The Singapore government yesterday announced the establishment of a committee to allocate air-traffic rights, clearing the way for the entry of new domestic carriers to compete with Singapore Airlines Ltd, Asia Pacific's fourth-largest carrier by sales.
Singapore's Ministry of Transport said the setting up of the air-traffic rights committee (ATRC) was in line with practices in other countries with more than one airline.
"Singapore has set up an air-traffic rights committee to allocate the government's air-traffic rights amongst Singapore carriers," the ministry said in a statement.
"The establishment of the committee will pave the way for the potential entry of new Singapore carriers," it said.
Singapore's air-traffic rights have been used solely by Singapore Air, which also operates a regional wing, SilkAir.
Singapore Air will keep its existing air-traffic rights for 10 years before having to renew them for a maximum of five years, according to the Ministry of Transport.
With the potential entry of new Singapore-registered carriers, the committee was set up to "allocate Singapore's air-traffic rights in a manner that maximizes both the interests of Singapore as a nation as well as the benefits to the public," the statement said.
Singapore Air may face competition from ValuAir Pte, a low-cost carrier that has applied for a license to operate commercial flights from the island state.
ValuAir, which is not yet operational, was started by Lim Chin Beng, a former managing director of Singapore Airlines.
The Civil Aviation Authority of Singapore has asked ValuAir to provide more information on the aircraft it will be using as well as maintenance and general support programs.
It will take six to nine months after all documents have been submitted to evaluate the application.
"It's a neutral for Singapore Air, since they get to keep their rights," said Chris Sanda, an associate director at DBS Vickers Research Singapore.
"New carriers can only compete where there are still open traffic rights," he said.
SIA, majority-owned by the Singapore government, has said it will make a decision by the end of the year on whether to set up a no-frills carrier.
It has appointed a task force to look into the rationale of setting up a low-cost outfit given the potential challenge from ValuAir and Malaysian budget carrier AirAsia which plans to set up a hub in Johor near the border with Singapore.
Singapore Airlines previously said it was prepared to convert SilkAir quickly into a budget carrier to meet any competition for its markets.
The air-traffic rights committee will be headed by the permanent secretary of the transport ministry and will have senior representatives from various government agencies.
All new rights will have a validity of up to five years.
In a concession to Singapore Airlines' role in building Singapore into a regional aviation hub, the Singapore Airlines Group will retain its existing air-traffic rights under a 10-year license which will be renewed for a five-year period after expiry.
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