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OPENING ASEAN SKIES: THE ASEAN SINGLE AVIATION MARKET
MICHELLE DY (LL.M., New York University; LL.M.,National University of Singapore) [email protected]
ASEAN AT A GLANCE
Sources: https://airlinenewsphilippines.wordpress.com/tag/cabotage/ http://www.aseanbac.ph/index.php/page/view/asean-economic-community
ASEAN AT A GLANCE
Indonesia 244,776 Philippines
97,691
*figures are in thousands (2012 data) Source: ASEAN Community in Figures (ACIF) 2013
Viet Nam 88, 773 Thailand
67,912 Myanmar 60,976
Malaysia 29,337
Cambodia
14,741 Lao PDR
6,514 Singapore
5,312 Brunei 400
Total Population in ASEAN is 616,614
ASEAN AT A GLANCE Member State Gross Domestic Product (GDP)
per capita (US$)
Brunei Darussalam 42,445
Cambodia 978
Indonesia 3,588
Lao PDR 1,394
Malaysia 10,338
Myanmar 861
Philippines 2,565
Singapore 52,069
Thailand 5,391
Viet Nam 1,596
Source: ASEAN Community in Figures (ACIF) 2013
ASEAN MINUS X (ASEAN-X)
“While all ASEAN member States are to participate in intra-ASEAN economic arrangements, one or more members may choose to withhold their implementation if they are not ready”
- Framework Agreement on Enhancing ASEAN Economic Cooperation (Singapore, 28 January 1992)
ASEAN FRAMEWORK AGREEMENT ON SERVICES (AFAS)
Air transportation as one of the selected service sectors
AFAS only dealt with “soft rights” and “hard rights” were excluded
Soft rights Hard rights
• sales and marketing • setting up of airline offices • maintenance and repair • computer reservation
systems • aircraft leasing
• traffic rights • capacity • price-fixing • designation • frequency
Source: http://www.bdg-asia.com/asean/
OPENING ASEAN’S SKIES Ministerial Understanding on
ASEAN Cooperation in Transportation (1996)
First official pronouncement of the desire to open ASEAN’s skies
Declared the need to develop a competitive air services policy with a possibility of leading towards an open sky policy in ASEAN
Integrated Implementation Programme for the ASEAN Plan of
Action in Transport and Communications (1997)
Liberalizing the “hard” rights within or between the sub-regions by applying the “ASEAN minus X” formula
LIBERALIZING WITHIN SUB-REGIONS
Brunei Darussalam-Indonesia-Malaysia-
Philippines East ASEAN Growth Area
(BIMP-EAGA)
Cambodia-Lao PDR-Myanmar-Viet Nam
(CLMV)
Indonesia-Malaysia-
Thailand Growth Triangle (IMT-GT)
Indonesia-Malaysia-
Singapore Growth Triangle (IMS-GT)
LIBERALIZING WITHIN SUB-REGIONS
Air Transport Cooperation between Cambodia, Laos, Myanmar, and Vietnam (CLMV), 1998
Granted unlimited capacity and unlimited third, fourth, and fifth freedom rights
Memorandum of Understanding on Expansion of Air Linkages between Brunei Darussalam, Indonesia, Malaysia, and Philippines (BIMP-EAGA), 2007
Provided unlimited third and fourth freedom rights and unlimited internal fifth freedom rights
Multilateral Agreement for the Liberalization of Air Passenger Services (MALAPS) between Singapore, Brunei, and Thailand, 2004
Provided for unlimited third and fourth freedom rights
MOVEMENT TOWARDS REGIONAL INTEGRATION
Declaration of ASEAN Concord II (Bali Concord II), 2003
Establishment of the AEC as “the realisation of the end-goal of economic integration…to create a stable, prosperous and highly competitive ASEAN economic region in which there is a free flow of goods, services, investment and a freer flow of capital, equitable economic development and reduced poverty and socio-economic disparities
ASEAN Framework Agreement for the Integration of Priority Sectors
(2004) Air travel as one of the eleven priority sectors
which will be integrated first
LIBERALIZATION BUT NOT YET INTEGRATION
ASEAN Sectoral Integration of Air Travel Sector (2004)
The initial intention for the air travel sector was couched in a very broad and vague characterization of “full integration of the air travel sector in ASEAN”
The measures proposed fall short of a “full integration of the air travel sector.”
Roadmap for Integration of Air Travel Sector (2004)
A full liberalization of air freight services was envisioned, but the liberalization of scheduled passenger services goes no further than measures to provide unlimited fifth freedom traffic rights for at least two designated points in each country and for the capital city in each ASEAN member State.
Member States were however encouraged to conclude more liberal bilateral arrangements.
TOWARDS A SINGLE AVIATION MARKET
Implementation Framework for the ASEAN Single Aviation
Market (ASAM), 2011
Economic elements (Roadmap for the Economic Elements of the ASAM) which include market access, charters, airline ownership and control, tariffs, commercial activities, competition law and policy/state aid, consumer protection, airport user charges, dispute resolution, and dialogue partner engagement.
Technical elements which include aviation safety, aviation security, and air traffic management.
Parses out the measures necessary to promote the identified elements as well as the timeline to achieve it.
LIBERALIZATION OF MARKET ACCESS
ASEAN Multilateral Agreement on Air
Services (MAAS), 2009
ASEAN Multilateral Agreement on the Full
Liberalisation of Passenger Air Services
(MAFLPAS), 2010
ASEAN Multilateral Agreement on
the Full Liberalisation of Air Freight
Services (MAFLAFS), 2009
FEATURES OF MAAS, MAFLPAS AND MAFLAFS
Multiple designation
Operational Flexibility
Relaxed ownership and control requirements
No limitation on capacity, frequency and aircraft type
Unlimited third, fourth and fifth freedom rights*
Bangkok – Yangon - Kuala Lumpur
7th freedom
Source: http://www.bdg-asia.com/asean/
BREAKING DOWN OWNERSHIP AND CONTROL BARRIERS TO ENTRY
ASEAN Community Carrier
subject to acceptance by a Contracting Party receiving such application, the designated airline which is incorporated and has its principal place of business in the territory of the Contracting Party that designates the airline, is and remains substantially owned and effectively controlled by one or more ASEAN member States and/or its nationals, and the Contracting Party designating the airline has and maintains effective regulatory control.
PH 40%
VN 35%
SG 25%
BREAKING DOWN OWNERSHIP AND CONTROL BARRIERS TO ENTRY
“Fully” Liberalized Carrier
subject to acceptance by a Contracting Party receiving such application, the designated airline is incorporated in and has its principal place of business in the territory of the Contracting Party that designates the airline in which the Contracting Party designating the airline, has and maintains effective regulatory control of that airline, provided that such arrangements will not be equivalent to allowing airline(s) or its subsidiaries access to traffic rights not otherwise available to that airline(s).
US 15%
FR 30%
MY 20%
DE 35%
2009 MULTILATERAL AGREEMENT ON AIR SERVICES (MAAS)
Protocol 1 Unlimited
3rd and 4th Within
Sub-Region
Protocol 2 Unlimited 5th Within
Sub-Region
Protocol 3 Unlimited
3rd and 4th Between
Sub-Regions
Protocol 4 Unlimited
5th Between Sub-
Regions
Protocol 5 Unlimited
3rd and 4th Between Capital Cities
Protocol 6 Unlimited
5th Between Capital Cities
Brunei Darussalam
√ √ √ √
√
√
Cambodia √ √ √ √
√
√
Indonesia √ √ √ √
√
√
Lao PDR √ √ √ √
√
√
Malaysia √ √ √ √
√
√
Myanmar √ √ √ √
√
√
Philippines √ √ √ √
X X
Singapore √ √ √ √
√
√
Thailand √ √ √ √
√
√
Viet Nam √ √ √
√
√
√
Protocol 1 Unlimited 3rd,
4th and 5th Among
Designated Points in ASEAN
Protocol 2 Unlimited 3rd,
4th and 5th Among All Points with
International Airports in
ASEAN
Brunei Darussalam
√ √
Cambodia √ √
Indonesia X X
Lao PDR X X
Malaysia √ √
Myanmar √ √
Philippines √ √
Singapore √ √
Thailand √ √
Viet Nam √ √
2010 MULTILATERAL AGREEMENT FOR THE FULL LIBERALIZATION
OF PASSENGER AIR SERVICES (MAFLPAS)
Protocol 1 Unlimited 3rd and 4th Between
Any ASEAN Cities
Protocol 2 Unlimited
5th Between Any ASEAN
Cities
Brunei Darussalam
√ √
Cambodia √ √
Indonesia X X
Lao PDR √ √
Malaysia √ √
Myanmar √ √
Philippines √ √
Singapore √ √
Thailand √ √
Viet Nam √ √
2009 MULTILATERAL AGREEMENT FOR THE FULL LIBERALIZATION
OF AIR FREIGHT SERVICES (MAFLAFS)
SEVENTH FREEDOM IS EXCLUDED
Country A
Country B Country C
CABOTAGE IS EXPRESSLY PROHIBITED
“Nothing in this Agreement shall be deemed to confer on the airline or airlines of one Contracting Party the right to take on board, in the territory of another Contracting Party, passengers, baggage, cargo or mail carried for renumeration and destined for another point in the territory of that other Contracting Party”
- Article 2, Section 3, MAAS
LIBERALIZING OUTSIDE THE REGION
Multilateral Agreement on the Liberalization of
International Transportation (MALIAT), 2001
ASEAN-China Air Transport Agreement
(ACATA), 2010
Ongoing
discussions with Japan, South
Korea, India and the European
Union
Source: http://www.bdg-asia.com/asean/
EU 3 PACKAGES OF LIBERALIZATION
Package I (1987) Package II (1990) Package III (1992)
• Fifth freedom rights services only on regional routes and was limited to 30 percent capacity.
• Multiple designation of carriers was also phased and subjected to thresholds.
• Cabotage was initiated by first opening up regional services for flights between Category 1 or 2 airports operated only certain types of aircrafts.
• Widened the thresholds set in the first package.
• Fifth freedom rights services capacity was increased to 50 percent.
• The threshold was further lowered in carrier designation.
• Cabotage was expanded but in a limited manner.
• All routes within the single market were opened.
• Full cabotage was permitted by 1997.
• Fifth freedom traffic rights were also permitted.
• Carrier designations and capacity distribution limitations were abolished altogether.
• The concept of community carrier where it must be owned by majority ownership by EU member States and/or nationals of member States and effectively controlled by such persons.
HIGHLIGHTS OF THE ASEAN SINGLE AVIATION MARKET
Stops at fifth freedom traffic rights Seventh freedom and cabotage are excluded However, because of operational flexibility,
carriers can theoretically mount seventh freedom flights
Mention of the possibility of further liberalisation of market access in 2016 onwards, but such discussions shall only be commenced if deemed necessary
Liberal treatment of ownership and control still subject to approval of the country receiving the application
Simultaneous process of enhancing external connectivity with internal connectivity
OPENING ASEAN SKIES: THE ASEAN SINGLE AVIATION
MARKET
MICHELLE DY (LL.M., New York University; LL.M.,National University of Singapore) [email protected]
