“Seamless ASEAN Sky: Policymakers need to look beyond Obstacles” by Sanchita Basu Das

2018/49, 2 May 2018 

The ASEAN Leaders’ Vision Statement at the end of 32nd ASEAN Summit emphasized the importance of connectivity. It reiterated the governments’ commitment towards a Seamless ASEAN Sky to help airlines operate within ASEAN in an integrated fashion. The governments also promised to harmonize safety standards and increase air traffic management capacity.

 

The ASEAN Open Skies Policy (OSP), as proposed by member countries in 2007, was to help ASEAN-based airlines to operate freely in an enlarged air market space. The agreement was ratified by all in April 2016. Many ASEAN members also bi-laterally liberalized air travel among themselves. Singapore and Malaysia, for example, liberalized the third and fourth freedom rights in December 2008, ahead of their ASEAN schedules.

While liberalization in line with ASEAN commitments, is almost complete, ASEAN is still not a ‘single’ aviation market. This is because the seventh freedom, that allows ASEAN carriers to operate between two foreign hubs, is not yet covered in the agreement. Indonesia’s participation in the agreement is limited to only five airports. Formulating and harmonizing regulatory measures for seamless movement in ASEAN airspace will take some time.

In 2017, ASEAN adopted an Air Traffic Management Master Plan to facilitate movement of aircraft across the member countries. The aim was to build airspace capacity and reduce delays and operational costs for the airlines. All 10 countries have agreed to gradually remove ownership restrictions in air transport services, such as ground-handling, by allowing firms from one ASEAN country to set up offices in another. The countries have agreed to mutually recognize licensing requirements for flight crew and pilots, increasing the pool of available resources.    

However, policy convergence across ASEAN countries is difficult to achieve. This is because ASEAN countries are at different stages of development. Singapore and Myanmar differ greatly in their technical and safety operating standards. In addition, robust safety regulations has been an issue with ASEAN countries for a while. In 2007, EU banned all Indonesian carriers from flying to its member states, lifting the ban only in 2009. In 2015, the US Federal Aviation Administration downgraded Thailand’s safety rating to Category 2 on safety concerns, prohibiting its airlines from launching any new international services. This has implications for ASEAN carriers as they may not be able to enter new markets to cover costs or generate profit growth.

There are also issues with air traffic management capacity. The Malaysian Aviation Commission in 2017 flagged that seven of its airports were handling more traffic than their design capacities. It recommended significant capital expenditure for the required expansion. Similarly, many of the Indonesian airports face capacity constraints and safety issues on air and ground movement. There are also concerns over adequacy and quality of air traffic controllers.

In addition, national interest takes precedence for ASEAN countries over regional ones. Harmonizing policies is seen as impinging on national sovereignty. Policymakers withhold their liberalisation process in order to protect domestic Full Service Carriers (FSC) or air traffic services that are often state-owned and natural monopolies. Given all these issues, to expect an EU-style of integration, where the European Aviation Safety Agency oversees and monitors safety and air traffic operations across its 26 members, will not be easy for ASEAN.

Nonetheless, in the past decade, the ASEAN countries have benefitted from their piecemeal efforts under OSP and other bilateral deals. They have witnessed huge growth in the airline industry with Low Cost Carriers flourishing in the region along with the FSCs, intensifying competition. This has driven down prices of air tickets and made travel within the region much more accessible to its 640 million population.

This positive outcome show that complying with commitments for Seamless ASEAN Sky can be a win-win situation for all. An integrated ASEAN airspace will enhance growth in many economic sectors. But ASEAN policymakers need to look beyond existing obstacles and undertake reforms. A Seamless ASEAN Sky can then contribute to overall economic integration and strengthen infrastructure, institutional and people-to-people connectivity in the region.  

 

Dr Sanchita Basu Das is Lead Researcher for Economic Affairs at the ASEAN Studies Centre of ISEAS – Yusof Ishak Institute. 

 

The facts and views expressed are solely that of the author/authors and do not necessarily reflect that of ISEAS-Yusof Ishak Institute.  No part of this publication may be reproduced in any form without permission.