IDEAS proposes Asean community carrier to serve region

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PETALING JAYA: With Asean marking its 50th birthday this year, Malaysian think tank IDEAS has come up with a policy paper that calls for the concept of an “Asean Community Carrier”.

The intention is for all Asean members having a policy for any airline set up for the sole purpose of inter-Asean travel, and with no restriction on ownership and landing rights.

“Asean grew through trade between member countries with the aviation industry playing a vital role in connecting between Asean member states.

“In light of enhancing the aviation market in Asean, IDEAS’ new policy paper ‘Ownership and Control of Airlines in Southeast Asia: Prospect for an Asean Community Carrier’ explores the opportunities and challenges in forming an Asean community carrier by examining the ownership and control of airlines in Southeast Asia,” IDEAS said in a statement today.

The paper was authored by Alan Tan Khee Jin, a professor at the National University of Singapore Law School and an expert in aviation law.

According to IDEAS, almost all Asean member states practise a protectionist policy when it comes to the aviation industry.

“There are two types of restrictions that exist in the aviation industry which are ‘internal lock’ under the domestic law and ‘external lock’ under the international law.

“The ‘internal lock’ is explained as the restriction in which airlines can be licensed for operation only if majority ownership and control reside in the nationals of that country.

“The ‘external lock’ is described as the restriction in which air services agreement between two countries will provide that the designated airlines to operate services between them must be ‘substantially owned and effectively controlled’ by their respective nationals,” the paper explained.

It added that while individual countries can choose to abolish the “internal lock” simply by amending their own laws, the “external lock” cannot be easily dismantled.

The IDEAS paper then gave the example of how Australia allows foreigners to own and operate an airline in Australia under its domestic law, even to the maximum 100% ownership.

“However, such an airline can only fly domestic routes. The moment it wishes to fly elsewhere, it would come up against the ‘external lock’ found in Australia’s bilateral air services agreements with other countries.”

The paper also pointed out that there are a few shortcomings to liberalise ownership and control of airlines in Asean member countries for the purpose of the “Asean Community Carrier”.

“Domestic laws in the individual Asean states must explicitly allow for other Asean nationals to hold majority ownership and effective control in their airlines so that community carriers can be established and designated.

“Also, each Asean state must explicitly allow other Asean states’ designated community carriers full access to its points,” IDEAS said, referring to having no restriction on landing rights within the region.

Commenting on the paper, IDEAS research director Ali Salman said “air transport for economic development continues to be one of 12 priority areas in the establishment of the Asean Economic Community (AEC)”.

“Liberalising ownership and control of airlines in Southeast Asia and establishing the Asean community carrier is crucial to knocking down barriers to connectivity and trade in the region.”

To achieve the full realisation of the Asean community carrier, the paper also recommended that Asean countries amend domestic laws to allow non-national majority ownership and control and amend Asean agreements to remove the consent of individual states to a community carrier’s operations.