THE POTENTIAL IMPACTS OF ASEAN OPEN SKY ON VIETNAM’S AVIATION INDUSTRY

FOREIGN TRADE UNIVERSITY FACULTY OF ECONOMICS AND INTERNATIONAL BUSINESS -*** GRADUATION THESIS Major: International Business Economics THE POTENTIAL IMPACTS OF ASEAN OPEN SKY ON VIETNAM’S AVIATION INDUSTRY Student’s Full Name: Nguyen Thuy An Student ID: 1111150117 Class: A27 – High Quality Program Intake: 50 Supervisor: Do Ngoc Kien, MPP Ha Noi, May 2015 TABLE OF CONTENTS LIST OF FIGURES LIST OF TABLES INTRODUCTION Rationale of the study Air transport plays a key role in economic development and in supporting long term economic growth It facilitates a country’s integration into the global economy, promotes the development of tourism and logistics industry Aviation industry and the overall economy have a mutual stimulating effect on each other Vietnam is a potentially lucrative market for air transport Regardless of the poor and limited infrastructure system and the economic growth averaging at just above 5% per year, the sector has experienced a dramatic annual two-digit growth at least over the past ten years (Kraiser, 2013) According to Vietnam Aviation Authority (2014), there were up to 17,5 million domestic seats purchased in 2014, increasing by 20,5% in relation to 2013 International Air Transport Association (2013, as cited in Phuong, 2014) evaluates that Vietnamese airlines will possibly double or triple their fleets to serve the huge domestic population of more than 90 million and the number of foreign visitors annually growing by approximately 20% Southeast Asia is also sharing the same dynamics with the rise of low-cost airlines and booming tourism This will be further facilitated by the regional liberalization realized by Open Skies agreements The agreements gears towards creating ASEAN Single Aviation Market by 2020, where air carriers are fully free to fly between any points in the region, without any restrictions on capacity, frequency, ownership structure and other commercial activities Starting in December 2008 with the removal of restrictions on Third and Fourth Freedoms between capital cities of member states for air passenger services, the open skies are targeted to gradually form as per a roadmap agreed by ASEAN members’ ministers by 2020 In such context, the fledging Vietnam aviation industry is expected to encounter both opportunities and challenges: a potentially surging demand but protectionism adopted by the government, fierce competition from aggressive foreign carriers, underdeveloped infrastructure and poor management capacity So what will be the Vietnam market’s picture under the one single open sky; whether Vietnam will be able to catch up with the enhanced competition brought about by foreign rivals to take advantage of its potential or it will lose this right time to develop remains great concerns These questions have lead the author to choose the topic “The potential impacts of ASEAN Open Sky on Vietnam aviation industry” with the purpose of estimating potential effects of ASEAN Open Skies agreements on Vietnam aviation industry, with the focus on passenger air transport in this study Thereby, the author could make recommendations on how to address the changes for the purpose of developing the market to a degree that is worth its potentials Objective of the study The study attempts to examine the impacts of the ASEAN Open Skies agreements on Vietnam aviation industry in order to produce a prospect overview of the market in the years to come This picture would be expressed in the following dimensions: competition level, traffic and route structure From those projections, the author would give some implications on policies to promote the development and competitiveness of the market Scope of the study Within the framework of a graduation thesis, the author would like to confine the scope of Vietnam aviation industry down to passenger air sector; the air freight sector will not be discussed This would ensure the depth and focus of the impact analysis The research objects are ASEAN Open Skies agreements and Vietnamese aviation market (mainly in terms of market side: competition, scale and infrastructure) Main countries in research would be ASEAN country members over the past ten years Research methodologies Overall, the study employs statistical collection, information synthesization, inductive and deductive methods It collects and synthesizes a number of data and information to present an overview of theories and arguments in chapter 1, to give out assessment points in chapter It uses inductive and deductive methods to express ideas and present supporting arguments throughout the entire paper In addition, analysis (including comparison and contrast methods) is employed very often in chapter to draw comments and conclusions about the agreements’ impacts Thesis structure Apart from introduction, conclusion, references and appendices, the thesis comprises the following sections as main elements Chapter 1: Air service liberalization: rationale and theory Chapter 2: ASEAN Open Sky’ potential impacts on Vietnam aviation industry Chapter 3: Policy implications and recommendations for airlines The author would like to express deep gratitude to Do Ngoc Kien, MPP for his critical comments and encouraging support as a supervisor He has employed his strong research expertise and experience not only to orient the topic, structure the outline but also to have overall and detailed looks into the study to help the author accomplish it in a better way Being aware of the importance of the thesis, the author has paid serious attention to study and research However, due to limited time, reference resources and professional competences as well as practical experience, the thesis does expose a number of shortcomings Thus, any feedback or comment for this study would be of great value for the author to improve it later on CHAPTER 1: AIR SERVICE LIBERALIZATION: RATIONALE AND THEORY 1.1 Regulation and deregulation in air service sector: rationale and scope 1.1.1 Air service regulation Since its inception, air transport has been imposed with restrictive regulations 1by governments Together with telecoms, water, energy, electricity and transport in general, air transport in particular normally falls into most heavily regulated sectors of an economy Due to the industry’s distinct nature, the controls over it serve to guarantee the country’s economy and security stability Major rationales for the sector’s regulation are in details as follows Firstly, air transport is seen as a public utility Indeed, there is a strong degree of public interest in transportation, especially air transport; so this serves as a primary legal basis for regulation (Walter, 1984 as cited in Smith, 1998, pp 31-34) A more detailed theory supporting Walter’s agreement is "public interest" theory which holds that regulation is supplied in response to the demand of the public for the correction of inefficient or inequitable market practices The theory tends to be implicitly assumed rather than completely expressed There are two fundamental assumptions associated with this theory: one is that economic markets are extremely fragile and apt to operate very inefficiently (or inequitably) if left alone; the other is that government regulation is virtually costless With these assumptions, it was very easy to argue that the principal government interventions are simply responses of government to public demands for the rectification of remediable inefficiencies and inequities in the operation of the free market (Posner, 1974) Also sharing the same viewpoint of market remedying, Dempsey (1988) briefs airline regulation’s rationale as to ensure: a) the provision of an adequate level of service at reasonable rates throughout the nation, b) the prevention of price or service discrimination between communities or shippers, large or small, c) the establishment of economic services and stability for the industry and the public it 1Within the limit of a thesis, for the most part of the study, the term “regulation” implies economic regulation serves, and d) the reduction of carrier concentration and protection of smaller competitors Secondly, safety is of paramount concern in operating air transport Aviation is a special sector because it applies highly advanced technological innovations; merely a small defect in operating a flight can cause a colossal tragedy Therefore, the tight control imposed on the sector is aimed at ensuring safety standards, while competition is seen as an element resulting in lower safety standards The US Federal Act of 1958, article 102 clearly stipulates the purpose of this regulation: “The regulation of air transport in such a manner as to recognize and preserve the inherent advantages of, assure the degree of safety in and to improve the relations between, and co-ordinate transportation by, air carrier” Thirdly, aviation is closely related to national defense and security Walter (1984, as cited in Smith, 1998, pp 31-34) finds that one actual purpose of regulations is to help protect flag carriers (national carrier) in order to ensure national defense and to serve other political and military purposes In such situations as wars, emergencies or natural disasters, states certainly need its own air transport For the sake of national security, ownership restrictions enable governments to gain control of the airlines in times of national emergency Also, the flying of an aircraft outside, across or to any countries concerns those nations’ air sovereignty This sensitive matter, hence, is certainly an area of control Fourthly and also noticeably, in contrary to the “public interest” theory, the control over air transport is believed by a group of economists to hugely benefit specific interest groups According to Marxists and by Ralph Nader-type muckrakers (as cited in Posner, 1974, pp.341), regulation is supplied in response to the demands of interest groups struggling among themselves to maximize the incomes of their members It is not about the public interest at all, but is a process of the by which interest groups seek to promote their (private) interests Taking a specific example, Vermooten (1996) describes the rationale for the introduction of economic control in South African air transport as a desire to establish, protect and subsidize the State’s own interest As such, this restriction was not for the purpose of protecting the interest of the public (users) directly by air services, but rather the interest of South African Railways and Habour Administration as a result of its public ownership which has been regarded as “in the interest of the public” Concerning scope of air transport regulation, this study mainly covers economic ones Normally, economic regulation in air transport covers the following areas (Margo Commission, as cited in Smith, 1998, pp 35-36): o Entry restriction: the control over the entrance of new airlines into a market These airlines have to satisfy certain prerequisites to get an operation license from local governments o Routes/ areas in which airlines provide services: in some circumstances, proof of an existing demand for the service must be given before permission is granted for that route o Types of aircraft used: this may be specified to limit excess capacity on certain o o routes Capacity allowed for airlines and routes Frequency or designation: this is specified in certain cases, for instance, the number of return flights per day on city-pair routes… o Tariff regulation: price setting mechanism o Relationship between airlines was also a scope of regulation, for example joint ventures and cooperative agreements between airlines (e.g US antitrust laws controlled these areas) o Ownership: to be authorized for operation, carriers must be substantially owned by the State or its nationals Regarding scheduled international air services, similar control dimensions were also stipulated in bilateral air service agreements (ASAs) Out of a wide range of regulation areas such as aviation security, incident investigation, immigration, control of travel documents and many others, The World Trade Organization Secretariat (2006) points out most commonly founded terms of an ASA which indicate openness: o Market access: Grant of rights which specifies the air freedom rights allowing airlines to provide services over designated markets These rights range from First to Ninth Freedom of the Air Details about these freedoms are provided in Annex I 10 o Capacity clause: This regulates seat number, frequency of service and/or aircraft types o Tariff approval: which defines how air services are priced: whether fares need to be approved before applied o Withholding: which defines the conditions for the foreign carrier to operate, such as ownership and effective citizen control requirements o Designation: which governs the number of airlines allowed to serve the market between two countries and on specific routes o Statistics: that requires the exchange of operational statistics between countries or their airlines o Cooperative arrangements: which regulate the cooperative marketing agreements between airlines An illustrating example of these agreements is ones in EU Before deregulation, international air fares in Europe were set via bilateral agreements between countries The industry was tightly controlled and inflexible, leading to the persistence of little competition between national carriers A web of bilateral air service agreements formed a restrictive industry where routes, carriers and airports were specified; while aircraft types, fares and frequencies were subject to limitation (Button, 2001) 1.1.2 Air service deregulation However, with time, these restrictive regimes proved not to generate efficient air transport systems for Europe (Scharpenseel, 2001) According to the author, though some countries may have enjoyed a few benefits because of their bargaining position, overall it tended to restrain trade and competition, thus, protect inefficient operations and distort the overall pattern of services provided High barriers to fledgling airlines’ entry, slow government response to existing airlines entering to compete in city-pairings, and monopolistic practices by legacy airlines (or longstanding airlines) inflated passenger ticket prices Also, increase in air travel began imposing great pressure on the ability of authorities to cope with the changing nature of air travel The emergence of high inflation, slowly moving economy, decreasing productivity, rising labor costs and fuel costs proved caused problems to the airlines As a result of restrictive bilateral ASAs within Europe, many European 69 Concerning capital shortage, airlines can seek to address the problem by entering joint venture with foreign entities In this way, not only can they obtain more money for investment, but they can also obtain aviation expertise, get technical know-how and other managerial experience from their international partners who are more mature and experienced As is discussed so far, an emerging trend of global air transport is the formation of airline alliance Not only full-service airlines but also low-cost carriers should consider this option for increasing brand awareness and accessing markets that they currently can afford VietJet Aircan form its own alliance of LCCs members, or can choose to join Tiger Airways’ LCC alliance The third option could be becoming a member of full-service alliance SkyTeam in 2012 became the first and so far only alliance to adopt a hybrid/LCC partnership platform The SkyTeam offering does not constitute membership in the alliance but provides an option for members to affiliate and partner with a selected LCC (CAPA, 2013) CAPA analysis (2013) also finds that LCCs from medium sized markets that have only one main full-service carrier (as is the case in Vietnam) can be attractive options for alliances that are looking to improve their coverage LCCs that are not owned by the full-service carrier and have a model open to partnerships are particularly good candidates 3.2.4 Human resources development Another thorny problem facing Vietnam aviation sector is the shortage and poor qualification of the workforce, in terms of pilots and aircraft maintaining mechanics “The number of aviation staff persons trained domestically account for only 53% of the total labor”, said the Minister of Transport at the aviation planning meeting (Vietnam Aviation Authority, 2014, as cited in Giang, 2015) Also according to the Minister, currently, more than 75% of Vietnam Airlines’ pilots are foreigners Meanwhile, upon entering Vietnam Airlines’ crew, re-training is necessary for national pilots before they can actually fly Vietnam Airlines estimate that training fee for each pilot can amount to 117.000 USD Concerning aircraft maintenance, according to Vietnam Aviation Authority, domestic mechanics are 70 only capable of maintaining aircraft’s body, while processes that are more technical such as equipment and engine maintenance can only be outsourced The problem is becoming worse, given that increasingly severe competition and booming traffic is visible for the years to come in the market The mismatch between limited supply and rapidly expanding demand can result in crises Given such situation, building capacity for local workforce is not only imperative for now but also strategic in the long term This is to prevent the sector’s dependence on foreign workforce, avoiding risks of unreasonably increasing labor costs, workforce shortage and security instability The target set by Vietnam Aviation Authority is that by 2020, the workforce of the whole sector is able to the meet demand, in terms of both quality and quantity in which demand in pilots, in staff of management, operation and maintenance will be fully satisfied To this, Vietnam Aviation Academy should play a key role in providing sufficient high-quality human resources to achieve the target Furthermore, government needs to issue supporting policies for airlines to develop their own staff International cooperation training programs should be facilitated by the authority to be built About the airlines, with incentives from government, they can form their own pilot training institution to stay autonomous in labors 3.2.5 Tourism – aviation partnership In parallel with developing aviation market, the government should also promote tourism because the two sectors exert mutual facilitating impacts on each other Tourism – aviation partnership should be stressed to level up both industries Firstly, a mechanism should be established for periodically updating information between Vietnam Aviation Authority, airlines and Vietnam National Administration of Tourism Secondly, coordination needs to be further enhanced in issuing and distributing tourism brochures in airlines’ customer touching channels For example, airlines should provide a handbook of attractive tourist destinations as an in-flight reading material for travellers Currently, this practice is being carried out by Vietnam Airlines’ monthly issued in-flight magazine named “Heritage”, while for 71 other airlines, it is still absent Especially, tourism promotions should be encouraged at airports, ranging from organizing events to putting up advertising boards In fact, most of the hoardings displayed at airports concern commercial advertisements Fourthly, when a new international airport is opened or upgraded, the information should be incorporated in tourism promoting activities, in tourism brochures In addition, airlines can work with travel agencies to construct travelling tours to Vietnamese tourist attractions at a lower fare 72 CONCLUSION To summarize, this research has found that though the current ASEAN Open Skies policy is still modestly liberal compared to other standard practical models as in EU or US, it does show attempts of the state members to build a single aviation market in the future The protectionism adopted by the largest economy in the region – Indonesia, which is illustrated by its disapproval of the Third, Fourth and Fifth Freedom (for any point in the region) remains a major obstacle to the envisioned open single sky Long way is needed to complete this ambitious mission The agreements, despite being relatively modest, are still predicted to impose strong impacts on Vietnam aviation industry Competition will intensify fiercely, resulting in lowered leadership position of the flag carrier, lowered fares and booming traffic Brand new routes will be opened and old routes will be operated with much higher frequency and bigger number of flights offered In such context, the infrastructure will experience more pressure and overcapacity The map of regional hubs is likely to stay unchanged in the near future, but to vary noticeably in the long term in case the strategic Long Thanh international airport is actually built as per its original design To develop Vietnam aviation market, two major recommendations have been proposed, including advancing and expanding the infrastructure system and government creating an equal environment for airlines to compete 73 REFERENCES A English published references Agarregabiria, V and C Ho (2010), “A dynamic game of airline network competition: Hub-and-spoke networks and entry deterrence”, International Journal of Industrial Organization, Volume 28, Nº 4, pp 377-382 Allaz, B., and J.-L Vila 1993, “Cournot Competition, Futures Markets and Efficiency”, Journal of Economic Theory, Volume 59, pp 1–16 Alves, V & Forte, R 2015, “A Cournot model for analysing the effects of an open skies agreement”, Journal of Air Transport Management, Volume 42, Issue C, p.p 125-134 ASEAN Secretariat 2004, "Action Plan for ASEAN Air Transport Integration and Liberalization", ASEAN, Jakarta ASEAN Secretariat 2007, "Implementation Framework of The Asean Single Aviation Market", ASEAN, Singapore ASEAN Secretariat 2008, “ASEAN Economic Blueprint”, ASEAN, Jakarta Asian Development Bank 2013, “Asia-Pacific aspirations: Perspectives for a Post-2015 Development Agenda”, Asia-Pacific Regional MDGs Report, Bangkok Brueckner, J.K & Whalen, W.T 2000, “The Price Effects of International Airline Alliances”, Journal of Law and Economics, Volume 43, No 2, pp 503-546 Button, K 2001, “Deregulation and Liberalization of European Air Transport Markets, Innovation”, The European Journal of Social Science Research, Volume 14, No.3, pp 255-275, Taylor and Francis online liberary 10 Button, K (2009), “The impact of US-EU “Open Skies” agreement on airline market structures and airline networks”, Journal of Air Transport Management, Vol 15, Nº 2, pp 59- 71 11 Cook, G N., & Goodwin, J 2008, “Airline Networks: A Comparison of Hub-and-Spoke and Point-to-Point Systems”, Journal of Aviation/Aerospace Education & Research, Volume 17, Nº 2, pp.51-60 12 Dempsey, PS 1988, Transport Deregulation – On a Collision Course? College of Law, University of Denver 13 D Jenkins ed 2002, Handbook of airline economics, 2nd edn, McGraw-Hill, New York, pp 27-33 74 14 Euro Commission, Directorate General Energy and Transport 2002, The Economic Impact of an EU-US Open Aviation Area: final report, prepared by Brattle Consulting Group Inc., Washington DC 15 Euro Commission 2007, The Economic Impacts of an Open Aviation Area between the EU and the US: final report, prepared by Booz Allen Hamilton Consulting Inc., Brussels 16 Findlay, C., and P Forsyth 1992, “Air Transport in the Asian Pacific Region”, Asia Pacific Economic Literature, Volume 6, pp.1–10 17 Forsyth, P, King J & Rodolfo, C.L & Trace, K (2008), Preparing Asean for Open Sky, Monash International Pty Ltd 18 Fu, X., Oum, T.H, Zhang, A 2010, “Air transport liberalization and its impacts on airline competition and air passenger traffic”, Transportation Journal, Volume 49, Nº 4, pp 24-41 19 Gillen, D., & Morrison, G 2005, “Regulation, competition, and network evolution in aviation”, Journal of Air Transport Management, Volume 11, Issue 13, pp 161-174 20 IATA 2009, The Impact of International Air Service Liberalisation on Panama: final report, prepared by InterVISTAS Consulting Inc 21 ICAO Secretariat 2013, Regulatory and Industry Overview, International Civil Aviation Organization in Worldwide Air Transport Conference, th meeting, 18 to 22 March 2013, Montréal 22 Jin TAN, A.K 2013, Toward a Single Aviation Market in ASEAN: Regulatory Reform and Industry Challenges, ERIA Discussion Paper, pp.14 23 McShan, S., & Windle, R 1989, “The implications of hub-and-spoke routing for airline costs”, Logistics and Transportation Review, Volume 25, No 3, pp 209-230 24 O’Connell, John 2011, “The rise of the Arabian Gulf Carriers: An insight into the business model of Emirates Airline”, Journal of Air Transport Management, Volume 17, No 6, pp 339-346 25 Pitfield, D 2011, “The Impact of the EU–US Open Skies Agreement and the Resulting British Airway's Open Skies Initiative: Passenger Numbers in London, Amsterdam and Paris”, Spatial Economic Analysis, Volume 6, No 2, pp.185-197 26 Posner, R.A 1974, “Theories of Economic Regulation”, The Bell Journal of Economics and Management Science, Volume 5, No 2, pp 335-358 75 27 Rodrigue, J.P 2013, “Transportation Modes”, in The Theory of Transport Systems,3rd edn, Routledge, New York 28 Scharpenseel, M.F 2001, “Consequences of E.U Airline Deregulation in the Context of the Global Aviation Market”, Northwestern Journal of International Law & Business, Volume 22, Issue 1, pp 91-116 29 Vermooten, J 1996, Economic control over domestic air transportation in South Africa : a historic perspective, Johannesburg, Rand Afrikaans University 30 World Trade Organisation 2006, Second Review of the Air Transport Annex: Developments in the Air Transport Sector (Part Two), Quantitative air services agreements review (QUASAR), Volumes I and II, Note by the Secretariat, document S/C/W/270/Add.1" B Websites Individual author Le Anh 2014, “Năm 2014, hàng không nội địa tiếp tục tăng trưởng mạnh”, The Saigon Times, viewed 12th May 2015, Thanh Binh 2014, "CHK Long Thành Sẽ Giúp Các Hãng Tăng Năng Lực Cạnh Tranh Quốc Tế", Giao Thong Newspaper, viewed 16th May 2015, Cristea, A and D Hummels 2011, Estimating the gains from liberalizing services trade: the case of passenger aviation, viewed 22th April 2015, http://pages.uoregon.edu/cristea/Research_files/osa.pdf Lam Giang 2015, "Bao Nuoc Ngoai Dua Tin Vu Hon 100 Phi Cong Viet Nam Xin Nghi Viec", Giao Duc Newspaper, viewed 17th May 2015, Hannson, T., Ringbeck, J., & Franke, M 2002, Flight for survival: A new operating model for airlines, Booz Allen Hamilton Inc., viewed June 15 th April, 2006, 76 Kraiser, E 2013, “Vietnam airlines plan fleet boom as roads and rail fail”, Thomson Reuters, 5th viewed March 2015, Lan Nhi 2015, “Sẽ Thiết Kế Điều Kiện Để Loại Độc Quyền Khai Thác Sân Bay”, The Saigon Times, viewed 16th May 2015, Pham Phuong 2013, "Du Lịch Hàng Không – Hợp Tác Và Phát Triển Cùng Vietnam Airlines", Vietnam Tourism News, viewed 16th May 2014, Thu Phuong 2014, "Vận Tải Hàng Không VN Tăng Trưởng Thứ Ba Thế Giới", viewed 17th May 2015, Giao Thong Newspaper, 10 Pukar, K.C 2012, Modeling the Effects of Air Transport Liberalization on the Airline Industry, Economics Honors Papers, pp 7, viewed 29th March 2015 http://digitalcommons.conncoll.edu/econhp/7 11 Smith, E 1998, An Evaluation of the Impact of Air Transport Deregulation in South Africa, PhD thesis, viewed 15th March 2015, 12 Quang Toan 2014, "Nam 2014, Nganh Hang Khong Tang 129 Su Co So Voi Nam 2013" Vietnam Plus, viewed 9th May 2015, 13 Phan Trang 2014, “Sân Bay Long Thành: Phải Làm Ngay, Nếu Không Muốn Trả Giá”, Bao Dien Tu Chinh Phu, viewed 14th May 2015, Group author 14 Airports Corporation of Vietnam 2014, Airport Profiles, viewed 28th May 2015, 77 15 Airports Council International 2015, International Passenger Traffic for past 12 months, viewed 11th May 2015., 16 ASEAN Secretariat 2004, "Tenth ASEAN Transport Ministers Meeting 23 November 2004, Phnom Penh, Cambodia”, ASEAN News, viewed 24th April 2015, 17 ASEAN Secretariat 2015, Table of agreement ratification, viewed 3rd May 2015, 18 Centre for Aviation 2011, “Vietjet Launch Not Affected By Airasia Pullout”, CAPA analysis, 7th viewed May 2015, 19 Centre for Aviation 2013a, “Profile on Vietnam”, CAPA profiles, viewed 5th May 2015, 20 Centre for Aviation 2013b, “VietJet Air will pursue more rapid expansion in 2014, targets 50% share of Vietnam’s domestic market”, CAPA analysis, viewed 6th May 2015, 21 Centre for Aviation 2013c, “Competition In Southeast Asia's Low-Cost Airline Sector Heats Up As Capacity Surges”, CAPA analysis, viewed 6th May 2015, 22 Centre for Aviation 2014a, “Vietnam Airlines Pre-IPO Outlook: Rapid Growth As 787s & A350s Arrive, But Competition Intensifies”, ”, CAPA analysis, viewed 2nd May 2015, http://centreforaviation.com/analysis/vietnam-airlines-pre-ipo-outlook-rapidgrowth-as-787s a350s-arrive-but-competition-intensifies-160338 23 Centre for Aviation 2014b, “Cebu Pacific Becomes Latest Tigerair Partner Can LCC Alliances Counterbalance Airasia And Lion?”, CAPA analysis, viewed 14th May 2015, 24 Centre for Aviation 2014c, “Cebu Pacific Becomes Latest Tigerair Partner Can LCC Alliances Counterbalance Airasia And Lion?”, viewed 17 th May 2015, CAPA analysis, 25 Centre for Aviation 2014d, “Kuala Lumpur Airport’s New Low Cost Terminal Uniquely Aims To Be A Model Of Connectivity Part 1”, CAPA analysis, viewed 14th May 2015, 26 Centre for Aviation 2015, “SE Asia - LCCs Still Dominate The Agenda As Flag Carriers Restructure”, CAPA Aviation Outlook, viewed 6th May 2015, 27 IATA Secretariat 2011, Aviation Opportunities for Vietnam, Press Release No 1, dated 14 January 2011, 28 IATA Secretariat 2014, Strategic Opportunities for Vietnam Aviation, Press Release No 50, dated 27 August 2014, 29 ICAO 2003, The Impact Of Low Cost Carriers In Europe, ICAO presentation, viewed 7th May 2015, 31 Indonesia Infrastructure Initiative (IndII) 2012, National Strategy for the Implementation of ASEAN Open Sky Policy Stage, viewed 15th April 2015, 30 Skyvector 2015, Global Flight Planning, viewed 4th May 2015, Alliance 2006, Facts and Figures, viewed 7th May 2015, 31 Star 79 32 Vietjet Air 2015, "Vietjet Chao Don Hành Khach Thu 10 Trieu" , viewed 11 th May 2015, 33 Vietnam Airlines 2015, Route map, viewed 9th May 2015, 34 Vietnam Aviation Authority 2009, National Aviation Development Planning 2020-2030, viewed 7th May 2015, 35 Vietnam Aviation Authority 2014, in "Hơn 50 trieu luot hanh khach qua cang hang khong Vietnam", Bao Dien Tu Chinh Phu, viewed 20th March 2015, 36 World Airport Awards 2015, World's Best Airports 2015, viewed 2nd May 2015, 37 World Bank 2013a, Annual air traffic data, viewed 1st May 2015, 38 World Bank, 2013b, Total population data, viewed 5th May 2015, 39 "World's Largest Airport Hub For Low-Cost Carriers Opens In Kuala Lumpur 2014", Ummid E-news, viewed 10th May 2014, 80 APPENDIX Freedoms of the Air (International Civil Aviation Organization, 2004) The freedoms of the air were first established at the Chicago Conference in 1944 in order to provide a standardised basis for negotiation of bilateral air service agreements In 1944 only the first five freedoms were identified, however, since that time another four definitions have been added These so-called “Freedoms of the Air” are summarized as follows:  First Freedom: The right to fly over another nation’s territory without landing  Second Freedom The right to land in a foreign country for non-traffic reasons, such as maintenance or refueling, without picking up or setting down revenue traffic  Third Freedom The right to carry people (or cargo) from the airline’s own country to the other country 81  Fourth Freedom The right to carry people (or cargo) from the other country to the airline’s own country  Fifth Freedom The right to carry traffic between two foreign countries with services starting or ending in the airline’s own country (also known as beyond rights)  Sixth Freedom The right to carry traffic between two countries via the airline’s own country 82  Seventh Freedom The right to carry traffic between two foreign countries on a service that does not involve the airline’s own country  Eighth Freedom The right to carry traffic between two points within a foreign country (i.e., domestic traffic) as an extension of a service starting or ending in the airline’s own country (also known as tagon or fill-up cabotage)  Ninth Freedom The right to carry traffic between two points within a foreign country with no requirement to start or end the service in the airline’s own country (also known as pure or standalone cabotage) 83 ... concerns These questions have lead the author to choose the topic The potential impacts of ASEAN Open Sky on Vietnam aviation industry with the purpose of estimating potential effects of ASEAN. .. purpose of developing the market to a degree that is worth its potentials Objective of the study The study attempts to examine the impacts of the ASEAN Open Skies agreements on Vietnam aviation industry. .. navigation facilities 16 1.3 Economic impacts of liberalization on aviation industry While the net effects of these major liberalization events vary across the markets, there are some common changes