In recent years, Thailand has established one of the more liberal air markets in the region, if not the world. It has permitted foreign carriers virtually unrestricted access to its gateway airports, and it has allowed for almost unlimited “beyond rights” for foreign carriers seeking to use Bangkok for services to onward destinations. As a result of these policies, traffic has grown rapidly and the country has established a reputation for being a major global transport hub. However, beginning in 2015, airline and government officials started to question its liberal policies and began to suggest that they should be modified. Officials argue that Thai carriers are facing unfair competition and that some counterparty markets may not be giving Thai carriers fair and equal treatment. Additionally, regional efforts to promote the liberalisation of ASEAN air travel may do little for Thailand. While achieving certain headline goals, the reforms are not working well in practice. The hope for a single regional air market remains elusive, and it may be years before Thai carriers can operate freely throughout ASEAN.
Thailand has had open skies agreements in place since 2001, when it signed an agreement with Malaysia to liberalise their respective markets. Other deals have subsequently followed, and the US signed a bilateral arrangement in 2005. Thailand’s airports are now relatively open to foreign carriers both in terms of flights to and from home countries and flights to and from third countries. However, the openness has started to generate some high-level domestic criticism. Commentators have expressed concern that excessive “fifth freedom flight” has eaten into the business of Thai Airways and that these rights are in part to blame for the troubles being faced by the airline. At least one industry executive has openly questioned the country’s open skies policies. In comments published in the Bangkok Post in 2015, Patee Sarasin, chief executive of Nok Air, a budget airline, said that the market is so liberal in terms of allowing foreign carriers to operate that it is damaging the local airlines. He added that Thailand was also not getting reciprocal treatment from other countries. A number of imbalances were identified that suggest that the policies of Thailand were either not being properly applied or simply leading to less than optimal results. The well-funded Gulf carriers were seen to be taking advantage of Thai open skies and flooding the market with frequencies. Cambodia and Laos were seen freely entering Thailand, while keeping their home markets restricted. Meanwhile, South Korea has five carriers on Thai-Korea routes while Thailand only has two.
Sarasin is calling for the market to be protected in order to help the Thai carriers. The government has taken an interest in the problem and appears to be supporting a reassessment of the air policies. In early 2015, Prajin Juntong, then minister of transport, said there would be a review of open skies. He wanted traffic to be better managed and congestion at airports relieved. A proposal to adjust open skies was submitted to the Cabinet in September 2015.
The open skies debate dovetails with the decisions by International Civil Aviation Organisation and US Federal Aviation Administration to downgrade Thailand from Category 1 to a Category 2. In part, the deficiencies cited are a result of heavy traffic at the country’s gateway airports. The Thai government says that it does not have the internal capacity to handle so many flights. While no direct connection between foreign traffic and the inspection of domestic airlines has been made, the country’s civil aviation institutions are being taxed by the volume.
Other nations, larger than Thailand, have also brought open skies into question and have made similar complaints. US carriers, specifically American, Delta and United have argued that the Gulf carriers – Emirates, Etihad and Qatar Airways – are taking advantage of the privileges granted to them and are essentially dumping capacity into the US market. They argue that subsidies from the Gulf states are anti-competitive and that the airlines should not be allowed this advantage when flying under the open skies arrangement being offered.
However, not all observers agree with this assessment, with some Thai airline executives arguing in the Bangkok Post that Thailand, as a country, has greatly benefitted from the policy, as it helped to boost the tourism sector and has improved global connectivity. Backing off of open skies agreements, they contend, would result in a significant loss of business for carriers and sector stakeholders. The number of Chinese tourists, for example, would drop if Chinese carriers were not able to freely enter the Thai market because Thai carriers don’t have the capacity or frequency sufficient for Chinese cities.
A spokesperson for Emirates told local press that Thailand has equal rights in Dubai, while the Gulf airline is adding much needed capacity to its Thai routes. Because of the difficulties being faced by the Thai carriers in terms of operations and funding, the open skies policy has been keeping Thailand well served until its home market carriers have the capacity to take on new destinations and meet demand. Some executives say that any watering down of open skies would tarnish the image of the country. They add that the government should focus on improving its traffic management rather than seeking to limit international traffic. They also note that while the country has an open skies policy, traffic is already capped because of the lack of additional landing slots. In 2015, Bangkok’s Suvarnabhumi Airport was receiving 800 flights a day, despite only having capacity for 600. Phuket is rated for 20 flights an hour but takes 23.
The next challenge and opportunity for Thai carriers and regulators is the ASEAN open skies agreement. Under the terms of the regional integration agreement, the ASEAN Economic Community (AEC) is supposed to work towards a single air market. The ASEAN Single Aviation Market ( ASEAN-SAM), when a reality, will allow regional airlines to fly freely and without capacity restrictions between airports throughout the region. Third and fourth freedoms, the right to fly to and from another country without having to gain specific permission to do so, will be standard. However, the ASEAN open skies policy has not progressed as planned. Indonesia is concerned that allowing for such freedom within the community will result in serious competition from its wealthier neighbours, Singapore and Malaysia.
There is also a sense that in terms of simple numbers the situation is unbalanced. Singapore Airlines will have access to five Indonesian airports, while Indonesian carriers will only get access to one airport in Singapore. By the end of 2015, the deadline for open skies in the region, two countries were still holding back on full ratification. Indonesia had only opened Jakarta, while the Philippines had opened all cities except Manila. The lack of true third and fourth freedoms in two of the 10 markets in the region, and in particular the largest country in the grouping, was seen as a serious gap. Without ASEAN participation it is also unlikely that any further progress can be made on the EU-AEC Open Skies agreement, the first such bloc-to-bloc agreement.
In part, regional open skies will be held back by overcrowding at some of ASEAN’s key gateways. Even with rights, some airlines may be unable to take advantage of them. This problem could be avoided somewhat if a higher level of rights was allowed. If foreign carriers could operate locally, congestion might be alleviated as traffic shifts. However, these freedoms will take time to achieve. Expansion of services is also being help back by a number of non-tariff barriers. Despite the agreements on paper, executives in the region say that from a practical point of view open skies is not actually working in ASEAN. In the two months after ASEAN was officially declared a single market, no new freighter routes had been opened. For ASEAN to truly be a single aviation market, it needs more than just third and fourth freedoms, which are really just a formalisation of what has long existed in most of the larger and more advanced countries in ASEAN. Observers say that true fifth freedoms, or onward rights, in all countries are needed for ASEAN-SAM to work, and full commercial rights of this kind are not yet available throughout the region.
Seventh freedoms, the right to fly between two destinations in third countries without touching down in the home country, are ultimately required but have not yet been placed on the ASEAN agenda.
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