Potential and Challenge for the Development of an Aviation Hub in Sri Lanka
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1 Potential and Challenge for the Development of an Aviation Hub in Sri Lanka AmalS Kumarage, Professor of Civil Engineering, Department of Transport & Logistics Management, University of Moratuwa Chairman, National Transport Commission, Sri Lanka, Presentation to the Sri Lanka Freight Forwarder s Association Seminar 21 st November 2007
2 SAARC Region in Perspective Nearly 1/4th of the total world population, but only 2.1%of world GNP and 1.2%of world trade. One of the fastest economic growth rates (avg % p.a.) South East Asia -2% per annum East Asia -5.8% per annum (the fastest growing) Total intra-regional export trade in SAARC to total global exports - only around 5.0% Lack of integrated transport systems.
3 Significance of an Integrated Transport network in SAARC region and Present concerns Essential to promote land locked countries; Nepal and Bhutan. Essential to enhance connectivity of Island states; Maldives and Sri Lanka with the rest of SAARC (Maritime and air transport). Concerns Very low connectivity in terms of direct flights. High cost of travel Deficiency of investment in relation to the provision of modern terminals and additional runway capacity. Regulatory barriers Lack of strong hub operations for efficient regional transfers.
4 Comparison of Regional Aviation in SAARC Region Intra Regional Passengers Carried (million) Regional Trips Per 1000 Capita Africa 6 11 Asia/Pacific Europe Middle East North America South America & Caribbean TOTAL SAARC (given within Asia/Pacific) Only 0.5% ; 1 in 200 of World wide regional traffic 2 1 Lowest aviation use in the world, lower than sub- Saharan Africa. Even though Air transport is correlated with increase in income, the extremely low indicators of use shows that aviation within SAARC is one of the least developed modes of transport particularly for intra-regional mobility.
5 Air Services Agreements in the SAARC region-2004 Country B desh Bhutan India Maldives Nepal Pakistan Sri Lanka Bangladesh 2 60 X n/a n/a 3 Bhutan 0 49 X 7 X X India *5 (metros) others unlimited Maldives X X 4 X X unlimited Nepal X n/a X Pakistan 4 X 14 X 2 unlimited Sri Lanka 0 X X 5 Weekly number of flights in operation at present The number of flights per week allowed in the present ASAs Maximum possible ASAs between the 7 countries; 21Total implemented; 14
6 The sixteen SAARC Gateways 16.Colombo 15.Lahore 14.Karachi 13.Kathmandu 12.Male 11.Hyderabad 10.Cochin 9.Trichy 8.Bangalore 7.Trivandrum 6.Kolkata 5.Chennai 4.Mumbai 3.Delhi 2.Paro 1.Dhaka 1.Dhaka 35,910 16, ,092 31,109 65,098 2.Paro 9,606 9,840 8,474 3.Delhi ,346 62,750 34,780 81,406 4.Mumbai 2 1,693 16,269 77,476 75,225 5.Chennai 453,662 6.Kolkata ,886 7.Trivandrum 80, ,683 8.Bangalore 13,841 92,889 9.Trichy 84, Cochin 48, Hyderabad 26, Male , Kathmandu , Karachi , Lahore 6 16.Colombo The 28 direct flight connections out of 83 at present, between the 16 aviation corridors.
7 Observations Only 15 direct connections between the top 8 airports (Colombo, Delhi, Chennai, Mumbai, Male, Dhaka, Karachi and Kathmandu)(Directness Index is only 54%) Only within the top 4 airports (Colombo, Delhi, Chennai and Mumbai) are there direct flights.(directness Index 100%) Only 9 connections between the 7 SAARC capitals, of a possible 21 direct connections are operative.(directness Index 43%). The direct connectivity between the capitals in particular is extremely deficient.
8 Inter-Regional Air Travel within the SAARC Colombo presently holds position as intra-regional air hub
9 Four routes carry over 40% of the entire demand for intra-regional air travel within SAARC; Socio-cultural linkages -Colombo to Chennai 453,662 passengers, Dhaka to Kolkata 167,092 passengers. Tourism & Trade Colombo to Male 271,998 passengers, Delhi to Kathmandu 264,346 passengers Colombo -Trivandrum 107,683 passengers (i.e. instead of flying to Chennai) and thereafter taking cheaper surface transport. Commercial and business travel within SAARC has still not grown to its full potential. e.g. Intra-regional corridors connecting the major commercial centres such as Mumbai Colombo, are still of moderate traffic levels, ranging between 15,000 to 80,000 passengers per year.
10 From To Tonne Rate Increase Distance Ton kms 2004 US$ per kilo (%) km 2004 Total Cost US$ per ton Freight Rate US$ per Tonkm Dhaka Delhi 1, ,273, Mumbai (7.6) ,090, Kolkota 1, (35.5) , Katmandu (27.0) , Karachchi 1, (48.8) ,029, Paro Delhi , Kolkota , Kathmandu , Delhi Kathmandu 2, ,448, Lahore , Colombo Chennai 6, ,079, Trivandrum 2, (15.5) , Bangalore , Tiruchrarapalli (28.7) , Cochin , Calicut , Hyderabad , Delhi 1, ,216, Mumbai 1, ,869, Colombo Male 9, ,138, Colombo Karachchi 2, ,489, Kathmandu Kolkata (43.7) , Trivandrum Male , TOTAL of the 16 Selected Gateways 36,602 36,101,725 TOTAL 36, ,769,323
11 Freight Intra-Regional Movements between Freight selected Movements SAARC Aviation (Tons/year) Gateways (2004) between major airports in SAARC Country From--> TAirport Bangladesh 1.Dhaka 2.Chittagong Bhutan 3.Paro India 4.Delhi 5.Mumbai 6.Chennai 7.Kolkotta 8.Trivandrum Total Bangladesh 1.Dhaka ,956 2.Chittagong 0 - Bhutan 3.Paro India 4.Delhi ,094 5.Mumbai ,209 6.Chennai ,546 7.Kolkotta ,194 8.Trivandrum ,102 9.Bangalore Tirucharapalli Varanasi 0-12.Cochin Calicut Hyderabad Buddhagaya 0 - Maldives 16.Male ,132 Nepal 17.Kathmandu ,727 Pakistan* 18.Karachchi , Lahore Sri Lanka 20.Colombo ,454 9.Bangalore Airport Total ,762 SAARC Total 36, Tirucharapalli 11.Varanasi 12.Cochin 13.Calicut 14.Hyderabad 15.Buddhagaya Maldives 16.Male Nepal 17.Kathmandu Pakistan 18.Karachchi 19.Lahore Sri Lanka 20.Colombo Airport SAARC Total 3.Delhi-Katmandu 2.Colombo-Chennai 1.Colombo-Male 4.Colombo-Karachi
12 Freight Rates between selected SAARC Gateways (per ton km- 2004) 1.Dhaka 2.Chittagong 3.Paro 4.Delhi 5.Mumbai 6.Chennai 7.Kolkotta 8.Trivandrum 9.Bangalore From--> TAirport Bangladesh 1.Dhaka $1.00 $0.62 $0.71 $0.16 $0.50 $ Chittagong $0.21 Bhutan 3.Paro $1.00 $2.00 $1.00 $1.00 India 4.Delhi $0.40 $2.00 $0.48 $0.50 $ Mumbai $1.99 $0.21 $ Chennai $ Kolkotta $0.10 $1.00 $0.58 $ Trivandrum 9.Bangalore 10.Tirucharapalli 11.Varanasi 12.Cochin 13.Calicut 14.Hyderabad 15.Buddhagaya Maldives 16.Male $0.65 $0.23 Nepal 17.Kathmandu $1.00 Pakistan* 18.Karachchi 19.Lahore Sri Lanka 20.Colombo $1.07 $0.74 $0.36 $0.28 $0.56 $0.31 $0.48 $0.37 $0.55 $0.44 $ Tirucharapalli 11.Varanasi 12.Cochin 13.Calicut 14.Hyderabad 15.Buddhagaya 16.Male 17.Kathmandu 18.Karachchi 19.Lahore 20.Colombo
13 Air Freight between SAARC Countries Bangladesh Bhutan Country Bangladesh Bhutan India Maldives 983 Nepal Pakistan Sri Lanka India Maldives Nepal Pakistan Sri Lanka
14 Very low modal share for air freight Freight carried on all international routes -23,000 mn tons. the movements within SAARC 36.6 mn tons Modal share 0.15%. The heaviest freight flows centered on Colombo (> 50%) of the intra-regional freight movements. Colombo -Male corridor, Colombo Chennai -flows between 50 to 100 tons per week (both ways). Average freight load is 2 tons per aircraft movement. Carried 36,602 tons of freight and produced 36.6 million freight tonne kms. Average haulage 1000 kms
15 Model : Economy Fares Vs Distance 700 US$ Observed Linear Distance (Km)
16 Multiple Regression Analysis To identify the best fit regression line based on Least squares method to explain the past trend in air fare. Linear relation-ship is assumed Use of Dummy variables to qualitative country specific factors Use of binary code scheme Backward Stepwise Regression Analysis Indicator variables are considered together and not individually Significance of the overall model was done using the F test.
17 Model 1 Variables Entered/Removed b Variables Entered NEPAL, BANGLAD E, MALDIVES BHUTAN, DISNEW, PAKISTAN INDIA a Variables Removed Method. Enter Model 1 Model Summary Adjusted Std. Error of R R Square R Square the Estimate.934 a a. Predictors: (Constant), NEPAL, BANGLADE, MALDIVES, BHUTAN, DISNEW, PAKISTAN, IND a. All requested variables entered. b. Dependent Variable: Economy Rate Model 1 a. Regression Residual Total ANOVA b Sum of Squares df Mean Square F Sig a Predictors: (Constant), NEPAL, BANGLADE, MALDIVES, BHUTAN, DISNEW, PAKISTAN, INDIA b. Dependent Variable: Economy Rate
18 Model 1 Coefficients a Unstandardized Coefficients Standardi zed Coefficien ts B Std. Error Beta t Sig. (Constant) DISNEW BANGLADE BHUTAN INDIA MALDIVES PAKISTAN NEPAL a. Dependent Variable: Economy Rate Model Model Summary Adjusted Std. Error of R R Square R Square the Estimate.668 a b c a. Predictors: (Constant), DISNEW b. Predictors: (Constant), DISNEW, BHUTAN c. Predictors: (Constant), DISNEW, BHUTAN, BANGLA
19 Economy = D *BH *BA fare D= Distance (kms), BH = Bhutan, BA = Bangladesh Interpretation and conclusions To all 7 countries distance had been a significant factor in determining the rates. All connecting flights to Bhutan have had an additional avg. cost of 251 in determining the fares, when other dependent variables are held constant. All connecting flights to Bangladesh have had an additional avg. cost of 141 in determining the fares, when other dependent variables are held constant. No country has achieved a better advantage compared to another in relation to distance or country specific factors
20 Model 1 2 Variables Entered/Removed a Variables Entered Variables Removed DISTANCE. BHUTAN. a. Dependent Variable: COST Method Stepwise (Criteria: Probabilit y-of-f-to-e nter <=.050, Probabilit y-of-f-to-r emove >=.100). Stepwise (Criteria: Probabilit y-of-f-to-e nter <=.050, Probabilit y-of-f-to-r emove >=.100). Model 1 2 Model 1 2 Model Summary Adjusted Std. Error of R R Square R Square the Estimate.546 a b a. Predictors: (Constant), DISTANCE b. Predictors: (Constant), DISTANCE, BHUTAN Regression Residual Total Regression Residual Total ANOVA c Sum of Squares df Mean Square F Sig a b a. Predictors: (Constant), DISTANCE b. Predictors: (Constant), DISTANCE, BHUTAN c. Dependent Variable: COST
21 Model 1 2 (Constant) DISTANCE (Constant) DISTANCE BHUTAN a. Dependent Variable: COST Unstandardized Coefficients Coefficients a Standardi zed Coefficien ts B Std. Error Beta t Sig Model 1 2 BHUTAN MALDIVES NEPAL MALDIVES NEPAL Excluded Variables c Collinearit y Partial Statistics Beta In t Sig. Correlation Tolerance.560 a a. Predictors in the Model: (Constant), DISTANCE.152 a a b b b. Predictors in the Model: (Constant), DISTANCE, BHUTAN c. Dependent Variable: COST
22 Air Freight Rates for Intra-Regional Haulage within SAARC Cost ( US $) Freight Rate v. Distance 1000 Observed Linear DISTANCE (km)
23 Calculation of average air freight costs for intra-regional movements in SAARC Freight Cost per Ton in US$ = (distance in kms) for Paro (Bhutan) add penalty of US$ 892
24 Calculation of average air passenger costs for intra-regional movements in SAARC Return Economy air fare in US$ = (one-way distance in kms) for Paro (Bhutan) add penalty of US$ 252 for Dhaka (Bangladesh) add penalty of US$ 141
25 What is a hub? Hubs pull resources (goods, financial resources, scientific excellence) from outside into them (if they do not possess them abundantly themselves) and use their own expertise and special environment to distribute them to the world economy and add an extra value to them
26 Lanka languishes low in Best for Logistics global list; Even Sudan is higher Sri Lanka, which politicians love to describe as the hub of South Asia, is languishing at number 92 in a global list of 100. That s the status of Colombo, Sri Lanka as per a new World Bank Group survey which led to the compilation of the first Logistics Performance Index. For years the strategic geographic location of Sri Lanka has been excessively spoken about but the sorry state of not having done anything dynamic in a global or regional context is well illustrated as per the first ever international ranking of logistics supremacy. Singapore, is ranked number one while Dubai is slotted at the 20th place. Less strategically located countries such as Slovak Republic, Croatia, and even Sudan, Cambodia and Kenya as well as India and Pakistan have better logistics compared with Sri Lanka.
27 Source: Logistics Performance Index, World Bank in collaboration with TSE Finland
28 Sri Lanka and the Hub status What does it take to be a hub? A modern hub : A commercial center, a place to which goods and information are brought for distribution. Business information, news, connections, market intelligence, practical experience, relationship networks, business contacts. Uniqueness of a hub Being geographically placed (link regions with other locations of the world.) Have the right capabilities, expertise, technical and support services
29 Evolution of Trading Hubs Roads and Roads (e.g. Silk Route) Roads and Ports (e.g. Roman Appian Way) Canals, Rivers and Ports (e.g. Colombo-18/19 th Century) Railways and Ports (e.g. Colombo -19/20 th Century) Highways and Ports (e.g. Durban) Airports and Ports (e.g. Dubai, Singapore, HK)
30 Dubai s claim Dubai is a major Hub for Sea/Air services due to the following factors. Excellent Port infrastructure for import to clearance of the cargo before the cargo arrival. Efficient operations for quick transfer of cargo from the marine container terminal to air cargo. Pre advance booking to make availability of air cargo space at attractive rates to almost all major destinations. Ease of documentation. Well developed banking system for funds to flow on behalf of the shipper for collecting and remittance due to free flow of foreign exchange remittances from UAE.
31 Singapore s Claim Singapore's connectivity to the world, via air, sea and telecoms infrastructure, enables the quick exchange of goods, capital, information and ideas. Have established the Airport Logistics Park of Singapore for quick turnaround value-added logistics and regional distribution activities. Singapore also provides a trusted and secured hub that ensures the continuity of global supply chains. To help manufacturers and supply chain partners improve their visibility of the supply chain and better manage their inventory needs. The government is committed to making Singapore a compelling global logistics hub and SCM nerve centre in Asia. Allows and encourages companies to use Singapore as a working laboratory to test-bed and commercialize new supply chain ideas.
32 Germany s Claims Frankfurt- Europe s busiest cargo airport Transportation Infrastructure Highway network density is twice the EU average. Freight Villagers-Cargo support centers act as regional nodes with optimal access to long haul networks Inter-modal Solutions-Providing the logistics industry with the flexibility it needs to prosper in the challenging market. ( Hamburg has excellent railway connection to the hinterland, 23% of containers transported to/from Hamburg by train)
33 Conclusion: What it takes to become a Modern Hubs 1. Geographical Centrality ( a weakening criterion) 2. Facilitate efficient inter-modalism (e.g. air-sea or road-air or sea-rail) 3. Physical infrastructure should be modern & reliable 4. It should be possible to add value to goods in transit (e.g. logistics villages) 5. Should have efficient ICT based documentation. 6. Supported by an efficient & modern urban centre (S pore, HK, Dubai) 7. It should be a leading financial centre (e.g. Hong Kong) 8. It should be a knowledge centre for developing logistics competencies (e.g Singapore)
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