Governments sign principles for liberalization

Published November 30th, 2009 - 01:48 GMT

The International Air Transport Association
(IATA) yesterday announced the signing of a Multilateral Statement of Policy
Principles regarding the Implementation of Bilateral Air Service Agreements by seven
states and the European Commission.

 

The signing took place at the conclusion of the IATA-hosted second Agenda for
Freedom Summit in Montebello, Canada.

 

The states that signed the document are Chile, Malaysia, Panama, Singapore,
Switzerland, the United Arab Emirates, the United States of America, as well as the
European Commission. In total they represent some 60% of global aviation.

 

"This is an historic achievement that will help set the foundation for a financially
sustainable global aviation industry. I congratulate the seven governments and the
European Commission for their visionary leadership. One agreement will not change
the world. But this is a strong signal that this industry's future must be realized
in a much more liberal environment. Today's signing is the beginning of a process of
change. Our shared task now is to bring even more countries on board," said Giovanni
Bisignani, IATA's Director General and CEO.

 

"Greater economic freedom is a critical element for aviation and I commend IATA's
Agenda for Freedom initiative. Today's Statement of Policy Principles is perfectly
in line with ICAO's vision for liberalization as articulated at the fifth Worldwide
Air Transport Conference in 2003. While safeguarding safety, security and
environmental responsibility, governments and industry must also find a platform for
financial sustainability in civil aviation," said Roberto Kobeh Gonzalez, President
of the Council of ICAO who witnessed the signing.

 

The 65 year-old bilateral system of air service agreements places restrictions on
how airlines can do business in ways that no other industry faces. National
ownership requirements do not allow airlines to merge across borders, precluding the
development of global players that has been seen in other previously regulated
industries such as telecommunications. Airlines are also restricted in market
access, until government negotiators conclude agreements to allow cross-border
services.

 

"Sixty-five years ago, when airlines were divisions of the state apparatus, the
bilateral system and its restrictions made sense. The world has changed. Airlines
are real businesses. Their bottom lines are subject to the harsh discipline of the
market that has seen the industry lose a net of US$53 billion since 2001. Airlines
made global business possible, but they remain a highly fragmented industry unable
to cover their cost of capital. We don't want government handouts. What is important
is that we have a level playing field and the freedom to do business that every
other industry takes for granted. Today's signing is a major step towards that
goal," said Bisignani.

 

The policy principles address three main areas:

 

Freedom to access capital markets: States agreed on principles that would open the
possibility for airlines to access global capital markets. This would be achieved
with an agreement not to exercise bilateral rights that could allow them to block
international services from airlines with non-national ownership structures. States
also agreed to consider the possibility of a multilateral agreement to waive
ownership restrictions.

 

Freedom to do business: States agreed on principles that seek to reduce restrictions
on market access and to expedite the further opening of markets in future bilateral
negotiations.

 

Freedom to price services: States agreed on principles that would allow greater
freedom to price airline services in line with market realities.

 

While these policy principles are non-binding, they are an important statement of
common government intention among the most active countries driving global aviation
policy. The document notes specifically that the signatories "recognize the
importance of promoting compatible regulatory approaches and reducing the potential
for conflicts" and the intention to use the policy principles to guide
"implementation of existing air service agreements and our approach to the
negotiation of new or amended air services agreements in the future".


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