Low Cost Airlines Drive Regional Reform

The emergence of low cost airlines in Asia will greatly accelerate moves to harmonise aviation policies across the region and drive “radical change”, the Asia Pacific Low Cost Airline Symposium in Singapore was told today.

Former Australian Government transport chief Tony Wheelens, now a Senior Associate with the Centre for Asia Pacific Aviation, says he is confident governments will see that change is essential and important reforms will take place “in a very short period of time”.

“The LCA phenomenon clearly now has the potential to become a vortex, sucking often greatly different aviation policies along the same path,” he told delegates at the symposium.

“The critical mass being generated by this process will short circuit what would otherwise be a 10 year timetable – compressing it into perhaps two or three years.”

Mr Wheelens previously served as Assistant Secretary of the Department of Transport and Regional Services and is currently involved in the development of a joint aviation and tourism strategy for the Government.

Speaking on the second day of the two-day symposium, organised by the Centre for Asia Pacific Aviation, he says that airlines, consumers and associated industries will benefit from the adoption of a more unified approach to aviation.

According to Mr Wheelens, regional cooperation in trade, improved access to sub-regional markets and higher levels of political stability have sharpened the focus on aviation reform.

“No longer is it sufficient to equate the national interest solely with that of national airlines. Other sectors of the economy, such as tourism, airport operators and trade are, correctly, demanding a closer role in the development of national transportation strategies.

“The challenge for the negotiators is in the complexity of the regulatory environment and the difficulties implicit in making the transition from outcomes based on the sectoral interests of airlines to those reflecting more closely broader national interest concerns.”

Mr Wheelens says that if aviation is to fully meet its potential and continue to contribute to growth in tourism and trade in the interests of national economies, careful consideration must be given by governments to “the adequacy of the policy and regulatory framework”.

“To specifically address this problem, strategic policy planners across the region must assume a higher level of responsibility for the resolution of these national interest conflicts.

“To ensure that the economic benefits that will derive from LCAs (Low Cost Airlines) stimulating demand and growing new market segments, policy planners must ensure that the bilateral system is used as a positive instrument of reform.”

He warns that the bilateral system will be used defensively by many economies to protect national carriers.

“LCAs will benefit most from genuine deregulation. Again, the responsibility for ensuring that impediments are minimised will fall to national strategic planners focused on broader regional economic development.”

Mr Wheelens says that the need for a high level regional approach is also underlined by policy changes occurring in Europe and their implications for bilateral negotiations with European countries.

He also says that, in the long term, access to capital “has the potential to frustrate the development of LCAs and the consolidation, mergers and cross equity arrangements that will be essential to structural reform in global aviation”. 

“During the next decade, consolidation, mergers and cross equity relations between international airlines will be inevitable and will be keenly sought by airlines. LCAs will be a fundamental part of that reform process.”

Despite his optimism for the future, Mr Wheelens expressed concern that the “constant shock” environment prevailing for aviation could undermine the reform process.

“I wonder, will governments retain their enthusiasm for liberalisation if their national flag carriers become seriously threatened in the next year or so? If it is a choice between their survival and that of independent LCAs, who will be more sympathetically treated?”