Open skies is just an idea, and the idea varies according to who is using the words. America invented the expression, and when the USA says "open skies" it does not mean unfettered free trade in air transport.
Air transport worldwide is still treated like a special industry, and it remains subject to protectionist rules which would be unthinkable for other businesses in today's global economy in any sphere except, perhaps, defence (although some governments seem to believe airline regulation is a security issue).
Liberalisation has taken place, in the sense that the trade in air transport services is subject to fewer trade restrictions than it was 20 years ago, but it is still uniquely bound by restrictive legislation and government-sanctioned quota systems.
This means, on most international routes, that there are government rules formalising some or all of the following: seat quotas; fare prices; designation of which airlines may fly which routes, and designation of international gateway airports; and finally what percentage of an airline's shares "foreigners" may hold.
No other industry in the world has been forming international alliances in the way that airlines have. Alliances, however, are the only way that the air transport industry can consolidate as creeping liberalisation results in tougher competition, because an airline from one country is not allowed to merge with, or take over, an airline in another - except within the European Union. At last two major European carriers are talking about merging - British Airways and KLM Royal Dutch Airlines.
Meanwhile the drawn-out slanging match, known as a bilateral air services agreement negotiation, between the USA and the UK, continues. Only the equivalent negotiations between Japan and the USA have ever challenged it for bitterness and recrimination. But the subjects discussed between the UK and USA, and those which ought to be discussed but are ruled out of order, are a superb illustration of just what a strange industry air transport is. Even industries like telecommunications which, until recently, were jealously protected by national governments, are beginning to gain normal business freedoms. Why not airlines?
Telecommunications has much in common with the airline industry as regards the origin of the attitudes which perpetuate the status quo.
Only about 15years ago, either the whole national airline industry or the major airline in any given country, used to be government-owned and controlled, and in many cases still is. If, as in America, it was not state-owned, then chosen successful airlines were designated the official carriers in carefully delineated sectors, both domestically and internationally. That was what domestic deregulation in the USA sought to get rid of internally, starting in 1977. The European Union has now done the same.
When any country negotiates with the USA, it is a case of a country negotiating with a nation with the size, the economic power and an airline industry equivalent to that of a large, prosperous continent. When the USA says "open skies", it chills the blood of the smaller negotiator, because the USA means it wants trading rights not only into but beyond it - sixth freedom rights. For most countries in the world, however, the USA is only any use to their airlines as a terminal destination, because sixth freedom via the USA is no use - routes the other way round the globe are almost always shorter to any destination they serve. So the only worthy quid pro quo which the USA can offer is access to the US domestic market, either through cabotage rights or direct ownership of a US-based carrier.
In other industries, foreign investment or even ownership, is no problem for the USA. What is it, then, about its airline industry which makes the USA so protective that it bars foreigners from holding more than 25% voting stock in its airlines, and that it bans all US Government employees and all US mail from flying on foreign airlines?
It is this nationalist conservatism which prevents the international airline industry from growing up and becoming the international service industry that it ought to be. Rules on national ownership are at the bottom of all these childlike attitudes, and should be withdrawn.
Source: Flight International
