Should air cargo be freed from the constraints of aviation bilaterals? And what would be the implications for passenger bilaterals if it were? The first question is something of an old chestnut in air cargo services. However, there are signs that momentum is building for separate treatment for cargo including an initiative being aired by the Organisation for Economic Cooperation and Development (OECD), the Paris-based club of the 29 most developed nations. If that succeeds, the second question could start to get a lot of attention from regulators and airlines.
It is clear that air cargo carriers increasingly find themselves in an incongruous position. They get a large chunk of their business from global freight forwarders, who in turn work for multinational companies with global manufacturing bases demanding global supply chain solutions. They also compete with express operators such as FedEx and UPS, who increasingly know no national boundaries, and with shipping lines whose nationality has become largely irrelevant. Still they remain bound by restrictive bilaterals.
Of course, the problem is that setting air cargo free is not simple. About 60% of it still travels in the belly of passenger carriers: no possibility of that being freed separately from passenger rights. Cargo carriers, however, could be freed of their shackles. Indeed, FedEx, though governed by bilaterals, routinely circumvents them (it has Asian and European hubs, for example), provides a ready model.
Bilateral attempts to get a special deal for cargo have not been a great success. While some countries, like Argentina and India, offer what is essentially totally free access for freighter operators, attempts by UK cargo carriers to get cargo concerns on the agenda of the stalled US-UK open skies talks are still getting buried in larger politics. There was hope a year or so ago that the two countries might agree to a cargo deal as a token of goodwill in the passenger talks. Instead, the argument became tangled in the usual passenger issues.
There are multilateral initiatives afoot, however. One is a proposal that cargo be considered in the next round of World Trade Organisation (WTO) talks under the General Agreement on Trade in Services (GATS). Two problems render this unlikely. One is that since the Seattle riots in 1999, WTO expansion has not been politically popular. The other is that aviation rights were specifically ruled out of GATS, a ruling which would require a two-thirds majority of the 90 or so WTO members to overturn.
Principles for liberalisation
An initiative with more potential impact is being considered by the OECD. Its transport division published a document in June that suggests general principles for liberalising cargo, and includes a draft protocol to add to bilateral treaties as well as a draft multilateral treaty.
Only the multilateral treaty addresses aviation rights as such, and, of course, it confines its suggestions to freighter operations. However, both the bilateral and multilateral documents include proposals on wetleasing, ownership, avoiding flags of convenience, safety oversight and ground handling.
The document is not official policy yet: for that to happen it has to be voted on by the OECD council, which it is expected to do early next year. However, it is interesting that at the October meeting of the OECD where the proposal was presented to various interested parties, it received widespread support from the largest carriers.
Governments also seem to be taking the proposal seriously. The USA sent a relatively high-ranking State Department official to the October meeting, according to one OECD official, who noted that the US delegate "was very positive, somewhat to my surprise".
It is early days yet, but if the proposal does become OECD policy, it would start a ball rolling that might be hard to stop. As another October attendee, Lucien Schummer, vice president strategy and corporate affairs at Cargolux, points out, once the proposal is OECD policy, it will at least become a factor in future negotiations. "Protectionist countries would not be able to pretend that the proposal does not exist," he says.
That raises the prospect of a world in which freighter operations might start getting the freedom to fly where they want, leaving passenger carriers wondering enviously why they do not enjoy the same right. The OECD might just be planting the acorn that will grow into the long-awaited liberalisation oak tree.
Source: Airline Business
