Blue skies ahead for Asean airlines with more flight options, transfers

Asean’s push to loosen protectionist chains that prevent the 10-nation bloc from operating as a single, wide open sky, gained good momentum when the region’s transport ministers and officials met in Singapore recently.

Four air deals, inked at the end of the two-day meeting on Oct 13, were especially significant.

The first was the adoption of the Asean Air Traffic Management Master Plan to facilitate and manage aircraft movement across the region in a more integrated manner. The aim is to enhance airspace capacity and safety, cut flight delays and lower operational costs for airlines.

Member states also agreed to allow domestic code-share rights between points within the territory of any Asean member state. This means a Singapore carrier can partner an Indonesian airline to offer Singapore travelers a single booking for a Singapore-Jakarta flight and, from there, to another Indonesian destination operated by the Indonesian carrier. Currently, code-share services are limited to international flights such as Singapore-Jakarta ones.

This paves the way for Asean airlines to expand their international networks without deploying their own aircraft. Travelers, meanwhile, can expect more flight options and convenient transfers from one airline to another.

Members have also decided to progressively ease restrictions on trade in air transport ancillary services within Asean. This includes, for example, relaxing ownership restrictions for a company from one Asean state to set up a firm in another Asean country to offer ground-handling services at airports.

On manpower issues, all 10 member countries will mutually recognize licensing requirements for flight crew, including pilots. This will allow licenses to be easily validated or converted, making it easier for flight crew to move from one Asean carrier to another.

The signings are significant. They testify to a strong will for collaboration and cooperation.

But as history has shown, and given the highly fragmented and diverse region, with countries and their airlines at different stages of development, execution will be challenging.

To be fair, Asean has done well in the last decade in its push for a single integrated aviation market.

From tight control over who can fly where and how often, airlines based in Asean countries can now operate freely within the region, with the full ratification of the region’s open skies deal last year.

The progressive liberalization over the years, including the easing of visa requirements, has allowed for more flights, including budget services, and convenient inter-Asean journeys. Travelers have gained with lower fares and more places to explore. Today, a Singaporean can travel to any Asean country without a visa and the same holds for any Asean national entering the Republic.

Outstanding Issues

Notwithstanding these achievements, Asean has a long way to go before borders truly melt away. Theoretically, open skies should mean no restrictions for airlines, as long as they can secure landing and take-off slots for their planes, and arrange for ground services at airports they want to fly to. In reality, though, not all Asean member states have opened all their airports to competition. Indonesia allows free access for passenger flights to just five cities – Jakarta, Surabaya, Medan, Denpasar and Makassar.

And while open skies should include what is termed as fifth freedom rights — the right for an airline from one country to fly to an airport in another country and from there to a third country — Asean has not completely adopted this. Fifth freedom rights exist, but only within the region, and not beyond.

So Singapore Airlines could, if it wanted to, operate a Singapore-Kuala Lumpur-Bangkok service without the need for regulatory approval, but not from Singapore to Kuala Lumpur and from there to a third country outside Asean.

When it comes to airline ownership, foreigners are not allowed to hold a majority stake. So a Singapore carrier, for example, must be majority-owned by a Singaporean or Singapore firm. It is, therefore, noteworthy that Asean has now decided to ease some of the restrictions, starting with ancillary services such as ground-handling work.

Apart from flight and equity barriers, there are also air traffic management issues to tackle, in particular Indonesia’s request over the last two years for Singapore to return part of Indonesia’s air space that the Republic currently manages.

Since 1946, Singapore has overseen parts of Indonesian air space in Riau, including the resort islands of Batam and Bintan. The responsibility was handed to the Republic by the United Nations’ International Civil Aviation Organization (ICAO), which regulates global commercial aviation. Unless this and other issues are sorted out, Asean’s single aviation market vision will remain elusive.

While Asean has never publicly said what a single market would entail, Europe offers the best example of such a system. There, air traffic is centrally managed by Eurocontrol – an inter-governmental organization with over 40 member states and about 2,000 personnel spread over four European countries.

Airlines fly freely within and beyond the zone, and operate as businesses instead of flag carriers. This allows them to merge between borders, for example, and have better access to funding.

Within what is known as the Schengen Area, nationals from 26 European countries including Germany and Norway, do not need to show their passports when travelling between these countries.

There are many reasons why such a system would benefit Asean travelers and economies, and in particular, the tourism and other related sectors. There are also good reasons why it is unlikely to ever happen in this part of the world.

For one, many, if not all, governments – whether they would admit to it or not – are protective of their national carriers, which fly their state flags. The natural tendency, as far as possible, is to shield them from extreme competition, especially against stronger neighboring airlines.

There are many ways this can and is being done, even with open skies.

The best landing and take-off slots, for example, can be reserved for national carriers, while foreign airlines are told they can’t mount additional services because the runways, terminals and air traffic controllers cannot cope with the extra flights.

Asean countries are also unlikely to loosen airline ownership strings, given the typically symbiotic relationship between the state and its national carriers. It is also common for states to want to wield some influence over their airlines, which is easier done if the airlines stay within the control of nationals.

For security reasons, given the heightened terrorist threat in the last few years, the chances of a single Asean visa are also slim, if not impossible.

Such barriers, though, should not derail Asean’s ambitions for further integration and cooperation. In air traffic management, more can be done to enhance communication so that flights can be better planned to cut travel time and ensure smooth handover from one air traffic control center to another.

Joint training, as well as sharing of technical and operational expertise, must be encouraged so that less-developed member states can beef up their facilities and resources. This, in turn, would allow Asean to handle more flights and compete more effectively against other regions for air traffic.

There is no doubt that Asean understands the need for air liberalization. The challenge is for political leaders and policymakers to look beyond the interests of their flag carriers and aviation firms, and focus on what is best for the country’s overall economy.