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Reforming Asia's friendly, no-frills
skies
By David Fullbrook
BANGKOK - No-frills airlines' rapid expansion in
Southeast Asia, especially in the now bubbling markets
of Singapore and Thailand, is running ahead of the
policy reality, likely crimping future growth.
Thailand now has eight scheduled carriers, not
all directly competing, but certainly not operating in
totally disparate markets. Singapore has six airlines.
New players may yet join the scrum. A shakeout in
Thailand is widely expected by analysts.
Singapore looks just as vulnerable. And unlike
airlines there, at least carriers in Thailand have a
large domestic territory, served by slow trains or
deadly buses, whose population enjoys fast-rising
incomes making air travel, especially at the current
fares, more affordable and desirable.
Singapore,
by contrast, offers no domestic routes. Its 4 million
people, albeit enjoying some of the highest per capita
incomes in the world, can only fly so much. To remain
competitive, its carriers will have to rely on long-haul
transfers and moving people around the region,
specifically the Malay archipelago for which Singapore
is the financial and services capital, a role that
Jakarta will likely one day usurp. That is a volume
game. Restrictions and regulations constrain
opportunity, in turn constraining volume.
New
rule books set the stage for the rise of low-cost
carriers in Europe and North America. China is putting
the ingredients into place for a low-cost boom,
including cutting loose airports by handing them over to
local governments. In India air travel is growing fast
after cuts to certain taxes and fees earlier this year.
Indonesia's booming air travel follows aggressive
deregulation that began back in 1999.
In
Southeast Asia, regulations governing travel between
members of the Association of Southeast Asian Nations
(ASEAN) are being dismantled one brick at a time,
involving bilateral deals between a core of five members
- Indonesia, Malaysia, the Philippines, Singapore and
Thailand. ASEAN wants the low fares and expediency of
modern carriers, but has yet to grasp that, efficient as
they are, these carriers will not thrive if structural
failures rive the market.
Southeast Asia's 400
million people need affordable, convenient air transport
in the absence of high-speed railways and because
maritime geography presents a major barrier to speedy
travel. That can only come when ASEAN leaders and
bureaucrats formulate a European-style common aviation
area policy.
There is no sign of such a policy
yet, in part reflecting ASEAN's rather loose nature. It
may take a rash of failures to bring this into focus,
just as financial reform, begrudged and half-baked as it
was, only followed the 1997 Asian financial crash. Or,
it may have to wait for ASEAN to make good on talk of a
common market and even a single currency. Yet it is
debatable whether ASEAN members have buried, or at least
tempered, lingering rivalries and suspicions as appears
to be the case in Europe.
Wholesale reform in
tandem with laws eliminating legacy carriers' advantages
would make for a more even market, allowing all players
to chart over longer horizons. Moreover, sustainable,
low prices will pave the way for many more people to
fly.
Airline costs currently cannot fall much
further without competition among airports. At present,
there are hardly any secondary airports around towns or
cities able to support air travel, so airport operators
can charge what they like. Secondary airports have been
a key factor in the West's no-frills travel boom.
A quick-fix may be possible by putting in place
legislation that supports the airport-within-an-airport
model, airport halls that have their own customs,
immigration and jet servicing areas. Awkward though it
may appear, similar arrangements have worked in other
sectors. Phone networks, for instance, sell capacity to
other companies, which operate virtual networks
providing cheaper services to the public.
Such a
move will have to overcome heavyweight vested interests,
with at least one arm firmly wedged in the region's
over-powerful bureaucracies. It may also raise questions
about competition laws in other sectors. There are few
signs that the region's leaders are ready to reduce
civil servants' power or write and enforce decent
competition laws.
Instead, threatened as they
are by lagging reform, some of Southeast Asia's new
airlines will fall back on rising demand springing from
the region's rising incomes and a surge in newly minted
tourists from China and India. Not the best hope, but
perhaps the only one airlines have.
(Copyright
2004 Asia Times Online Co, Ltd. All rights reserved.
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