As liberalisation continues to sweep across much of Asia, the ugly hand of protectionism has crept in over Indonesia, with the government there restricting foreign low-cost airlines from serving four key cities.

The Indonesian Directorate General of Air Communications (DGAC) revealed late in March that it would bar foreign low-cost carriers from launching new services to the capital Jakarta, as well as Denpasar (Bali), Medan and Surabaya. It admitted the move was designed to help state-owned Garuda Indonesia, which has been suffering as a result of new competition.

The DGAC says airlines from foreign countries are welcome to operate to other Indonesian cities, however, and says low-cost carriers with existing operations to the four major cities will be allowed to retain their services.

The move came as a surprise to many, as Indonesia has been one of the more open nations in Asia in terms of supporting liberalisation. Its decision has mainly affected new Singaporean carriers, such as Jetstar Asia, which wanted to launch services to Surabaya. There have also been accusations of tit-for-tat retaliation. AWAIR, a 49%-owned Indonesian-headquartered associate of Malaysia's AirAsia, angrily charged that the Singapore government had blocked it from serving the city state from Jakarta.

Protectionist moves are also being seen in other parts of Asia. Jetstar Asia, 49.9%-owned by Australia's Qantas Airways, says it has also been prevented from launching services to Shanghai in China. It has said Chinese authorities, despite opening up their main hubs to full-service airlines, are barring new low-cost carriers from flying to Beijing, Guangzhou and Shanghai. Like Indonesia, the Chinese government has indicated it is in support of new airlines serving secondary destinations, and it has started awarding landing rights to some foreign low-cost carriers.

Thai AirAsia, 49%-owned by Malaysia's AirAsia, recently announced plans to launch services between its Bangkok base and Xiamen, in a move that it says will make it the first foreign low-cost airline to serve mainland China. It will initially operate daily services using its Boeing 737-300s. Already operating on the route are full-service carriers Thai Airways International and Xiamen Airlines.

The city of Xiamen is on the south-east coast of China and is the second largest in Fujian province, which has a population of around 30 million people. Thai AirAsia says that with the new route announcement it is "the first low-fare, no-frills airline in Asia to gain entry into China".

Singapore's Valuair, meanwhile, which launched services last year using Airbus A320s in single-class configurations, is also planning for services to Xiamen, as well as to Chengdu. However, most industry observers see the protectionist moves as temporary, as low-cost airlines are still relatively new to Asia and they are only now starting to make their presence felt. Some governments are, in the meantime, urging their designated airlines to look beyond the capital cities until markets become more open.

For example, after the Indonesian restrictions were made public, Singapore's transport minister, Yeo Cheow Tong, said: "There are still other cities in Indonesia that are available. And we have urged [the new Singapore-based airlines] to take a look at these other cities. We have told them to cast their network as large as possible, not just focus on the key capital cities or the key cities in each country."


Source: Airline Business