On Tuesday (21 February), the Australian cabinet announced that Singapore would not be allowed to fly on the Sydney-Los Angeles route.
Australian Transport Minister, Warren Truss added that SIA would be unable to operate on the route “for some years”. Instead he urged SIA and Qantas to consider merging. Both SIA and Qantas have declined this proposal which had been raised earlier by Australian Prime Minister John Howard.
In uncharacteristically strong language, the Singapore Transport Minister Yeo Cheow Tong described the Australian cabinet decision as “extremely disappointing.” He added, “I am naturally very disappointed with this decision, especially after more than 10 years of protracted discussions….. Singapore has also been more than generous in facilitating the growth of Australian carriers to and beyond Singapore. It is disheartening to see that they have taken this and the warmth in our bilateral relationship for granted.”
To mitigate the bilateral fallout, Australian Foreign Minister Alexander Downer said that Australian officials would soon meet to hold talks with Singaporeon developing closer bilateral ties.
The CEOs of both SIA and Qantas have also written to Australian newspapers explaining their respective position with the former stressing the importance of competition and the latter arguing for “due consideration for the benefits of Australia.” The route is estimated to account for 15-20% of Qantas’ profits. Qantas CEO Geoff Dixon has warned that liberalisation of the route would result in massive job losses.
Ties between the two countries have been somewhat strained since Singapore’s hanging of convicted drug smuggler Nguyen Tuong Van last year. However, Australian Treasurer Peter Costello explicitly denied that this has anything to do with the aviation policy and decision on the trans-pacific route.
Although both sides have signed a free trade agreement in 2003, the FTA does not cover liberalisation of the air travel. Both sides have only signed a partial open skies agreement. A full open skies agreement also does not seem to be in the card for the ongoing negotiation of the ASEAN-Closer Economic Relations (which comprises of Australia and New Zealand) FTA. It also underscores the partial nature of many of the FTAs concluded in the region, hence reducing their actual utility and efficacy in liberalisation of trade and services.
Singaporeis unlikely to succeed in its attempts to push freer skies given that it has already given Australian carriers fifth freedom traffic rights. Ironically given its liberal aviation and trading policies, it now finds that it does not have much bargaining position. While relations will improve due to the traditionally close bilateral ties, there is likely to be some turbulence in the short time.
Singapore Angry at Air Route Denial, The Age, 23 February 2006
Qantas, Singapore say merger not in their flight path, The Australian, 23 February 2006
Qantas not afraid of competition, The Age, 23 February 2006
Australian Shuts SIA out of Lucrative Route; Cheow Tong: S’pore Generosity Towards Aussie Carries Taken for Granted, Business Times, 22 February 2006