Level Playing Field Needed For Asean Open Skies To Succeed

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The new Asean open skies policy announced by transport minister Loke Siew Fook last month is broadly positive for regional connectivity.
However, its benefits will likely vary depending on how liberalised the air services agreement becomes after the open skies policy is implemented.
Undoubtedly, each country in the regional grouping will give priority to protection of its national carriers (first-tier) before considering second- or third-tier airlines.
The size and operational capacity of the airlines in each country are also key factors. Some member countries have more than two airlines, while Brunei and Myanmar have only one, and Timor-Leste has none.
Population size, which determines the market size for air travel, is another critical factor that requires serious consideration.
Fifth air freedom and how does it work
The initiative, known as the fifth air freedom right, will allow airlines to stop in a second country, drop off passengers, and pick up new passengers for a third country, as long as the flight begins or ends in the airline’s home country.
For this to be implemented, bilateral or multilateral agreements between countries are required. Myanmar and Indonesia’s signing of the protocol will be crucial for full implementation across Asean.
With the fifth freedom right in place, Asean airlines can link multiple destinations within Asean countries in a single itinerary without returning to their country of origin or home base.
This right, based on international protocols in airline operations agreements, enables more efficient route planning.
As a result, airlines will stand a better chance of reducing operational costs, potentially passing savings on to passengers through lower fares, thereby increasing Asean’s appeal as a travel region and cargo trade hub.
Smaller airlines may also find opportunities to expand by exploring underserved regional markets or operating in smaller or second-tier airports.
For instance, Sarawak’s forthcoming takeover of MASwings, with the objective of transforming it into a regional airline, aligns with this framework and regulatory initiative.
The Sarawak airline could become Malaysia’s fourth regional airline after Malaysia Airlines, AirAsia, and Batik Air. It could target secondary cities such as Kuching or Kota Kinabalu as mini hubs to capitalise on niche demand.
With the new open sky policy, the new airline could explore routes such as Kuching-Singapore-Jakarta, Kuching-Brunei-Manila, or Kuching-Nusantara-Davao, for example.
However, for this proposal to take effect, Malaysia must establish bilateral or multilateral air agreements with the countries involved, and also reciprocate by allowing airlines from those countries to operate along the same routes.
Big benefits for major carriers
Allowing the fifth freedom right to take effect comes with its challenges and limitations. Not all Asean countries have well-developed airlines, with some being larger and more established than others.
Major carriers such as Singapore Airlines and Thai Airways, with their extensive fleets and networks, are better positioned to benefit from the open sky policy.
These carriers will not sit idle while other airlines attempt to penetrate and chip away at their markets. Instead, they are likely to integrate the new flexibility into their hub-and-spoke systems, enhancing their competitiveness with new fare packages, promotions, and marketing initiatives.
For example, SIA could offer new services combining two sectors into one, such as: Singapore-Bangkok-Hanoi, Singapore-Kuala Lumpur-Yangon, and Singapore-Kota Kinabalu-Manila, to name a few.
Such dominance by larger airlines poses significant challenges for smaller carriers. The open sky policy may lead to more competition among airlines, regardless of size.
Smaller or budget airlines may struggle to capitalise on the new freedoms due to their limited fleet size or financial resources needed for multi-leg regional operations.
Another consideration is the nomination of airlines in bilateral or multilateral air agreements between countries.
For example, in the past, Malaysia Airlines, as a government-owned entity, was typically nominated by Malaysia in air services agreements.
Similarly, KLIA was often prioritised as the main nominated airport over others in Penang, Kota Kinabalu, Kuching, and Johor Bahru. Such an arrangement could disadvantage other Malaysian airlines and regional airports.
While this initiative represents a step forward in enhancing regional aviation connectivity and economic integration, a truly level playing field is essential within each Asean country.
Though all airlines may benefit to some extent, larger and more established carriers with extensive networks and resources will likely gain the most.
Smaller airlines could still capitalise on niche opportunities if they can strategically expand and secure resources.
The success of this initiative will depend on establishing a balanced open sky policy and how these rights are negotiated and implemented across Asean nations. - FMT
The author can be reached at: [email protected]
The views expressed are those of the writer and do not necessarily reflect those of MMKtT.

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