ASEAN Aviation: A Single Sky Over the Region

The ASEAN market with a population of around 600 million people remains one of the brightest growth sectors for global aviation. There are two contributing factors: a quickly growing tourism industry driven by intra-ASEAN travel as the region’s populace become increasingly wealthy; and robust international business travel driven by the region’s economic fundamentals.

Yet, the development of the sector is being stymied by the fragmented nature of ASEAN’s aviation regulatory framework, which is generally protectionist in nature. This has in turn created inefficiencies for airlines, raising operating costs, as well as created blocked linkages that prevent airlines from operating throughout the region.

“The question is, ‘How do we maximise this market of 600 million?’” said Tony Fernandes, AirAsia Bhd’s Group Chief Executive Officer and ASEAN Business Club council member. “How do we take away some of the inefficiencies and some of the nationalism that are prevalent in our industry?”

Fernandes, who chaired of the roundtable session, also warned that the absence of a region-wide aviation agreement would be to the advantage of carriers from larger, overseas countries.

Although the development of the ASEAN Economic Community in 2015 is supposed to overcome these issues through the creation of a single aviation market for ASEAN by 2015, the market will be moot if certain existing barriers are not immediately addressed.

The findings of a research paper by Dr Alan Tan of the National University of Singapore was presented at the session and identified the following obstacles barriers to ASEAN aviation in general:

  1. Infrastructure congestion including airports and runways
  2. Looming shortage of pilots, engineers and maintenance personnel
  3. Lack of a central aviation authority for the region
  4. Non-unanimous participation in aviation agreements by key markets
  5. Ownership and control barriers

Tan said that the growth of low-cost carrier travel in ASEAN has seen an explosion in the demand for travel, which shows no signs of slowing. Indeed, the 1,000 new aircraft orders by Lion Air and AirAsia will exert massive pressure on airport infrastructure and personnel over the next 10 years.

Meanwhile, the absence of a central aviation authority to coordinate ASEAN skies creates overlaps and inefficiencies as each individual ASEAN country continues to impose their own regulatory requirements.

“We’re not talking about uniform standards but harmonised standards that are close enough in spirit and intent such that cross-border recognition and enforcement are possible,” Tan said.

But perhaps the biggest concern, he added, was Indonesia’s seeming reluctance to participate in the open-market project: “The country staying out [of these agreements] is Indonesia because it wants to protect its national carriers…With Indonesia having half the population in ASEAN, its omission from these agreements significantly impairs the ASEAN single aviation market.”

Emirsyah Satar, the CEO of Garuda and chair of the Indonesia National Air Carriers Association (INACA), disagreed with Tan, saying the issue for Indonesia was not that it did not want to open its market, but it wants to do so in an “orderly manner”.

As home to over half the population in ASEAN, critics of the single-aviation market have argued that the opening of the market will be to the advantage of all other ASEAN nations and none to Indonesia.

“We all have to look at the market itself and the so-called benefits which each of the parties will enjoy [if it is liberalised],” Emirsyah said. “If this cannot be answered, we will tend to have issues.” However, he conceded that it was a “matter of time” before the aviation market becomes borderless, regardless of the demands of the Indonesian carriers.

By the end of the forum, the roundtable session identified several key takeaways to be reported back to the ASEAN aviation authority and the governments of each ASEAN member nation. Nonetheless, it is plainly evident that more dialogue and engagement will be required before a single-aviation market is possible.

Sector Champion

Tony Fernandes,
Group CEO, AirAsia

Emirsyah Satar,
President Director, Garuda Indonesia

Research Partner
National University of Singapore (NUS)

Dr Alan Tan, Director, NYU@NUS Dual Degree Program, National University of Singapore

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