Asean slow to open its skies to more airlines
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Asean has come a long way in break?ing down the barriers that prevent airlines from flying freely within the region, with travellers the key beneficiaries.
Take the Singapore-Kuala Lumpur market, which just six years ago was a duopoly controlled by Singapore Airlines (SIA) and Malaysia Airlines.
Since 2008, when liberalisation threw open the doors to budget carriers and many more flights, return fares for the 45-minute sector have tumbled from about S$400 to as low as under S$100.
From Singapore-Bangkok to Kuala Lumpur-Jakarta, many other air links have opened up to more carriers and competition.
The idea of Asean open skies has been talked about for a long time but it is only in the last decade that the pace has picked up.
A major breakthrough came recently when Indonesia, home to almost 40 per cent of the region’s population of more than 600 million, agreed to allow unlimited flights by airlines from other Asean countries to Jakarta.
Given Southeast Asia’s great diversity and political structure, Asean’s progress so far is commendable, but the wheels must turn faster, industry experts said.
It is not practical to expect Asean to operate the way the European Union (EU) does, said Andrew Herdman, director-general of the Association of Asia Pacific Airlines.
“It must be remembered that Asean is structured in a way that does not override the national sovereignty of its member states.
“Therefore, any agreements reached within Asean are subject to ratification by its individual member states,” he said.
“Given the deeply embedded political and institutional relationships involved, the process of change inevitably takes time,” he said.
It took the EU more than two decades to develop the single aviation market, which is still a work in progress, he said.
To be truly a single sky, there are other milestones Asean has to cross, like allowing an airline from Country A to operate domestic flights in Country B, as well as flying to a point in Country B and, from there, onwards to another destination outside Asean.
A single-sky concept also means an integrated air traffic management sys?tem that will allow the region to better handle a growing number of flights and avoid gridlock in the air.
Asean must move faster, especially if one considers the threats from improving airlines from China and India that have a huge market base to draw upon, said aviation law academic Alan Tan of the National University of Singapore.
To compete effectively, SIA, Thai Airways and other Asean carriers must be able to expand their market base with what the industry calls “seventh freedom” air rights, he said.
Such an arrangement, which exists within the European Union, would allow a Singapore carrier, for example, to operate services between Malaysia and Indonesia.
Without Asean functioning as a single market, its carriers are disadvantaged, said Professor Tan, citing a 2010 agreement between the 10-member group and China.
The pact effectively allows Chinese carriers to connect any point in China to any point in Asean states that accept this agreement.
But an Asean airline can connect only from points in its own home with points in China. So SIA, for example, has unlimited penetration into China, but only from Singapore.
“This is an imbalance, but is created simply because Asean countries won’t give each other the seventh freedom to fly to China.”
For now, Asean’s goal is to allow carriers from member states to fly freely, but only within the region and excluding “seventh freedom” air rights, by the end of next year.
There is little doubt this will be achieved. But beyond that, there is little that has been agreed on and this is where it will be a challenge to push further.
The huge disparity in size and bank balance between airlines in the region and the concerns governments may have that their national carriers will not be able to compete effectively in a truly open market are major stumbling blocks.
On the flip side, there is growing awareness that liberalisation stimulates economies, in particular, the tourism industry, and countries that do not embrace this risk losing out.
As Asean skies continue to liberalise and airlines can fly freely to destinations that may have been more difficult to access, there could be some impact on transit hubs like Changi Airport, UOB Kay Hian aviation analyst K Ajith said.
To stay ahead, Changi must continue to expand its network and connections and ensure its charges and rates for airlines, among the highest in Southeast Asia, are competitive.
“This will become more important as rival hubs like Kuala Lumpur International Airport continue to expand and narrow the gap in terms of connectivity and service offerings,” he said.
In the end, open skies will benefit airlines and airports quick to seize the opportunities that come with liberalisation. For the traveller, though, it is a sure win.
