* Small plane manufacturers hope for additional sales
* Airport capacity crunch limits growth in air traffic
* Investment can add 25 mln jobs and $298 bln to ASEAN GDP
By Siva Govindasamy
SINGAPORE, May 17 (Reuters) - Low-cost airline groups and
manufacturers of smaller passenger aircraft will be among the
main winners after Southeast Asia's open skies agreement finally
came into effect last month, although airport capacity
constraints could limit the benefits.
Ratification of the Association of Southeast Asian Nations
(ASEAN) open skies agreements by Indonesia and Laos in April
lifts restrictions on capacity and competition, allowing
airlines to launch unlimited flights from their home to any
point in the region subject to airport slot availability.
Hubs like Singapore, which have a clear expansion plan,
could gain from an increase in air services, as will budget
carriers which are ideal for a region where no two points are
more than a few hours apart, say analysts.
"Airlines can launch any number of international flights as
the market can support," said Alan Tan, an aviation law
professor at the National University of Singapore. "Travellers
can thus look forward to more flights at more competitive
prices."
Dominant low-cost airlines like Malaysia's AirAsia
AIRA.KL , Indonesia's Lion Air, and Philippine carrier Cebu
Pacific CEB.PS plan to do just that.
AirAsia, for example, wants more international flights from
the Philippines and Indonesia, a spokeswoman said. This will
help its affiliates, which have found it tough to break into the
domestic market in those countries.
"Improved connectivity in the region will be a boon to
tourism and strengthen ASEAN as an economic union," the
spokeswoman said.
Full service airlines like Thai Airways THAI.BK , Garuda
Indonesia GIAA.JK and Philippine Airlines PAL.PS , which have
lost market share to budget carriers over the last decade, say
they plan to use their long-haul network to connect passengers
to their Southeast Asia services.
The Singapore Airlines SIAL.SI group has an additional
advantage, given its ability to operate services using two
premium brands and two low-fare subsidiaries, analysts say.
The opening up of regional destinations can also boost
manufacturers of 70-130 seater aircraft, like Brazil's Embraer
EMBR3.SA , Canada's Bombardier BBDb.TO and ATR, a joint
venture between Airbus and Italy's Finmeccanica LDOF.MI .
These planes can serve some routes more profitably than the
larger Airbus A320s and Boeing (NYSE:BA) 737s, they say.
"Many of the region's airlines are beginning to recognise
the potential advantage of right-sizing and the ratification of
ASEAN open skies, we feel, will simply accelerate the process,"
said Mark Dunnachie, who leads Embraer's aircraft sales in the
Asia-Pacific.
HUBS LIMIT GROWTH
While there will clearly be winners from the open skies
deal, the full gains could be limited by airport constraints.
Bangkok's Suvarnabhumi Airport, Ninoy Aquino International
Airport in Manila, and Jakarta's Soekarno-Hatta International
Airport serve Southeast Asia's three biggest domestic markets of
Thailand, the Philippines and Indonesia respectively.
All have reached full capacity with congestion and delays
the norm, creating spillover problems for smaller airports in
those countries as well.
"Unlimited flight capacity is meaningless if airport and
slot congestion remains unaddressed by governments," Tan said.
Singapore's Changi Airport is the exception. Despite having
relatively little domestic traffic, it has three terminals which
can handle 66 million passengers and served 55 million in 2015,
the most in Southeast Asia. Work has begun on two more
terminals.
Such long-term national aviation policies are needed due to
the lengthy gestation period for terminals and runways, said
Vinoop Goel, Asia Pacific director for airports at the
International Air Transport Association (IATA), a global airline
trade body.
IATA estimates that ASEAN countries can add almost 25
million jobs and $298 billion to the region's GDP by 2035 if
they invest in aviation infrastructure. This is up from 11.6
million jobs and $144.4 billion to GDP in 2014.
"Clearly, failing to tackle airport infrastructure will have
an economic cost," Goel said.