MTI issues Exclusion Order for Air Shuttle Service Operation Agreement between Malaysian Airline System Berhad and Singapore Airlines Limited

Minister for Trade and Industry issues Exclusion Order for Air Shuttle Service Operation Agreement between Malaysian Airline System Berhad (MAS) and Singapore Airlines Limited (SIA) on the Singapore-Kuala Lumpur sector

The Minister for Trade and Industry has today issued an Exclusion Order to exclude the Air Shuttle Service Operation Agreement between MAS and SIA on the Singapore-Kuala Lumpur sector (‘Singapore-KL Shuttle Agreement’), from Section 34 of the Competition Act[1] (Cap. 50B) (‘Act’) which prohibits business agreements that prevent, restrict or distort competition.

The Exclusion Order has been issued on the basis of an international arrangement between the Governments of Singapore and Malaysia in August 1982. This arrangement established an air shuttle service between Singapore and KL to be operated by MAS and SIA. The two airlines subsequently entered into the Singapore-KL Shuttle Agreement, which is a commercial agreement between the airlines to share capacity and coordinate their flight schedules so that there are frequent air services between Singapore and KL throughout the day.

The Singapore-KL Shuttle Agreement is important as the existing Air Services Agreement (‘ASA’) between Singapore and Malaysia allows only limited air traffic rights between Singapore and KL. Currently, there are more flights between Singapore and KL than allowed under the ASA because of the Singapore-KL Shuttle Agreement.

The Government has therefore, after careful study, concluded that the Singapore-KL Shuttle Agreement should be excluded from section 34 of the Act. This will preserve the 1982 arrangement that Singapore reached with Malaysia. In addition, the Government also noted that an unraveling of the Singapore-KL Shuttle Agreement without a corresponding liberalization of the ASA may actually result in a reduction of the number of flights between Singapore and KL. This will not be to the benefit of the travelling public. As such, the Exclusion Order is issued to maintain the status quo, while negotiations between the Governments of Malaysia and Singapore to further liberalize the Singapore-KL air route[2] continue.

Singapore is continuing with its efforts to achieve such liberalization. The Government remains committed to the objective of seeking maximum liberalization of air services wherever possible. At the same time, we fully support the initiative by ASEAN member states to work towards allowing unlimited air access between ASEAN capital cities by December 2008, which is in accordance with the ASEAN Roadmap for Integration of Air Travel Sector (RIATS).

MINISTRY OF TRADE AND INDUSTRY and MINISTRY OF TRANSPORT

25 September 2007

[1] Section 34 of the Competition Act is subject to a number of exceptions. One such exception allows the Minister for Trade and Industry to exclude an agreement from the application of section 34, if he is satisfied that it is appropriate to do so in order to avoid a conflict with an international arrangement relating to civil aviation.

[2] The Ministry of Transport has been, and will continue to be, in discussion with its Malaysian counterparts to explore the further liberalization of air services between the two countries to, amongst other things, allow more airlines to operate services between Singapore and KL.

Additional Background Information

On aviation industry

The current aviation industry is highly restrictive, with air travel regulated by a web of bilateral government-to-government Air Services Agreements (‘ASAs’). These agreements generally place a cap on the level of commercial flight operations permitted between countries, including the number of daily or weekly flights that can be operated and flight routings. Singapore has in this regard pursued a liberal aviation policy by working with our bilateral partners to conclude liberal agreements wherever the opportunity arises.

However, the majority of ASAs remain restrictive in nature. The Singapore-Malaysia ASA is one such example. Under the existing ASA, Singapore has exhausted its entitlements on flight capacities, and Singapore carriers cannot operate more services to Malaysia until the ASA is expanded to allow for more capacity. The Singapore Government recognizes that the Shuttle Agreement is presently the best alternative until air travel between Singapore and Malaysia is fully liberalized. Full liberalization will allow more airlines to operate services between Singapore and Kuala Lumpur.