Open Skies Pacts Expected To Broaden Competition
<I>Washington, D.C.</I> - The U.S. is well on the way to establishing a regional open skies policy with Asia, having signed recent aviation pacts with Singapore, Taiwan and Brunei. Another agreement is expected to be reached with Malaysia by April, and talks are scheduled to begin soon with South Korea.
The new pacts lift restrictions on passenger and cargo operations, allowing airlines from each country great leeway in establishing new gateways and flight frequencies in the other country and to continue flight service on to a third country. They also allow for more code-sharing agreements between carriers on both sides of the Pacific. All this translates into good news for travelers doing business in Asia.
"For passengers, the agreements are a good thing on all counts," observed Laura Sweeney, an airline analyst with the Economic Strategy Institute in Washington, D.C. "They will mean increased service, new city pairs and more fare competition."
But still casting a cloud over the scene is Japan which, despite several talks with U.S. Department of Transportation officials during the past year, has not yet agreed to liberalize its aviation relationship with the United States (BTN, Oct. 7, 1996). During talks in January, Japanese officials argued that U.S. carriers already dominate the U.S.-Japan market and that an open skies agreement would only worsen the situation for Japanese airlines.
At press time, a new round of talks between the two countries was in progress. Along with again focusing on the open skies issue, the talks also will address a complaint filed by Northwest Airlines that Japan is violating the existing aviation agreement by not allowing Northwest to establish Seattle-Osaka-Jakarta service. The carrier had hoped to establish the new route in October.
But if the United States can't win over Japan--by far the most important player in Asia--through direct negotiation, it may be able to make some headway by forging agreements with many of Japan's neighbors. When announcing the pact with Singapore, former U.S. Transportation Secretary Frederico Peña said, "this agreement initiates what we hope will be a series of open skies relationships with our partners in Asia."
Airline analysts believe the new U.S. emphasis on racking up airline agreements throughout Asia is a strategy designed to chip away at the Japanese wall of resistance, forcing Tokyo to fall in line. But Sweeney doesn't think the strategy will have much impact.
"Japan will liberalize in its own time--it's not heavily influenced by what's happening with other countries," she said. "The market size that Japan commands gives them the leeway to take their time.
Sweeney also believes that the new aviation pacts won't affect how U.S. airlines operate in Asia until an agreement with Japan is in place. "U.S. carriers already have liberal transportation terms in Asia and the right to build hubs in certain cities," she said. "The reality is that they've already tried the strategy of setting up hubs in Asia outside Japan, and they've failed."
Asian carriers, particularly those who now have only a few U.S. gateways, probably will benefit more than their U.S. counterparts, Sweeney added. "The smaller Asian carriers now will have access to the U.S. market that they didn't have before," she said. "They're not really a threat to U.S. carriers, but they will be able to make some inroads in the U.S. market."
One Asian carrier that is expected to expand its American presence is Malaysia Airlines, which currently has just one U.S. gateway, Los Angeles. "We're watching the Malaysia-U.S. talks with great interest; they will be instrumental in opening up new gateways for us," said a Malaysian Airlines official. "It won't mean as much for U.S. carriers; several already have rights to fly into Malaysia but have chosen not to use them."
Singapore Airlines, which already has a strong U.S. presence with 39 flights per week, is expected to see significant global benefits from the new U.S.-Singapore open skies agreement. According to Mathew Samuel, director of corporate affairs for Singapore Airlines in Los Angeles, the agreement opens up far more possibilities than just additional U.S.-Singapore service.
"This new agreement with the U.S. will remove all existing restrictions, giving SIA new opportunities to operate to the U.S. via Europe and Asia," he said. "Of course, we will have to negotiate with European and Asian countries for more access to the U.S., but at least there will be no more hurdles from the U.S. side."
SIA has no immediate plans to add any U.S. gateways, Samuels added.
Similarly, the U.S.-Taiwan agreement opens up new routing possibilities for Taiwan-based EVA Air, a young, fast-growing airline that offers 40 flights per week to Taipei from six U.S. gateways, San Francisco, Los Angeles, Newark, New York, Seattle and Honolulu. The airline also has been building a base in Europe and will start thrice-weekly Taipei-Amsterdam service in May.
While the airline is not considering the possibility of offering service between Europe and Asia, EVA is planning to expand its presence in the United States, said airline spokeswoman Mary Graybil. "We very much want to add additional gateways, and the new agreement will help with that," she said.
EVA hopes to establish service to Chicago, Washington, D.C., Miami, Houston and Dallas.