Singapore Airlines and All Nippon Airways: A New Era of Cooperation or Monopoly?

In the ever-evolving landscape of global aviation, the recent approval of the business cooperation between Singapore Airlines (SIA) and All Nippon Airways (ANA) by the Competition and Consumer Commission of Singapore (CCCS) marks a significant milestone. This joint venture, five years in the making, promises to enhance connectivity, improve service offerings, and drive competitive fares between Singapore and Japan. However, beneath the surface of this seemingly beneficial alliance lies a web of regulatory commitments and potential risks that could reshape the competitive dynamics of the aviation industry.



The CCCS's conditional approval of the Proposed Cooperation comes with a set of stringent commitments designed to mitigate competition concerns. SIA and ANA have agreed to maintain seat capacity, develop a growth-oriented business plan, report flight schedules, and appoint an independent auditor to monitor compliance. These commitments are a double-edged sword: while they ensure fair competition and transparency, they also impose significant operational constraints on the airlines.

The commitment to maintain seat capacity on an aggregated basis between the Applicants on the Singapore-Tokyo route is a critical aspect of the regulatory framework. This ensures that the total number of seats offered on the route remains stable, preventing the airlines from reducing capacity to artificially inflate prices or restrict competition. However, this stability in seat capacity could also limit the airlines' flexibility to respond to market demands and fluctuations, potentially impacting their operational efficiency and profitability.

The development of a business plan detailing growth figures and the reporting of flight schedules and capacity levels operated by the Applicants’ low-cost carriers (LCCs) are additional layers of regulatory oversight. These commitments promote transparency and accountability, ensuring that any shifts in capacity between full-service carriers and LCCs are monitored. This transparency is crucial for maintaining fair competition and ensuring that both full-service and low-cost options remain available to passengers. However, the burden of compliance with these commitments could also divert resources away from innovation and service improvement, potentially hindering the airlines' long-term competitiveness.

The appointment of an independent auditor to monitor compliance with the commitments and submit annual reports to the CCCS is a significant step towards ensuring accountability. This external oversight provides an additional layer of scrutiny, ensuring that the commitments are adhered to and that the competitive dynamics on the route remain balanced and fair. However, the cost and complexity of compliance with these commitments could also impose a financial burden on the airlines, potentially impacting their profitability and market positions.

The potential long-term financial benefits of the cooperation between SIA and ANA are significant. The enhanced connectivity and service offerings promised by the alliance could attract more passengers, leading to increased revenue and market share. The elimination of double marginalisation and better fare combinability could result in more competitive fares, attracting price-sensitive customers and further enhancing the airlines' market positions. However, these benefits come with risks, including competition concerns, regulatory scrutiny, and the potential for market dominance.

The substantial market shares of SIA and ANA on the Singapore-Tokyo route, combined with the barriers to entry and expansion, could lead to market dominance. While this could strengthen the airlines' market positions, it also comes with the risk of regulatory intervention if the airlines do not adhere to the commitments made to the CCCS. The dependence on regulatory approval and the potential for market dominance are significant risks that could impact the airlines' long-term financial performance and market positions.

In conclusion, the approved business cooperation between SIA and ANA presents significant long-term financial benefits, including improved connectivity, enhanced service offerings, and more competitive fares. However, it also comes with risks, such as competition concerns and regulatory scrutiny. The impact on their market positions will depend on how effectively they manage these benefits and risks. The regulatory commitments made by SIA and ANA to the CCCS are designed to mitigate competition concerns and promote fair and sustainable competition on the Singapore-Tokyo route. By maintaining seat capacity, developing a growth-oriented business plan, reporting flight schedules, and appointing an independent auditor, the airlines are encouraged to focus on long-term sustainability, innovation, and customer satisfaction, ultimately benefiting passengers and the overall aviation industry. However, the burden of compliance with these commitments could also impose a financial burden on the airlines, potentially impacting their profitability and market positions. The potential for market dominance and the dependence on regulatory approval are significant risks that could impact the airlines' long-term financial performance and market positions. The approved business cooperation between SIA and ANA is a significant milestone in the global aviation industry, but it also comes with risks and challenges that will shape the competitive dynamics of the industry in the years to come.

Ask Aime: What is the regulation guaranteeing seat capacity between SIA and ANA?