Air Asia boss Tony Fernandes
has been repeatedly calling for a comprehensive ASEAN approach to aviation
issues. Most reports, particularly after the tragic crash on the
Surabaya-Singapore route last December, portray Fernandes’ efforts as an appeal
for a regional aviation safety regulator in Southeast Asia. A recent study just published for the CIMB
Asean Research Institute (CARI) and the ASEAN Business Club prepared by a
team led by my NUS Law colleague Alan Tan goes
beyond this relatively simplistic analysis and explains how a regional approach
can help all airlines do better in the ASEAN Economic Community.
The report first provides an
overview of the huge growth in the ASEAN aviation market:
With such huge growth rates, ASEAN aviation now faces
real concerns over congestion. These concerns affect all facilities ranging
from terminal and runway capacity to airspace management. From the human capital
angle, the challenge relates to the supply of pilots, maintenance crew, air
traffic controllers and other technical experts. The airline industry projects
that the Asia-Pacific region alone will require 185,000 more pilots and 243,500
maintenance personnel for the next 20 years. These pressures on infrastructure and
human capital have been largely caused by the huge spike in flights made
possible by the increasing economic liberalisation of ASEAN skies.
However, the report notes that
ASEAN governments have not kept up with regulatory and infrastructure
improvements to support this growth:
In short, investments in infrastructure and human
capital have not kept up with the economic liberalization that has fuelled the
aviation boom in ASEAN. Neither has there been convergence in national laws and
standards to create a more integrated and cost-efficient regulatory regime.
There must thus be greater investments in infrastructure and human capital to
keep up with the additional planes entering the ASEAN market in the coming
years. At the same time, technical or regulatory integration must take place in
the subsequent phase of ASAM [ASEAN Single Aviation Market] to complement
economic liberalisation. Only then can there be true regional integration.
Thus the report proposes
that ASEAN establish a new coordinating body of national civil aviation
regulators that would meet regularly and allow for the mutual recognition of
standards in the aviation industry. In
this approach, national standards would be recognized by other ASEAN national
regulators, leading to eventual harmonization.
Although the creation of an EU-style single regional aviation regulator
is envisioned as an ultimate goal, the report recognizes that this would be an
evolutionary process that will take time to develop.
In the ASEAN context, the
paper queries whether the mutual recognition approach should be done first on an
ASEAN-X approach, with a subgroup of more advanced ASEAN member states
proceeding first and the rest catching up later, which has the advantage of
moving faster, or whether a region-wide approach is to be preferred, even
though this would require more time and effort to implement. Either way, the paper posits that some form
of best practices in aviation recognition must be put forward to establish
sufficient confidence among the ASEAN national regulators in each other.
The paper then goes on to identify specific areas for mutual recognition of
standards:
A legal agreement [should] be adopted to lay out the
formal procedures for mutual recognition of certifications licences, permits,
approvals and other documentations that are aligned with the relevant “base”
standards. Annexes to the agreement can lay out the specific
categories/disciplines of regulation, including crew/personnel licensing and
training organisations, safety and maintenance programmes, flight operations
and air traffic management.
Mutual recognition in
these areas would allow for the creation of an ASEAN-wide labor market for
flight crew, and eliminate duplication or inconsistent safety measures. Both would help reduce operating costs for
operators and improve safety.
Just as importantly, the
paper calls for an effective regional monitoring and sanctioning system to give
full effect to the mutual recognition process. This follows what this blog has
been calling for in other aspects of the AEC, as the current institutional
structure of ASEAN is insufficient. This
is even more important for the aviation sector, where prudential concerns are paramount,
and the sector is critical for the proper functioning of the single production
base and single market.
The paper also calls for
full implementation of existing ASEAN market access agreements for aviation:
19. In addition, even if all the ASEAN
member states were to accept all the above agreements, their airlines will
still have to begin and end their flights in the home state’s points. For
instance, a Thai carrier will not be able to station planes in Indonesia to
connect Jakarta and Manila. At best, it can only connect Jakarta and Manila
with operations beginning and ending in Bangkok, one of its home points. For
instance, it can operate a Bangkok – Jakarta – Manila – Jakarta – Bangkok
route, which is a fifth freedom operation that enjoys traffic pick-up rights in
Jakarta both ways.
20. Even then, such fifth freedom
operations are controversial in ASEAN because the Thai carrier in this example
would be servicing a “V”-shaped geographical route, as opposed to a linear or
straight line route. The practical effect of this is that all the passengers
getting on board in Bangkok will likely be bound for Jakarta (and will
disembark there). At Jakarta, a full new load of passengers will be taken on
for Manila. This effectively turns the operation into a “seventh freedom”
operation, i.e. the right of a carrier to carry traffic between two
international points outside its home base. Yet, such operations are permitted
by the ASEAN agreements which specify that there are no directionality or
capacity conditions on fifth freedom flights. As they are wholly consistent
with ASAM’s liberalising spirit, all member states should give approval when
any ASEAN airline requests authorisation for such operations.
21. The “seventh freedom” must be
addressed explicitly in the post-2015 period and allowed to flourish. To begin
with, all fifth freedom routes, as illustrated above, must be permitted without
restriction and regardless of their route “shape”. In time, pure “seventh
freedom” routes should also be allowed – this would allow the Thai carrier to
station planes in Jakarta to operate stand-alone flights between Jakarta and
Manila. Just as in the E.U. common market, it is essential for a single
aviation market project like ASAM to include the “seventh freedom” (though for
now, domestic “cabotage” flights for foreign airlines remain controversial in
ASEAN and should best be left for future discussion). In other words, the ASAM
cannot stop at third, fourth and fifth freedom rights only. If it does, the
ASAM will remain restricted and “single” in name only.
Finally, the paper calls
for simplication of ownership structures to allow for true regional carriers,
and for ASEAN to deal with other countries as a bloc in aviation negotiations
and relations.
Again, I am not an aviation
expert, and I would refer more detailed questions about this topic to Alan. My
point in discussing the aviation industry here is to provide yet another example
of a sector in which the ASEAN national governments have not yet caught up with
an industry sector which is much further developed in regional integration.
