REPORT ON IMPLEMENTATION OF AIR SERVICES GROUP RECOMMENDATIONS (REPORT BY AUSTRALIA)

IMPLEMENTATION OF THE EIGHT RECOMMENDATIONS FOR MORE COMPETITIVE AIR SERVICES

BACKGROUND

The APEC Leaders Declaration of 13 September 1999 supported implementation of the eight steps for more competitive air services, and the identification of further steps to liberalise air services in accordance with the Bogor Goals. The Leaders instructed Ministers to take account of recommendations made by ABAC in their work in 2000.

This declaration was prompted by ABAC's letter to the APEC chair before the Leaders' meeting emphasising the importance of a strong, open and competitive international air transportation network in supporting economic development and offering particular benefits to developing economies.

ABAC recommended that Leaders implement the TPT-WG's recommendations for more competitive air services with fair and equitable opportunity, giving particular urgency to the high priority recommendations identified namely "doing business" issues, including multiple carriers in bilateral agreements; facilitating cooperative arrangements or code-sharing between airlines; and removing barriers to air freight services; as well as identifying and implementing further steps to be taken by APEC economies towards the removal of barriers to trade and investment in air services in line with Bogor Goals.

The APEC TPT-WG's report on the options for more competitive air services with fair and equitable opportunity is at Attachment A.

The 16^th TPT-WG convened in Hong Kong in November 1999 undertook to identify the extent to which implementation of the eight recommendations had been achieved and to determine further steps for liberalisation.

It was agreed that Australia would survey member economies on the extent to which they have implemented the eight recommendations for more competitive air services. The questionnaire and a summary of the responses is at Attachment B.

THE FINDINGS

Analysis of the responses to the questionnaire provides a useful measure of the extent to which APEC economies have implemented the eight recommendations of the Air Services Group which were agreed at TPT-WG 14. Fifteen economies responded to the questionnaire.

The responses to the questionnaire indicate a high degree of common interest by APEC member economies in including liberal provisions in air services agreements. This is particularly strong in the areas of multiple designation, doing business matters, cooperative airline arrangements, charter services and air freight.

Responses to the questionnaire also show that, although there appears to be a wide acceptance of the benefits of the on-going liberalisation of air services, the degree to which the recommendations have been taken up varies considerably across APEC economies.

THE KEY FEATURES OF THE QUESTIONNAIRE RESPONSES

Recommendation 1: Air carrier ownership and control

Responses to the questionnaire indicate that there is widespread experience of provisions other than substantive ownership and effective control.

Substantial ownership and effective control however remains universally accepted.

Recommendation 2: Tariffs

Responses to the questionnaire indicate that most economies are relaxing their tariff clauses or have experience of more liberal outcomes than double approval tariff clauses.

Recommendation 3: Doing business matters

Responses to the questionnaire indicate that most economies can remove impediments to doing business matters and in most cases foreign airlines are afforded the same treatment as the economy's national airline(s).

Recommendation 4: Air freight

Responses to the questionnaire indicate that more economies are willing to liberalise hard rights for air freight than for passenger services. Most respondents have experience of separate, and often more liberal, freight arrangements from passenger services.

There is also evidence also that foreign ownership of transportation/facilitation businesses is widespread. Most economies report adequate infrastructure for freight requirements and flexibility in inter-modal operations. However, relatively few respondents reported provision for inter-modal transfer of freight.

Recommendations 5: Multiple airline designation

Responses to the questionnaire indicate that respondents accept multiple designation although in some instances this is on a case by case basis.

Recommendation 6: Charter services

Responses to the questionnaire indicate that there is overwhelming acceptance of charter operations for both passenger and freight services. However the majority of respondents see charters as supplementing or complementing scheduled services, rather than competing with them.

Recommendation 7: Airlines' cooperative arrangements

Responses to the questionnaire indicate that most respondents have experience of relatively liberal code share arrangements.

Half of the respondents noted that their domestic competition laws can now override the provisions of individual air services agreements.

Recommendation 8: Market access

Responses to the questionnaire indicate that respondents were more inclined to liberalise capacity than route rights, and 5^th freedom rights are more likely to be constrained.

CONCLUSIONS

One clear conclusion that can be drawn from responses to the questionnaire is that there are enough economies interested in taking a liberal position on each of the eight recommendations for further work to be done in APEC on aviation liberalisation through the Transport Working Group.

The survey also suggests a reluctance on the part of some economies to move forward on a several of the recommendations. This approach is driven, in part, by a wide range of often legitimate considerations such as infrastructure constraints and the relative competitive position of national airlines. APEC Economies may also have legitimate concerns about the timing and direction of either liberalising market access for international airlines bilaterally or moving it beyond the bilateral system and into regional agreements. However, there will also be occasions where policy change is delayed simply because concepts are new and not fully understood or there is uncertainty about the economic implications of change.

To achieve the outcomes required by the September 1999 Leader's Declaration, it is important that each economy has the opportunity to review its approach with the benefit of a full and detailed analysis of the potential benefits and costs of implementing each of the eight options. It is not clear that this information is currently available in a form that will assist economies to a deeper understanding of the eight options.

A more detailed understanding of the potential impact of each of the options would be assisted by encouraging a wider debate which might include not only APEC economies but also academic institutions, airlines and other sections of industry within APEC.

There is also support among a number of economies for the development of a plurilateral accord on aviation within APEC. The benefits of such an approach appear to be self evident, particularly as the possibility of regional accords elsewhere become more likely.

Responses to the questionnaire suggest that it should be possible to develop a plurilateral accord that accommodates the eight recommendations, which can operate as a supplement to the bilateral agreements of each economy. Equally, consideration could be given to expanding beyond the eight options the matters included in plurilateral accords, subject to the following principles:

• new items would be added only on a consensus basis

• movement toward a plurilateral accord should be inclusive. That is, no APEC economy should be excluded from being able to participate in the outcome.

• once any APEC economy decides to follow the process eventually decided on by the TPT-WG, it should be easy to implement and transparent to other economies; and

• any outcome from this process should be exclusive to APEC economies, unless all APEC economies decide otherwise.

PROPOSAL FOR FURTHER WORK

In order to bring together the various elements described above and to create a framework that addresses the Leaders instructions, Australia suggests that

TPT - WG 17 consider the following proposals:

1. Each of the eight options be subject to a detailed and open review to fully examine benefits and costs associated with the option. An objective of the review would be to consider how each option might be addressed in an APEC plurilateral accord on air services.
   
2. To manage the work associated with this exercise, eight individual economies are invited to each sponsor one of the options for further review. This would not preclude joint leadership of a project or any other means of cooperation between economies.
   
3. Each APEC economy would be invited and encouraged to make submissions on the deeper implications of each of the eight recommendations and to invite their academic institutions, airlines and industry to participate in that discussion. Submissions might also address plurilateral drafting issues and issues beyond the eight options, on the understanding that issues beyond the eight options would ultimately be subject to the consensus test.
   
4. Each sponsoring economy will present a synopsis of views and submissions it has received to TPT-WG 18 identifying also the potential benefits of, and barriers to the plurilateral implementation of the recommendation.
   
5. TPT-WG 18 will, in turn, present these synopses as a report to SOM on progress on implementing the aviation elements of the Leaders' Declaration.
   
6. Those economies that are willing to sponsor a recommendation for further work, be asked to indicate their willingness to do so at TPT-WG 17.
   
7. TPT-WG 18 would decide on the next phase of implementing the recommendations.

This page was last updated on 17 May 2000