ASEAN Open Skies: Benefits & Implications for Aviation Businesses

ASEAN Open Skies: Benefits & Implications for Aviation Businesses

The Push For Greater Economic Integration




The Association of Southeast Asian Nations (ASEAN) is an inter-governmental organisation created to promote regional cooperation and integration between the 10 member states (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam). With the rise of economic powers in this region, it comes as no surprise that air travel is increasingly important between the 10 nations.

For an overview of the aviation industry in each ASEAN member state, click here.

As a result, the vision of the ASEAN Open Skies Agreement (also known as the ASEAN Single Aviation Market, ASEAN-SAM) came to be. The agreement is a key policy in the ASEAN aviation industry and is directed at the unification of a single aviation market throughout the region. Open Skies is geared towards the liberalisation of tourism, investment, services, and trade flows between member states. The policy will supersede existing air services agreements – both unilateral and bilateral.

ASEAN Open Skies was ratified in 2016. However, several setbacks have delayed its full materialisation. Nonetheless, with the increasing growth of each member state, the ASEAN aviation industry is set to move closer towards achieving a true single aviation market.

How Does This Benefit Aviation Business in ASEAN?




Over 1 million jobs are projected to be created by 2030, through the ASEAN Open Skies Agreement. It is also predicted to contribute close to US$ 100 billion to the economy each year. Additionally, ASEAN citizens are likely to be able to travel up to three times easier than today. So, how does this translate to benefits for aviation businesses?


Benefit #1: Increased Air Travel = Increased Business Opportunities

As a result of member states opening up their local markets, the unified ASEAN market presents an abundance of opportunities for new airlines. In turn, the rise in number of airlines will cause prices to be lower due to higher competition. The increase in air travel thanks to competitive pricing will cause a ripple effect, allowing related industries such as cargo, ground handling and consultancy services to flourish.

Benefit #2: Increase in Foreign Investment

By facilitating trade, the policy has made the ASEAN region more attractive to foreign investors. Through the rising unification of the ASEAN aviation market, investors are now starting to see the true potential of this thriving region.

Benefit #3: Technological and Managerial Transfer from Major Players

As a result of the Open Skies policy, ASEAN has become a magnet for large international companies. Companies including Lufthansa Technic and GE Aviation (General Electric) have set up facilities in ASEAN, with many other major players looking to establish hubs in the region. Apart from the benefit of foreign investment, as mentioned above, this allows local ASEAN firms to gain technological and managerial transfer from other well-established industry players through collaborations. An example of such is a joint venture training centre formed by CAE (Canada) and AirAsia (Malaysia).


Is It Really As Good As It Sounds?



With no doubt, ASEAN Open Skies is an advantageous policy that will benefit industry players across the ASEAN region. While the concept of a fully unified aviation market overflows with benefits, one may wonder if it truly is as good as it seems to be. As with all things, there are pros – and cons:


Implication #1: Industry Players May Not Be Fully Cooperative

While on the national and regional level, ASEAN Open Skies may seem effective – looking at the grassroots of the ASEAN aviation industry – integration between companies may not be as smooth-sailing as expected. This is especially apparent in highly lucrative sectors of the industry. In an article on Aerotime News Hub, an aviation analyst pointed out that, because the MRO and manufacturing sectors are incredibly lucrative, it would be ‘naïve to think any one country would want to share it with another’. Thus, ASEAN Open Skies may, in fact, increase competition between aviation businesses; smaller businesses may lose out.

Implication #2: Limited Infrastructure

ASEAN Open Skies cannot be at its full potential without the availability of adequate infrastructure. Despite the fact that the support of airports is crucial, not all ASEAN airports are open to this policy. In the best interest of their local industry, some member states are limiting their ‘openness’ to the ASEAN Open Skies policy. This may, of course, reduce potential opportunities for many aviation businesses.

Implication #3: Disparity Among Member States

To achieve successful unification and liberalisation of the ASEAN market, standardisation between member states is needed. However, there is clear economic and social disparity in ASEAN. For example, Singapore has a Human Development Index (HDI) of 0.932, ranking 9th in the world, while Laos ranks 148 in the world with an HDI of 0.578. Adopting a common negotiating position between member states – as the Open Skies aims to achieve – could disadvantage smaller firms in less developed countries.

To overcome these implications, the ASEAN region needs to push for greater standardisation between member states, especially in terms of safety and security. Certain regulatory barriers need to be reviewed, and perhaps, removed. There also needs to be a focus on human resources and the development of human capital in the 10 nations.


The Next Steps




Certainly, this list is not exhaustive – there are numerous other benefits (and implications) the ASEAN Open Skies policy has and will bring about. Member states need to strive for further harmonisation of the region in order to propel this policy forward, towards a truly Single Aviation Market.


The Dviation Group strives to drive the ASEAN region to the forefront of the global aviation industry. Discover more about their goals at www.dviation.com, and find out how you can be part of this vision!

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