AIR SERVICES BETWEEN MALAYSIA AND SINGAPORE (Liberalisation)

Column No : 1816

AIR SERVICES BETWEEN MALAYSIA AND SINGAPORE:

(Liberalisation): 19.

Prof. Ivan Png Paak Liang asked the Minister for Transport if he will work with the Malaysian Government to generally liberalise air services between Malaysia and Singapore, and specifically to (a) abolish the "revenue pool" on the Kuala Lumpur to Singapore air route, as it inhibits market competition; and (b) facilitate multi-mode travel, for instance, arrangements combining travel by bus and air.

Mrs Lim Hwee Hua (for the Minister for Transport): Sir, Singapore has always adopted an open aviation policy that seeks to maximise air links with other countries for mutual benefit. We have always been prepared to liberalise our Air Services Agreement (ASA) with Malaysia to establish more air links between our two countries.

During PM's visit to Malaysia in October 2004, PM and Malaysian PM Abdullah Badawi had agreed to expand cooperation in air transport. Mr Yeo Cheow Tong had also visited his Malaysian counterpart, Transport Minister Dato' Chan Kong Choy last year, and they agreed that it would be timely for both sides to review our bilateral Air Services Agreement, which was last expanded in 1980. Since then, our officials have held preliminary discussions to expand the air links. We have also invited Minister Chan to visit Singapore for further discussions.

Sir, a more liberal Air Services Agreement would allow carriers from both sides to expand their operations between Singapore and both Peninsular and East Malaysia. It would also pave the way for new Singapore and Malaysian carriers to serve the market. The travelling public will then benefit from a wider choice of carriers and destinations, as well as more competitive fares. More air links will generate greater economic benefits for both countries as well as the region through increased tourism, trade and investments. Singapore and Malaysia can also help bring about a more liberal aviation regime in ASEAN by taking the lead and moving ahead of ASEAN's goal of lifting all restrictions on passenger flights between the ASEAN capital cities by 2008.

Prof. Ivan Png has asked if the existing "revenue pool" arrangement between SIA and Malaysian Airlines on the Singapore-Kuala Lumpur route would be abolished as this may be inhibiting market competition. Let me provide some background information on this "revenue pool" arrangement. SIA and Malaysian Airlines first entered into this arrangement in September 1988 to divide their combined revenues from their Singapore-KL operations. The objective was for both airlines to share capacity and to coordinate flight timings in order to provide frequent and regular operations for the Singapore-KL route. Today, the two airlines operate a combined total of 13 frequencies per day, ie, almost an hourly service by SIA or Malaysian Airlines between 6.00 in the morning and 11.00 at night. As this "revenue pooling arrangement" is a commercial agreement between SIA and Malaysian Airlines, itis best for the two airlines to decide on whether to continuewith this arrangement, based on their own commercial considerations.

Sir, this arrangement, however, does not prevent other approved carriers from operating services between Singapore and Malaysia. Besides SIA and Malaysian Airlines, other carriers such as Japan Airlines currently operate a total of two daily services between Singapore and KL. Singapore is prepared to allow other carriers from both countries to operate on the Singapore-KL route, as well as to other points in Malaysia but this will require the agreement of the Malaysian side. I therefore hope that both sides can meet soon to expand bilateral air services for the benefit of the travelling public.

Prof. Ivan Png has also asked about facilitating multi-mode travel. We would be happy to explore this where it makes sense and it is in our national interests. In any case, there are already extensive road transport services linking Singapore and Peninsular Malaysia.

Prof. Ivan Png Paak Liang: Sir,is the Minister aware that as a result of the revenue pool, there are fewer flights between Singapore and KL, and the prices are higher than even more distant destinations such as Singapore-Bangkok orSingapore-Jakarta?Would the Minister please comment on the usual way to undermine a cartel, such as this revenue pool, is through the entry of competition? Competition is now limited on the KL side, according to the Minister. But if we allow low-cost carriers to operate a combination of bus plus air services through Senai Airport, this would be a way by which the consumers - theSingapore travelling public -can enjoy low-cost fares to Kuala Lumpur, and the additional benefit of undermining this revenue pool that SIA and MAS are holding up.

Mrs Lim Hwee Hua: Sir, for the Member's interest, there was actually an expansion of airline operationson what we would term as an extra bilateral basis, and this was done in March 2005 where SIA, SilkAir and Malaysian Airlines actually mounted additional services in response to the demand. So I am not aware of a reduction in the number of services. But beyond this, these extra bilateral arrangements are not unique to the Singapore-Malaysia route, and are really meant to facilitate air services in general. The existing G-to-G Air Services Agreement currently does not provide for such services and would necessarily have to bereviewed.

Mr Tan Soo Khoon (East Coast): Mr Speaker, Sir, this issue of the revenue pooling between the two airlines of Singapore and Malaysia is not a new issue. But can I ask why is it that in this era of competition and trade liberalisation, we are still allowing the two airlines to have this archaic policy of revenue sharing which, in fact, results in higher prices for travellers commuting between Singapore and Kuala Lumpur? Does it not appear ludicrousto the Minister of State that it is in fact cheaper to fly from Singapore to Bangkok than to fly from Singapore to Kuala Lumpur?

Mrs Lim Hwee Hua: Sir,airline operators would have to decide on the commercial arrangements that best fit the needs whilst at the same time, as a country, we need to ensure thatall air rights are fully utilised.The policy of the Ministry of Transport is one of encouraging all carriers to operate on the Singapore-Malaysia route and, as it is, this route is not dominated by Singapore Airlines and Malaysian Airlines. This is strictly a commercial arrangement and it is quite similar to the different code-share arrangements that other airlines have on other segments as well. As the Member would know, pricing for any one sector is not strictly by distance and it is more a question of supply and demand. And, therefore, a comparison between the pricing of a service from Singapore to Bangkok with that from Singapore to KL is not entirely comparable.

Mr Tan Soo Khoon: Mr Speaker, Sir, does the Minister of State believe that it is in the interest oftravellers between the two countries to allow what is essentially a cartel made up of MAS and SIA to exist? Because although she says that there are other carriers that ply this route, in effect, these other airlines are not having the same frequency of flights as SIA and MAS. And at any rate, the times at which they fly off are not really practical for most people, particularly business people.

Mr Speaker: You have two minutes, Mrs Lim.

Mrs Lim Hwee Hua: Sir, this is really ultimately a question of allocation of air rights to the different operators operating on the route. The solution is not to re-allocate the air rights. The solution is to seek greater air rights so that we can cater to the underlying demand that is currently not satisfied.