Competition Set to Take Off in ASEAN as Open Skies Policy Looms

February 11, 2014 Posted by ASEAN Briefing Reading Time: 4 minutes

SINGAPORE – As the biggest airshow in the Asia-Pacific region kicks off this week in Singapore, progress towards implementing an ASEAN-wide open skies regime by 2015 appears to be slow but steady.

During his opening address at the Singapore Airshow Aviation Leadership Summit on Monday, Singapore’s Transport Minister Lui Tuck Yew expressed optimism that the ASEAN bloc would successfully liberalize some elements of its air services under a single and unified air transport market by 2015.

A component of ASEAN’s 2015 regional economic integration, the Single Aviation Market (ASEAN-SAM or Open Skies Policy) will increase regional and domestic connectivity, integrate production networks and enhance regional trade by allowing airlines from ASEAN member states to fly freely throughout the region via the liberalization of air services under a single, unified air transport market.

“We don’t know whether a full open skies will be achieved because that’s in 2015. But certainly what we have today is much better than what we had five years ago. Obviously, a lot still needs to be done before (an open skies regime) fully materializes. We are all realistic. We know some of the constraints and difficulties that some countries may be facing,” Lui Tuck Yew said.

Despite Lui Tuck’s optimism, the ASEAN-SAM remains incomplete due to concerns from some member states over the fierce intra-ASEAN competition such an agreement would engender. Several ASEAN governments have already ratified the first phase of the ASEAN-SAM, which entails opening up capital city routes to all ASEAN-based airlines, but most are hesitant to endorse the second phase, which entails widening this to secondary cities.

Namely, key members of ASEAN, including Indonesia and the Philippines, have voiced opposition to some of the proposed components of the ASEAN-SAM agreement – namely relaxations of the third, fourth and fifth freedoms of the air.

These freedoms entail, respectively, the right to fly from an airline’s home country to a foreign country and from a foreign country to an airline’s home country, and the right to fly between two foreign countries during flights originating or ending in an airline’s home country. Seventh freedom operations – the right to fly between two foreign countries while not offering flights to an airline’s home country – and the right to cabotage – to connect two domestic points in a foreign country – have not yet been addressed or considered by ASEAN despite the inclusion of these freedoms in most Western open skies agreements.

Currently, two existing multilateral agreements – the multilateral agreement on air services (MAAS) and multilateral agreement for the full liberalization of passenger air services (MAFLPAS) – contain protocols that would liberalize market restrictions among ASEAN cities. Indonesia, Cambodia and Laos currently remain opposed to several protocols within these agreements, however, due to concerns that competing airlines from Singapore, Malaysia and Thailand would put local carriers out of business.

In an effort to circumvent market restrictions, however, several carriers have begun establishing overseas subsidiaries with local owners to reach other ASEAN locations.

Despite ASEAN’s concerns, India and China have sought to develop better air connectivity with ASEAN in recent years – evident through the establishment of the 2010 ASEAN-China Air Transportation Agreement and India’s offering of eighteen designated cities as possible extensions to the ASEAN-SAM agreement.

At the Singapore Air Show this week, ASEAN and the European Union will also seek to strengthen their aviation ties through a jointly organized EU-ASEAN Aviation Summit that will occur on the sidelines of the Show.

“With a combined population of more than 1.1 billion, ASEAN and the EU have a huge potential to strengthen cooperation in the aviation sector and to generate substantial benefits for people on both sides. So, there’s much to gain from closer cooperation. I am confident that the summit will mark the beginning of a new era in EU-ASEAN aviation relations,” EU Commission Vice-President Siim Kallas said in his opening statement.

The Singapore Air Show is expected to attract nearly US$25 billion in deals, with early highlights including a GE Capital contract with Myanmar’s national carrier to lease 10 Boeing aircraft in what has been described by U.S. Ambassador to Myanmar Derek Mitchell as the “largest commercial sale” by a U.S. company to Myanmar in decades. Delivery of the planes is expected to begin in June 2015, and comes alongside Myanmar’s ascension to ASEAN chairmanship.

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