Ripple effects from the European Court of Justice (ECJ) ruling on air service agreements have already reached Asia. Uncertainty about that decision has created a stumbling block in Singapore-Australia talks over a new air accord.
In November, the ECJ ruled that nationality clauses within open skies agreements were illegal under European law. Although the case involved agreements signed by eight member states with the USA, it could potentially extend to all bilaterals signed with European Union (EU) countries.
For example, Singapore and Australian officials would like to replace their current air services accord with an open skies agreement, but a sticking point could be the issue of fifth-freedom flights to Europe.
Australia believes a new pact with Singapore would make it easier for competition regulators to approve the Qantas-Air New Zealand alliance. If Singapore Airlines could fly Australia-New Zealand or Australia-USA, the anti-competitive effects of that alliance would be reduced. Singapore already has open skies with New Zealand and the USA.
But Qantas is resisting. Such a deal might help its Australasian alliance, but hurt elsewhere. The carrier opposes open skies with Singapore, arguing that such a deal would bring no benefit due to constraints on its fifth freedoms beyond Singapore. Since Singapore is its main hub on the Kangaroo routes, that generally means Europe.
Australia could reopen talks with European bilateral partners over more rights for Qantas, but the ECJ ruling raises a dilemma. With whom should Canberra negotiate? No one is sure.
This issue is not limited to fifth freedoms. Virgin Atlantic 's interest in operating from Hong Kong to destinations in Australia raises the same question.
On the back of the court decision, the European Commission (EC) has called on member states to tear up their bilaterals with the USA and provide Brussels with the authority to negotiate a transatlantic agreement. EC officials believe that the entire bilateral system should be replaced by a multilateral system with no ownership restrictions.
However, under a compromise deal being promoted by European airlines, member states would grant the EC a mandate to negotiate a deal with the USA. In return, most of the numerous other bilaterals between EU states and third parties would receive legal protection. The EC says it will look at these on a "case-by-base" basis, but sees Russia and Japan as its priorities as far as EU-wide agreements are concerned.
Talks between member states and the EC in early January on granting Brussels a mandate for US negotiations are said to have made some progress. It is possible that an outline mandate could be ready by as early as March. When this happens, the status of other bilaterals may become clearer.
Even if this proves the case, one aviation lawyer points out that negotiations with the USA are likely to be drawn out, and that reaching agreement with "like-minded liberal" states such as Australia and Singapore may eventually overtake any EU-USA accord.
DAVID KNIBB SEATTLE AND COLIN BAKER LONDON
Source: Airline Business
