The Straits Times says

Air links vital to help Asean soar

The expansion of South-east Asia's aviation market was highlighted at discussions surrounding the Singapore Airshow. The number of air passengers within the region has tripled over the past decade. Plausibly, some of this growth would have come from the relative youthfulness of the market compared to the mature skies of the advanced industrial economies of Europe and North America.

However, air travel in Asean reflects also the increasing purchasing power of the middle class in a region whose population of more than 620 million exceeds that of the European Union or North America. According to one study, the middle class in Asean grew more than six times in size, from about 50 million in 2004 to more than 300 million by 2014. A young population is adding to the premium of the growing middle class, and its disposable income, in supporting healthy growth in demand. Given that the market for air travel in Asean could grow 6.5 per cent annually over the next two decades, it is natural that global aviation leaders are sitting up and taking notice of the region's rise.

Yet, Asean countries could do more to improve the prospects of the sector. The template for action is the Asean Single Aviation Market. Air travel growth rates could go even higher if plans for open skies take off. It is a pity, therefore, that the Asean Economic Community has been inaugurated without the policy coming into effect. Indonesia's inability to ratify the open skies agreement is a disappointment that runs against the grain of Asean integration. The missed opportunity might be felt keenly down the road because greater air connectivity is crucial to realising the goal of a region defined by the free movement of goods and services, among other things.

Certainly, countries do worry about how open skies will affect domestic airlines. However, they should heed the analysis of Mott MacDonald, a global management, engineering and development consultancy. It had reviewed the competitive market position and operational readiness of Indonesian airlines in an open skies scenario. Quantifying the costs and benefits of Jakarta implementing open skies, it estimated that the policy would account for US$2.7 billion (S$3.8 billion) in additional direct GDP and an additional 16,000 direct jobs in 2025. If indirect and other effects were included, the corresponding gains would be US$5.7 billion and 29,000 jobs. Competition would put pressure on inefficient market players, but it would increase the size of the pie for all.

Asean's members must seize the economic initiative. Liberalising the aviation sector would benefit consumers, bring Asean nations and their peoples closer, and help the association to press on in reaching an agreement to allow airlines from Asean and the European Union easier access to each other.

A version of this article appeared in the print edition of The Straits Times on February 22, 2016, with the headline 'Air links vital to help Asean soar'. Print Edition | Subscribe