South America's five Mercosur nations are taking a significant if limited step towards open skies in the southern cone.
The presidents of Argentina, Brazil, Chile, Paraguay, and Uruguay have inked an accord that would give airlines from those countries the right to launch third and fourth freedom services on routes not covered by existing bilaterals.
Initial hopes among most of the Mercosur member states that the changes would be even more far-reaching were dashed by opposition from Brazil. Officials from the continent's largest nation are understood to have opposed proposals to lift restrictions on routes covered by current bilaterals and grant cabotage rights. 'The Brazilians definitely would not favour complete open skies, for fear they would lose more than they gained,' one source notes.
The accord takes effect 30 days after ratification by each of the five nations. But no-one will predict when the five legislatures will act, although the hope is that the agreement will take effect later this year.
The accord is not part of the Mercosur trade pact which took effect in 1995 - like most trade pacts, it excludes aviation. The signing of a regional aviation accord, however limited, is a victory for the airlines. A concerted lobbying effort persuaded the heads of state that opening new city pairs without the usual bilateral negotiations could boost economic growth in the regions of the Mercosur grouping. As one aviation consultant observes: 'The overriding focus of this is really to push the intraregional traffic.'
A head of steam built up last year following the annual meeting of the region's airline chief executives in Santiago. At the conference, Canadian aircraft manufacturer Bombardier unveiled a study estimating annual intraregional traffic growth over the next ten years at 20 to 40 per cent. The report identified 100 unserved city pairs throughout Latin America that could support scheduled services. Analysts have estimated that between 50 and 75 such city pairs exist within Mercosur alone.
Steve Pierson, who handles marketing and sales at Miami's Cauff, Lippman Aviation, predicts the prospect of opening up new routes will attract great interest from the region's airlines. Pierson believes the yields will be better than on north-south routes, as there will be no competition from US carriers.
The accord will present some of the region's carriers with an opportunity to launch their first crossborder scheduled services. The limiting factor could be suitable fleets, and one aircraft lessor predicts a boom for regional aircraft: 'Demand for 50-100 seat aircraft will be incredible.'
The embryonic open skies initiative could extend to other members of the Andean Pact. Bolivia has already signalling interest in joining Mercosur and with LAB already under the control of Brazil's Vasp, it is unlikely to object to opening its skies, partially at least.
The expected surge in regional service could also add further impetus to crossborder alliance building. The acquisitive Vasp, which controls Ecuatoriana as well as LAB, is setting the pace in the region with its
Source: Airline Business
