ASEAN's Single Aviation Market is a relatively modest goal
To begin with, ASEAN’s conception of a single market is vastly different from, say, the European Union’s.
The ASEAN version is much less ambitious – only third, fourth and fifth freedom relaxations among member states are contemplated.
Seventh freedom access (allowing, for instance, a Singapore carrier to connect Jakarta and Manila without the flight originating or terminating in Singapore) is not included. Neither is the sensitive right of cabotage, the ability of a foreign airline to connect two domestic points in a country. The “single” market, for now, has to be understood in this qualified manner.
On their part, the third/fourth and fifth freedom relaxations are set out formally in two multilateral agreements that have entered into force.
The first is the Multilateral Agreement on Air Services (MAAS); this contains two relevant protocols that free up third/fourth and fifth freedom access respectively among the ASEAN capital cities. These protocols now have the acceptance of all the ASEAN countries, except for Indonesia and the Philippines. Both countries’ reluctance to accept them has meant that their capitals, Jakarta and Manila, remain excluded from the liberalising movement that is sweeping across the region.
The second is the Multilateral Agreement for the Full Liberalization of Passenger Air Services (MAFLPAS); this follows up by abolishing third/fourth and fifth freedom restrictions among all other ASEAN cities.
This second Agreement has even fewer adherents – Indonesia, Brunei, Laos and Cambodia have yet to accept it. Interestingly, the Philippines has accepted this agreement to open up access to its secondary cities even while keeping Manila restricted.
Meanwhile, Indonesia’s rationale for staying out is simple – unlimited third/fourth freedom access into its cities, including Jakarta, translates into unlimited sixth freedom opportunities for Singapore, Malaysian and Thai carriers (including aggressive low-cost airlines such as AirAsia, Tiger and Jetstar).
To protect themselves from such competition, Garuda and other Indonesian carriers lobby their government aggressively to steer clear of the ASEAN agreements. In turn, this restricts the other ASEAN carriers’ operations into Indonesia, subjecting them to finite capacity that remains negotiated bilaterally.
With Indonesia alone accounting for almost half the entire ASEAN population, its decision to stay out hampers the Single Market project significantly. Intra-ASEAN liberalisation is thus far from complete.
In sum, if the relatively modest third/ fourth freedom relaxations do not even enjoy full acceptance from member states, prospects are bleaker still for any future relaxation to seventh freedom and cabotage restrictions.
Another obstacle to liberalisation relates to ownership and control restrictions
Both ASEAN agreements attempt to introduce alternatives to the traditional “substantial ownership and control” rule. Thus, the agreements contemplate the creation of ASEAN “community” carriers that repose majority ownership and effective control in the hands of one or more ASEAN countries or their nationals. This opens the way for a carrier to be owned and controlled by interests spread among ASEAN countries, just like in Europe.