even more pivotal with the journeys of one in five travellers being either to, from, or within its geography,” adds Tyler.