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Asia's airlines are positioned to compete, Tilton says

Email|Print| Text size + By Nicole C. Wong
Globe Staff / November 27, 2007

United Airlines' Chief Executive Glenn Tilton, one of the most outspoken advocates for U.S. airline consolidation, told 300 business leaders in Boston today that Asia's airports and airlines are better poised to cope with and compete in the global marketplace.

Tilton framed his prepared remarks at The Boston College Chief Executives' Club luncheon around the trip he took to Japan, Vietnam and China two weeks ago to visit business partners, government officials and airport authorities there. He said by 2010, more than one-third of the world's air traffic will be to, from or within Asia.

"There is a sense of possibility that the global economy can be shaped to serve Asia's interests -- and a clear understanding of the vital role aviation plays in creating that future," Tilton said.

"Work is well underway in China to relieve congestion and convert China into a global aviation leader by completing its ambitious $17.7 billion plan to modernize its aviation system, add 49 new airports and more than 600 new aircraft, along with 700 other airport expansion projects, by the year 2010," Tilton said. "And growth is not limited to Asia. In the Middle East, Dubai is building a new airport with the latest technology, best passenger comforts, and six runways -- all capable of landing the world's largest new passenger aircraft -- to serve as a new global 24/7 airport."

In contrast, he said, the U.S. has failed to modernize its aviation industry's infrastructure and regulatory environment to keep up with technological advances because special interests keep bickering over how to pay for and implement new systems. For example, America has been using the same air traffic control system since the 1950s -- "a huge network of ground-based control towers that are located largely where bonfires and electric beacons were places in the 1920s to guide air mail pilots," Tilton said. But if it switches to a satellite-based aviation system, he added, planes would be able to safely fly straighter, closer and better in bad weather, which would reduce congestion in the sky and reduce fuel burn by 12 percent.

"U.S. aviation once led the world in innovation, efficiency and competitiveness," Tilton said. " Today, we no longer lead."

Earlier this month, rumors swirled about United and Delta talking about merging -- a combination that would create the world's largest airline. Tilton declined to comment to reporters today on any contact his company has had with Delta about this, but he did highlight in his speech how industry consolidation is giving European and Asian airlines an advantage. He said the four-year-old merger between KLM and Air France has created the world's largest international carrier, based on revenue, and China Eastern Airlines is poised to become a world-class carrier after its September announcement about selling a 24 percent stake in its business to Singapore Airlines receives shareholder approval in January.

"Our systems are obviously different," Tilton added, "but China recognized the need to strengthen by combining resources."

Tilton says the U.S. needs to do the same to compete.

"In the U.S. today, we have a total of 150 certificated airlies -- including six majors, five low-cost carriers and nine regional carriers," Tilton said. "It was the goal of deregulation back in 1978 to create a market with much more choice and better pricing options for consumers. That ambition has more than been achieved. Washington's desire to keep the industry fragmented, driven by domestic market concerns, has led to a resistance to the normal order of free market activity."

Nicole C. Wong can be reached at nwong@globe.com.

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