The Association of Southeast Asian Nations (ASEAN) and the European Union (EU) signed the Comprehensive Air

Transport Agreement (CATA) between their member states in October 2022.

The ASEAN-EU CATA is the world’s first bloc-to-bloc air transport agreement and reflects the latest policy

thinking in air transport regulation. The agreement allows the carriers of the two blocs to operate passenger and

cargo services between and beyond both regions, by exercising Fifth Freedom traffic rights and liberalising

codeshare restrictions.

Since 2014 and despite both sides showing a commitment to elevating their aviation relations to a new level,

the two regions remain different regarding the level of domestic air travel market integration and liberalisation.

These intrinsic variations contribute to creating disadvantages in the competitive position of ASEAN-based

carriers when compared to their EU counterparts.

This study aims to investigate the possible implications of the CATA on the competitive dynamics of airlines in

both markets, by applying the Competitive Dynamics Model to analyse the interactions in the strategies and

responses, and its implications on the performance of the relevant air carriers. Using secondary data, a series of

quantitative indicators are utilised to examine selected ASEAN and EU carriers’ awareness, motivation, and

ability to respond to the novel changes in the industry’s regulatory and competitive environment.

While the findings indicate the strategic responses of both ASEAN and EU carriers is more focussed on interline

agreements and joint ventures, competitive rivalry is to remain intense for popular destinations such as those to

and from Thailand and Singapore.

The study analyses the advantages in the scheduled frequencies and fares of the big three Middle Eastern

carriers and Turkish Airlines, over home airlines in major ASEAN and EU hubs. The CATA-induced partially

liberalised market will drive more partnerships among ASEAN and EU carriers to align schedules in their

respective hubs as a response to competition posed by Middle Eastern carriers. The findings suggest that the

possible actions and reactions of airlines to one another are precursors to driving changes in market structure

over time within the new ASEAN-EU CATA framework.