Air Transport Director Ministry of Transport and Telecommunications The Impact of Aviation Regulations on Airports Infrastructure Requirement Ebtesam Al Shamlan Air Transport Director Ministry of Transport and Telecommunications 5 – 6 May 2015

INTRODUCTION Airports provide access to international business opportunities and an important element of infrastructure. Transport infrastructure is essential for economic growth. To allow the national economy to grow, an adequate airport capacity is needed. Aviation requires economic regulations.

Air services agreements are playing essential role in regulations and operations of airlines through the airport. Liberalization of aviation markets has contributed to accelerating globalization. Liberalization of aviation market has resulted in tremendous air traffic growth at ME area in the past 10 years. Strong need to build airport infrastructure to meet the passenger and cargo demand expected within the next 20 years.

Air Transport Regulations

Air Transport Regulations 1 Chicago Convention 1944 (94 Articles): Part One: Air Navigation Part Two: ICAO Part Three: International Air Transport Part Four: Final Provisions 2 Bilateral Agreements: Regulation System De-regulation System Re-Regulation System 3 National Law and Regulations

Regulated and De-Regulated Air Transport System

STRICTLY REGULATED AIR TRANSPORT SYSTEM Fundamental Principles: Single designation. Equal share of capacity and frequency between both states. Capacity increase occur when load factors exceed 65%. Fares require to be approved before being offered in the market (double approval). Governments monitor fare levels and numbers of passenger carried. Imposition of penalties can be made if fare levels are violated or number of agreed passengers carried is exceeded 5th freedom rights are limited. STRICTLY REGULATED AIR TRANSPORT SYSTEM

DISADVANTAGES Full dependency on governments to provide air services. Full dependency on national carriers to service the market. Direct government intervention in the market. Direct/indirect government support (subsidies, grants, discounts, etc.). Encourages dominance by national carrier. Restriction on market access. Lack of competition. No product differentiation. Lack of consumer protection.

First occurred in USA in 1978: Fundamental Principles: Open market access.. Market forces predominate (Supply/Demand). No monopoly. No pricing controls (Double disapproval). No capacity control. Multiple designation. DEREGULATION AND ITS EFFECTS

Advantages Encouraged integration and alliances of airline companies. No government support to carriers.

DISADVANTAGES Focus on most productive routes, some ‘essential’ services may not be operated. Fares/capacity could be ‘dumped’ in particular markets by large carriers, providing initial benefits to consumer but designed to drive out other carriers. Emergence of ‘monopolies’ through market share dominance. Loss of jobs due to bankruptcy of some carriers or through forcing carriers to reduce operating costs.

REGULATION OF DEREGULATION Fundamental Principles: To prevent monopoly. To prevent carriers using artificially low fares and/or over capacity to drive out other carriers from the market. To prevent use of subsidies by any carriers. To protect consumers and other airlines rights. Ensure compliance with international safety standards and security. REGULATION OF DEREGULATION

PROGRESS TOWARDS LIBERALIZATION 2003: ICAO 5th Conference on Air Transport Reiterated the path towards liberalization through a gradual phased approach based on bilateral, regional or multilateral agreements. 2012: ICAO 6th worldwide A.T conference Ensure the implementation of liberalization. Lead to Air Connectivity

Air connectivity between GCC and the world has created tremendous benefits Air Connectivity benefits Increase Consumer choice Export industries in all aviation sector Increase Tourism Lead to Investments growth Job creation sdgsdshdgsdgshd

Overall benefits: We must focus on maximizing benefits for the travelling public Aviation industry (including Airports Airlines) Wider Economic Benefits

Aviation and Economic Benefit

Economic Benefit: Summary of impacts evaluated in recent studies There is considerable evidence that liberalization of international markets has led to substantial benefits for both passengers and the wider economy Liberalization drives wider economic growth, competition, affordable airfares, greater choice, connectivity growth, tourism, investment stimulation and job creation Traffic growth subsequent to liberalization of air services averages between 12-35%.

Tax and duties to government Daily international long haul flight generates (IATA) $ 97 millions income / year Tax and duties to government $ 22 millions paid in salaries 840 Jobs

Develop/replace existing airport infrastructure Global Rise in Traffic (IATA) Demand is increasing Global economic impact US$ 2.3 trillion 3.91 billion passengers by 2017 Average aircraft movements growth 7.6% per annum 31% increase in passengers between 2012 and 2017 International tourists average growth 3.3% per year between 2010 to 2030 Develop/replace existing airport infrastructure

Aviation Multiplier Effect (IATA) Air transport industry serves 70 other industries. Employment Multiplier Income Multiplier Air traffic Multiplier US $1 invested results in US $3.25 benefit to economy. 1 job creates 6 other jobs. 1% increase in GDP lead to 2% increase in air traffic.

Global Region Market Share Africa 3% Asia & Pacific 31% Europe 27% Latin America & The Caribbean5% Middle East 9% North America25%

Kingdom of Bahrain Air Transport Industry

Air Services Agreements & MOUs with other states Number of utilized Air services agreements 20 Number of open skies agreements 51 Number of restricted agreements 43

Air Services Agreement with other States 94 Eastern and Southern Africa 15 European and North Atlantic 37 Middle East 14 North America and Central America 3 South America 2 Western and Central Africa 2 Asia 21

Bahrain International Airport Movements Statistics and Forecast

Bahrain 2005-2014

Passengers (Medium Term Forecast) Over the Period 2015 - 2020 Actual Forecast

Aircraft (Medium Term Forecast) Over the Period 2015 - 2020 Actual Forecast

Flight Information Region (F. I. R Flight Information Region (F.I.R.) (Medium Term Forecast) Over the Period 2015- 2020 Actual Forecast

Impact of Liberalization in GCC & Middle East Countries

GCC National Carriers Share to International Airports Worldwide 226 Airports Middle East & Africa 63 Indian Sub Continent 29 North & South America 15 Far East & Australia 27 Russia & East Europe 11 Europe 53

Middle East is the fastest growing region in the world (ATAG) Demand is increasing M.E. employments contributes 3.4% (1.5m) of total global aviation Air Transport GDP in M.E. contributes 2.1% of total global GDP & will increase to 4% by 2025 Average annual passengers growth rate is 5% Average load factor in M.E. 75% Intra-Middle East route average growth 11.4% Develop/replace existing airport infrastructure

GCC Aviation Infrastructure Investment Rapid expansion in infrastructure and dramatic traffic growth. GCC airports are becoming major hubs between Asia and Europe. GCC carriers are becoming Global carriers. Increased contribution of air transport sector to GDP.

Higher growth is expected in all emerging regions* Global Rise in Passenger Traffic (Airbus) Higher growth is expected in all emerging regions* ?

Expanding extra airport capacity Opportunities Challenges Expanding extra airport capacity Infrastructures constraints & intensive competitive Efficient private sector investment Continuance aviation industry growth and increase demand Increase direct and indirect employment Update existing air transport rules and regulations No tax regime Shift to other modes of transport Offering high tech product with higher yield Infrastructure has to develop in parallel with the rapid growth of technology

CONCLUSION There is tough competition between airports in the region. Rapid expansion of infrastructure and dramatic traffic growth. Adequate airport capacity is required to accommodate the growth of traffic and to compete with other airports. Air service agreements are the legal tools to expand connectivity.

CONCLUSION Aviation is an engine for the national economy. GCC airports are becoming major hubs. Encourage participation of private sector. Adopt rules and regulations to safeguard liberalization (subsidies, consumer rights, competition, market access, fair competition). Recruit and develop qualified manpower is required. Massive investment and development in airports infrastructure is needed.

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