Asia’s oldest airline pushes lobbyist levers to “protect” the industry from the open skies policy. The theme of the anti-open skies lobby is to appeal to nationalism – and to use the “infant industry” argument. Frankly, I find it hilarious that the same industry which brandishes “Asia’s oldest airline” is the same Philippine industry which NEVER GREW up and worse, FAILED TO LAUNCH.
The Anti-Open Skies Lobby
Here’s a sprinkling of what the anti-open skies lobby is saying: Asean open skies poses threat to Philippine carriers
Here, Raralio said the regional open skies policy worsens the situation as it places the local air cargo companies, which are privately owned, at a disadvantage because those in neighboring countries are mostly owned by the state and enjoy subsidies and financial assistance.
“You cannot open up the market at this time as almost all markets are getting smaller due to the crisis,” Raralio said. This, he said, will result in cutthroat competition which will see air cargo companies offering lower and lower rates if only to get a piece of a shrinking pie.
In the end, the bigger companies and those that enjoy government financial support will benefit because they can offer lower rates in exchange for large cargo volumes, Raralio said. He questioned the wisdom of the regional open skies which was adopted recently as a strategy to weather the global economic crisis in the belief that carriers and forwarders will handle more volumes when cargo capacity and other restrictions are lifted.
Debunking the Anti-Open Skies Position
EO 500 and EO 500-B were first crafted by Pres. Arroyo. EO 500b was drafted by Narzalina Lim, a board member of the Pacific Asia Travel Association and a former secretary of tourism, gives unlimited access to the two airports to all foreign airlines, with no need for government designation or bilateral air agreements.
The open skies EO met fierce resistance and the proposition became untenable due to the media campaign from the alliance of emo leftist groups and monopoly Filipino businesses. The Filipino monopolists and emo nationalists bent on protectionism cherish their sweet misery of late flights, high fares, lost bags, lousy customer services – I DON’T.
As an air traveler,my view is that these provisions are meant to provide travellers (Filipino and non-Filipino) more options. If the Philippine aviation industry is not willing to step up to the demand of consumers there is no reason why consumers shouldn’t be given other alternatives.
I don’t want to be stuck with PAL – I want to have more options that will get me to my destination how I want it, when I want it, at a price I can afford.
A position paper prepared by the Makati Business Club in support of EO 500 and EO 500B refuted the various arguments put forth by the anti-open skies lobby.
The liberalization of the Philippine aviation sector, however, is being opposed by special interest groups that favor an environment of “protectionism” and claim that said reform is a threat to national (or should we say “vested”) interest. We, the various stakeholders of Central Luzon, express our unconditional support to this administration’s move towards liberalization as embodied in Executive Order 500 and Executive Order 500-B and would like to address the concerns of the Philippine air carriers.
To wit: On the claim that the grants of aviation privileges to the Diosdado Macapagal International Airport (DMIA) and other airports are devoid of “reciprocity”
Fact: Reciprocity since the 90’s has been defined in a broader sense to mean the exchange of rights, freedoms, and opportunities of equal or equivalent value. The entry of Low Cost Carriers (LCCs) in DMIA has led to enormous opportunities and economic value to Central Luzon. The local carriers want us to be counting air seats entitlements (that, by the way, they are still not utilizing fully) instead of counting true economic value when we speak of reciprocity.
On the claim that EO 500B gives 7th Freedom Rights to foreign airlines
Fact: That is untrue. EO 500 and 500-B do not grant 7th freedom rights. What is granted is unlimited 5th freedom rights.
On the claim that EO 500B would have an adverse effect on the existing routes operated by local carriers
Fact: The entry of LCCs at DMIA since 2005 had not adversely affected the load factors of local carriers. PAL’s load factor for its equivalent route, in fact, rose from 68 percent to 76 percent. PAL was even awarded the “Airline Turnaround of the Year” by the Centre for the Asia Pacific Aviation. Their argument against competition has been used before when PAL objected to the entry of Cebu Pacific, Asian Spirit, and other local carriers in the 90s and has proven to be untrue.
On the claim that EO 500B would make the Civil Aeronautic Board (CAB) a mere rubberstamp body
Fact: All carriers applying for a route to the Philippines are still required to secure a Foreign Air Carriers Permit (FACP) from CAB and an Air Carriers Operating Certificate (ACOC) from the Air Transport Office (ATO). Hence, both CAB & ATO can still exercise regulatory functions to ensure that air carriers serving meet all international industry standards.
On the claim that unilateral grants force the nation to give up valuable bargaining chips
Fact: We have been granting unilateral grants since the early 90s and said practice has not prejudiced on bargaining powers. Considering that foreign carriers are also enjoying benefits from such unilateral grants and that a unilateral grant may be withdrawn by us anytime, we feel that such grants even enhance our bargaining power.
On the claim that the EO would run afoul of a number of constitutional & legal provisions
Fact: We see no basis for this claim as EO 500-B does not have constitutional infirmities as it does not violate any provisions of law. This argument, perhaps, is based on the assumption that EO 500B grants 7th freedom, which is, of course, a false assumption.
Pleading the Case for EO 500B
The open-skies debate is not new. It can be recalled that the open skies policy was already being debated in 2007.
Saturday, May 26, 2007Arroyo told to sign EO 500BBy Reynaldo G. NavalesCLARK FREEPORT — Cabinet Secretary Edgardo Pamintuan is urging Malacanang to approve the proposed Executive Order (EO) 500B so as not to delay the development of the Diosdado Macapagal International Airport (DMIA).In his letter dated May 9, 2007, Pamintuan asked President Gloria Macapagal-Arroyo to “approve, sign and issue the proposed EO 500B, which is necessary to the development of DMIA as a premier international gateway.”Pamintuan cited Cambodia, which declared a unilateral open skies policy in 1999 effectively increasing the number of tourist arrivals from 24,000 in the same year to 1.5 million in 2006.A total of 170 intra-Asian flights now serve the otherwise listless Siem Reap International Airport.Pamintuan disclosed that the equally war-ravaged Vietnam is now attracting 3.5 million visitors per year while both Thailand and Singapore are attracting 10 million visitors per year.DMIA posted 7,880 passengers only in 2003 and the number increased in 2004 to 49,500 passenger after the entry of Asiana Airlines of South Korea, which provided flights between Incheon, SK and Clark.In 2005, DMIA posted 225,000 passengers and in 2006 the number rose to 471,000 international passengers. In 2006, DMIA was averaging 39,000 passengers per month but for the current year, the Macapagal airport was already posting 45,000 passengers per month.It is expected that over half a million international passengers will pass through DMIA in 2007.Other countries that have declared unilateral open skies policies include Bahrain, Chile, China, Ecuador, Guatemala, Honduras, India, Lebanon, Pakistan, Sri Lanka, Tunisia and the United Arab Emirates.Japan, which has a strict air policy, will also undertake the most radical liberalization of its highly regulated skies with Asian Gateway Plan. Local carriers of these mentioned countries prospered after undertaking air liberalization.“May I now urge the President to decisively and positively act on the matter,” said Pamintuan.“My position is emboldened by the fact that one of our country’s top economic experts and industry leaders — Mr. Washington Sycip — told me during the recent National Infrastructure Forum that he personally conveyed to Mr. Lucio Tan and Mr. John Gokongwei the futility of stopping the full development of DMIA, considering the problems at our current gateway at the Ninoy Aquino International Airport (Naia),” said Pamintuan.“The issue of reciprocity has already been defined by your administration as one that is, in essence, beyond the mere interests of the carriers, but to cover national interest,” he added.“The benefits of a liberalized and competitive regime have already been proven in many industrial and economic sectors. Our local airline industry is an example. It thrived when it opened up to competition,” said Pamintuan.Pamintuan further said the “issue of security and safety, as propounded by the Department of Transportations and Communications (DOTC) and the Civil Aeronautics Board (CAB), is totally unrelated to the liberalization of the air traffic and entry of more players.”
Clark International Airport Corporation (Ciac) executive vice president Alexander Cauguiran supported the views of Pamintuan.In a letter to Deputy Executive Secretary Manuel Gaite, Cauguiran emphasized that “the Chicago Convention of 1944, which established the regulatory framework for international civil aviation, recognizes only five Freedoms of the Air. Non-cabotage traffic rights mentioned in EO 500B should make reference only to the Freedoms of the Air recognized by the said convention.”Foreign carriers are also obliged to secure a Foreign Air Carrier Permit (FACP) from the CAB under the provisions of EO 500B, regardless of whether said foreign carrier is designated under an Air Service Agreement or not, noted Cauguiran.Supporters of a liberalized air policy called on the issuance of EO 500B to allow sustainability and entry of more budget airlines operating at DMIA and to increase visitor arrivals.
Pamintuan is supported by the Clark Investors and Locators Association, Makati Business Club, American Chamber of Commerce, Bulacan Chamber of Commerce and Industry Inc., Bataan Chamber of Commerce and Industry Inc., Angeles Filipino-Chinese Chamber of Commerce and Industry Inc., Philippine Chambers of Commerce and Industry Inc., Metro Angeles Chamber of Commerce and Industry Inc., Pampanga Chamber of Commerce and Industry Inc., San Fernando Filipino-Chinese Chamber of Commerce and Industry Inc., Advocay for the Development of Central Luzon (ADCL), North Luzon Chambers, Chamber of Real Estate and Builder’s Association, Task Force on Transport and Logistics Export Development Council, Philippine Travel Agencies Association, Pinoy Gumising Ka Movement (PGKM) and local officials of Pampanga led by Mabalacat Mayor Marino Morales and Angeles City Mayor Carmelo Lazatin.
Taxpayers need to stop subsidizing PAL’s inefficiency
The social benefits of open skies policy far outweigh the benefits of not liberalizing the Philippine aviation industry. Inefficient businesses which do not innovate should not be protected. The impact of the protectionist Philippine aviation industry on tourism and exports is felt in the higher ticket prices, the lack of flights, and the lack of choices when stuff hits the ceiling.
Philippine Airlines’ cancellation of flights following the resignation of 25 pilots may spur higher ticket prices and encourage the government to ease market restrictions, Tourism Secretary Alberto Lim said on Tuesday.
The reduction in services “shows the need for more carriers to serve the tourism industry as well as business and investment,” Lim said. Lim, who co-founded the Freedom to Fly Coalition that advocates an open-skies policy as a strategy to promote economic development, said PAL’s labor problems “would help the cause of liberalization.”
The country eased the restrictions on services by overseas carriers following a Philippine Air pilots’ strike in 1998, Lim said, to ease its reliance on the nation’s flag carrier. The government on Tuesday held another emergency meeting with Philippine Air officials and other local airlines because of concerns the reduction in services may disrupt tourism and exports.
Open Skies – If not now, when?
In 1997, a released policy paper suggested that the Philippines is not yet ready to adopt an open skies policy.
The paper, prepared by a consultant at the UP College of Economics and Management in Los Banos and supported by the US Agency for International Development in partnership with the Trade and Investment Policy Analysis and Advocacy Support (TAPE) project, indicated that the Philippine government has a preference for adopting the traditional practice of forming bilateral air agreements with foreign nations on a reciprocal basis, rather than entering into more open air traffic agreements.
A preference highlighted by the recent problems between the Philippines and Taiwan with regard to the termination of their 1996 air services agreement and the subsequent cessation of flights between the two nations by the countries’ national carriers.
It has been a decade since the study was conducted, many more countries have adopted the open skies agreement.
It is 2010, Asia’s Hermit Archipelago is still finding its way – in aviation, in divorce, in electricity, in water, in telecommunications.
P. Noy and his oligarch pals are already chopping up the Philippine economy for themselves – the continuing legacy of a protectionist oligopoly market in a feudal/medieval political economy.
No wonder more Filipinos are lining up the airports securing a one way ticket – to anywhere, but the Philippines – – – PAL pilots included.
- Air Transport Agreements Between the U.S. and Philippines » US-Philippines Protocol to Air Transport Agreement of November 20, 1995 – http://www.state.gov/e/eeb/rls/othr/ata/p/rp/114212.htm, Accessed Aug, 15, 2010
- ‘Open skies’ drives air fares down – http://www.lfpress.com/travel/2010/07/23/14806616.html, Accessed Aug, 15, 2010
- PAL woes helping advance open skies — Tourism chief – http://www.manilastandardtoday.com/insideNews.htm?f=2010/august/4/news1.isx&d=2010/august/4, Accessed Aug, 15, 2010
- Policy paper suggests Philippines is unprepared for open skies policy (1999). – http://www.allbusiness.com/operations/shipping-air-freight/331987-1.html, Accessed Aug, 15, 2010