Are we ready for ASEAN open skies?

With less than three years to go before ASEAN members adopt a Single Aviation market, government has to exert more effort to fully capitalize on gains that could be derived from the agreement, while at the same time guard against potential abuses.

The ASEAN Single Aviation market is perhaps one of the most dramatic landmark agreements of the decade inked by the 10 member-states that make up Southeast Asia.

Although Indonesia had recently announced that it would only partially comply with the agreement – and in effect remain as the only country that would not completely open its skies to the nine other ASEAN members by 2015, this would not entirely prejudice the agreement for all other members.

More than its intended benefits for airline companies, the ASEAN open skies accord is seen to spur the growth in the region by liberalizing not only passenger but also cargo air services.

In simpler words, with the lifting of tariffs and other add- on costs, as well as the resultant lower cost in the traffic of passengers and cargo, there will be freer flow of trade and business among ASEAN member countries. This will be a key step towards achieving the aspired One-ASEAN economy.

On the transport industry’s side, this would mean more competing airlines and hopefully lower fares as more companies go after the business of transporting people and goods to and from different ASEAN international, and eventually domestic, airports.

Benefits for tourism

For the Philippines, in particular, the forthcoming open skies among ASEAN members would mean a boost for the local tourism industry by allowing more airlines to land in the country, leading to more flights coming in, and offering visitors a wider choice.

While this would give our tourism effort a decided boost with the virtual opening up of country borders, it is the spill-over effect that seems more interesting.

Countries outside the ASEAN rim, such as Japan, Korea and China, are seeing opportunities arising from open skies accord. These countries are major trading partners as well as a rich source of tourism revenues of most of the ASEAN members, including the Philippines.

Act fast on tourism infrastructure

Our country, however, has to act fast to set up the necessary infrastructure that would entice tourists to visit our shores. While we may have some of the best beaches in the world and unparalleled hospitality of Filipino tourism industry workers, our airports, ports, hotels, roads and even medical support services are mostly inferior to those in Indonesia and Thailand, for example.

And while there has been a marked increase in investments in hotels, resorts and tourism-related establishments over the past years, these may still not be enough in the coming years. Worse, our airport facilities which comprise the gateway for all tourist arrivals continue to be wanting.

The first year of the current administration of P-Noy is almost over, and yet we have not seen anything concrete arising from the promise of gearing up the tourism industry, specifically finding investors willing to finance tourism-related infrastructure.

After the infamous tourism logo that the existing tourism leadership unveiled last year, we have yet to see more concrete marketing plans that would attract inbound visitors to our shores even if we do not yet have the financing for improved airports and roads.

Uneven competition

There are other areas that need to be guarded by our bureaucrats as ASEAN moves to embrace open skies. Price fixing, predatory pricing, prejudicial mergers and collusion are just a few of the practices that could prey on the benefits of a liberalized regional air transportation.

On the side of the ASEAN governments, care must be taken to keep relationships with their own airlines on a transparent basis and to avoid granting subsidies to their national flag carriers, thereby creating an uneven playing field.

ASEAN Open Skies is a new undertaking that does not have the advantages that Europe and the US both enjoyed. It will be interesting to see if the distinctly uneven economic levels of growth and development unique to ASEAN members will create problems in the future implementation of open skies.

When Europe and the US deregulated their respective airline industries, the countries (in the case of Europe) and states (in the case of the US) had an acceptable system of governance that allowed disputes arising from unfair competition cases to be resolved. This is not currently yet in place for ASEAN.

“Fair” play

Even as our government is already extolling the benefits of open skies, members of the domestic airline industry are quick to point out that this jubilation may get out of hand to their detriment if other ASEAN countries play dirty.

Cebu Pacific, for example, is saying that the Philippines has given foreign airlines way too much without always ensuring that these reciprocate the rights given them.

The Civil Aeronautics Board requires that any air rights granted to foreign airline firms should also be given by the foreign country to Philippine airlines. But there is a proviso that allows this rule to be waived should it be to our “national interest” to do so.

Philippine Airlines has also been resisting the open skies policy, mainly also on the ground of limited reciprocity especially when dealing with the US market. Other smaller airlines have voiced out concern to protect their investments in view of the coming liberalization.

Such worries are worth hearing out, and must be acted on especially if they would unduly create an unfair business environment.

Are we prepared?

Based on European and US experience, deregulating the airline industry seems to have provided greater benefits for everyone. Taking heed of some uniqueness in the regional market, the general principle of an ASEAN single aviation market should work for the benefit of most of the members.

The question is: Are we, government and private sector, acting fast enough to be fully geared for these changes for the benefit of the greater number of Filipinos?

Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. For a compilation of previous articles, visit www.BizlinksPhilippines.net.