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ASEAN Air Community

The open skies agreement signed by the ASEAN (the Association of Southeast Asian Nations) countries last year has had a significant impact on the region, the harmonisation of its operations and development. The region has experienced many positive changes as a result of the open skies pact, with considerable increases seen in flights and airlines operating on certain routes. The Kuala Lumpur - Singapore route, for example, now has Malaysia Airlines, Air Asia, Silk Air, Tiger Airways, Singapore Airlines and JetStar adding services, which will enhance customer choice.

Dato’ Seri Bashir Ahmad, Managing Director and CEO of Malaysia Airports Holdings Berhad (MAHB) has been closely involved since 2003 in fostering the initiative to phase in liberalisation of freight and passenger services. Even though it has taken a great deal of discussion and planning before the deals were eventually signed last year, Dato’ Seri Bashir is convinced that the thorough and meticulous process of refining the details has been vital in ensuring that every ASEAN state agreed to the programme.

All ten members of ASEAN signed the open skies agreement last year. These countries include Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. Although there had been much discussion about the pact, it was still a very big step to take for the governments concerned. A well-established roadmap has been in place for some time and despite the fact that some of the governments may have had particular concerns along the way, it appears that they all agreed to the deal in the end.

The open skies agreement has resulted in the liberalisation of the industry in the region and a more competitive and expansive regulatory environment. It has also contributed towards greater harmonisation for the future of air travel in the Asia-Pacific region and will integrate the community of nations. The effect of this new era of liberalisation has been the considerable growth in passenger numbers, with Singapore’s Changi Airport, for instance, seeing record traffic in 2008, with a total of 37.7 million passengers. The most significant areas of growth, however, were Malaysia, Indonesia and the Philippines, with Malaysia, in particular also experiencing the early signs of an upturn in business. Dato’ Seri Bashir claims: “There has been an increase in passenger numbers, though it has not been that huge. The number of services is still rather limited, however, over time, frequency will improve. Passengers have certainly benefited. They have far more choice and fares are lower.”

The huge significance of the deals that were signed cannot be underestimated, as they have encompassed the framework on facilitation of inter-state transport and the multilateral agreements on full liberalisation of air freight services and air services. In previous years, the policies that were put in place to protect national air carriers from competition with foreign carriers had meant that air services between ASEAN states were very restricted. This was clearly evident with the route between Singapore and Kuala Lumpur, for example. However since December last year this key route and many others became fully deregulated, allowing the airlines from ASEAN member states to fly across each other’s territory, make fuelling stops, and pick up passengers at one location before completing the journey to their final destination.

The open skies agreement has also enabled regional carriers to make as many flights between the region’s capital cities as possible. There is no doubt that this will foster the growth of tourism in the region, which in turn will require future investment in the air travel industry. The agreement will also benefit trade and commercial aims of the region.

As liberalisation of cargo and passenger traffic was only finalised in December last year, however, there is still a great deal of progress to make as yet, but the early signs are that the ASEAN open skies programme will bring enormous benefits to the member nations and that the deal will be vindicated. Dato’ Seri Bashir believes that time will show what impact there is from the liberalisation of the industry in the ASEAN region, but he cautions that there is a need to progress steadily and judiciously. Nevertheless, he is convinced that the region will enjoy positive changes and advantages as a result of the new deregulated environment. It is likely that even more liberalisation lies ahead, but the governments of the ASEAN nations are taking it steadily. There is both caution and optimism in the air.

Development Opportunities

The well-established roadmap has made the transition easy and implementation of the new legislative regime has proved to be reasonably simple. The way in which the region’s air travel industry operates has changed significantly, bringing with it new opportunities to develop new routes and new operations. Undoubtedly, the liberalisation has had an effect on airport development and expansion in the ASEAN region and there are exciting plans for growth in Malaysia. Passenger numbers will increase and inevitably the regions airports will need to cope with the extra capacity.

The new open skies arrangement has meant that the development of regional hub airports is even more important. Malaysia, Thailand and Singapore and other ASEAN members, have been planning and investing in airport infrastructure for some years now, but the opportunity to develop has never been more critical or exciting.

KL International Airport (KLIA) is one of Southeast Asia’s major aviation hub. It began its operations in June 1998, and today, KLIA is capable of handling 35 million passengers and 1.2 million tonnes of cargo a year in its current phase. KLIA has matured into a model airport and is fast emerging as the gateway of choice in the region.

New routes have also recently been opened to Kota Kinabalu, Penang, Kuching and Langkawi to attract airlines to invest in other Regional Airports in Malaysia. Investment will continue to be a priority for many airports under MAHB’s control. The terminal at Lahad Datu Airport has recently been improved to help increase air travel to the Sabah region (Malaysian Borneo). Today, Kota Kinabalu International Airport is the second busiest airport in Malaysia after KL International Airport (KLIA).

Penang International Airport, previously known as Bayan Lepas International Airport, is situated 16 km south of Georgetown, the capital city of Penang. With the combined attractions of tourism and business, Penang International Airport is consistently being upgraded to cater to the increasing traffic demand making it the third busiest airport in Malaysia (2007).

Kuching International Airport, the main gateway into Sarawak, has a newly renovated terminal complex, capable of handling 5 million passengers annually. Kuching is poised for greater growth as it continues to gain international recognition as a choice destination.

Langkawi International Airport is situated on the duty-free island of Langkawi in Kedah. The airport has been refurbished to cater to the increasing demand of the tourism and business industry. The island is also one of the most beautiful and magical tropical destinations in Southeast Asia, featuring beaches that are fringed with palm trees, duty-free shopping opportunities, as well as places of interest that revolve around the myths and legends of Langkawi.

Potential in the Region

Dato’ Seri Bashir is very optimistic about the future because only a small proportion of the population of the ASEAN region actually travel by air. Inevitably, this means that there is a great deal of potential for growth, particularly when you consider that air travel is probably the most convenient form of transport for the population given the fact that all the countries are separated by water.

The ASEAN region offers a largely untapped market in relation to travel between the member nation’s countries and so hopes are high and the future growth potential is strong, giving rise to understandable optimism amongst the backer’s of the open skies deal.

Last year, the open skies deal between the US and Vietnam drew attention to investors that there were promising opportunities in the Vietnamese market and other exciting opportunities lay ahead.

There is no doubt that the deal will be the start of more deregulation and the opening up of even more routes to take advantage of traffic outside the ASEAN region. Even though the global economy has suffered a recent setback and growth may be slower than originally anticipated, there is real optimism in the region that the potential for increased traffic can be met with new routes and infrastructure development. The open skies initiative is a positive step towards a more liberalised and possibly more dynamic air transport industry. Dato’ Seri Bashir is certainly optimistic about the future and quite probably, with good reason.

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