Rabat, 21-22 December 2005ACAC Presentation1 A RAB A IR T RANSPORT L IBERALISATION A GREEMENT : B RIDGING T HE G APS

Rabat, 21-22 December 2005ACAC Presentation 1

ARAB AIR TRANSPORT

LIBERALISATION AGREEMENT:

BRIDGING THE GAPS


Arab Air TransportLiberalisation Agreement:Bridging the Gaps

Arab aviation scene

Existing world models

ACAC agreement: Strengths and weaknesses

Gaps and how to bridge them


Arab Aviation SceneGrowth & Development

Impressive economic growth 5.6% Extraordinary traffic growth

Jan-Oct 2005 Passenger: 12.6% Cargo: 14.1%

Fleet expansion (orders $60 b) Infrastructure development ($30 b) Emerging low cost carriers Better airline profitability Uneven growth/expansion across the region


Arab Aviation SceneLiberalisation Status

Wide spectrum of attitudes towards aviation regulation

Liberalisation as growth catalyst: e.g UAE, Lebanon

Generally slow pace towards liberalisation

Only six states with fully or partially liberalised agreements

ACAC agreement: a leap forward, but gaps need to be filled

Serious support and political will are needed


Arab Aviation SceneImplications of ACAC Agreement

Higher traffic growth rates Easier rules on market access and entry Increased competition Changes in regulatory environment to support liberalisation

Freer movement of persons and goods Competition laws to create level playing field (airlines operating like

any other business)

Revision of ownership and control clauses Multinational/cross border ownership Mergers, takeovers?


Existing World Models European Union

Fully deregulated internal market Any EC carrier can fly from

anywhere to anywhere

Now enlarging scope External dimension

EC Clause (horizontal mandate) EU/US deal Soon other mandates?

Development of EASA Influence on technical issues European licenses


Existing World Models EU “horizontals” – various models

Designation Clauses negotiated by EU Partners Traditional National Ownership and Control Regional O&C + safeguard

…[non EU State] may refuse, revoke, suspend or limit the operating authorisation… if by exploiting traffic rights granted under an existing bilateral with a member State, [EC carrier] circumvents limitations imposed under a bilateral with another member State…

Principal place of business + regulatory oversight Principal place of business + regulatory oversight + safeguard Mixed (e.g. Morocco)


EU “horizontals”

EU ‘HORIZONTALS”

National O&C

Regional+safeguard

Regional- in negotiation

Princ.pl.of business+reg.ctrl

Princ.pl.of business+reg.ctrl +safeguard


Existing World Models So-called APEC

Chile, NZ, Brunei, Singapore, USA

Traffic rights not completely multilateral Service must have a point in the country

designating the airline (Except all cargo) No cabotage

National Ownership and Control + Principal Place of Business

X


Existing World Models Latin America: Going around the restrictions

No multilateral treaty framework in place

But countries unilaterally negotiating “CLAC clause” with EU Chile (soon: Argentina, Uruguay, Nicaragua)

“Multi-national” airlines emerging TACA LAN COPA

• Minority stakes in foreign carriers• Doing business under one brand• Some still use separate codes for diff’t operators


ACAC Liberalisation Agreement


ACAC Liberalisation AgreementExcellent foundation !

Agreement contains all basic elements of a regional block Regional Clause (art 5.2.a)

In line with developments in other regions CLAC Clause EC Clause

“Traffic Rights” More than the EC Package 2

Stops short of Cabotage but still very generous External dimension

in place (Art 32) Could lead to creation of one or several pan-Arab carriers


ACAC Liberalisation Agreement

Weaknesses Problems will not emerge from conflict with national laws

But from gaps in the Agreement …which can be filled…

“regional/multilateral” vs “bilateral” aspects Agreement still contains left-overs of bilateralism Is this balance stable?

Probably not


ACAC Liberalisation Agreement Left-overs from bilateralism

Tariff filing : Why? Capacity and frequency are fully deregulated Internet = increased transparency Embryo of competition rules in place

Safety checks With possible multinational carriers emerging, need for common standards ECAC experience with SAFA: common checklists, but not common interpretation

Viz. “Blacklist” debate in EU IOSA?

Dispute resolution mechanism Dry-Leases only? (art 15)

Ability to transfer crews at short notice


Competition Law National? Bilateral? Multilateral? Annex 2: Basic Rules Yet basic rules need to be developed

E.g. Arts 81, 82 of EC Treaty Case-Law Guidelines Regulations

Recent developments in EC Law Large devolution to national competition authorities BUT: EC may ‘pull’ cases where

Unity of doctrine is required Case affects cross-border trade Air Transport, typically

E.g. EC / US Draft Open Skies Art 19

“Minimize differences re competition law” “cooperation among competition authorities”

Annex 2: Cooperation on Competition Law issues


Competition Law (2) Annex 2

Too reliant on national laws / authorities But not all ACAC countries have them

And traditions may differ

Risk of diverging interpretations

Subsidies Problem area

Loose definition

No dispute resolution mechanism

No remedies E.g. countervailing measures

Competition LawNo Competition LawIn transition


Competition Law (3)

Dispute Resolution Problem area Traditional bilateral (consultation, negotiation, arbitration) Strong enough? What about a permanent arbitration panel ?

Development of common case-law on aviation

Conflict will not be solely between States Airline vs airline State vs Airline

Airlines should have recognized roles in dispute resolution mechanism Active Passive


ACAC Liberalisation AgreementGaps & How to Bridge Them

Weak Dispute Resolution Mechanism Power based, not rule based

Weak rules on competition & subsidies Need developing

A possible solution: Permanent arbitration body Interprets the Treaty Develops Competition Law aspects of the treaty through case law Solves general disputes re implementation of the Treaty


THANK YOU

Documents

Rabat, 21-22 December 2005ACAC Presentation1 A RAB A IR T RANSPORT L IBERALISATION A GREEMENT : B RIDGING T HE G APS