ASEAN Open Sky policy spells bad weather for Indonesian airlines

As early as January next year, ASEAN carriers will fly freely across the region to any airport and as often as they want, as part of the ASEAN Open Sky policy. Ahead of that, the Indonesian government is taking steps to make sure Indonesian airlines can compete with other airlines in the region.

ASEAN is moving towards a single aviation market, with the aim of higher efficiency, better connectivity and cheaper fares. In Indonesia, the biggest economy in the bloc, the open sky policy is expected to create almost 30,000 jobs and add almost US$500,000 to the country’s GDP.

Yet, Jakarta has not signed off on the deal on concerns about competition, because Indonesia charges more than its regional peers for aviation services.
Djoko Murjatmodjo, Acting Director General for Air Transport at the Ministry of Transportation, said: “We are aware there are problems regarding the high price of aviation fuel as well as import tariffs for airlines and aircraft spare parts. The airline association and the Transportation Ministry are taking steps to reduce these tariffs.”

Currently, aviation fuel in Indonesia is 13 per cent more expensive than Singapore. The policy also calls for Medan, Jakarta, Surabaya, Denpasar and Makassar to open their airports, but those airports and cities do not have the capacity to accommodate a swell in passenger numbers.

Indonesia said efforts are underway to address fuel costs, infrastructure development and personnel training to manage aviation traffic. However, AirAsia CEO Tony Fernandes said a key problem is the government itself. “The trouble is in ASEAN - government owns a lot of businesses. So there’s a huge conflict. Am I regulating AirAsia or is he my competitor? That’s the real problem. When I criticise governments, they say I’m criticising them. I’m criticising the airline or the regulator, so this is the Jekyll and Hyde situation. Governments need to decide what’s good for my people.”

So far, eight ASEAN member states have ratified the agreement. Indonesia has only ratified the ASEAN’s Multilateral Agreement on Air Services but has not ratified the agreement on cargos and passengers. As the Open Sky policy will take into effect only when all agreements are ratified, it may be up to the next administration to pick up what the current government has left off.

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