VZCZCXYZ0001
RR RUEHWEB

DE RUEHGP #0469/01 0670933
ZNR UUUUU ZZH
R 080933Z MAR 07
FM AMEMBASSY SINGAPORE
TO RUEHC/SECSTATE WASHDC 2596
INFO RUCPDOC/USDOC WASHDC
RUEAWJL/DEPT OF JUSTICE WASHINGTON DC
RUEHBY/AMEMBASSY CANBERRA 1858

UNCLAS SINGAPORE 000469 
 
SIPDIS 
 
STATE PASS USTR FOR AUSTR WEISEL AND JJENSEN 
COMMERCE FOR JBAKER 
DOJ FOR SCHEMTOB 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ETRD EAIR ECON EINV SN
SUBJECT: COMPETITION BODY FOCUSES ON AVIATION IN FIRST DECISIONS 
 
 
NOT FOR INTERNET DISTRIBUTION 
 
¶1.  (U) Summary:  Two recent decisions of the Competition Commission 
of Singapore (CCS) brought good news to Singapore's aviation sector. 
 The CCS announced on February 13 that it did not object to the 
Joint Services Agreement (JSA) between Qantas Airways and British 
Airways and approved on March 5 a coordination agreement between 
Qantas and Orangestar Holdings.  While both agreements potentially 
contravened certain provisions of Singapore's Competition Act, the 
CCS ruled that they also resulted in "net economic benefits" for 
Singapore and were therefore excluded from the mandated 
prohibitions.  The decisions were the CCS' first since it was 
established under Singapore's new Competition Act in January 2005. 
They also appear to reflect the GOS' strategic thinking about how to 
preserve Singapore's status as an aviation hub and to serve as a 
means to press Australia ]?/;?{P2-85bvC fare pricing, scheduling, and marketing on 
certain routes.  The two airlines submitted their request for 
decision to the CCS to ensure the viability of their 1995 agreement 
in light of new Competition Act guidelines.  At issue were the 
airlines' Australia-Europe and Australia-Asia-Europe flights that 
utilize Singapore's Changi International Airport.  In making its 
decision, the CCS examined two sections of the Competition Act -- 
Section 34, which prohibits agreements that prevent, restrict or 
distort competition, and Section 35, which alllows anti-competitive 
agreements that otherwise create net economic benefits for 
Singapore.  An attorney representing Qantas told us that the CCS 
selected the JSA decision as its first case based on its assessment 
that it would be relatively clear-cut to adjudicate and also send a 
positive signal to industry.  (Note: The CCS has been careful to 
dispel any perceptions that it might become an aggressive 
competition watchdog by encouraging industry to self-assess and 
voluntarily submit requests for decision.  End note.) 
 
Qantas-Orangestar 
----------------- 
 
¶3.  (U) Qantas and Singapore-based Orangestar submitted their 
request for decision concerning a proposed business and marketing 
coordination agreement to both the CCS and the Australian 
Competition and Consumer Commission (ACCC) in April 2006; the ACCC 
issued a positive ruling shortly thereafter.  Orangestar is the 
holding company for Singapore-based Jetstar Asia and Valuair, two 
low-cost carriers.  Qantas owns Australia-based Jetstar Airways and 
also owns 44.5 percent of Orangestar.  Singapore's largest budget 
carrier, Tiger Airways, submitted comments to both the ACCC and CCS 
challenging the agreement.  Singapore opened a US$29 million 
terminal for budget airlines in March 2006.  However, only two 
airlines (Tiger and Cebu Pacific) currently utilize the new 
terminal.  Observers expect the Qantas-Orangestar decision will 
encourage other budget carriers in the region to structure 
partnerships allowing them to operate out of Changi without fear of 
running afoul of the Competition Act.  Case summaries and decisions 
are available at http://www.ccs.gov.sg. 
 
And the Winner is...Singapore Inc. 
---------------------------------- 
 
 
¶4.  (SBU) The CCS' Qantas-BA decision appears unlikely to jeopardize 
Singapore's aviation-related government-linked corporations (GLCs). 
Singapore Airlines will continue to dominate the "kangaroo route" 
from Australia to Europe.  Changi Airports International, Singapore 
Airport Terminal Services, and Changi International Airport 
Services, all closely linked to the GOS, also stand to benefit from 
a continued Qantas and BA presence.  GLC Tiger Airways may lose 
customers to competitor Jetstar Airways, but the GOS will win either 
way since it also owns a significant stake in Jetstar through its 
investment arm, Temasek Holdings.  (Note: Tiger Airways filed 
applications to operate domestically in Australia just prior to the 
to the CCS decisions.  End note) 
 
Comment 
------- 
 
¶5.  (SBU) The CCS decisions probably represent more than just "slam 
dunk" rulings on competition.  Singapore's promotion of itself as a 
low-cost carrier hub is not just directed at attracting more tourist 
dollars.  It is also meant to address concerns that it might lose 
airline traffic as long-haul carriers capable of bypassing regional 
hubs like Changi take to the skies in coming years.  Singapore also 
appears to be using the two decisions to take the moral high ground 
in its open skies discussions with Australia.  Australia denied 
Singapore Air access to the lucrative Sydney-Los Angeles route early 
last year, a disappointing decision for the GOS that soured 
bilateral aviation relations.  Last week, the former Chairman of 
Singapore Airlines referred to the CCS decisions during a speech at 
a private equity conference in Sydney, accusing the Australian 
government of not doing its share to "walk the talk" when it came to 
open skies policy -- a position that will likely be a standard GOS 
talking point following these decisions. 
HERBOLD