February 2, 2010 2:00 am

Asean and China close to deals to open up Asia-Pacific air travel

China and the Association of South East Asian Nations are nearing agreement on two air service pacts that would mark a big move towards open skies across a vast area of the Asia-Pacific region, Singapore's transport minister said yesterday.

Raymond Lim, who is also second foreign minister, said talks between Asean and China to establish "a liberal air services regime" were expected to be concluded this year after six years of talks.

He said ministers were also near agreement on plans to replace a two-year old pact allowing limited competition on routes between Asean capitals with a fresh deal allowing virtually unrestricted competition within five years.

The imminent completion of the two agreements was welcomed as "very good news" by Giovanni Bisignani, director-general of the International Air Transport Association, who called for further liberalisation in the Asia-Pacific region.

"Asian aviation will not reach its potential if the airlines are constrained to old ways of doing business," Mr Bisignani told an aviation conference before the Singapore air show, which starts officially today. The Asia-Pacific region accounts for just over 25 per cent of global passenger traffic, slightly ahead of North America. But Iata expects passenger numbers in the region to rise from 647m last year to 864m by 2013, which it says will then be a third of the global market

Asean, which has 580m people and a combined economy bigger than India, already has strong competition on a limited number of internal routes between capitals, mainly as a result of a boom in low-cost carriers such as Malaysia's AirAsia, which are expected to be the biggest beneficiaries of further liberalisation.

"There is structural growth in passenger demand because gross domestic product per head is rising", said Chris Tarry, a veteran UK-based aviation consultant. "That creates a market for low-cost carriers if regulatory barriers can be removed." Both aviation pacts are intended to build on earlier deals on trade in goods, including a regional agreement between Asean and China that took effect on January 1 in spite of objections from Indonesia, Asean's biggest member.

Jakarta had also sought a delay in the implementation of the internal Asean aviation agreement, arguing that its industry was unable to compete with airlines based in more developed countries such as Malaysia and Singapore, Asean's richest member. However, Garuda Indonesia, the country's flag carrier, confirmed yesterday that it planned to raise up to $400m (€290m, £250m) in an initial public offering in June to fund expansion.

Garuda was one of four Indonesian airlines re-moved from a European Union's list of banned carriers, after safety improvements and has said it wants to fly to Amsterdam.

The Asean member states are Singapore, Indonesia, Thailand, Malaysia, Brunei, Vietnam, Cambodia, Laos, Burma and the Philippines.

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