During your lengthy tenure what have been the main difficulties the aviation authority has faced ?
Simon Chan – Nothing stands alone. The same issues apply to the aviation industry as to the wider Macau society. Therefore we need enough human resources and adequate regulations to monitor the operations of the operators, especially now that ICAO has harmonised most of the safety and security standards.
We are in the process of doing that but not in the systematic way that they request, so there’s a lot more we need to do to improve on that issue. Plus, they (the ICAO) have set up an audit program through which they audit all the authorities in the world in an effort to harmonize standards. They request a lot of information from each authority and currently this is a pressing issue.

It seems that Macau Airport will face new challenges, not the least of which are fuel prices which forced a lot of airlines to cut flights. Now that fuel prices are almost back to normal, there’s a world economic crisis to deal with, not to mention the challenge of mainland-Taiwan direct flights. What the strategy to ensure a competitive airport in the region?
I repeat that aviation is only one side of the issue and is always linked to the other side of the economy. Quite high fuel prices, the world economic crisis plus the visa issuing policies for travellers, all affect the industry. However, it’s not only a Macau problem. If you look at the figures, cargo has dropped a lot and passengers a little, leading some airlines to adopt a strategy of cutting flights.
I think this is not only a Macau trend. Worldwide operators are cutting flights and some airlines have even terminated their services. It’s a global thing. I’m sure that when the economic crisis ends and the economy picks up again, the airline market will pick up as well.

Globally and in Macau, cargo throughput grew very fast in the past decade, more so than passengers. However as rates are dropping and some carriers like Air Macau have lost 30 percent on cargo, should we blame it all on fuel charges?
No. We have to look at the whole picture. The figures I have until September this year show that cargo has dropped about 37 percent already this year which is a big drop. It’s not only the fuel factor.

But is it only Air Macau or…?
The whole market. For example, Shanghai Airlines has stopped freight services to Macau. If they stop it will link to the carriers in Taiwan because they are connected, meaning if one stops the other needs to stop as well. You have to understand that the cargo that goes through the airport is not produced in Macau. It’s transported to Macau by road, by sea or by plane and then continues its journey through the Macau International Airport, in other words, transit cargo.

Is it possible to change Macau’s policies so we could attract more cargo flights even if we are a third party?
I think we do have good policies. As I said, our airport is working 24 hours and is very aggressive in trying to get its own customers, however, the origin of the cargo is not in Macau, the production lines are not in Macau and it all links together. The transportation route from the manufacturer to Macau, the customs clearance services, the border hours of operation, it all counts to this big business. Every bit of it counts and actually each government department is working very hard within their scope to improve all this. However some of them rely on outside parties.

Still plenty of opportunities

How do you think the bridge between Zhuhai, Macau and Hong Kong could affect Macau in the cargo area?
Frankly speaking it’s very difficult to have an accurate evaluation at this point and it’s not a question of a single bridge because all the procedures count, like goods clearance and tax declarations, because as far as I know the east side of the river, in terms of tax declaration, reports to the Central Government.
However, if the cargo comes to Macau to fly out, there will be another set of procedures making it more difficult to bring cargo into Macau airport for departure. All this plus the networking of forwarders, it all counts in the cargo business. The bridge itself will facilitate the movement of people and cargo but in my opinion there are advantages and disadvantages because when you look at the population in the Pearl River Delta region, plus the number of runways, its not the number of airports, but the number of runways that represent the real capacity. So, when you look at the population figures and number of runways in the Pearl River Delta I think we still have a lot of opportunities.

Viva Macau has accused the Macau authorities and therefore indirectly yourselves of giving Air Asia the most favorable incentives of any airline operating in Macau and now they say Air Asia is cutting flights. What is your response to this?
I must have missed that article, but based on what you said just now, first of all our airport runs privately, although the government has a share, all revenues goes to the airport and the government has not imposed any tax. Even the incentive program is a commercial product not a government policy.
The incentive program is not only applicable to local airlines, it also applies to all airlines that meet the requirements. Of course the airport can revise the incentive program to attract people or based on the market they can adjust the incentive program to meet the market needs and at this moment I know they are doing precisely that.

Do you think Tony Fernandes (of Air Asia) should be reminded that when he started out he promised to open new routes, for instance, to Penang this year, to Phuket and so on, and not only has he not opened those new routes, he has cut some flights. In light of this, should the airport not revise its incentives program?
When we approved the incentives program proposed by the airport we made it very clear that the incentive program must be fair. Who ever meets the requirements gets on the incentive program. Of course I’m sure that in a commercial or business perspective who ever in the airport has the communication channel with Air Asia will try to persuade them to stay or to fulfill their requirements or the commitments to the Macau International Airport. But again it’s always a commercial decision, a market oriented decision. If there’s no market the airline would not invest a lot of money and lose money on their services. When the economy is bad this can happen.

Air Macau must diversify routes

How do you see Air Macau’s crisis?
When you look at Air Macau’s network they provide services mainly to Taiwan and to mainland cities and to a few international destinations. As already reported they are not the only ones facing this issue, but I would say that probably the other airlines solved this problem much faster than them. It takes some time to deal with this and I know they are working very hard to create solutions. When you have a crisis, when you have a challenge, you also have an opportunity and this is the way to look at our market and to where routes should be expanded, eventually becoming more healthy.

Let me remind you that Air Macau has been promising to diversify routes for ten years and they still haven’t. And they knew, we all new, that sooner or later direct flights between Taiwan and the mainland would start.
You are exactly right. This is nothing new to us. We have been talking about this for years and that’s why one of the things that AACM can do is to revise and eliminate the limitations on the routes and make them as flexible as possible to allow the airline to develop the market.
What we need to do is to create the conditions, because we have a regulator’s role to play and then operators have their role to play and develop the market. If you come to the point of wanting to open a route but there are no air traffic routes, or the limitations in the route are not commercially feasible to operate, then we have to do something.
That’s why for a couple of years we have been trying to eliminate all these limitations and create better conditions for the operators to develop their markets. Each of us has our own role to play.
Of course I understand that it’s always a question of priority setting, even for an airline to make commercial decisions. When you open a new market that means you are investing. It’s not only opening a route, get an hundred passengers and you are immediately making profit. It doesn’t work like that. Normally new routes, take two or three years and long haul maybe five years of investment before you break even.
That’s a huge investment. For them at this moment the priority is not that. They are now talking about solving their own crisis as you mentioned. They are still enjoying the Taiwan market, however with all these changes I’m sure they will need to diversify.

Contracts must be respected

Is it time to put an end to the monopoly? Or can nothing be done because the government would have to heavily compensate Air Macau?
I’m glad you brought up the subject. The same situation applies if, for instance, Air Macau wanted to establish a base in Singapore. They cannot. Each country in the world has its own policies. Japan has more than two airlines but only two can fly international routes. Each country has its own policy to control international routes. In Macau we use a very simple way to control that by means of a concession for 25 years. That was decided by the joint-liaison group before the handover and we work within that legal framework.
The so-called monopoly or concession only limits the number of airlines that can be established in Macau, it doesn’t control the number of airlines routes because that falls within the framework of bilateral or multilateral agreements with other governments, therefore it will not affect the air links of Macau to the outside.
Many people don’t understand the meaning of aviation concessions here. As I always stress, the system is there, it is a matter of people respecting it. Air Macau’s concession contract is very clear under what conditions one can have a sub- concession. When you have a sub-concession that means you have a contract between the interested party, the government and Air Macau.
Unlike other industries we have a system that allows others to be based in Macau and this system also allows underused traffic routes to be used by other airlines. This is a much better organised system than in other concessions. The question is respecting the system.

Is the system being respected?
In my opinion, no. If all of them would respect the contracts here we wouldn’t have this issue.

Should the government bring all parties to the table, work things out together and get everyone on board to follow the policies that all of them know they should be following?
For the last three years we have been working very hard on this issue and we are hopeful of having long term solutions. What is happening now is not because we don’t have a system but because the system is not being respected. In this case the operators need to play a key role.

One of the strongest criticisms of Macau’s government is that it is very passive about what’s going on with Air Macau, because after all, the government is also one of the share holders, with five percent. How should the government force the other share holders to work together so this problem can be solved once and for all?
The government has five percent in Air Macau; it is not a major share holder. Everything is being worked according to the commercial code, just like any other company. I don’t think we are passive, we have only five percent and things are done according the institutions or the procedures. The shareholders need to find solutions and we play our part, but five percent is not enough when voting.

Airport needs to expand

One of the challenges for Macau is that we have around fifty hotels in the pipeline, more than twenty of them to be completed soon, which will double the number of available rooms. We have a massive gaming conference and exhibition industry being built, big shopping malls and so on. How can we ensure more traffic of every kind and make the airport a real international player in the region?
Because we are the regulator what we need to do is to create the conditions. In terms of traffic routes we try to eliminate all the limitations in all major markets. Whenever an airline thinks it’s commercially feasible to invest their service in Macau they can do that without limitations. That’s the first thing we have to guarantee and we are doing that with quite good results when you look at Malaysia and Thailand.
I think what you mean is the capacity of the airport. I know that the airport is working very hard on expansion plans. They have submitted it to the government and the government agrees with the development plans in principle and they will proceed.
Currently, when you look at our tourist structure, most of them are from the mainland, from the Guangdong area and to be frank, they don’t need to take an airplane to come to Macau.
What is happening now is we are attracting more and more international visitors to Macau, particularly from the Asia Pacific region. This makes up almost 35 percent of our total traffic volume. It has increased a lot.
What we need to look at is that some of the facilities of the airport are getting old and need to be replaced. Another issue is the gaming operators bringing 10 or 12 people in large jetliners which need space in the airport. However, the executive jets or private jets are not as frequent as a normal airline, because the normal airlines the longer they stay in the air the better for their revenue.

In other words, we need to expand the airport…?
We need the ramp space to park the aircrafts. Normal airlines come, they drop the passengers and they fly way. Most of the time private jets drop the passengers and stay on the ground for ten days, or even two weeks, until they fly away. So we need the space to park the aircraft. The airport has also told the government about this and they are adjusting the development plans accordingly.

They have been talking about the expansion of the airport for quite a while, including the runway. When can we expect expansion of all the facilities to take place?
They will start work in the commercial area soon, according to what we have been told. Once that is complete it will increase commercial revenues. After that they will expand on the south side and later to the other side. It will be done in phases.

This will bring a further financial burden to an airport that still hasn’t paid off what it spent on the initial construction…
They are working out solutions….

No regrets

He would give the same answer today as he gave some years back when he took over as head of the aviation regulator. Because, says Simon Chan, it’s not the position itself but the “challenge” to which you’re committed.
He has no regrets and plenty on his plate – most of it of no appeal to journalists in search of a scoop, he emphasises. “Even though people are probably more interested in the commercial and traffic routes issues, the key role of a civil aviation authority, wherever it is in the world, is to enhance safety and security,’’ he says.
The obvious question from a journalist seeking a story had to be: Are the airlines flying to and from Macau all safe? Chan says after more than ten years of operation there have been no major problems. However, he adds: “There might have been some occurrences or incidents”, without elaborating.
His job is a never ending task and it needs “a lot of work to maintain the status-quo,’’ he says.

Not plane sailing

Entrepreneur Michael Agopsowicz’s seaplanes project (see previous pages) has been presented to AACM but according to Simon Chan the plan is “still at a conceptual stage” and “there are a lot of factors to consider”.
“Basically when you are faced with a new project you have to look at two sides, one the commercial feasibility and the other the technical and legal issues,” Chan told Macau Business.
One of the main difficulties for the aviation regulator may be the fact that Macau does not have a water territory so a licensing system may not be feasible at this moment.
Also, according to the AACM president: “When a plane lands it needs clearance from both [Macau and Hong Kong] sides and we have three bridge crossings.’’ All these are factors that at this moment are still in the melting pot, Chan conlcudes.

by Paulo A. Azevedo