ASEAN Air Passengers and Cargo Liberalization to start 2008

May 10th 2007

The ASEAN Transportation Working Group (ATWG) in its 15th. Meeting in Palembang, South Sumatra, recently agreed to liberalize air transportation among ASEAN members, offering fourth freedom rights to passenger airlines from member countries flying to and from all 10 capitals of ASEAN beginning 2008, said Director General for Air Transportation, Tri S. Sunoko, as reported by Bisnis Indonesia.

This means that as from 2008 member countries’ airlines will have the rights to lift unrestricted number of passengers from member country to home country, explained Sunoko, so that this agreement will overrule earlier bilateral agreements that limited passenger lift.
For example, at present Singapore is limited to carry a maximum of 24,000 passengers per week from Jakarta , while Indonesia’s airlines are limited to 27,000 weekly.
Starting 2008 no restrictions are made on the number of passengers carried from Singapore to Jakarta, and vice versa, Director General Tri Sunoko explained.

The open sky policy will be gradually expanded to become fifth freedom rights, allowing ASEAN airlines to carry passengers from other ASEAN ports to third countries in unrestricted numbers, which is expected to come into force starting 2010.

Consequently, Indonesia must prepare our airlines and Jakarta’s airports to face the new regulations, giving special attention to air safety, and service compliance.

Results of the Working will be reported to the ASEAN Transportation Ministers Meeting in Singapore later this month, although two points have still to be thrashed out, namely the territorial issue and the issue of safeguard. While other points of agreement that had been reached were on the subject of tariffs, chance of flights, healthy competition and air services. Moreover, countries who feel that they are not yet prepared to accept such conditions may delay to ratify the agreement.

As regards the liberalization of Air Cargo, which is due to start in 2008, Indonesia has offered 7 cities to ASEAN airlines, these are Batam, and Palembang in Sumatra, Pontianak and Balikpapan on Kalimantan, Makassar and Manado on Sulawesi and Biak on Papua. Cargo liberalization allows for fifth freedom rights, so that ASEAN airlines may carry cargo from ASEAN point to third countries. Indonesia has agreed to the liberalization of air cargo to boost exports especially from the eastern islands of the archipelago, reports Bisnis Indonesia.

Hub and Spoke Policy to be gradually enforced

Meanwhile, anticipating the ASEAN Open Sky agreement, the Indonesian Government plans to disperse the home base of Indonesian airlines from a concentration at Jakarta to
9 other airports, implementing a policy of hub and spoke.

Indonesia counts 16 airlines with 203 domestic routes serving 101 cities. Of these, Garuda Indonesia, Adam Air, Indonesia AirAsia, Lion Air, Metro Batavia and Sriwijaya Air are expected to maintain their home base at the Soekarno-Hatta International Airport in Jakarta, while other airlines are expected to move their operational hub to Medan, Surabaya, Makassar, Balikpapan, Batam, Kupang, Jayapura, Merauke, Sorong or Manado.

Merpati Airlines is expected to move to Makassar, Wings Air to Surabaya, Riau Airlines to Batam, reports Bisnis Indonesia.

Moreover, the government plans to review airline routes and urge partnership among airlines, including operating code-share alliances or even to merge.
In so doing, the sprawling Indonesian islands will be better served, and airlines will reduce overlap in operations.

In the latest development, answering questions Wednesday posed by detik.com journalist, Lion Air President Director, Rusdi Kirana said that the airline preferred Surabaya as its home base, but Medan, Manado or Denpasar, Bali as its international hub. Lion Air’s subsidiary, Wings Air plans to make Makassar its home base.

On its side, Garuda Indonesia President Director, Emirsyah Satar said that the airline has its home base both in Jakarta and Bali, where Bali is particularly operated for Garuda flights to Japan and Australia.

The main problem in merging or code-sharing between Indonesian airlines is the different systems and service standards applied by each. So that, these need to be harmonized first, said Emirsyah Satar.