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Singapore shakes up skies over
Asia
By Bill Guerin
JAKARTA - The Civil Aviation Authority of
Singapore (CAAS) has come under fire for refusing
to grant landing rights at its only airport,
Changi International, to an Indonesia-based
carrier in which Malaysia's leading low-fare
airline, AirAsia Berhad, holds a 49% stake. Though
Singapore may call the shots in granting landing
rights at Changi - upsetting AirAsia, which claims
Singapore is using its planned Jakarta-Singapore
route to give itself an edge in bargaining with
Jakarta over air links - the issue has stirred up
waves of criticism.
Southeast Asian
countries plan to adopt an open-skies policy
between their respective capital cities by 2008
and fully liberalize the region's air-travel
industry by 2011, but AirAsia's charismatic
founder and chief executive officer Tony Fernandes
has implied that unless the respective governments
fight back, the only winners in the skies between
Singapore, Indonesia and Malaysia, at least, will
be Singapore. AirAsia has said it is abandoning
the planned Jakarta-Singapore route after having
to postpone its launch at the 11th hour because it
failed to secure the necessary approvals from
Singapore aviation authorities. This would be a
setback for the republic's plan to present its
only airport as an aviation hub for Southeast
Asia.
Singapore has begun building a new
airport terminal at Changi to attract the 10
low-fare airlines that are flying in Southeast
Asia. Tourism contributes more than 5% of
Singapore's $91 billion economy every year and
Transport Minister Yeo Cheow Tong has even offered
to cut landing fees and hand out other financial
incentives to attract airlines to route their
services via Changi.
AirAsia carries
considerable clout. The carrier flies 7.5 million
passengers a year. It operates over 100 domestic
and international daily flights with a fleet of 18
Boeing 737-300s from its hubs in Kuala Lumpur
International Airport and Senai International
Airport (Johor Bahru) in Malaysia, while its
sister company Thai AirAsia operates an additional
six Boeing 737-300s from Bangkok International
Airport, and Indonesia-based AWAIR operates two
Boeing 737-300s from Sukarno-Hatta International
Airport.
"We don't need to come to
Singapore," Fernandes said at the Asia-Pacific and
Middle-East Aviation and Tourism Outlook
conference in Singapore recently. "If we're not
welcome, we will find alternative routes. Our
patience is surely not endless."
AWAIR had
to transfer nearly 300 passengers to another
airline on January 19 after Singapore authorities
said it would take at least several days for
landing-rights documents to be approved. Thai
AirAsia Co, AirAsia's venture in Thailand, flies
four times a day to Singapore and had no problems
getting approvals to land in the city-state, with
the same documentation.
The Singapore
authorities asked AWAIR to provide one more
document, although it had earlier been given
approval to start flights. The airline complied
and Singapore promised to respond within a week.
However, the airline did not receive any formal
reply after three weeks. More than 5,000
passengers were reportedly booked for the first
few flights and were either accommodated on other
flights or refunded.
CAAS said in a
statement that while a review of the documents for
AWAIR's application to operate to Singapore from
Jakarta has been completed, it is unable to
proceed further with the airline's application in
light of "new developments concerning the
operations of low-cost carriers between Singapore
and Indonesia". AWAIR's response, also in a
statement, was to say: "This is clearly a
government-to-government matter, and the CAAS
should not have used AWAIR as a bargaining chip to
gain better positioning with the Indonesian
government."
"We are very disappointed by
the treatment. This is clearly a case of
protectionism by the Singapore government,"
AirAsia executive director Kamarudin Meranun said.
"It has now become evident that the delay tactic
adopted by CAAS in processing our application to
fly into Changi International Airport was a
deliberate attempt to gain greater bargaining
position vis-a-vis the Indonesian government in
the recent bilateral talks on Air Service
Agreement on January 25 and 26."
AWAIR has
said it may seek monetary compensation from the
Singapore government for blocking flights from
Jakarta. At least 400 flights a week connect the
city-state and Jakarta but, as Meranun points out,
there are fewer flights operated by Indonesian
airlines to Singapore than the number of flights
by Singapore-based airlines to Indonesia.
Telling the world
Fernandes
pointed out earlier that the decision to stop the
AWAIR flight had not only disrupted the travel
plans of passengers who had made their travel
bookings earlier but had also "upset" the
Indonesian authorities. On January 25, speaking at
the Fifth Malaysia Capital Market Conference 2005
in Kuala Lumpur, he said: "First they barred our
bus from entering Singapore, now they have barred
us from taking our planes there despite their
earlier approvals."
He told the assembled
bankers and top officials from regional financial
institutions that Singapore is not as open to
business as it claims. "From our experience, they
are very closed and we want to tell the whole
world about it," said Fernandes.
This
sentiment was echoed in Jakarta, where AWAIR
president Sendjaja Widjaja, an Indonesian
national, said in a statement, "This is clearly
inconsistent with the CAAS statement that it
welcomes all airlines, including AWAIR, to operate
to Singapore."
Singapore currently has
three low-cost carriers (LCCs) based in the
city-state - privately owned Valuair, Tiger
Airways, a unit of Singapore Airlines and
Qantas-owned Jetstar Asia. Widjaja implied the
incident illustrated how the Singapore government
had tried to block the entry of LCCs from
competing directly with these three. "We believe
that it is not so much related to the issue of
planned flights by low-cost carriers between two
countries as it is simply the protectionist stance
taken by CAAS to protect Singapore's own fledgling
start-ups."
This is not the first time
AirAsia has encountered difficulties with the
Singaporean government. Two years ago, the carrier
was denied permission to start a bus service from
its Senai hub in Johor Baru to Singapore. AirAsia
is now opposing the entry of more Singaporean
players into Malaysia, warning that granting them
rights to direct flight routes could marginalize
Kuala Lumpur International Airport (KLIA) and hurt
Malaysia's ambition to become a regional aviation
hub.
"If AirAsia is not given rights to
fly into Singapore from Jakarta, why should
Malaysia allow the Singaporean carriers here?"
asked Meranun. "By giving rights to SilkAir, we
are seen to be promoting and enhancing Changi
Airport's connectivity and helping it become a
regional hub. Should we not be promoting our own
KLIA as a regional hub? Why such a move and at
whose expense?"
Last month the Malaysian
government announced it would build a dedicated
LCC terminal at KLIA for low-cost airlines, which
should begin operations by the middle of next
year. Transport Minister Chan Kong Choy said it
would enhance the airport's position as a leading
aviation hub in Southeast Asia. Fernandes had
argued earlier that the Sultan Abdul Aziz Shah
Airport in Subang should be reopened to support
Malaysia's huge lead in the LCC market over
Singapore, but Choy pointed out that Malaysia
could not afford to have a two-airport policy
because it did not have a large hinterland and
population mass. Fernandes said of the decision,
"AirAsia is a company that never wastes time to
look at the past as we have been through so many
adversities." He said the airline would focus on
making the low-cost terminal in KLIA into an
efficient design for AirAsia's low-cost model and
make it the center of low-cost travel in Asia
despite stiff competition from Singapore.
Barely a week after Kuala Lumpur announced
the plan for the new terminal, Malaysia Airlines,
the national carrier, agreed on a new code-sharing
deal with Singapore Airlines and its subsidiary
SilkAir, which will allow the latter two airlines
frequent access to Malaysian domestic destinations
Kuching in Sarawak state, and Kota Kinabalu in
Sabah state, without having to fly to KLIA. From
March 27, these flights, along with others to
Penang, will bypass KLIA.
"I am baffled by
the tripartite code sharing," Meranun was reported
as saying. "When we requested locating the
low-cost terminal at Subang Airport, Malaysia
Airlines strongly opposed it, saying it would be
against the plan to make KLIA a regional hub. How
is KLIA going to benefit now?" the executive
director asked. "Changi Airport will see an
increase in passenger traffic."
In the
same week, AirAsia scored a victory over
Singapore. Jetstar Asia and Valuair are seeking
Chinese approval to fly from the city-state to
major mainland cities, but AirAsia stole the show
by becoming the first no-frills foreign airline to
fly to China after its plan to offer daily
services between Bangkok and the southeastern
Chinese city of Xiamen was approved by the Chinese
government.
Indonesia offers
most
At least Singapore cannot thwart
AirAsia's local ventures in Thailand or Indonesia.
Thai AirAsia lost money in 2004, its first year,
after it was badly hit by bird flu, high fuel
prices and rising competition. At the year's end,
the tsunami affected inbound traffic to Phuket and
Bangkok. Its Indonesian operations, however,
started in January this year and were unaffected
by everything except the high fuel prices and
competition.
An improved economy, new
airlines, more aircraft and greater affordability
has led to a rapid expansion of the market in
Indonesia. The Indonesian National Air Carriers
Association (INACA) estimates that domestic
passenger traffic will rise some 31% over last
year's impressive 17.5 million. Some 22 airlines
and 35 companies that charter aircraft are
licensed to operate in the country, though the
government has now stopped issuing new licenses.
The INACA says load factors for domestic flights
average between 80-85%.
Asked in February
how his Indonesian venture was doing in its second
month, Fernandes said that because of the problem
with Singapore, the two aircraft it currently
operates were underutilized. However, he expected
to carry 50,000 passengers by the end of the month
and a million by the end of this year. If AWAIR
achieves that number, it would represent 25% of
the total domestic passengers carried by national
flag-carrier Garuda Indonesia last year with its
much larger fleet and much bigger range of
domestic routes.
AWAIR flies to five
domestic destinations: Padang and Medan in
Sumatra, Balikpapan in Kalimantan, Denpasar (Bali)
and Surabaya, the country's second major city.
Though competing with no less than 10 other
airlines on the latter route, AirAsia is seeing
load factors of 80% against a break-even level of
56%. "The market in Indonesia is very elastic. You
put in the planes and you'll fill it if the fares
are right" Fernandes said.
Bill
Guerin, a Jakarta correspondent for Asia Times
Online since 2000, has worked in Indonesia for 19
years as a journalist. He has been published by
the BBC on East Timor and specializes in
business/economic and political analysis in
Indonesia.
(Copyright 2005 Asia Times
Online Ltd. All rights reserved. Please contact us
for information on sales, syndication and republishing.) |
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