Myths Behind Blue Skies

Open skies will not guarantee foreign airline flights to the country

December 10, 2010

The turmoil in Philippine Airlines aside, it really is time to ramp up the implementation of the so-called “open skies” policy for air transportation. It has been over 15 years since the landmark Executive Order 219, issued by President Fidel Ramos in January 1995, called for the liberalization of the air travel industry in the Philippines.

As far as domestic travel is concerned, liberalization was an unqualified success. The most obvious proof is the rise of Cebu Pacific, which now has fair claim to being the country’s leading airline. When it comes to the international sector, however, the record has not been very encouraging.

President Benigno Aquino III, following through on a long-held commitment, has said he wants to implement EO 219 fully. At the private-public partnerships “summit” last month, he vowed to take the necessary next steps to implement the EO’s provisions on international aviation. “Our national development requires promoting an open and competitive international aviation sector that enables Philippine and foreign air carriers to expand their operations, maintain a strong Philippine-based aviation industry, and ensure international connectivity in order to allow Philippine and foreign air carriers to plan and make long-term investments in the Philippine market.”

Open skies will have its biggest impact on Philippine tourism; it is seen as one crucial stage in the development of a world-beating tourism industry. Even the Aquino administration, however, despite its high approval ratings, will face great resistance in implementing the policy. It will be up against three persistent, pernicious myths.

It is obvious that the open skies policy, even in the “pocket” version that the Aquino administration wants to try first, cannot work by itself. No advocate has ever said that it is the silver bullet that will slay the vampire of lower-than-deserved tourist arrivals. However, quite a number of critics of open skies argue as though the policy were a stand-alone initiative. This, then, is the first myth: open skies will be characterized as putting the cart before the horse. But in fact efforts are under way to decongest airport terminals, build new roads, create more support systems, train more tourist workers and (as we have seen in the botched Pilipinas Kay Ganda campaign) create a new, more attractive marketing drive.

The second myth is present market demand. It is an argument offered by Philippine Airlines management, and has been echoed by an official of the Civil Aeronautics Board. Foreign airlines have seat entitlements they do not use, said Porvenir Porciuncula, CAB deputy executive director. “It is really a function of the market. Open skies will not guarantee foreign airline flights to the country,” he said. This is the kind of thinking that, under its old management, allowed PLDT to monopolize the telephone industry for many years. It is a bureaucrat’s view, not an entrepreneur’s perspective—and would have been incapable of imagining the growth in the number of phones in the country after deregulation.

Opponents of open skies are insisting on reciprocity, wrapping this particular argument with the mantle of nationalism. Of course reciprocity is fundamental to any open-skies agreements but, we hasten to add, reciprocity must be understood in a broader sense, the better to serve the public interest. This, then, is the third myth: The idea that open skies must mean strict equality, seat for seat, route for route, airport for airport. But, just to give one example, wouldn’t we want more tourists from Singapore? How many points of entry can that tiny but rich island-state offer us? EO 219 defined the criteria for the exchange of travel rights and routes right: It should be a combination of reciprocity, defined as “the exchange of rights, freedoms, and opportunities of equal or equivalent value,” and the national interest, including “value for the Philippines in promoting international trade, foreign investments and tourism.”

We should not leave the definition of national interest to airlines or bureaucrats alone.

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