Throughout Asia, Singapore is one of the few nations that has pursued a liberal aviation policy; it does not prevent foreign investors from holding a majority share of ownership or control in an airline. The one exception is Singapore Airlines, in which foreign ownership is restricted to 50 per cent. To date, Singapore’s Ministry of Transport has concluded over 100 bilateral air service agreements with other countries. Of these, 40 are Open Skies Agreements, in which common restrictions on the number of flights that may be operated between and beyond the contracting states have been removed. To a large extent, this liberal approach has also influenced the framework within which the assessment of airline consolidation activities takes place under the supervision of the Competition Commission of Singapore (CCS).
Late last year, the threat of the complete exit of Tiger Airways from the market prompted the CCS to approve the proposed acquisition by Singapore Airlines of an increased interest in Tiger Airways. The CCS was notified of the transaction under the CCS’ voluntary merger control rules. During its review of the proposed acquisition, the CCS found that the transaction would lead to a monopoly situation on five routes and to significant competition concerns on a further five routes. However, the transaction was ultimately cleared after the parties had successfully demonstrated that the stringent conditions of the failing firm defence were met in the case, i.e. the likely bankruptcy and exit of Tiger Airways would have posed even greater competition concerns than allowing the transaction to proceed. In contrast with other jurisdictions in Asia, Singapore takes a “macro” view in weighing the benefits and anticompetitive effects arising from a proposed transaction, affording much greater flexibility in determining the outcome of an assessment.
As competition grows increasingly fierce in the region, Asian airlines are facing mounting pressure to enhance their competitiveness through synergies and by optimising their network coverage. Unlike in Singapore, civil aviation regimes in most other Asian jurisdictions continue to lag behind; ownership and control constraints constitute the main hindrance to consolidation between airlines of different nationalities in the form of full mergers. Against this background, airlines in the region have sought other methods of overcoming these antiquated restrictions, notably through the establishment of more complex forms of cooperation, including alliances and joint ventures. For this reason, alliances and joint ventures are expected to become the preferred approach for airlines to achieve growth and improvement in performance and profitability in the foreseeable future. In this context, the CCS has in recent years already approved a number of extensive cooperation arrangements, including those between Singapore Airlines and Air New Zealand, Etihad and Jet Airways, and Emirates and Qantas. In neighbouring jurisdictions, similar joint ventures have also been approved (albeit within a materially different regulatory context) by way of antitrust immunity from national transport authorities. Of note are those between Japan Airlines, British Airways and Finnair, and All Nippon Airways and Lufthansa which received immunity from Japan’s Ministry of Land, Infrastructure, Transport and Tourism.
While a number of airlines in the region have already entered into similar alliance and joint venture arrangements with foreign carriers, there remains ample potential for these opportunities to be explored further.