International Regulations for Global Aviation - Essay Example

? Table of Contents 1Introduction 5 2Discussion 8 2.1International regulations for global aviation 8 2.2 The ‘Open Skies’ agreement 10 2.3African aviation sector 14 2.4 The benefits of open sky policies 19 Conclusion 21 Bibliography 22 Abstract This study will study and analyse the advancements made by Africa in the liberalisation of its aviation sector and in working as per the guidelines outlined in the “open skies” treaties with US, taking into account the poor economic situation and the slow development of this continent. The present norms for the liberalisation and deregulation within the worldwide air transport and aviation market assumes that a level field is set which guarantees a fair and equal chance for all players to operate and compete. The African airlines operated by the states, compete within a global market that operates on the homogenous “Standard and Recommended Practices” (SARPS) uniformly applicable for the participant states and airlines, and monitored by the International Civil Aviation Organization (ICAO) for compliance. After the 1970s, there was perceived large-scale liberalisation in the air trade based on bilateral or multilateral intra regional treaties. Within the next few decades US has signed a large number of “open skies” treaties with its trade partners for a better economic integration. Various studies have revealed that the economic conditions and the process of development within the African continent does not hamper with the formation of a uniform field for the complete liberalization of the aviation market, and experts contend that the overall African business conditions will show an increased if the liberal policies are indeed embraced. The Yamoussoukro Decision, which reflects the African process of aviation liberalization, has not achieved much success, owing to a lack of the political will to make the provisions enforceable. in this context the various “open skies” treaties signed with US needs to be examined in order to ascertain whether they will be successful with the African context and whether they spell out fairness in ‘commercial opportunities’ and ‘fair competition’ in the air trade relations between the United States and African countries Fairness of the regime of ‘commercial opportunities’ and ‘fair competition’ expressed in the bilateral ‘open skies’ agreements between the United States and African countries 1 Introduction The development of an efficient and a competent aviation sector is necessary for a rapid economic progress and global integration of the African countries. The land-based infrastructure (the railroad) that exists in Africa was primarily for facilitating the extraction of the continent’s rich raw material deposits, while the road network is completely in shambles and without any signs of further development or renovation, thus rendering them useless to the intra-African trade or passenger travel.1 Taking note of the present poor conditions of the African infrastructure, they further added that such dismal conditions largely display the “geographical realities” in Africa, while “international competitiveness” makes it necessary to have a set of effective institutions that would help to link the national economy globally.2 There is little doubt that under such poor rail and road connectivity the aviation sector in Africa has great potential for setting Africa free in the global market; however, it is imperative that a better infrastructure is provided for the air transport to effectively perform their role. A large number of regulations (domestic and international) rule the global aviation sector, which place severe limitations of the airline activities. The monitoring body is the Montreal (Canada) based The International Civil Aviation Organization (ICAO) that ensures the compliancy of all global air activities with the existent Standards and Recommended Practices (SARPs). The regulation of economic advantages in global air transport is primarily monopolized by the norms of bilateral treaties, which tends to make the process restrictive and state-dominated. The chief regulatory rules associated with the Bilateral Air Service Agreement (BASA) and the different inter-airline agreements are free market access; nature of fair competition and safeguards; transparency in operation; carrier ownership; safeguarding consumer interest; and the nature of the production distribution. The first step towards air traffic liberalization in Africa was taken in 1988, in the form of Yamoussoukro Declaration, which advocated liberalization along with integration of the entire African aviation sector, in the context of globalization and optimizing the profits made from this sector for the economic betterment and national integration.3 Subsequently, the Yamoussoukro Ministerial Decision (November 1999) was created that established an outline for the liberalization of the entire African sector within 2002. Under it guidelines, all kinds of restrictions were eliminated pertaining to the frequency and flight capacities between cities; traffic rights (which included the fifth Freedom); government regulated tariffs; and full liberty in the operation of the of cargo/non-schedule services.4 Besides these internal regulations, the African nations have signed no less than 10 ‘Open Skies’ bilateral agreement with the United States, and four other ‘Open Skies’ agreement with non- United States parties. 5 The Open Skies are various bilateral aviation related agreements started by the US since 1992. 6 Under this group of treaties, the total number of cargo and international passenger flights from USA to various parts of the world has increased largely. The “open skies” agreements aim at increasing figures of commerce and travel, rising production levels, better jobs, and a flourishing economy. The ‘Open Skies’ treaties seek to eliminate all forms of state interference within the commercial activities of the aviation sector (regarding flight capacities, routes, and prices) in any country, while freeing the air carriers in order to serve more competently and efficiently. 7 The US “Open Skies” agreements are mainly aimed at trade and commerce globalisation, and the principle behind the treaties as per the US guidelines are “by allowing air carriers unlimited market access to our partners' markets and the right to fly to all intermediate and beyond points, [these] agreements provide maximum operational flexibility for airline alliances.”8 It in this context of African infrastructural problems, and the failure of the Africa states to effectively implement the Yamoussoukro Declaration, we will examine the various ‘open skies’ agreements with US to find out the fairness of the regime of ‘commercial opportunities’ and ‘fair competition’ expressed in the bilateral ‘open skies’ agreements between the United States and African countries. 2 Discussion 2.1 International regulations for global aviation This section gives a brief overview of the various norms that exists within the aviation sector. Well-regulated norms bind the particular industry sector that is impartial to any country and its geographical location. The Paris convention was the first of its kind where the first set of regulations for the aviation sector was adopted in October 1919. Here the Regulation of Aerial Navigation was created that legalised internationally, the basic axiom of ‘unfettered sovereignty’ over all national airspace. 9 The Paris convention created the basic principles that guide all aviation sector negotiations and agreements. The Convention on International Civil Aviation, or the Chicago Convention, created the International Civil Aviation Organization (ICAO), which forms a specialized unit of the United Nations. This body, ICAO, is responsible for the monitoring and the coordination of the international air transport system. The Convention established various rules pertaining to the registration of the aircrafts, airspace regulations, safety norms, and the signatories’ rights in relation to air transport. The Chicago Convention also excluded tax from all air fuel. This conference attended by 52 countries, reaffirmed the basic principles as proposed in the Paris convention, and came to a consensus on the ‘first’ and ‘second freedoms.’ US put in pressure in the convention that brought in the ‘third’ and the ‘fourth’ freedoms that were relatively notable as they were “conditional on an initial equal sharing of frequency” 10and, there was an added “escalator clause” that allowed a flight to increase its flight frequencies if they were carrying minimum two–thirds of the cargo. 11 The conventions that regulate the aviation sector are however not multilateral in nature, and are mostly dependent on the various bilateral agreements between two nations. The most famous bilateral agreement, as signed by UK and US at Bermuda (1946), ruled that would be no ‘predetermination of capacity’ and this led to the formation of the fifth freedom. In this context, we will now take a look at the various “Freedoms of the Air,” that are followed in principle, as are listed below. Fig 1: the “Freedom of Air,”12 the Eighth freedom (cabotage) relates to the “right of an aircraft registered in one country to undertake domestic services within another country.”13 2.2 The ‘Open Skies’ agreement In the wake of the first oil crises in the 1970s, there was widespread de-regulation within the US domestic market, when there was a sudden rise in the flight numbers that rose from 36 to 123 by 1984. 14After the Aviation De-regulation Act was enforced in 1978, many restrictions were removed related to geographical route access and the airfares, within the national US market.15 This was marked by a significant rise in the frequency and number of flights, and though the fares at this time actually increased in many of the routes, however, owing to constant presence of discount on the flight fares actually led a decrease in the average fare by 30%16. The air traffic also rose dramatically, showing a sharp incline of 50% during 1978 - 1985. Thus, de-regulation, as a process was profitable since it gave rise to cheaper air rates that helped in raising the air passenger volume, ultimately bringing in profits for the aviation sector. Various studies on the subject of de-regulation within the domestic US economy17 have shown that the profits that came in from the increased flight frequencies was far greater than the lower fares, leading to deregulation being marked as a great success process, especially for consumers.18 At around the same time, when the market deregulation was being seen as the most important policy for the aviation industry, US started the bilateral ‘open skies’ aviation agreement with various trade partner countries. Staniland viewed this process as a system which “means that technologically qualified carriers may fly internationally between whichever cities in the country concerned they choose, at whatever frequency, with whatever capacity, and charging whatever fares they decide are commercially appropriate.”19 Under the ‘Open Skies’ agreements the 3rd, 4th and 5th freedom rights for the flights were entirely free, allowing them to reach almost anywhere: Third Freedom – that relates to carrying the passengers from their origin-country (as for example, in US), to taking them to another country (Africa). Fourth Freedom – this relates to picking up the air passengers from a country (say any part of Africa), and taking them across to their origin-country (US). Fifth Freedom – to come from the point of origin (US), pick up passengers from a different country (Africa), and take them to another country (say UK).20 Here we find that the open skies agreements guarantee that there were no restraints on entering any country or to any airport, thus signifying, “open entry, unlimited capacity, and unlimited frequency.” 21 These form the basic features of an ‘Open Skies’ agreement, between US and any country (in this case the African countries), and are subject to only certain existent market disciplines. The reports from the US Aviation Subcommittee has shown that before the liberalisation process, the employment rates were up, air passenger rates were increasing by 1% per year, whereas after the ‘Open Skies’ agreements came into being, the air passenger annual growth has shot to 11%.22 Between 1992 -2000 we find that US has signed almost 51 ‘Open Skies’ agreements in Latin America, Europe, the Middle East, Asia, and Africa; of which no less than 10 are with the various African countries. The ‘Open Skies’ treaties have also aided in the growth of a borderless worldwide aviation network, where we find that the total number of international aviation companies and alliances have magnified in the last decade. These air-alliances allow the aircrafts to expand their total geographical networking scope without actually putting in a large capital investment. 23 Despite the overtly positive developments of the Open Skies agreement, and a general global movement towards greater trade liberalisation, observations reveal that the present day regulations within the air transport system, conflict with many of the multilateralism principles. 24 In the General Agreement on Trade in Services (GATS) annex 9, we find that it eliminated the system of computer reservations and the aviation marketing services, air traffic rights, and the directly associated traffic activities, (with exception in services associated with aircraft repair and maintenance). Negotiations on the Rights are worked on a complementary basis where there are efforts to manage a profitable balance for the negotiating parties. Thus, even within the ‘open skies’ agreement there are distinct scope more for making biased treatment as regards the trading partners thus not always functioning in a non–discriminatory way. There is discrimination between the domestic organisations and the foreign trading firms in terms of the domestic market reach, thus again leaving scope for an unfair treatment. Thus, from an overall overview it is apparent that the open skies agreement favours primarily the consumers that can avail of the various discounts; and the US, that can reach to almost any part of the country with which it signs the agreement, while leaving scopes for a discriminatory trade agreement. We will now examine the present condition of the African aviation sector to comprehend whether the various the Open Skies agreement with the US, work towards creating an atmosphere of unfair commercial aviation activities. 2.3 African aviation sector The African aviation sector is presently going through a rough phase that had started some decades back, owing to poor management, overt state interference, financial restraints, safety problems, and the new bilateral treaty-signing spree.25 In the current context, we find that a chief motivation behind the economic monitoring of air trade in Africa is to accord protection to domestic firms. The African aviation regulations and norms always showed greater concern for safeguarding the interests of the domestic airline companies, rather than protecting the consumer and shippers interests.26 The present economic scenario of the African aviation sector is based primarily on a complicated order that consists of bilateral air treaties that are protectionist in nature, through which the extent of market access by the foreign airlines and other associated issues are state regulated which exercise air space sovereignty. The various bilateral treaties that are in vogue amongst the African states reflect, a strong state control over the extent of accorded traffic rights to the foreign (US) trade partners, and restraints on the third and fourth “freedoms of the air” (ref: fig 1), while the states are also reluctant to give permission for technical landing for an aircraft flight that will be going on to a third destination. Truncating the exercise of the fifth “freedoms of the air” by the foreign aircrafts, which has created an extremely limited and a point-to-point air traffic flow within the continent. Here it is noted that the proper exercise of the fifth freedom traffic is most essential to create a sustainable aviation service sector in Africa. The African states tend to put restriction on the flight capacities and their frequencies, double approval of tariffs, and restriction for both the foreign and intra-state aircraft pathways. There are state imposed limitations on the number of carriers; subsequently the designated carriers enjoy monopolistic rights within the African aviation markets. At times, it is prohibitive to demand for royalty payments. Thus, we find that the present African aviation sector tends to show an extremely protectionist attitude that goes against all the “freedoms of the air” rights, while also negating most of the principles that are followed in the open skies agreement followed by US. 27As a consequence of the above-mentioned restraints put in the by the different African states, the ‘bilateral’ regulatory system followed by the African countries have resulted in a deep bottleneck, that in turn is causing a degradation in the African aviation sector. Thus, we find a certain amount of unfairness in the regime of ‘commercial opportunities’ and ‘fair competition’ expressed in the bilateral ‘open skies’ treaties Africa and US, which is to a large extent owing to stringent state regulations and measures, and constant governmental interference and the protectionist attitude. The “Open Skies” policy that follows the rule where the chief air flights of one state are permitted to operate freely in another state, which is in direct contrast to the rules set by in the bilateral agreements that had created guidelines for the fairness in commercial rights and also a stringent monitoring of rights being exercised. Captain Dele Ore viewed the “open skies” policy “as a liberalized aviation” where the aircrafts from one state are allowed to operate in another state without any kind of restraining environment.28 The ex Aviation Minister of Nigeria, Mr. Kema Chikwe opined that, Open Skies policies would implicate that there would be no compulsive restraints on the flight frequencies and traffic duties as outlined in the conventions to be implemented. Within a pure “Open Skies” regime, the airfares would be completely market driven forces, while various other commercial advantages would not be subjected to the governmental approval. The provisions for the Open Skies in such cases would include: Free trade and market competition The price factor would be a market driven forces A suitable atmosphere and fair chances for a just and cooperative market scenario where various aviation companies can compete and operate, while the seventh freedom “all-cargo rights” be made completely effective along with an arrangement for a liberal air Charter. 29 The U.S. Transport Secretary, Mr. Rudney Slater, commented that the “Open Skies Agreement permit unrestricted air service” for the aircrafts for any country to fly into almost all territories by removing all kinds of sovereignty restraints, pertaining to their listed prices, flight frequencies, and the type of aircraft to be used.”30 This lack of adherence towards the “freedoms of the air” and the other “freedoms” as expressed within the conventions has not augured well for the African countries. There has been rapid deterioration in the quality and quantity of air services, and we find that the state regulations have neither worked well for the consumer rights nor boded well for the foreign airlines, thus completely restraining the growth and development potential of this sector. The current dismal state of with the African air industry results from the overtly protectionist policy of the different states.31 Though globally there has been a large growth in the aviation sector, “the market share of Africa in world air traffic has diminished...from more than 4 per cent in 1985 to 3.71 per cent in 1996.” 32 There is a misbalance in the air-traffic flow composition, with air traffic from Europe and US roughly making up for two thirds of the total traffic, and on the other hand, the flow of intra–African traffic, is limited in service and rapidly shrinking.33 As conditions within the African airline sector became worse, it was very apparent that the forced restrictions on the various bilateral agreements have done great deal of harm for the African aviation sector. It is also clear under such protectionist regime this industry cannot survive much longer, and must necessarily meet the diverging requirements of the African economy and the global market. The current structure of the African aviation sector that slowly developed over the last few years, and is shaped by the protectionist bilateral agreements that is not use any economic logic for viewing the future. In view of the drawbacks in the African bilateral system that had further multiplied owing to the modern globalization trends, there is an acknowledgement amongst many of the African countries regarding the present limitations within the framework of the currently operational bilateral framework. There is also an acknowledgment amongst the members for the necessity to bring in various initiatives that would work towards creating a true liberalization of the African aviation sector. 2.4 The benefits of open sky policies the ‘open skies’ policy if effectively implemented in Africa would help in the recovery of at least a part of “the millions of dollars in losses inflicted by oil price volatility in 2008” as has been opined by, Glenn Orsmond (CEO of local low-cost airline). 34 The open skies policy, if made effective within the African context, would allow the aircrafts to move freely through all countries, thus allowing greater efficiency, and also cost savings for the aviation industry leading to cheap airfares. He further said that ‘open skies’ would cut down the airfares by 50%, while increasing the market growth by 50%. Thus, it is essential that the African state government follow the ‘open skies’ policy in similar lines as are viewed in US and Europe, in order to decrease the high prices and give relief to the air travellers.35 Iata in one of its reports said that the African aviation sector in the modern context needs to bring in more commercial liberties, to operate as real business organisations and serve their consumer better.36 The Guardian reported that owing to the open skies policies the air passengers to and from Africa would be able to receive more choices and slashed fares once the ‘open skies’ treaty would be made effective. 37 In the context of African aviation sector, the Yamoussoukro Decision that has been called a “still-birth aviation treaty” owing to its general ineffectiveness and slow implementation, aimed at the liberalisation of the African air sector. This declaration remained ineffective though it carried enormous potentials as regards assisting in the growth of trade and tourism, and increasing the international investment. The states are reluctant to adapt this declaration, as they fear that they would lose their sovereignty in the arena of the local airline industry. Thus, the only measure would be to gradually implement the procedure and keeping a sort of ‘transition period’ to allow the weaker countries to be able to compete. A major criterion for a liberal air transport system in Africa is to bring in the various measures to provide for a “fair and equal opportunities” to the operating airlines and also the promotion of a fair and healthy competition amongst various domestic and an international aviation firms. Unlike the various aviation initiatives that are seen in the European countries, where the ultimate aim was to form an integrated and unregulated air transport scenario, the African initiative to implement the liberal YD declaration is lacking. There are at present no competitive rules for the regional based or African Community (AU) based competition rules, while we notice a complete lack in of any arbitration procedures that are necessary for according support for the effective implementation of the YD. There are no community treaties implemented within the various African states that would take care that any competition within the African market remains undistorted while also taking care that the markets operate as smoothly and efficiently as possible, within the scenario of a single economic market. in contrast to the position of the Directorate General for Competition within the market economy in Europe, in Africa we find that there is no national authority to implement effectively a set of competitive rules within Africa. The BASA commercial air service routes heavily depend on the traffic coming in from the origin markets on either end of the air-route where they offer limited seating capacity and a negative price discrimination that can be associated with restrictions that are effective on the on the ticket use. There is a lack of market reach owing to the states’ interference and their eagerness to keep their sovereignty, leading to severe restrictions in the effective implementation of the YD, thus slowing the process of liberalisation. A lack of willingness on the part of the African states and their protectionist attitude towards the aviation sector, is slowly choking this industry to death, despite the various open skies policies that US had in the past signed with them. Conclusion The African aviation sector is recently going through an exceptionally bad phase, owing to pressures from the recent economic recession, and primarily from a lack of a liberal and open market. This industry, which is completely controlled by the various African states, is slowly suffocating under the stringent regulations that are in place today. The ‘open skies’ policy that were used during signing agreements with the US government are riddled with different clauses that makes it almost impossible for the air trade to operate smoothly. The open skies agreements primarily operate by putting stress on the third, fourth and fifth freedom rights for the airlines, which allow them free movement to fly almost anywhere. The African states especially restrict these three freedoms, thus negating the basic principles of the open skies agreement policies. The African states do this out of a fear that their sovereignty would decrease within the domestic aviation sector, if the markets were made completely liberal. The basic infrastructure or railroads and roadways within the African states are also extremely poor, thus lacking proper support to the aviation industry that is showing a persistent downward slide. By defying the eight ‘freedoms’ as are expressed in the Conventions, and in the ‘open skies,’ the African states are thus defying the basic principles of the fairness of the regime of ‘commercial opportunities’ and ‘fair competition’ expressed in the bilateral ‘open skies’ agreements between US and the African countries. They are thus creating a condition where the aviation industry of the continent is taking a fast downward slide with very slim chances of recovery, unless very soon they call in for a more liberal trade and commerce scenario and an open sky policy. Bibliography Bamako, M. 2001. Liberalization of Air Transport Markets Access in Africa: “The road forward for the implementation of the Yamoussoukro Decision.” ECONOMIC COMMISSION FOR AFRICA- UN, 1-11. Bloom, D., and Sachs, J. 1998. Geography, Demography, and Economic Growth in Africa. Brookings Papers on Economic Activity, vol. 2, 263. Button, K. and. Stough. R., 2000. 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