Stefano Baronci of ACI APAC & MID Explores the Sustainability, Labor, and Economic Challenges Facing the Aviation Industry

0
8

Anyone who has booked a flight since the end of the COVID-19 pandemic is invariably familiar with some of the most significant challenges facing the aviation industry. Labor shortages and other factors have converged, resulting in many flights that have been seriously delayed or canceled outright. Inflationary pressures and rising fuel prices have impacted profitability, forcing many airlines to increase the cost of airfare.

But fixing these obvious challenges isn’t the only priority for today’s airlines and airports. They are also actively working towards aggressive carbon emission and other sustainability goals intended to help make the entire industry greener and more environmentally conscious.

To learn more about the challenges facing the global aviation industry, Connected Aviation Today recently sat down with leaders from aviation associations and organizations across the globe. In our most recent conversation, we spoke with Stefano Baronci, the Director General of Airports Council International Asia-Pacific & Middle East (ACI APAC & MID).

During our discussion, we asked Stefano about rising airfares, increased flight delays, carbon emission goals, and other pressing issues impacting every player in the commercial aviation industry.

Connected Aviation Today (CAT): Why are flights so expensive right now, and will it remain that way? 

Stefano Baronci: According to our research, the rise in airfares is due to various factors, including inflation, a spike in fuel prices, a reduction in competition due to supply-demand imbalances, and COVID restrictions. Long-haul routes have been hit harder than short-haul markets, with long-haul routes (in the Asia Pacific and Middle East regions) seeing fare increases of 20 percent to 30 percent compared to a less than 10 percent increase for short-haul routes (when comparing fares from 2022 to 2023).

Moreover, the reduction in competition due to supply-demand imbalances has enabled airlines to increase fares, with some more popular routes witnessing fare increases of up to 50 percent.

In the first half of 2023, despite a progressive increase in traffic, domestic airfares have continued to increase compared to the same period in 2019.  For example, India (22 percent), Australia (24 percent) and Malaysia (18 percent). Similarly, many markets experienced high increase in airfares in the international segment. For instance, Australia (20 percent), Indonesia (25 percent) and Malaysia (27 percent). Airlines are capitalizing on low competition and pent-up demand to increase profits and recover losses incurred during the pandemic, while airports continue to provide enhanced services to passengers despite incurring heavy operational and capital expenditures.

The latest trend is that some airlines opting for capacity reductions have surprisingly witnessed a surge in revenue. A majority of airlines are deliberately maintaining their Revenue per Available Seat Flown (RASF) below the 1.3 threshold compared to 2019 levels as they are implementing capacity cuts. However, some players are capitalizing on the financial advantages of capacity cuts – increasing RASF and thus affecting the affordability of airfares from the passengers’ point of view. 

“Airports in our region are taking steps where possible to digitalize every step of the journey to enhance the convenience and speed of passenger processing.” – Stefano Baronci

The trend of rising airfares is likely to remain, as most of the routes in the Asia Pacific and the Middle East are struggling to manage a variety capacity issues. ACI Asia-Pacific will continue to monitor airfare trends to evaluate their influence on the aviation industry, specifically focusing on airports.

CAT: Do you foresee a reduction in demand for travel as a result, and will this impede growth for the industry?  

Stefano Baronci: The aviation industry has maintained its consistent recovery, providing a positive outlook for the rest of 2023. According to our latest forecast, Asia-Pacific will likely regain its market leadership by the end of 2023, reaching 2.9 billion passengers – or 87.3 percent of the 2019 level. The Middle East is expected to touch 394 million in 2023 – recovering 96.8 percent of 2019 traffic. 

The future looks bright – subject to addressing a number of factors. Some of these factors include limitations in traffic rights, challenges airlines and airports face regarding operational readiness rebuilding route networks. And the high inflation rate in the Asia Pacific region in particular has resulted in rising fuel prices and air fares and reduced disposable income.

CAT: The industry faces an unprecedented shortage of skilled labor in all sectors. What can airports do to mitigate the issue?

Stefano Baronci: The shortage of skilled labor in the aviation industry is a significant challenge globally. However, it is important to note that in the Asia-Pacific and the Middle East, the labor shortage is not entirely on the airports—it is spread across the ecosystem, such as airline check-in, security, immigration, and ground handling services. All these are separate functions that are not under the airport’s control. 

Airports in the Asia-Pacific and the Middle East have not experienced the same degree of manpower shortages as Europe and other parts of the world. This was due mainly to two factors:  the long-term vision of several airports to retain their staff despite the challenging time, and the moderate traffic recovery compared to other regions in the world.

We have seen that the airport community in Asia-Pacific and the Middle East are focused on attracting, retaining, and developing airport staff as a priority for all aviation stakeholders, including governments.  Airports from our region agree on a set of measures – including hiring and retaining workers and redeployment of manpower for the most critical functions – in the short-term, while enhancing training and staff development for reskilling and upskilling – providing better career development plans and making airports a more attractive place for long-term career opportunities.

“Despite substantial financial losses during the pandemic, airports continued investing in infrastructure expansion. Throughout that challenging period, many of our airport members allocated resources to enhancing their facilities…” – Stefano Baronci

Additionally, airports in our region have been proactive in addressing the challenge by implementing technology to streamline passenger processing. Airports in our region are taking steps where possible to digitalize every step of the journey to enhance the convenience and speed of passenger processing.

CAT: We’ve witnessed massive delays and mass cancellations at airports across Europe and North America during busy travel seasons. What proactive steps can an airport take to match capacity to demand and keep delays in check? 

Stefano Baronci: A collaborative effort across all actors in the aviation ecosystem – including airlines, airport operators, security establishments, immigration, and ground handling services – can be key to effectively addressing inefficiencies and labor shortages and reducing the risks of delays and cancellations as experienced in Europe and North America.

Airport operators in our region have proactively implemented technology solutions across different touchpoints to facilitate seamless passenger processing. They have equally prioritized the provisioning of essential facilities on the airside to enhance the efficiency of airside operations. 

Despite substantial financial losses during the pandemic, airports continued investing in infrastructure expansion. Throughout that challenging period, many of our airport members allocated resources to enhancing their facilities – such as expanding terminal capacity and optimizing runway efficiency – to prepare for the expected surge in traffic after the pandemic.

CAT: As the industry moves towards a greener future, what steps should airports take to increase sustainability now and in the long term?

Stefano Baronci: Bear in mind that carbon emissions are not the only environmental aspect that airports are addressing to limit the impact of air travel on climate over the coming years. The increasing need for disclosure in Environment, Social, and Governance (ESG) is expected to become a norm for large organizations like airports, which will have synergy in promoting airport sustainability initiatives shortly.

But, specifically for decarbonization, airports in our region are implementing energy efficiency measures, including switching fuel for on-site thermal and sustainable electrical applications such as switching to LED lighting, replacing inefficient heaters or chillers, and implementing renewable energy, which are fundamental enablers to reducing emissions in the years to come.

Airports in the ACI Asia-Pacific & Middle East region are working towards exploring potential pathways towards net zero carbon. As of August 2023, 28 airports from the region have committed themselves to becoming Net Zero Carbon by 2050, eleven of which have committed to reaching the goal by 2030. Outstandingly, Christchurch Airport declared net zero in 2021.

“Airlines are capitalizing on low competition and pent-up demand to increase profits and recover losses incurred during the pandemic…” – Stefano Baronci

Our approach is to encourage airports to achieve the target of net zero emissions by adopting industry best practices in carbon management and emissions reduction. We’re accomplishing this by leveraging our flagship program, Airport Carbon Accreditation, the only institutionally endorsed global carbon management certification program for airports. 

According to the Travel Foundation, airlines contribute the majority of emissions in the travel sector.  Apart from developing new aircraft technology and improving operational and infrastructure efficiency, significantly increasing Sustainable Aviation Fuel (SAF) production and consumption will be crucial to achieving net zero.

However, airports can play a role in supporting airlines in the effort towards net zero carbon emissions.

In the short term, airports can facilitate increased efficiency in operations on the ground using approaches such as Airport Collaborative Decision-Making (A-CDM). Based on ICAO data, the 51 busiest Asia-Pacific airports have implemented A-CDM.  In the medium term, airports can facilitate the deployment of sustainable alternative energy sources onsite, especially SAF. And, in the longer term, airports should be prepared for the future energy systems that will power aircraft – such as electric and hydrogen.

The views and opinions expressed in this article belong to the author and do not represent the views, opinions, or endorsement of Collins Aerospace, its affiliates, or employees.

Stefano Baronci, Director General, ACI Asia-Pacific & Middle East

Mr. Stefano Baronci serves as the Director General of Airports Council International Asia-Pacific & Middle East (APAC & MID), an organization dedicated to advocating for the airport industry in the Asia-Pacific and Middle East regions. Appointed in December 2019, Mr. Baronci is responsible for leading the implementation of the association’s strategic agenda while also leading a team of dedicated professionals based at the Regional Office headquarters in Hong Kong and the Middle East office located in Riyadh.

With more than two decades of extensive experience in analytical and representational roles within the aviation sector, Mr. Baronci brings a wealth of expertise at both national and international levels, representing the interests of both airport and airline industries. His familiarity with the ACI community is evident from his previous roles as Director of Economics at ACI World in Montreal and Senior Policy Manager at ACI Europe in Brussels. Additionally, he has held the position of Secretary General at Assaeroporti, the association representing Italian airport operators, and served as Assistant Director and ATM Infrastructure Expert at the International Air Transport Association (IATA).

Mr. Baronci, a native of Italy, holds an Executive MBA from Warwick University in the United Kingdom and graduated with a Law degree from La Sapienza University in Rome, Italy. 

LEAVE A REPLY

Please enter your comment!
Please enter your name here