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Air Transport AIR TRANSPORT ANNUAL REPORT 2013 TRANSPORT, WATER, AND ICT DEPARTMENT WORLD BANK GROUP 1818 H STREET, NW WASHINGTON, DC 20433 USA www.worldbank.org/airtransport THE WORLD BANK GROUP AIR TRANSPORT ANNUAL REPORT Photo Credits: Front Cover: Image by Yuichi Kosio under a Creative Commons license (http://creativecommons.org/licenses/by/2.0) Executive Summary and Page 47: Images by Veronica Glick All other images by World Bank or IFC, unless otherwise noted THE WORLD BANK MISSION End extreme poverty within a generation and boost shared prosperity. TABLE OF CONTENTS page Executive Summary 01 Abbreviations & Acronyms 02 Acknowledgements 03 Foreword 05 Air Transport Portfolio 07 IBRD & IDA Projects 08 IFC Projects 32 MIGA Projects 46 External Relations 48 Research & Knowledge Sharing 51 Internal Services 52 Outlook for Fiscal Year 2014 55 EXECUTIVE SUMMARY The World Bank Group (WBG) is an important ing implemented. The WBG has ongoing com- source for financial and technical assistance to mitments in a number of countries including developing countries through the provision of Tanzania, Burkina Faso, and the Democratic Re- low-interest loans, grants, credits, and advisory public of Congo. The focus of these projects is services. primarily on safety, infrastructure rehabilita- tion, institutional strengthening, and capacity In Fiscal Year 2013 (FY13), the World Bank's Air building. Transport Portfolio amounted to US$1.36 bil- lion, an increase of 9.6% from Fiscal Year 2012 The IFC’s Air Transport portfolio in FY13 is $592 (FY12). The Air Transport segment makes up million, a decrease of 6% from FY12. However, over 3% of the WBG’s $43 billion Transport several new commitments were made in Cote portfolio. The WBG’s FY13 Transport portfolio is d’Ivoire, Jamaica, and Nepal. IFC Advisory Ser- approximately 19% of the WBG’s active portfo- vices also continued activities initiated in FY12. lio of $227 billion (excluding MIGA). MIGA has been involved in the air transport The FY13 portfolio includes approximately 30 sector through the issuance of guarantees for projects or project components in five World two airport projects in Ecuador and Peru. Bank regions through the operations of the In- ternational Bank for Reconstruction and Devel- World Bank staff continue to represent the or- opment (IBRD) and International Development ganization externally at various air transport Association (IDA), as well as the International conferences and events, notably the World Finance Corporation (IFC)’s portfolio of lending Routes Strategy Summit 2012 in Abu Dhabi, and investment advisories in the aviation sec- which was co-organized by the WBG, ICAO, and tor. Routes. A particular highlight in FY13 was the approval Research and knowledge generation activities of a US$50 million IBRD loan to China to im- continue to be a critical function of the WBG’s prove airline connectivity in the Northeastern Transport Anchor. A current focus is on Low- Jiangxi Providence and to demonstrate the en- Cost Carriers (LCCs) and the opportunities and vironmental sustainability of the development potential impact they can have in developing and operation of the Shangrao Sanqingshan Air- countries. port. Finally, the worldwide recovery of the airline A key ongoing project is the Pacific Aviation In- industry brought solid growth in air services to vestment Program, which was launched in many emerging markets in 2013. This, however, FY12. The project’s current implementation co- entails the need for infrastructure improve- vers Tonga, Kiribati, and Tuvalu, while subse- ments to meet demand, improved regulatory quent phases will expand to Vanuatu, Samoa oversight to ensure safety and security, and the and the Solomon Islands. facilitation of required fleet renewal for many airlines in developing countries to remain com- The World Bank continues its active engage- petitive. The WBG is addressing these challeng- ments in other regions, particularly in Africa, where the majority of projects are currently be- es of its client countries in Fiscal Year 2014. 1 | AIR TRANSPORT ANNUAL REPORT 2013 ABBREVIATIONS AND ACRONYMS ACKNOWLEDGEMENTS ADS-B/C Automatic Dependent Surveillance – Broadcast/Contract AGL Aeronautical Ground Lights ATC Air Traffic Control This report benefited from the knowledge and expertise of a number of staff ATM Air Traffic Management members across the World Bank Group. BOT Build-Operate-Transfer BOO Build-Own-Operate We would like to acknowledge the contributions of Christopher Bennett, Pierre BOOT Build-Own-Operate-Transfer Bonneau, Ravi Bugga, Surinder Chawla, Jean-Charles Crochet, Sylvia Michele BTO Build-Transfer-Operate Diez, Anca Dumitrescu, Harsh Gupta, Layne Hill, Olivier Le Ber, Alexandre Leigh, CAA Civil Aviation Authority Justin Locke, Ramatou Magagi, Laurie Manning, Flore Martinant de Preneuf, CES Charles E. Schlumberger, Lead Air Transport Specialist (WBG) Yonas Mchomvu, Monica Moldovan, Xavier Muller, Gylfi Palsson, Noroarisoa DME Distance Measuring Equipment Rabefaniraka, Binyam Reja, Kavita Sethi, Evelina Stanoeva, Vincent Vesin, GNSS Global Navigation Satellite System EASA European Aviation Safety Agency (Agency of the European Union) Margaret Walsh, and Nora Weisskopf. EC European Commission We would also like to thank Jose Luis Irigoyen, Director of Transport, Water and ESW Economic Sector Work FAA Federal Aviation Administration (United States) Information and Communications Technology and Marc Juhel, Sector Manager FY Fiscal Year of Transport for their continued guidance and support, and Shruti Vijayakumar IATA International Air Transport Association for her assistance with research and compilation of this report. IASA International Aviation Safety Assessment (FAA) Who we are IBRD International Bank for Reconstruction and Development (WBG) ICAO International Civil Aviation Organization (UN Agency) IDA International Development Association (WBG) IFC International Finance Corporation (WBG) ILS Instrument Landing System IOSA IATA Operational Safety Audit LCC Low-Cost Carrier MIGA Multilateral Investment Guarantee Agency (WBG) PPPA Public Private Partnership Agreement PPP Public-Private Partnership SARPS Standards and Recommended Practices TA Technical Assistance TWITR Transport Unit of the Transport, Water and ICT Department (WBG) US DOT US Department of Transportation USOAP Universal Safety and Security Oversight Audits Program (ICAO) VOR VHF Omni-Directional Radio Range VSAT Very Small Aperture Terminal WBG World Bank Group WRSS World Routes Strategy Summit 2 | AIR TRANSPORT ANNUAL REPORT 2013 3 | AIR TRANSPORT ANNUAL REPORT 2013 FOREWORD A Message from the Lead Air Transport Specialist A sustainable air transport system by itself does not ensure economic development. However, without it, no country can integrate and develop successfully in today’s global market place. The global air transport industry has recovered from the losses in earlier years and is forecasting an esti- mated US$12.9 billion profit for 2013. The key drivers, according to IATA, were improvements to the industry’s structure and lower jet-fuel prices. However, the industry’s 1.8% net profit margin in 2013, and 2.6% expected for 2014, remain below the weighted cost of capital. As such, investments in airlines still remain risky and unprofitable for shareholders. Moreover, profits depend to a large extent on the cost of jet fuel, a factor which cannot be controlled by airline management. On the other hand, never before has air transportation played such a crucial role for global economic development. Over 3 billion passengers have been transported globally last year by an industry that achieved a new safety record. Global trade and the integration of emerging markets depend more than ever on sustainable air services. The tourism sector, which contributes about US$2 trillion to global GDP, hinges on air transportation as 51% of international tourists now travel by air. These tourists generated US$1.3 trillion dollars in exports for the countries they visited, close to 6% of the world’s exports of goods and services or 30% of service exports alone. Cargo demand, however, has remained stagnant, with airlines having transported 51.6 million tons in 2013. The industry sees the reasons in “on-shoring” of production, which is decreasing cargo business. This seems to be driven by the rise in protectionist measures by governments aiming to stimulate do- mestic economies, and the rise of labor costs in previously low labor-cost locations. Emerging and developing countries have experienced strong growth in 2013. While air traffic in terms of available seat kilometers (ASK) grew modestly in the US and Europe, strong growth of over 12% was maintained in the Middle East and China, as well as 7.4% in Latin America, while traffic in Africa and the Asia-Pacific Region grew at 5.2%. Continued growth is forecasted in emerging countries, which requires investments in airport and air traffic control infrastructure. However, the industry remains vulnerable, especially to rising fuel cost and sudden economic downturns. Airline fleet renewal, international alliances, and effective yield manage- ment are necessary to weather future downturns. Governments, finally, need to continue to liberalize and facilitate the sector, while ensuring safety and security through compliant regulatory oversight. Against this backdrop, the World Bank Group (WBG) is supporting its client countries in the develop- ment of a sustainable air transport sector. The focus remains on safety, security, and affordability of
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