In the 49 years since its conception, the 10-member Association of Southeast Asia Nations (Asean) has been gradually moving towards greater liberalization of its air transport services. In line with this strategy is the Asean Single Aviation Market (ASAM)–an ambitious open-skies scheme that was intended to further liberalize air services under a unified air transport market by the end of 2015.

Asean’s self-imposed deadline has now come and gone, with three members–the Philippines, Indonesia and Laos–reluctant to ratify the full agreement. The plan was for all carriers from Asean to enjoy unlimited third, fourth and fifth freedom operations within the region. To date, Indonesia remains opposed to opening up its secondary cities, the Philippines has excluded Manila from the agreement and Laos has yet to free up Luang Prabang and the national capital Vientiane.  

Given that Indonesia and the Philippines are Asean’s two largest nations by population, their decision to stay out prevents the project from being fully realized. At the same time, the ASAM liberalization agenda remains relatively modest. Only third, fourth and fifth freedoms are currently being considered, while seventh-freedom relaxations and the right to cabotage have yet to be addressed. Accordingly, the ASAM falls short of a true open skies policy.

The third-, fourth- and fifth-freedoms are addressed in two multilateral agreements that have already come into force. The multilateral agreement on air services (MAAS) liberalizes market restrictions among Asean capital cities while the multilateral agreement for the full liberalization of passenger air services (MAFLPAS) frees up secondary cities and sub regions.

Indonesia has agreed to open access to Jakarta but has yet to ratify relevant protocols under MAFLPAS. As such, traffic rights into points other than Jakarta remain restricted by existing bilateral air services agreements.

Indonesia’s decision to refrain from joining a true ASAM is due largely to it wanting to protect against competitors, particularly from Singapore and Malaysia. Indonesia has the ability to offer regional carriers hundreds of unlimited access points, while many countries can offer only one point of access. This systematic imbalance for exchange of traffic rights has led Indonesian carriers, such as Garuda, to lobby their government to refrain from entering into Asean multilateral agreements.

While airlines from other Asean states now have unlimited rights to fly into Jakarta from their own capitals, it is well known that there is limited slot capacity at Jakarta’s congested Soekarno-Hatta Airport. Built to handle 22 million passengers annually, the airport currently handles roughly three times that volume.

An $805 million expansion plan of Soekarna-Hatta is currently underway that aims to boost passenger capacity to 62 million people. However, according to the International Air Transport Association (IATA), the capacity problem plaguing Jakarta is nowhere near being solved, even with the terminal upgrades. IATA estimates that Indonesia could be serving 270 million passengers by 2034

Meanwhile, the Philippines has opted to exclude Manila’s Ninoy Aquino International Airport from the agreement, citing runway congestion and a shortage of airport slots. The airport’s four terminals have a combined design capacity of 31 million passengers. In 2015, Manila handled 36 million passengers, representing an increase of 7.6 percent increase from the previous year.

As an alternative, the Philippines has agreed to liberalize secondary cities under MAFLPAS, including Clark International, which is already open to Asean carriers.  While Clark has the available infrastructure capacity, the airport is 62 miles from Metro Manila with very little connectivity infrastructure available.

“In pockets of Southeast Asia, such as Jakarta and Manila, there is substantial growth opportunity, but the chronic lack of infrastructure is stifling that demand with no magic wand to change in the short term,” said Mark Clarkson, business development director for Asia Pacific at OAG.

Clarkson said that smaller regional airports will eventually emerge to absorb some of the growth. Infrastructure developments are also underway in several Asean countries including a $3 billion plan to expand Singapore’s Changi airport with a fifth terminal and a $100 million project in Cambodia to upgrade passenger terminals at Phnom Penh and Siem Reap.

In Thailand, both Bangkok Suvarnabhumi International Airport and Don Mueang are earmarked for expansion. Vietnam is also poised to expand provincial airports and build a new gateway airport to serve Ho Chi Minh City.