1 Eurasian Air Transport Strategies: Strengthening the Network and Improving Connectivity with Surface Transportation Martin Dresner University of Maryland, R.H. Smith School of Business and Air Transport Research Society ASEM Symposium – Seoul, Korea – September 10, 2015

2 Current State of Affairs Eurasian air transport network connectivity has been increasing, with much of the improvement driven by the expansion of the Gulf carriers Emirates Network – Connects Asia to Europe Source: ap% jpg – Accessed August 7, ap% jpg

3 Increased Asia-Europe Connections from East Asian Carriers as Well The large Chinese carriers, for example, have expanded their networks to Europe over the past decade. European carriers have had established networks to Asia for years but new carriers, such as Turkish Airlines, have dramatically expanded their networks. Source: – Accessed August 7,

4 Alliances Improve Connectivity When carriers have not been able to establish their own international networks, they have increased their reach through alliances. Oneworld Alliance Route Map Source: ction/generic/onworld-map.jpg - Accessed August 7, ction/generic/onworld-map.jpg - Accessed August 7

5 Low-Cost Carriers – Tremendous Growth but Still Largely Regional LCCs fly relatively few intercontinental routes, concentrating on shorter-haul regional routes. Source: Boeing Current Market Outlet

6 Asian Airports Have Let the Way in Improving Air Freight Connectivity Rank (2013) AirportCargo (Millions of Tonnes) 1Hong Kong, HK4.16 2Memphis, US4.14 3Shanghai, CN2.93 4Incheon, KR2.46 5Dubai, AE2.44 6Anchorage, US2.42 7Louisville, US2.22 8Frankfurt, DE2.10 9Paris CDG, FR Tokyo Narita, JP2.02 Five of the top 10 air cargo airports are in Asia, while 2 are in Europe. Source: Source: ACI-NA Annual World Airport Traffic Report.

7 Air Freight Integrators are Still Key to Freight Connectivity RankAirlineRTK (million) 1FedEx16,127 2UPS Airlines10,584 3Emirates10,459 4Cathay Pacific Airways8,241 5Korean Air Lines7,666 6Lufthansa7,218 7Singapore Airlines6,240 8Cargolux5,225 9Qatar Airways4,972 10China Airlines4,813 The two largest air freight carriers are FedEx and UPS, but Asian carriers occupy 6 of the top 10 spots. Source: FlightGlobal - Accessed on Nov. 17, 2014.

8 Integrating the Air Freight Network with Surface Transportation In general, airlines carry high-value freight while surface carriers, especially shipping lines and railroads, carry mainly low-value freight. Efforts to integrate air networks with surface networks have generally been disappointing due to the different missions of the two kinds of carriers. The exception being trucks that are needed to carry airfreight on the “last mile”.

9 Customers Want Short Lead Times, Customized Products and Low Costs However, increasing demands on manufacturers to customize their products, but at the same time, reduce their costs and shorten their lead times may lead to more air-surface transportation integration strategies.

10 Water- Air Integration Strategy – An Example “Fast Fashion” manufacturers could ship apparel items from factories in East Asia in containers to a central distribution center in Europe. Packaging, labeling (and maybe even dying to meet latest trends) could be performed at the CDC with goods air shipped to meet JIT demands at stores throughout the continent. Retail customers could benefit from lower costs, shorter lead times, and customized shipments.

11 Going Forward Boeing has forecast Europe-Asia air traffic growth of 5.1% over the next 20 years. Air transport demand will increase as incomes in developing countries increase. Although networks have been improved, clearly there are both infrastructure and regulatory impediments to continued expansion. On the infrastructure side, airports need to be expanded to accommodate growth. This will require a tremendous amount of capital, so governments need to be very careful about how funds are allocated among airports. In addition, new technologies need to be introduced into air traffic control to handle the additional traffic. On the regulatory side, governments need to ensure that airlines have access to international routes and are not stymied by overly restrictive bilateral or multilateral agreements. Source: Boeing Current Market Outlet

12 Keys to Sustaining and Strengthening the Eurasian Air Transport Network Intelligent targeting of capital for key infrastructure investments in airports and air traffic control. Commitment by governments to a regulatory environment that allows passenger and freight carriers access to markets and routes throughout Asia and Europe. An environment that allows both network and low-cost carriers to develop regional and intercontinental markets via their own networks and through alliances.

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