The APEC Air Services Group, at its meeting in Singapore in October 1995 identified eight options for more competitive air services with fair and equitable opportunity for all member economies, as a follow-up to the APEC Transportation Ministers' directive at their 1st Meeting in Washington DC in June 1995. There was general agreement among the APEC Air Services Group that for the foreseeable future, the bilateral system offers the best prospects for further development of more competitive air services, while allowing fair and equitable opportunity for all member economies.

2 The eight options were endorsed by the APEC Transportation Ministers at the 2nd APEC Transportation Ministerial Meeting in Victoria, Canada in June 1997. APEC Transportation Ministers further instructed the Transportation Working Group to reconvene the Air Services Group (ASG) "to analyse and prioritise the eight options and prepare, on a consensus basis, a recommendation on the options to be developed and how they should be implemented". APEC Transportation Ministers also directed "the Transportation Working Group to submit for their consideration, by mid-1998 a comprehensive final report including recommendations on options to be implemented by each member economy as developed on a consensus basis by the Transportation Working Group". Singapore was nominated to chair the Air Services Group.

3 Two ASG Meetings were convened in Singapore on 14-16 October 1997 and 25-26 February 1998. Papers from 12 economies were discussed at the Meeting in October 1997, and another set of papers from 16 economies was discussed at the Meeting in February 1998. Details of the meetings are recorded in the Chair's Report dated 16 October 1997 and 26 February 1998.

Guiding Principles for Developing and Implementing Options for Competitive Air Services with Fair and Equitable Opportunity

4 The ASG recognised that when proceeding with the discussion on options to be developed and how they should be implemented, fundamental guiding principles addressed in the Bogor Declaration, Osaka Action Agenda and other relevant documents should be kept in mind.

Prioritisation of Options

5 The eight options were prioritised under three categories, i.e. high, medium and low priority, based on the ease of implementation for each of the options.

Recommendations on Options

6 The ASG reached consensus on the following prioritisation and recommendations for the eight options:

Option 1:

Air carrier ownership and control Recognising that cross-border investments can promote economic cooperation and competition and benefit both carriers and consumers, the ASG:

(A) noted the results of the January 1998 survey on APEC economies' policy and practices on ownership and control of their designated air carriers at Attachment I. The survey showed that most economies required national airlines to be substantially owned and effectively controlled by their own nationals, and that with regard to their bilateral partners, the substantial ownership and effective control clause was prevalent in most bilateral air services agreements; and

(B) noted the recommendation by the ICAO Air Transport Regulation Panel in June 1997:

That States wishing to accept broadened criteria for air carrier use of market access in the bilateral or multilateral air services agreements agree to authorise market access for a designated air carrier which:

(a) has its principal place of business and permanent residence in the territory of the designating State; and

(b) has and maintains a strong link to the designating State.

(C) recommended that APEC economies give consideration to relaxing the ownership and control requirements when considering designation made by partners under bilateral air services arrangements on a case-by-case basis. The ICAO Air Transport Regulation Panel's formulation could be used as a guide/option.

This recommendation is categorised as medium priority.

Option 2: Tariffs

The ASG recommended that APEC economies support the removal or progressive easing of tariff regulations through the bilateral air services arrangements where this promotes competitive pricing to the benefit of consumers. A double disapproval regime could be considered. Consideration could also be given to the elimination of formal filing requirements. Where filing is required, electronic filing could be considered.

This recommendation is categorised as medium priority.

Option 3: Doing Business Matters

The ASG recognised that the maintenance and development of competitive air services is often dependent on minimising restrictions and discriminatory practices on "doing business", for example, ground handling arrangements, currency conversion and remittance of earnings, employment of non-national personnel, sale and marketing of air services products and access to computer reservation systems.

The ASG recommended that APEC economies work towards removing impediments to "doing business" matters whether under bilateral agreements or in domestic laws and by-laws, using as guidance the model clauses developed by the ICAO Air Transport Regulation Panel, or through other means.

This recommendation is categorised as high priority.

Option 4: Air Freight

Noting that the current framework of bilateral agreements has generally worked well to provide the necessary capacity and route alternatives for the carriage of air freight; and recognising that the facilitation and enhancement of air freight services and related activities can assist in: promoting trade by APEC member economies; and complementing broader efforts being made by APEC member economies to better facilitate trade within the region; the ASG recommended that APEC economies progressively remove restrictions in the operations of air freight services while ensuring fair and equitable opportunity for the economies involved. One means of doing so would be to include, where appropriate, provisions for additional flexibility and capacity for air freight services in air services arrangements between APEC economies.

The ASG also reached general consensus that adequate physical infrastructure, flexibility in intermodal operations and implementation of business-friendly procedures are important to the development of air freight services.

The ASG agreed to categorise this recommendation as high/medium priority, as this option involves elements on Doing Business Matters (Option prioritised as high) and Market Access (Option prioritised as medium).

Option 5: Multiple airline designation

Noting that the growth in the number of airlines providing services within the region adds to competition and provides greater choice for consumers, the ASG recommended that APEC economies include, as appropriate, multiple airline designation in their bilateral air services agreements.

This recommendation is categorised as high priority.

Option 6: Charter services

The ASG recommended that APEC economies allow and facilitate the operation of both passenger and freight ad hoc charter services which supplement or complement scheduled services, having regard to the principle of reciprocity, as appropriate.

This recommendation is categorised as medium priority.

Option 7: Airlines' cooperative arrangements

The ASG recommended that APEC economies facilitate cooperative arrangements such as code-sharing including third-country code-share and code-share over domestic sectors, joint operations and block space arrangements, where it can be shown to be of benefit to consumers and airline(s), and where there are no anti-competitive effects, and where fair and equitable opportunity for the economies involved can be ensured.

This recommendation is categorised as high priority.

Option 8: Market access

The ASG reached general consensus to recommend that APEC economies take an approach to progressively achieve more liberalised market access under their bilateral air services arrangements, while ensuring fair and equitable opportunity for the economies involved.

This recommendation is categorised as medium priority.

The Air Services Group discussed the importance of having some mechanism to monitor and report on the progress of implementation of the eight options across APEC economies. The Group agreed that such issues would be for the Transportation Working Group to decide.

(26 February 1998)


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