Political Economy of ASEAN Open Skies Policy: Business Preferences, Competition and Commitment to Economic Integration

Prayoga Permana*, Herman Hoen, Ron Holzhacker

*Corresponding author for this work

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    Abstract

    Despite significant growth of the domestic airline industry, Indonesia was hesitant to ratify ASEAN Open Skies Policy (OSP) until 2016. One of the recent findings exposed the increasing concern over foreign–domestic airline competition with too little attention in exploring airline aspirations and the potential interplay between the airline preferences and the state interest. This study empirically investigates the dynamics of domestic resistance to the implementation of OSP, and to what extent the interplay of Indonesian airlines’ business preferences, ASEAN contexts and state interests have contributed to the OSP ratification postponement. Taking some lessons from the OSP ratification, we argue that the efforts towards advancing ASEAN economic integration through the open skies are contested domestically when business preferences showed mixed reactions. There has been little agreement on how the OSP could benefit the domestic airlines following their own business strategy. In the meantime, state principles indicated certain priorities for domestic interests, while ASEAN contexts allowed a member state to practice a negotiated move. The study was conducted using a qualitative method, with semi-structured interviews involving three Indonesian airlines (state and privately owned, full service and budget airlines), government officials, a civil society element and the Indonesian national air carriers association.
    Original languageEnglish
    Pages (from-to)44-61
    JournalJournal of Asian Economic Integration
    Volume2
    Issue number1
    Early online date1-Apr-2020
    DOIs
    Publication statusPublished - Apr-2020

    Keywords

    • ASEAN open skies, business preferences, competition, state interest, economic integration

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