Promising to dramatically open up the region’s airways, the planned Asean Single Aviation Market (ASAM) will bring with it fierce competition and price wars, experts said yesterday during a seminar on the subject at the Phnom Penh Hotel.
The seminar brought representatives from the majority of the 10 Asean member states together to discuss ASAM – also referred to as the open skies policy – and learn from the experiences of the European Union’s integrated single aviation market that took effect in the mid-1990s.
Under an umbrella treaty, an open skies agreement will, among other things, allow Asean airline operators to run a greater amount of flights, either directly or with a stopover, between all regional cities.
The deadline for the agreement is December 31 next year, in line with the launch of the Asean Economic Community in 2015 (AEC). The AEC is supposed to bring member states together by facilitating a freer flow of skilled labour, goods and services; though few believe that 2015 is a realistic deadline.
Stephan Baertges, operational manager for international technical cooperation at the European Aviation Safety Agency, said after launching the European single aviation market, competition intensified, shaking up the market as companies were forced to adjust to new conditions.
“It goes without saying that there was a major restructure within Europe and it had quite a significant impact on the established players, but what was important was the consideration of the future economic benefits of liberalisation,” he said.
He also mentioned that congestion became a problem as the skies filled with airlines.
Nine out of the 10 Asean member states have signed on for the agreement. Indonesia, however, which accounts for about 40 per cent of Asean’s total population of 604 million people, is holding out.
“It’s a little like France, Germany and the UK not participating in the EU agreement,” said Alan Khee-Jin Tan, professor of law at the National University of Singapore, who helped design the first consultancy report on ASAM back in 2007, when the idea was floated.
“They [Indonesia] are being cautious over the effect ASAM could have on their national carrier Garuda Airlines,” Tan said.
“There will certainly be a lot more competition for all member states from foreign airlines within Asean. There will be winners and losers,” he said, adding that without allowing airlines to base aircraft in offshore locations, the aviation single market falls short of being a truly liberal agreement.
Tan predicts Air Asia, with its Thai Air Asia and Indonesia Air Asia arms, is poised to take the region by storm and spark a competitive pricing war with other low-priced carriers such as Lion Air.
Cambodia Angkor Air, the country’s only functioning commercial airline, is well placed to survive the deluge and remain competitive at home, according to Tan.
“They have Vietnam airlines, which owns a 49 per cent stake in the company and presumably has good management experience to cope with that,” he said.
Keo Sivorn, director general at the State Secretariat for Civil Aviation, threw his support behind the agreement and shrugged off heightened competition concerns.
He said the Asean proposal would lead to increased tourism for the Kingdom and potentially give rise to another locally-owned carrier.
“Cambodia’s aviation sector is okay, but it still has a way to go,” he said. “Before we even consider the effect increased competition will have on our small aviation industry, Cambodia needs to first increase its civil aviation skilled workforce and infrastructure to prepare for ASAM.”
Source: Phnom Penh Post | March 7, 2014 | Eddie Morton
Cambodian Business Corner 