Reality lags well behind the lip service paid to liberalised aviation.
Occasional headlines herald breakthroughs, such as the new Canada-China accord, which opens access between these countries, but such progress is incremental and frustratingly slow. A review of both bilateral and multilateral steps towards liberalisation confirms that "slow" is the operative word.
At the bilateral level, the negotiating conferences hosted by the International Civil Aviation Organisation (ICAO) attract few headlines but perhaps have the widest effect because of how many doors they open. At ICAO's first such conference in Dubai in 2008, officials from 27 nations gathered to negotiate bilateral agreements. That one-stop global market proved so popular with developing nations that ICAO has since hosted four more conferences - in Istanbul, Mumbai, Montego Bay and Jeddah. ICAO's Yuanzheng Wang, who runs these events, estimates they have produced almost 400 new bilaterals, often between nations that shared no air service.
ICAO has decided to make these an annual affair. Wang says the next one is slated for Durban, South Africa in December. They have "been very successful", he explains, and ICAO is exploring ways to expand them, "for example, by providing them for regional or multilateral meetings".
Beyond conventional bilaterals, the push for open skies continues. New Zealand inked three more open-skies agreements in July - with the UAE, Qatar and Kuwait. The USA now claims open-skies accords with over 100 nations. Each new one, US officials say, fits another piece into the puzzle. One of the big incentives for other nations to enter these deals is that the US Department of Transportation treats open skies as a prerequisite to antitrust immunity. But when two of the most recent US open-skies accords are with Guyana and Yemen, one wonders if the programme has reached the limits of its effectiveness.
Beyond one-on-one bilaterals are deals between blocs of nations on the one hand and individual countries on the other - pacts that might be called "super-bilaterals". The 2010 accord between the Association of Southeast Asian Nations (ASEAN) and China is an example. ASEAN wants more super-bilaterals, specifically with India, Japan and South Korea. But the reluctance of less-developed ASEAN countries to ratify ASEAN's agreement with China shows how hard it is for any bloc to commit all its members without a central governing body.
Europe has such a central authority in the form of the European Commission, plus a court-ordered obligation to replace bilaterals with super-bilaterals, or "bloc" agreements. As a result, it can show more progress. As a first step, the EC has inked "horizontal agreements" with most nations of the world. These put existing bilaterals on an equal footing for all EU members until the EC can replace them with super-bilaterals.
The EU-US agreement completed in 2007 pioneered these super-bilaterals, opening skies between the USA and the EU. Norway and Iceland have since acceded to it. The second-stage EU-US agreement inked in 2010 tries to tackle the more contentious issue of airline ownership and control, but does little more than set a framework for further talks. In the meantime, the EU has entered open skies super-bilaterals with Canada, Brazil and most recently Israel.
Last year the EC reviewed its progress in liberalising aviation and called for "a major and rapid transformation". In December it announced plans to open negotiations with Turkey and India, and set a 2015 goal for super-bilaterals "with all neighbouring countries". An accord with Ukraine is expected by mid-2014. Negotiations are under way with Australia, New Zealand and, recently, with Tunisia. Despite resistance from some quarters, such as that Israel's unions raised against the EU-Israel pact, Europe is moving ahead with its super-bilateral programme.
Compared with this piecemeal progress on bilaterals and super-bilaterals, multilateral efforts have little to show. Multilateral progress is either behind schedule, stalled, or losing ground.
ASEAN will probably miss its 2015 goal for a single aviation market. Alan Khee-Jin Tan, law professor and aviation specialist at the National University of Singapore, says ASEAN is behind schedule. "The region has not even achieved full relaxation of third/fourth freedom rights among all the capital cities, with Indonesia holding out for its capital, Jakarta," he says. "This means that unlimited third/fourth freedom for the other cities, as well as fifth-freedom rights, remain unrealised."
But even if ASEAN creates its "grand-sounding" single aviation market, as Tan calls it, he predicts it will be more cosmetic than real. He notes that it will not address such key issues as seventh freedoms. Without seventh freedoms, ASEAN airlines can only serve other nations from their home base. For instance, Air Asia could not fly to China from Singapore or Vietnam, but only from Malaysia.
MALIAT, the Multilateral Agreement on the Liberalisation of Air Transportation, is stalled or going backwards. Initially the USA, Brunei, New Zealand, and Singapore signed it, followed by Chile and Peru, but it has failed to gain a following. Only three small Pacific Island nations and Mongolia have since joined, and Mongolia limited its commitment to cargo flights - hardly a ringing endorsement. Moreover, following a tiff with neighbouring Chile, Peru has withdrawn.
The Forteleza agreement, designed to open skies between secondary cities in the Mercosur group of South American nations, is even more moribund. Argentina blocked carriers in neighbouring Uruguay from using it. In Africa, no visible progress has occurred since the African Union endorsed the Yamoussoukro Decision to open aviation markets 13 years ago.
This overall lack of multilateral progress in aviation seems to parallel the World Trade Organisation's lack of progress in completing the Doha Round on international trade.
Market access is one key to liberalisation, but it is not the only one. Lifting the limits on airline ownership and control is the other. If airlines from different nations could own each other, third, fourth and fifth freedoms would matter less. But access rights remain critical because reforms in airline nationality or ownership and control show so little progress. In some cases there is even open hostility. The US Congress, for instance, recently warned it does not even want the subject of airline ownership on the agenda in new EU-US trade talks.
Again, there are more signs of local than of multilateral progress. Individual nations continue to experiment with different approaches to airline ownership and control. Canada allows variable voting rights to ensure that foreign shareholders never control an airline. Malaysia does not vary the voting rights; it cuts them off for foreign shareholders above the limit. Colombia and Australia are among a handful of nations that apply a national interest rather than a national citizenship test, although Australia continues to hold Qantas to a traditional foreign-ownership limit.
Cross-border affiliates, pioneered in Latin America and now popular in Asia, present one of the greyest areas. Southeast Asian transport officials pay close attention to these cross-border carriers with foreign ownership limits but almost none to foreign control. In several other countries, officials simply turn a blind eye to both.
IATA's agenda for freedom converts the blind-eye approach into a formal waiver. Nations that sign the agenda agree to waive on a reciprocal basis any restrictions in their own bilaterals on ownership by airlines from other signing nations. For instance, even if foreigners took over Air New Zealand, it could still fly to Malaysia, Singapore and the USA because all four countries have signed the agenda, thereby agreeing to waive any requirement that New Zealand citizens own a majority of Air New Zealand. Unfortunately, this does not address the problem Air New Zealand would face in flying to non-signatory Japan.
The agenda was signed or endorsed early on by Chile, the EC, Kuwait, Malaysia, Panama, Singapore, Switzerland, United Arab Emirates and the USA, who have since been joined by Bahrain, Lebanon, New Zealand and Qatar. Together these nations represent more than 60% of the world's aviation. But the question remains how non-signing nations would treat agenda-country airlines that are foreign-owned or controlled. Until more nations sign, the agenda is mainly a promise of liberalisation some day in the future.
The USA and EU also have discussed a draft multilateral convention on foreign investment in airlines. But the US State Department, which would handle these talks, has no current information on their status.
The principal reason that liberalisation is progressing so slowly is that many airlines or the governments that protect them do not want it. They fear the competitive onslaught that liberalisation could unleash. As Professor Tan explains: "Member states like Indonesia, the Philippines and Vietnam [ASEAN's three biggest markets by population] continue to be very cautious in opening up market access to carriers from other member states."
Law professor Brian Havel, director of DePaul University's International Aviation Law Institute in Chicago, elaborates in a recent law review article co-authored with Gabriel Sanchez: "The bilateral system and the nationality rule, operating hand-in-glove, have parochialised an industry that has enabled so many other industries to globalise."
They add: "Many of these national laws are retained for explicitly protectionist purposes."
Source: Cirium Dashboard
