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Aviation Sector Sets to Soar in ASEAN Open Skies
ECONOMY Beyond

Aviation Sector Sets to Soar in ASEAN Open Skies

The ASEAN Open Skies policy, also known as the ASEAN Single Aviation Market (ASEAN-SAM), aims to increase regional and domestic connectivity, integrate production networks and enhance regional trade by allowing airlines from all ten ASEAN member states to fly freely throughout the region via the liberalisation of air services under a single, unified air transport market.

Although it is arguably not a completely “single”, fully liberalised market compared to what the European Union has achieved, it boasts numerous benefits to the aviation sector and passengers with competitive prices and more options.

"Airlines can launch any number of international flights as the market can support," says Alan Tan, an aviation law professor at the National University of Singapore to Reuters. "Travellers can thus look forward to more flights at more competitive prices."

AirAsia. Image: Asia.Nikkei
AirAsia. Image: Asia.Nikkei

Explosion of Low-cost Airlines

The Southeast Asian region itself has witnessed an explosion of low-cost carriers in the past decade, with dominant low-cost airlines Malaysia's AirAsia, Indonesia's Lion Air, and Philippine carrier Cebu Pacific have already dominated the open skies.

“We are certainly now Asia’s largest discount carrier. We stretch from India to Japan and we’re the only airline that has the breadth of coverage,” says the 53-year-old Chief Executive Officer, globally famous for co-founding AirAsia, Tony Fernandez to The Independent . AirAsia has grown the ailing Malaysia-based domestic carrier into Asia’s largest airline group with operations in five countries.

He adds, “We want Asean to become a single market so we should start behaving like one, and we’re getting there slowly with Asean Open Skies finally becoming a reality.”

Nguyen Thi Phuong Thao, Founder and CEO of VietJet Air Image: HR in Asia
Nguyen Thi Phuong Thao, Founder and CEO of VietJet Air Image: HR in Asia

Meanwhile, in only five years, Vietnam’s first private low-cost airline, Vietjet Air just launched its initial public offering (IPO) in February 2017. It was recorded as Vietnam’s largest IPO

Its CEO, Nguyen Thi Phuong Thao, has also soared to be the only female USD billionaire in Southeast Asia with estimated fortune of $ 1.7 billion, according to Forbes.

Soaring Tourism Sector and International Trade

As visa restrictions ease and convenient eVisa services are introduced, governments will find it easier to convince airlines to fly to secondary destinations.

“More than ever airports and government tourist offices are the key players. They have the funding and can go to airlines and offer incentives to encourage airlines to establish new routes,” says Jameson Wong, ForwardKeys Director of Business development APAC, at the Mekong Tourism Forum in Luang Prabang earlier this month.

Regional tourism is expected to increase with ASEAN Open Skies. Image: Bangkok.com
Regional tourism is expected to increase with ASEAN Open Skies. Image: Bangkok.com

Airports are also catching up to the new flux of people travelling through borders, with second and third-tier destinations also benefit from better air connectivity.

According to Mekong Aviation Snapshot trending report Mekong Aviation Snapshot trending report  The fastest growing airports in terms of airline seat capacity between July 2015 and July 2016 were U-Tapao, Pattaya, Thailand (up 214.2%); Phu Quoc, Vietnam (66.4%); Haiphong, Viet Nam (60.4%); Nha Trang, Vietnam (48.8%); and Luang Prabang, Lao PDR (38.9%).

Region’s air cargo industry is also expected to benefit from ASEAN countries, a move that promises to help increase air cargo volume by 50 percent this year.

Indonesia National Air Carriers Association (INACA) head of cargo division Boyke P. Soebroto tells The Jakarta Post , “Prior to ASEAN Open Skies, also known as the ASEAN Single Aviation Market (ASEAN-SAM), Indonesian cargo planes were required to stop over in countries like Singapore, as a hub, en route to a final destination.”

Image: LionAir Cargo
Image: LionAir Cargo

“This is a chance for Indonesian air cargo service providers to get into ASEAN industrial centers, both for imports and exports.”

He adds, “Tuna producers, for example, they can export from Manado to Manila, which is already close to Japan, making the product cheaper to sell.”

With improved aviation sector, The International Air Transport Association (IATA) estimates that ASEAN countries can add almost 25 million jobs and $298 billion to the region's GDP by 2035 if they invest in aviation. This is up from 11.6 million jobs and $144.4 billion to GDP in 2014.

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