Hopes are high that the Association of Southeast Asian Nations (ASEAN) will be able to take further steps towards a single aviation market over the next few years.

That was the consensus among many during a panel discussion on the progress of the ASEAN open skies at the ASEAN Aviation Summit, held in conjunction with the recent Langkawi International Maritime and Aerospace exhibition in Malaysia.

Professor Alan Tan of the National University of Singapore explained that under the current framework, carriers will from 1 January 2016, be granted unlimited third and fourth-freedom rights between ASEAN capital cities, with the exception of Manila. Thereafter, rights will be opened to secondary cities. Laos and Indonesia, which are holding out, are expected to fall in line.

Wolfgang Sander-Fischer, air transport expert for the ASEAN Air Transport Integration Project labeled the situation as “half-open skies”, which will not deliver the benefits of a fully open market, such as in the European Union. Nevertheless, he applauded it as a good starting point that could lead to further developments.

“Achieving the first step of open skies is a wonderful thing, but it is only the first step,” he said.

Tan made a strong call for full ‘seventh-freedom’ rights to be part of later agreements. Such rights will allow carriers to establish bases outside of their home nation without requiring a 51% local ownership.

“That currently is not on the table and I would like to see it on the table after 2015, maybe in part II, if you like,” he added.

AirAsia chief executive Aireen Omar said that in such a scenario, the budget carrier could restructure its joint ventures across the region, with each being able to play to its “comparative advantage”.

Less enthusiastic about future steps was Liew Chee Khuan, vice-president of long term planning and network at Malaysia Airlines.

“How open is open enough?” he countered.

“If most of the population base is within the capital cities then you have achieved a specific part of the objectives."

Tan however warned that ASEAN needs to stick together on the liberalization agenda, or the region will “lose the game to external parties”.

He pointed to the ASEAN-China bilateral agreement as a case in point. That arrangement allows Chinese carriers unlimited capacity between all cities in China and Southeast Asia, potentially opening up more markets for them, than for carriers based within ASEAN.

Looking further ahead, most panel members called for a greater harmonization of rules and regulations to truly allow a single market to develop.

“Many more measures will have to be taken to safeguard a high level of safety, high level of security, environmental protection, competition rules consumer protection etc,” said Sander-Fischer. “Only once that is all in place, can we call this a single aviation market.”

Omar agreed, pointing out that measures such as mutual recognition of engineering licenses will allow carriers to better allocate labour where it is needed, rather than getting caught in licensing issues across different countries.

She also called for a harmonization in air traffic management and airways charges for carriers to operate more efficiently, allowing them to then grow connectivity within the region.

Winners & Losers

Most panelists agreed that, within the current framework, carriers that already have a strong hub operation, and the airports that support them, will benefit most from the moves towards a single market.

“The winners will ultimately be the carriers in the centre of the traffic flow, not at the end point. China is an end point, India is an end point from an Asean perspective,” said Liew. “Those airports in the centre that command the crossroads of trade and travel, the airline that serves that is going to win.”

Tan said the regions' major hubs – Singapore Changi, Bangkok Suvarnabhumi and Kuala Lumpur International - will be the biggest beneficiaries. Should Indonesia properly address the infrastructure constraints at Jakarta's Soekarno-Hatta International airport, it will also stand to gain a large amount of traffic.

“Remember they have half the Asean population so they could give the others a run for their money,” he said.

To a large extent, Tan said this would rely on Garuda Indonesia and Lion Air “stepping up their game” to offer more connectivity throughout southeast Asia.

Sander-Fischer added that secondary airports with international status will also win once the secondary routes are liberalised.

“The losers on the airport side are those that can’t grow, where there is no secondary airport that can’t be built easily,” he added.

Omar said liberalisation is expected to spur a wave of new carriers especially in the low-cost space, but that AirAsia will not be threatened as long as is is "able to build the traffic volume".

In closing, industry stalwart Professor Rigas Doganis summed up the situation succinctly: “We’re not going to have open skies - we’re going to have cloudy skies, but the clouds are slowly clearing.”

Source: Cirium Dashboard