ASEAN Aviation: Ready for Take-off

By Chayut Setboonsarng

ASEAN Aviation: Ready for Take-off

In the list of top ten airlines in the world, measured by international passengers flown, only one ASEAN carrier, Singapore airways, makes the list as the seventh busiest airline.1 The remainder of the list is populated with American and European major full service airliners with the exception of Cathay Pacific and the low-cost carrier, RyanAir.

A critical factor for the success of American and European airlines is the notion of economies of scale. Major airlines are able to serve a large market due to economic union and multilateral cooperation. The privatization of the aviation industry, compounded with the Single Sky for Europe 2 initiative and the United States domestic market have enabled airlines to grow, achieve scale, and transfer their gains to the consumer.3

It is factual that countries with open sky agreements are the base of the highest-performing airlines. These agreements allow them to serve a larger market at lower costs.4 Success in commercial aviation is partially due operational experience, acute business practices, and the quality of service. ASEAN’s major carriers, Thai Airways International, Malaysian Airlines, Garuda Indonesia, and Philippine Airlines, have consistently won awards for in-flight service and maintained the highest international standards in safety. However, they are not as globally competitive as their western counterparts. The reason for this is that there is a fundamental difference between the ASEANand European aviation industries. Firstly, Europe and America have a unified regional standard in flight control, safety policy, and civil aviation authority that operate in bodies such as the Federal Aviation Administration and European Aviation Safety Agency. In most industries, including aviation, harmonized standards simplify day-to-day operations and lower transaction costs. Currently, ASEAN is working towards establishing an ASEAN aviation authority and implementing regional standards.

Another crucial difference lies in the ownership structure of ASEAN airlines. ASEAN aviation policy still follows the traditional flag carrier model. Governments give special regulatory treatment and airport privileges to their flag carriers. The government or holding company owns the majority of these airlines. WTO and ASEAN standards would consider these special privileges as protectionist in nature since they do not follow the practice of normal treatment. While national carriers may have an advantage over competition at home, the cost does not only befall the taxpayers, but it will cultivate an uncompetitive industry and lead to higher prices for passengers. However, the rationale for government policy is not groundless. Championing flag carriers is linked to national security and national connectivity.5 Governments sponsor their national carriers so airlines can service uneconomical short-haul flights between urban centres and the country’s hinterlands. 6Theoretically, a private airline, only interested in profit maximization, would only fly popular routes and not service flights outside populated areas making it prohibitively expensive for citizens to travel through the country. By giving special treatment to flag carriers, the government is essentially subsidizing domestic routes and providing a public service that the private sector would normally not address.

To date, this public policy has largely served out its purpose and its utility has expired. Aerospace technology has significantly advanced in the last 50 years, driving down the cost of flying. Furthermore, physical infrastructure and the availability of public transportation also grew. To this end, national connectivity no longer has to rely on national carriers. ASEAN leaders recognized that public policy must evolve in keeping with the technological and developmental realities and in endorsed the ASEAN Single Aviation Market (ASAM) in 2009. 7ASAM will foster a competitive aviation industry, which will propel ASEAN airlines into the global market.

Rapid economic growth, urbanisation, and swelling middle class attribute to the increasing demand for air travel in ASEAN. Currently there are 75 airlines operating8 in the region, which will benefit from a unified policy that expand markets. Open skies in ASEAN will yield a host of opportunities by removing obstacles to growth such as restrictive airspace and route constraints. Indeed, momentum already exists for growth as evidenced by LionAir’s investment in 230 new planes and AirAsia’s recent order of 200 planes engines, which was the single largest deal in General Electric aviation history.

Giving scale to ASEAN’s airlines will require more than changes in airspace regulation. Reliable and comfortable cross-border travel must entail improvements in infrastructure such as airport efficiency9, and convenient transit between the city centres and airports. Infrastructure investment will add to the ease and desire of doing business in ASEAN, which will compound pre-existing investor interest.

Furthermore, these recommendations will also impact the service sector due to the positive correlation between tourism and air travel. Remember that a visit to foreign country can begin abroad when visitors meet the crew and enter the cabins of ASEAN airlines. As the first point of contact, flag carriers play an important role in delivering the promised tourism experience. Secondly, airports are the first and last impressions foreigners will take after a visit. Given the importance of efficient, convenient, and safe travel between hotel rooms to the cabin to investors and tourists, ASEAN and its domestic constituencies must design foreign and public policy that is conducive to welcoming visitors.

The time is right for ASEAN follow through its commitments to the ASEAN Economic Community and allowing its airlines to operate freely in the region. Lifting the barriers, implementing harmonised standards, and investing in infrastructure will elevate the performance of the airlines to their potential. The spill over effects into tourism and adding fluidity to business travel will also serve the regional agenda. European and American airlines have been able to do this given the level of their economic unions. There is no secret ingredient to creating a successful carrier; ASEAN airlines already possess the necessary qualifies of world-class service, now it is up to the government to implement policies outlined in the ASEAN Single Aviation Market and Regional Air Service agreements to increase market access, establish central authorities and industry standards to advance the regional industry.

  1. “Scheduled Passenger – Kilometres Flown,” International Air Transport Association, date accessed March 2012,
  2. “Single European Sky,” Eurocontrol, date accessed, March 2012,
  3. It is possible that there is more impetus for expanding the aviation market in the United States and Europe due to the presence of the major aerospace Airbus and Boeing. In the U.S. and EU, the aerospace industry is a public-private consortium of high technology companies that produces, researches, and maintains vehicles that travel in air and space. A considerable number of related industries surrounding aerospace manufacturing also exist and account for large manufacturing bases and large constituencies. Advancement in the aerospace industry has national security implications as military-grade jets, fighters, drones, missiles, and electronics are developed in this sector.
  4. For example, Emirates is based in Dubai, UAE, which has over 60 open sky agreements. The government adopted this policy before the establishment of the Emirates airlines. “UAE, Dubai, Emirates airlines secure 60 open skies agreements” last modified, December 14, 2010,
  5. National connectivity, either through air, land, or sea transportation is a crucial element of the unified nation-state. However, the same case can be made for regional connectivity because in order to have bloc cohesion intra-ASEAN travel must be affordable.
  6. Given this fact, small nations, such as Singapore, have a significant advantage in civil aviation because national connectivity is easily achieved and therefore adopting open sky policies does not vis-à-vis archipelagic nations like Indonesia.
  7. ASAM will follow the Roadmap for Integration of Air Travel Sector (RIATS) by 2015. Among other agreements in the ASEAN Connectivity Masterplan are: the ASEAN Framework Agreement on the Facilitation of Goods in Transit (AFAFGIT), (b) ASEAN Framework Agreement on Multimodal Transport (AFAMT), (c) ASEAN Framework Agreement on the Facilitation of Inter-State Transport (AFAFIST),
  8. List of Operational Airlines in ASEAN (Passenger and Cargo) Country from Association of Asia-Pacific Airlines
  9. “Clogged, creaking airports hamper SE Asia carriers,” last modified March 26, 2012,

Photo credit: betta design / / CC BY-NC

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