Liberalisation: Breaking the bilateral web

This has been the argument. If every nation in the world had an air services agreement with every other nation, it would take about 12,500 bilateral agreements to blanket the globe.

Now there are just over 4,000, but that is still enough to prompt not only the International Air Transport Association (IATA) to lament, but also proponents of African ‘Open Skies’.

To this group, “the archaic nature of the current system (BASA) is no longer relevant to, or useful for, the 21st century reality. The flags on the tail of our aircraft were meant for protection when airlines were primarily an extension of national policy.” And, after racking up $50 billion in net losses over the last decade, airlines need to be in tune with the new reality.

International aviation is premised on the principle of national sovereignty of a State over the airspace above its territory under its control.

The exercise of this right is often regarded as demonstrating the independence of a State. A national airline is sometimes regarded within this context as a physical manifestation of statehood by a government Such an airline may be maintained to provide connectivity and promote business and tourism opportunities.

The national sovereignty principle enables governments to have exclusive discretion within their domestic air transport markets.

As a result, domestic product markets under the exclusive control of its government have generally been deregulated more quickly than international markets that are subject to the jurisdiction of at least two States where the origin and destination markets of passengers, cargo and mail (traffic) on international air services routes are located. Generally stringent local ownership and control rules are applicable for domestic airlines.

The current system of BASAs constraints the ability of airlines to operate on a fully commercial basis on international routes much more than in domestic air transport markets where the behaviour of airlines is generally deregulated and subject to the free working of market forces.

Particular operational (or product market) conditions normally provided for in BASAs include restrictions on the number of airlines permitted to operate on a certain route.

This could be limited to one airline that may be designated by each State, dual or multi designation on single or multiple routes provided for under more liberal BASAs, the capacity (seating of aircraft) or frequency of flights that may be operated.

This may be restricted to specific numbers of seats per flight or per the number of weekly frequencies that may be operated is limited. The manner in which these limitations are determined in relation to historic or projected market demand indicates whether the route is constrained or liberal.

Fares and tariffs may be regulated by both States whose prior approval must be sought by an airline, a country of origin approach, where each State decides on the tariffs within its own jurisdiction, deregulated tariff regimes or regimes that still require filing of tariffs but where the airlines are free to decide on tariffs and fares and so called double disapproval regimes under which airlines have freedom until a fare is disapproved by both States.

Aviation experts said one of the drawbacks to air transport growth in the continent is political boundary, as every nation has one immigration barrier or another, all geared towards preventing their neighbour countries from gaining access to their countries.

Besides retarding air transport growth, it has also stultified economic development of the region because it has been shown that by trading among themselves, African nations could boost capital formation among African states and empower the citizenry economically.

But what has been prevalent is that monies earned in Africa are moved to Europe, Asia and America where they are exchanged for goods.

IATA has disclosed that enhanced intra Africa air connectivity would generate 17,400 jobs and add about $128.2 million annually to Nigeria’s Gross Domestic Product (GDP).

This means that a Nigerian airline can operate from Lagos to Lome and Lome to Dakar without visa and immigration restrictions. It is expected that this would boost intra continental trade and make more people travel in the continent.

The liberalisation of the airspace or open sky for Africa is the offshoot of the Yamoussoukro Decision, which African states agreed on, ratified and about 21 states will start implementing the policy in 2017 But it is not yet a smooth ride for some countries and some airlines, which feel that they are being short-changed in the whole arrangement.

Well-established airlines that have thrived for decades and have developed network are enthusiastic to see the policy implemented. An airline operator told New Telegraph that the open sky for Africa plan is good and recalled that it was introduced by the United States, which over the years had well developed aviation industry, but noted that the industry is still relatively young in Africa.

He said at a level playing field, open sky is good where everybody has equal opportunities, but the lope-sided reality of African airlines, where most of them are still operating on the fringe, would be difficult to successfully implement the open sky policy. He said: “Open skies at a level playing ground are a good thing.

This is where everybody is at the same level and has the same opportunities. It will be an advantage. But that is at a level playing ground. If we look at what is happening in the Middle East; the Middle East carriers don’t have open sky agreement with the United States. And the United States is still objecting to some of them because of the way they receive funding and subsidy from their governments. “In that case that is no longer a level playing ground.

That is why the United States is objecting to their coming into their country. So in Africa too, we must have a legal framework where we define ownership of airlines, where we define subvention, where we define contribution and where we define outright bailout funds that are given to airlines in respective states before you start talking about liberalisation and open sky,” he said.

He said this is necessary because government owns some airlines, while other are run and owned by individuals; some airlines are even subsidised and the government could float an airline, subsidise it and use it to fly to other countries.

Vice-President (Africa) IATA, Raphael Kuuchi, said 21 African nations have moved away from their protectionist policy by embracing decade long BASA. The nations including Nigeria have so far signed the solemn declaration to open up their markets unconditionally.

He noted that the responsibility now falls back on African Civil Aviation Commission (AFCAC) to ensure that the framework within which airlines would be able to exercise this freedom is actually in place.

“The assistance IATA is giving to AFCAC is to help them come up with an implementation framework that is conducive for implementation within the continent and which in the future, should there be a need to expand this to a globally liberalised market, there won’t be conflict or contradiction.”

Kuuchi disclosed that they are bringing global expertise to ensure that there is complete alignment with existing liberalisation programmes around the world so that it may be easier to implement. He said that the support, “we are giving to AFCAC is to ensure that they come up with a framework that is not only applicable within the continent.”

The commercial operation of a BASA air service route relies on traffic generation in the origin markets on either side of the route by means of services offerings in terms of seating capacity and price discrimination associated with timing and conditions/ restrictions on the use of tickets.

The lack of market access and especially the confidence in quick application of suitable competition rules combined with substantial differences in the operating scope of airlines is constraining the implementation of the YD.

Hence there has been little progress with the actual implementation of YD and certain important air services routes have remained constrained as far as capacity is concerned.