As this magazine marks 20 years of publication with a look backwards and forwards at the industry, liberalisation is naturally one of the central and constant themes. There have been advances, but progress is uneven, and the Asia-Pacific is no exception
This is a simple message for governments in Asia that still do not get it: liberalisation good, protectionism bad.
The world knows this simple truth, and it is now time to accept it as a stipulated fact and keep up the pressure – lest progress just comes to a halt. Macau is a prime example of progress. The tiny Portuguese enclave west of Hong Kong has long had a slowly growing aviation industry as it served mainly as a transit hub for flights between Taiwan and mainland China.
That will eventually change when non-stop flights are allowed between Taiwan and China, but Macau has already seen that low-cost airlines are a good way of supporting its growth as a destination in its own right. Several low-cost airlines now serve it, growing the market. Meanwhile, Macau is looking at allowing other airlines to establish competition with its sole carrier, Air Macau, which has a monopoly licence on air services from Macau.
While the region boasts many other positive examples, Asia-Pacific offers more than a few double standards and clearly selective liberalisation. Australia, for instance, has long said it favours liberalisation. Today it has a very open regime. Domestic airlines can be owned 100% by foreigners, for example, and its former transport minister has called for an end to the global bilaterals system.
Yet, when he had the chance to agree to an open skies deal with willing partner Singapore in a pact that would have given Singapore Airlines the right to fly between Sydney and Los Angeles, it was determined that the time was “not right”. This was clearly to protect Qantas Airways, but why? Qantas is no longer owned by its government, and few doubt that a new player entering that market would help grow it overall rather than simply steal business from a competition-fearing incumbent.
Before Singapore can get smug, however, it too needs to be shamed. It preaches full openness, and clearly has benefited economically by embracing the low-cost sector. Air travel has increased as fares have fallen. New airlines are now firmly established at the city-state’s Changi airport. Yet, while Singapore talks of openness, it maintains one of the most restrictive air services agreements in Asia – with neighbour and former motherland Malaysia. Malaysia itself preaches liberalisation and has benefited from new airlines. But the fact remains that the Singapore-Malaysia market is virtually closed to all but the two flag carriers. In a market that is ripe for low-cost competition, any rhetoric of openness is a sham.
Another nation, Indonesia, had been moving towards freer skies, but has stepped backwards. It allowed new domestic airlines, with a resulting huge traffic boost. Earlier this year, however, state-owned Garuda was successful in making the government turn back the clock: it persuaded the authorities to ban foreign low-cost airlines from Jakarta, Bali, Medan and Surabaya – all highly desirable destinations. State-allowed protectionism had reared its ugly head.
The region where the most dramatic change is needed is within north Asia. Importantly, Japan maintains highly restrictive policies, which upset the regional balance. As the Centre for Asia Pacific Aviation (CAPA) said recently: “The governments of north Asia need to embrace deregulation or the low-cost revolution will pass them by.” It noted that most routes between North Asian countries are capacity limited – there are only a handful of multiple designation gateways in Japan, South Korea and China – and as a result there is little competition on smaller routes.
China is also no angel. Although it has opened up dramatically to allow more services by foreign airlines, it will not allow foreign low-cost players to serve the major hubs of Beijing, Guangzhou or Shanghai, and for no apparent good reason. Its air services agreements generally provide for multiple airline designations, but it is clear that the central authorities still fear the effects of new forms of competition.
The irony of all this is that in parts of Asia-Pacific where governments are still restrictive, the state no longer owns the airlines. In markets such as Japan the reverse seems true: governments still give in to the airlines. What are they afraid of? Upsetting the status quo, – and again sadly for no good reason.
It is too late to go back to the days of heavy protectionism. If proof is needed, one need only look at India. Its air transport market has exploded over the past 18 months as the government eased restrictive policies on domestic and foreign airlines. India for decades had one of the most protectionist air service regimes on the planet; if India can do it, everyone else can. And should.
Source: Airline Business
