manual on the regulation of international air transport-doc9626_en

International Civil Aviation Organization

Approved by the Secretary Generaland published under his authority

Manual on theRegulation ofInternationalAir Transport

Second Edition — 2004

Doc 9626

AMENDMENTS

The issue of amendments is announced regularly in the ICAO Journal and in themonthly Supplement to the Catalogue of ICAO Publications and Audio-visualTraining Aids, which holders of this publication should consult. The space belowis provided to keep a record of such amendments.

RECORD OF AMENDMENTS AND CORRIGENDA

AMENDMENTS CORRIGENDA

No.Date

applicableDate

enteredEntered

by No.Date

of issueDate

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1 12/8/05 — ICAO

2 25/10/05 — ICAO

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FOREWORD

The main purpose of this Manual on the Regulation of Inter-national Air Transport is to meet an ever-increasing need fora comprehensive and objective source of information aboutthe many facets of this dynamic activity. This need was fore-seen by the ICAO Assembly which, by Resolution A24-11,directed the preparation and publication of this manual.

The need for and expected usefulness of this manual isnot confined to any particular State or category of States,whether small or large, whether least developed, developing,or having developed economies. Rather, it was prepared tomeet the needs of all ICAO Contracting States.

The air transport authorities of these States may wellbecome the most frequent users of this manual. Yet manyothers in these States may also find it very useful. Inter-national air transport evokes considerable interest of manypeople: those associated with airlines; airports andcommunities seeking new air services; users of air transport;air carrier labour; aircraft manufacturers; certain inter-national organizations; people involved with aviationfinancing, tourism development and trade; people inacademia and the communications media; and, at times,members of the general public as well. This manual isintended to also meet the needs of and be useful to thesebroader constituencies within ICAO Contracting States and,in so doing, to increase its value to air transport authoritieswho interact with such constituencies.

As international air transport developed and became morecomplex over the past half century, so too has its regulation.Also, much new terminology evolved, often without widelyaccepted definitions (or with conflicting ones) and some-times with more than one term applied to the same subject.Thus the approach taken in the preparation of this manualhas been to provide clear and adequate explanations andguidance in a well ordered context. Each relatively shortchapter is, in effect, a narrative composed largely of a series

of definitions and explanations in a logical order of presen-tation derived from the topic itself.

Regulation is the giving of authoritative direction tobring about and maintain a desired degree of order. Allregulation involves regulatory process, various patterns ofactivity by people interacting to establish and maintain somedesired result for the subject or entities being regulated.Similarly, all regulation involves regulatory structure, i.e.the organizations or other entities involved and the legalframework (such as licences, regulations and agreements).Finally, all regulation involves regulatory content, theparticular subjects being regulated (such as market access,pricing and capacity).

The process and structure of international air transportregulation have three distinct venues — national, bilateraland multilateral; therefore, each venue has been assigned aseparate part in this manual, i.e. Parts 1, 2, and 3, respect-ively. Regulatory content topics, which States deal with in allthree venues, are in Part 4. General terminology, i.e. thatwhich is common or supplemental to all parts of this manual,forms Part 5. Appendices contain certain reference materials.

This manual is designed to be “user friendly” and to servethree distinct functions. First, it can be used as a dictionaryof international air transport terms: each term listed in theIndex has a definition or an explanation on the page indi-cated. On that page, the term is highlighted in bold italic andits definition or explanation is presented in italics.

Second, it can be used as an encyclopedia. Each broadregulatory topic has its own chapter or section of a chapterin the manual, written to compress essential facts into oneor a few pages. The Table of Contents assists the reader todetermine the location of material on broader topics (e.g. thebilateral regulatory process, traffic rights, etc., each of whichmay involve many related definitions and explanations).

BASIC COMPOSITIONOF THE MANUAL

FUNCTIONS AND SCOPEOF THE MANUAL

(iv) Manual on the Regulation of International Air Transport

Third, this manual as a whole can be useful as a textbookfor academic or other educational and training purposes.

The scope of the manual is limited to the economicaspects of international air transport regulation asdistinguished from the technical aspects thereof such asthose involving navigation, safety and security. Neverthe-less, these other areas of regulation are not totally separablefrom economic regulation and can affect such matters asairline licensing, airport access and the structure of agreedroutes. Although air transport regulators sometimes alsoregulate commercial non-transport operations, such as aerialcrop dusting and surveying, as well as non-commercialflying, such as overflight and landing by private, militaryand State aircraft, both topics are outside the scope of thismanual. The term “aviation” is often used incorrectly in lieuof the term “air transport”. While air transport is morespecific, referring to those aspects related to the carriage byair (usually commercial air transport), aviation is genericand includes far more topics such as military, state andprivate flying, aircraft manufacturing, air navigation, non-commercial transport and specialty air services.

Along with the trend of globalization and liberalization,international air transport has also undergone significant

changes in the last ten years. This second edition has beenupdated and expanded to take account of the developmentsin international air transport and its regulation since 1996when the manual was first published.

This edition includes many new topics (e.g. State aids,competition laws, airline alliances, franchising, aircraftleasing, passenger rights, and privatization of airports),which are emerging issues drawing increasing regulatoryattention. A number of new air transport terms anddefinitions have been added, including many that were non-existent when the first edition was published (e.g. mega-alliance, e-commence, B2B, etc.). Additionally, newwebsites and e-mail addresses (primarily of air transport-related international organizations and entities) have beenadded, enabling computer-equipped readers to vastly expandtheir knowledge base.

The updating of established topics, as well as theaddition of new information, adds significantly to themanual’s value as a user-friendly tool for those who areinterested in knowing more about the regulatory aspects ofinternational air transport.

This manual both complements and supplements ICAODoc 9587 — Policy and Guidance Material on the EconomicRegulation of International Air Transport, which is acompendium of all the formal policies and guidance adoptedby ICAO in this field (such as Assembly resolutions, Councildecisions, and conclusions and recommendations of airtransport conferences).

WHAT IS NEW INTHE SECOND EDITION

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TABLE OF CONTENTS

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Part 1 — NATIONAL REGULATION

1.0 Introduction to National Regulation. . . . . . . . . 1.0-1

1.1 Process of National Regulation . . . . . . . . . . . . . 1.1-1

— The Legislative Component . . . . . . . . . . . . . 1.1-1— The Licensing Component . . . . . . . . . . . . . . 1.1-1— The Ad hoc Authorization Component . . . . 1.1-2— Comity and Reciprocity . . . . . . . . . . . . . . . . 1.1-3

1.2 Structure of National Regulation . . . . . . . . . . . 1.2-1

— The Organizational Component . . . . . . . . . . 1.2-1— The Legal Component. . . . . . . . . . . . . . . . . . 1.2-2

1.3 Key Issues of National Regulatory Process and Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3-1

— The Relationship Between Air Transport Regulators and Interested Parties . . . . . . . . . 1.3-1

— The Optimum Location of the International Air Transport Regulatory Function. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3-2

Part 2 — BILATERAL REGULATION

2.0 Introduction to Bilateral Regulation. . . . . . . . . 2.0-1

— Evolution of the Bilateral Regulation of International Air Services . . . . . . . . . . . . . . . 2.0-1

2.1 Process of Bilateral Regulation . . . . . . . . . . . . . 2.1-1

— Initiation of and Preparation for a Formal Bilateral Consultation . . . . . . . . . . . . . . . . . . 2.1-1

— Consultations and Negotiations: Types of Meetings and Documents . . . . . . . . . . . . . . . 2.1-4

— Consultations and Negotiations: Strategic and Tactical Considerations . . . . . . . . . . . . . 2.1-5

— Conclusion, Implementation, Management, Dispute Resolution, Amendment and (Exceptionally) Termination of an Agreement . . . . . . . . . . . . . . . . . . . . . . . . 2.1-7

2.2 Structure of Bilateral Regulation . . . . . . . . . . . 2.2-1

— Basic Document Types . . . . . . . . . . . . . . . . . 2.2-1— Typical Provisions of Bilateral Air

Transport (Services) Agreements . . . . . . . . . 2.2-2— Types of Bilateral Agreements on Subjects

Closely Related to Air Transport . . . . . . . . . 2.2-4

2.3 Key Issues of Bilateral Regulatory Process and Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3-1

— Balancing Benefits in a Liberalizing Environment . . . . . . . . . . . . . . . . . . . . . . . . . 2.3-1

— Shortcomings of Bilateral Regulatory Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3-3

— Bilateral Relations Involving Groups of States. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3-4

— Application of Competition Laws to Air Transport . . . . . . . . . . . . . . . . . . . . . . . . . 2.3-5

— Effects of State Aids and Subsidies . . . . . . . 2.3-6

2.4 Types of International Air Services Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4-1

Part 3 — MULTILATERAL REGULATION

3.0 Introduction to Multilateral Regulation. . . . . . 3.0-1

— A Brief History of the Multilateral Regulation of International Air Transport . . . . . . . . . . . . . . . . . . . . . . . . . 3.0-2

3.1 Process of Multilateral Regulation . . . . . . . . . . 3.1-1

— Formal Multilateral Meetings . . . . . . . . . . . . 3.1-1— Process within Formal International

Organizations. . . . . . . . . . . . . . . . . . . . . . . . . 3.1-3— The Multilateral Treaty Process . . . . . . . . . . 3.1-3

3.2 Structure of Multilateral Regulation . . . . . . . . 3.2-1

— Basic Elements of the Organizational Component . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-1

— Basic Terminology of the Legal Component . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-2

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— The Chicago Conference Documents . . . . . . 3.2-3— The Warsaw System and the Montreal

Convention of 1999. . . . . . . . . . . . . . . . . . . . 3.2-4— Other Air Law Instruments. . . . . . . . . . . . . . 3.2-5— Regional Multilateral Agreements . . . . . . . . 3.2-5

3.3 Key Issues of Multilateral Regulatory Process and Structure . . . . . . . . . . . . . . . . . . . . . 3.3-1

— Why the Multilateral Approach? . . . . . . . . . 3.3-1— Possible Processes in the Quest for a

New Multilateralism . . . . . . . . . . . . . . . . . . . 3.3-2— The Likely Generic Structural Elements

of a New Multilateral Air Transport Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3-3

— The General Agreement on Trade in Services (GATS) and its Air Transport Annex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3-4

3.4 International Civil Aviation Organization (ICAO) . . . . . . . . . . . . . . . . . . . . . 3.4-1

— Policy Development Bodies . . . . . . . . . . . . . 3.4-1— Air Transport Bureau . . . . . . . . . . . . . . . . . . 3.4-3— ICAO Policy, Guidance and Information . . . 3.4-4

3.5 Worldwide Intergovernmental Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5-1

— Organs of the United Nations. . . . . . . . . . . . 3.5-1— Specialized Agencies of the

United Nations . . . . . . . . . . . . . . . . . . . . . . . 3.5-2— Other Worldwide Intergovernmental

Organizations. . . . . . . . . . . . . . . . . . . . . . . . . 3.5-2

3.6 Regional Intergovernmental Civil Aviation Organizations . . . . . . . . . . . . . . . . . . . . 3.6-1

— Africa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6-1— Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6-1— Latin America and the Caribbean. . . . . . . . . 3.6-2— Middle East . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6-2

3.7 Regional and Trans-regional Intergovernmental Organizations and Trade Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-1

— Regional Intergovernmental Organizations. . . . . . . . . . . . . . . . . . . . . . . . . 3.7-1

— Formal Trans-regional Groups . . . . . . . . . . . 3.7-6— Informal Trans-regional Groups . . . . . . . . . . 3.7-6

3.8 International Air Transport Association (IATA) . . . . . . . . . . . . . . . . . . . . . . . 3.8-1

— Main Components of the IATA Organizational Structure . . . . . . . . . . . . . . . . 3.8-1

— The IATA Traffic Conference Structure. . . . 3.8-1— Tariff Coordination Process . . . . . . . . . . . . . 3.8-2— Trade Association Activities. . . . . . . . . . . . . 3.8-3

3.9 Non-governmental Organizations . . . . . . . . . . . 3.9-1

— Air Carrier Organizations . . . . . . . . . . . . . . . 3.9-1— Other Aviation Organizations . . . . . . . . . . . . 3.9-2— Other Organizations Interested in

Air Transport . . . . . . . . . . . . . . . . . . . . . . . . . 3.9-3

Part 4 — REGULATORY CONTENT

4.0 Introduction to Regulatory Content . . . . . . . . . 4.0-1

4.1 Basic Market Access . . . . . . . . . . . . . . . . . . . . . . 4.1-1

— Route Rights . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-2— Operational Rights . . . . . . . . . . . . . . . . . . . . 4.1-5— Traffic Rights . . . . . . . . . . . . . . . . . . . . . . . . 4.1-8— Market Access as Affected by the

So-called “Sixth Freedom” . . . . . . . . . . . . . . 4.1-12

4.2 Air Carrier Capacity . . . . . . . . . . . . . . . . . . . . . 4.2-1

— Capacity Regulation by Governments . . . . . 4.2-1— Capacity as Viewed by Air Carriers . . . . . . 4.2-3

4.3 Air Carrier Tariffs . . . . . . . . . . . . . . . . . . . . . . . 4.3-1

— Why States Regulate Tariffs . . . . . . . . . . . . . 4.3-1— Definition of Tariff . . . . . . . . . . . . . . . . . . . . 4.3-1— Types and Characteristics of Tariffs. . . . . . . 4.3-2— Methods for Regulating Tariffs . . . . . . . . . . 4.3-6— Key Tariff Issues . . . . . . . . . . . . . . . . . . . . . . 4.3-8

4.4 Air Carrier Ownership. . . . . . . . . . . . . . . . . . . . 4.4-1

— The Discretionary Criteria . . . . . . . . . . . . . . 4.4-1— Use of the Criteria . . . . . . . . . . . . . . . . . . . . 4.4-1— Some Exceptions. . . . . . . . . . . . . . . . . . . . . . 4.4-2— Foreign Investment in Air Carriers . . . . . . . 4.4-3— Key Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4-3

4.5 Air Cargo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5-1

— Distinct Features of Air Cargo . . . . . . . . . . . 4.5-1— Regulation of Air Cargo . . . . . . . . . . . . . . . . 4.5-1

4.6 Non-scheduled Air Services . . . . . . . . . . . . . . . . 4.6-1

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— Characteristics of Non-scheduled Air Services . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6-1

— Kinds of International Non-scheduled Air Services . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6-1

— Regulation of Non-scheduled Air Services . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6-3

4.7 Airline Commercial Activities . . . . . . . . . . . . . . 4.7-1

— Currency Conversion and Remittance of Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7-1

— Employment of Non-national Personnel . . . 4.7-2— Sale and Marketing of International

Air Transport . . . . . . . . . . . . . . . . . . . . . . . . . 4.7-2— Airline Product Distribution and

Electronic Commerce . . . . . . . . . . . . . . . . . . 4.7-3— Aircraft Leasing . . . . . . . . . . . . . . . . . . . . . . 4.7-5

4.8 Airline Cooperative Activities . . . . . . . . . . . . . . 4.8-1

— Airline Alliances . . . . . . . . . . . . . . . . . . . . . . 4.8-1— Airline Codesharing . . . . . . . . . . . . . . . . . . . 4.8-2— Airline Franchising . . . . . . . . . . . . . . . . . . . . 4.8-4

4.9 Airline Passengers . . . . . . . . . . . . . . . . . . . . . . . . 4.9-1

— Passenger Rights . . . . . . . . . . . . . . . . . . . . . . 4.9-1— Airline’s Condition of Contract/Carriage . . . 4.9-4— Unruly or Disruptive Passengers . . . . . . . . . 4.9-5— Improperly Documented Passengers. . . . . . . 4.9-6

4.10 Airport-related Matters. . . . . . . . . . . . . . . . . . . 4.10-1

— Ground Handling. . . . . . . . . . . . . . . . . . . . . . 4.10-1— Slot Allocation . . . . . . . . . . . . . . . . . . . . . . . 4.10-2— Privatization of Airports . . . . . . . . . . . . . . . . 4.10-2

Part 5 — GENERAL TERMINOLOGY

5.0 Introduction to General Terminology. . . . . . . . 5.0-1

5.1 Air Carriers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-1

5.2 Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-1

5.3 Air Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3-1

5.4 Airports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-1

APPENDICES

1. Formats for Tariff Filings . . . . . . . . . . . . . . . . . . . . A1-12. IATA Currency Conversion System . . . . . . . . . . . . A2-13. Prorating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A3-14. Guidance Material for Users of

Air Transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A4-1

INDEX

Part 1

NATIONAL REGULATION

1.0-1

Chapter 1.0

INTRODUCTION TONATIONAL REGULATION

National regulation of air transport is regulationundertaken by a State within its territory in its exercise ofsovereignty over that territory and the airspace above it.Thus national regulation extends to both domestic andinternational air services and to both national and foreignair carriers. The national regulation of international airservices must take into account the State’s internationalobligations pursuant to bilateral and multilateral agree-ments and arrangements and should give due regard to theactions and concerns of other States.

The particular aims of national regulation in the field ofinternational air transport vary from State to State and areinfluenced by national economic policies, territorial sizeand location, the degree of national development, domesticand international politics, etc. Those aims are, however,likely to include all or several of the following:

• to provide for the transport requirements of foreigncommerce;

• to promote particular service sectors (such astourism);

• to provide employment;

• to earn foreign exchange;

• to meet the needs of the postal system;

• to create the conditions for a viable, healthy airtransport sector;

• to aid in national development;

• to serve national defence; and

• to meet disaster assistance needs.

The process of national regulation involves threedistinct kinds of actions — legislating; licensing; and deter-mining ad hoc authorizations. Chapter 1.1 describes thesethree components and explains the concepts of comity andreciprocity used in the national regulation of internationalair services.

The structure of national regulation has an organiz-ational component made up of governmental bodies and alegal component embodied in national laws, policies, rulesand regulations with respect to air transport services.Chapter 1.2 explains the organizational component byidentifying the primary as well as other governmentalbodies that are involved in air transport regulation andexplains the legal component by describing its majorelements.

Chapter 1.3 examines certain key issues of process andstructure in the national regulation of international airtransport.

The topics which make up the subject matter or contentof regulation, such as traffic rights, tariffs and capacity, arepresented in Part 4 of the manual.

1.1-1

Chapter 1.1

PROCESS OFNATIONAL REGULATION

The process of national regulation of air transport serviceshas three basic components:

• legislative (i.e. the making of laws, policies, rulesand regulations);

• licensing (i.e. the granting, conditioning, denying orwithholding of permission to conduct air transportservices on a continuous or long-term basis); and

• ad hoc authorization (i.e. the granting, conditioning,denying or withholding of permission for individualtariffs, flights, etc.);

each of which are complemented by enforcement actionstaken if and when required.

These three elements are described in the next threesections. The last section discusses the concepts of comityand reciprocity employed in the national regulation ofinternational air services.

The legislative component of the process of national regu-lation has three elements: law-making, policy-making andthe writing of rules and regulations. Each element of theprocess is likely to differ from the others and to vary fromState to State according to its particular legislative system,governmental structure and customary practices. In general,however, the law-making element tends to come into useleast often and be employed for establishing laws and fun-damental policies. Once enacted, such laws are usuallychanged only when issues of far-reaching significance areinvolved. The details of implementation are typically left tothe rule-making process.

In contrast to the law-making element, the processinvolved in the writing or amending of rules and regulationstends to be used more frequently, to be more rapid and tobe initiated and completed by air transport authorities withor without public comment. Rules and regulations are likelyto be more detailed and flexible than laws and to providepossibilities for making exceptions or granting exemptions.

The policy-making element is perhaps the most flexibleand most likely to vary from State to State and even withina given State. This is because a State may choose to expresspolicy within a law or decree, in a rule or regulation, in aseparate policy statement, or by other means. (A State mayalso establish some policies, usually more detailed andspecific, in certain licensing or ad hoc approval determi-nations which can serve as precedents for future similarsituations.)

The licensing component of the process of nationalregulation involves the consideration of and action uponapplications received from national and foreign air carriersfor authority to provide commercial air services on a con-tinuous basis and for extended periods of time (for example,scheduled services on a specified route or routes). Inaddition to licensing national and foreign air carriers, airtransport authorities may also engage in licensing certainintermediaries in air transportation such as tour organizers,freight forwarders or travel agents.

The regulatory authority typically makes its licensingdecision on the basis of an evaluation of the pertinent factsin the light of established legal and policy criteria. Theauthorization issued often takes the form of a licence or per-mit, i.e. a formal statement of permission from a constitutedauthority to carry out some service or business activity. In

THE LEGISLATIVE COMPONENT

THE LICENSING COMPONENT

1.1 Manual on the Regulation of International Air Transport

1.1-2

some States, a licence is issued to a national carrier and apermit to a foreign applicant, while in some others, a licenceis granted for scheduled operations and a permit is given forcharter flights. A licence or permit may be valid indefinitelyor for a specified period of time only.

The criteria used in licensing a national carrier varyfrom State to State but generally include:

• a national ownership and control requirement;

• proof of the applicant carrier’s fitness, i.e. itsfinancial health, its willingness to provide the pro-posed services and its ability to meet establishedoperational and safety standards; and

• a finding that granting the authority will be in thepublic interest.

In addition, in some cases, criteria agreed upon at theinternational level may be included.

The scope of the authority granted to a national carriermay cover domestic or international air services, or both.When the requested authority involves operation of aninternational air service, consideration is also given to therights available to the licensing State under pertinent airtransport agreement(s). In situations where more than oneair carrier applies for a route which only one such carriermay serve, a selection process is required. Such a selectionprocess may involve analysis and evaluation of the pro-posals or intended services of each contender and may ormay not be public.

In considering the grant of a permit or licence to aforeign air carrier, air transport authorities usually rely ondecisional criteria established in the relevant air transportagreement as well as national laws or regulations. Such cri-teria are likely to include the requirement that substantialownership and effective control of the foreign air carrier bevested in the designating State or its nationals and thewillingness and the ability of the applicant to comply withrelevant national laws and regulations.

The requested authority may be approved in whole orin part, conditioned, denied or withheld on the groundsestablished in the applicable national laws and regulationsand the relevant air transport agreement. One condition, forexample, could be a requirement that the carrier obtain acertain amount and type of liability insurance.

Unlike the licensing component which deals with relativelygeneral and longer-term authorizations for air services, thead hoc authorization component of the process of nationalregulation primarily involves making day-to-day decisionsregarding specific matters, such as permitting a single flightor a series of non-scheduled flights or approving or disap-proving a particular tariff or schedule filing. This processcould have some or all of the following phases:

• a fact-finding or information-gathering phase (oftenthe initial responsibility of the applicant) whichincludes assembly of the basic elements necessaryto reach a decision, i.e. an adequate description ofthe approval being sought; the relevant inter-national rights and obligations; the applicablenational laws, policy, rules and regulations; relevantprecedents; and views of interested parties;

• an analysis phase which includes examination ofthe gathered information and the production ofoptions for the decision-maker with a rationale foreach, including the advantages and disadvantagesof each option;

• a decision phase which includes weighing the factsand options presented and may also include, in sig-nificant cases, taking into account the viewsreceived from other regulatory officials or othergovernmental elements as to the course of action tobe taken; and

• an optional review/reconsideration phase which maytake place either within the governmental entity thatundertook the previous three phases, or elsewhere inthe government; may be done publicly or in private;and may, in some instances, also involve judicialreview.

This process may be quite brief (for example, when aregulator considers a single non-controversial fare or rate)or very long if it concerns a complex or controversialmatter (for example, a commercial arrangement involvingcodesharing).

THE AD HOC AUTHORIZATIONCOMPONENT

Part 1 — National RegulationChapter 1.1 — Process of National Regulation 1.1

1.1-3

Of particular importance in the national regulation ofinternational air services are the concepts of comity andreciprocity, especially where a commercial activity is notcovered by a specific provision in an air transport agree-ment. Comity is due deference given by the authorities ofone State to the official acts of another State. In regulatorypractice, comity sometimes underlies the unilateral grant ofa right or benefit to a foreign airline with no necessaryexpectation of the same treatment by that airline’s State insimilar circumstances. For example, a State may, on thebasis of comity, approve reduced fares or rates which a for-eign government has ordered its national airline to provideto its officials.

In contrast, reciprocity is the granting of a right or ben-efit by a State to a foreign entity such as an air carrierwhen it has no international obligation to do so, on thecondition that the same treatment will be accorded to itscomparable entity (entities) by the home State of that for-eign entity. For example, a State might approve a non-scheduled flight or flights by a foreign airline if that foreign

airline’s State has in the past approved, or promises in thefuture to approve, a non-scheduled flight or flights for thefirst State’s airline(s).

Reciprocity may be narrowly or broadly defined. Forexample, in relation to non-scheduled air services, reci-procity in a narrow context might require approval only ofa specific type and number of non-scheduled flights, forexample, four non-scheduled flights to carry livestock. Abroader concept of reciprocity would make no such distinc-tion as to the type or number of non-scheduled flights butmight require merely that all non-scheduled flights in ageneral category, for example, those to/from a third country,be approved.

Comity and reciprocity are often employed together.One such case arises when an air transport agreement hasbeen terminated and no new agreement or arrangement hasbeen reached to replace it. In such a situation, when auth-orizing scheduled services, a State might, as a matter ofcomity, approve services by a foreign airline or airlines ofits former bilateral partner which involve routes not servedby its national airline(s) but insist on reciprocity withrespect to the capacity operated by such foreign airlines onroutes also served by its national airline(s).

COMITY AND RECIPROCITY

1.2-1

Chapter 1.2

STRUCTURE OFNATIONAL REGULATION

The structure of national regulation of international airtransport has:

• an organizational component consisting of a gov-ernmental entity or entities which function as theState’s air transport authorities as well as certainother non-aviation governmental bodies, the actionsof which affect international air transport; and

• a legal component embodied in the pertinentnational laws, rules and regulations, judicial andadministrative decisions, licences and/or permitsand declared policies as well as relevant inter-national agreements to which the State is a party.

The next two sections of this chapter explain the organiz-ational and legal components, respectively.

The primary element of the organizational component ofthe structure of national regulation is that of the State’s airtransport authorities. National air transport authorities(also called aeronautical or civil aviation authorities) arethe governmental entity or entities, however titled, that aredirectly responsible for the regulation of all aspects of civilair transport, technical (i.e. air navigation and aviationsafety) and economic (i.e. the commercial aspects of airtransport). The functions performed by such entity or enti-ties with respect to the economic regulation of internationalair transport are likely to include:

• the development of economic policies and strategieswith respect to air transport;

• the formulation of specific rules and regulations toimplement basic aviation law and to further nationalpolicy goals and objectives;

• the issuance (or denial or withholding) of nationaland foreign air carrier licences and permits;

• the authorization of air carrier schedules, tariffs,etc.;

• the coordination of air transport policy and regu-lation with other governmental entities such asthose responsible for trade and commerce, tourism,financial controls, taxation, national development,etc.; and

• the conduct of bilateral and multilateral inter-national relations with respect to air transport.

These functions (other than that of international aviationrelations where the lead role may be taken by the ministryor department responsible for foreign affairs) are generallylocated in a single national entity such as a ministry oftransport or a department of civil aviation. The functionsmay, however, be divided among two or more entities, forexample, with one responsible for technical regulation andanother responsible for economic regulation. In some Statesthe primary air transport economic regulatory entity may bea quasi-judicial body which is relatively independent andwhich performs some or all of the above functions (e.g. aboard or commission).

The effective operation of any national organizationalstructure requires skilled people. The primary skills neededby air transport regulators include those essential for:

• the collection and presentation of traffic, financialand other air service statistics;

THE ORGANIZATIONAL COMPONENT


1.2-2

• the analysis of relevant quantitative and qualitativedata such as that relating to tariffs and air transportagreements;

• the forecasting of future traffic in order to meetinfrastructure requirements, a proposed establish-ment of a new route or routes, etc.;

• decision making, particularly in licensing and otherauthorization matters;

• effective writing of decisions, agreements, policystatements, etc.;

• foreign relations, both with foreign air carriers andwith foreign governments as part of air serviceconsultations;

• multinational affairs, particularly relationships withworldwide international organizations such as theInternational Civil Aviation Organization and theInternational Air Transport Association, as well aswith regional and trans-regional organizations;

• legal matters regarding the interpretation of lawsand agreements, the licensing process, etc.;

• administration, including matters of finance, per-sonnel, information storage and retrieval, etc.; and

• public relations and coordination with othergovernmental entities.

In a small air transport regulatory entity, the skills to per-form the above tasks could be possessed collectively and invarying degrees by as few as one or two persons who mayrely on a larger body, such as a governmental department orministry, for certain services (such as legal, administrative,and public relations).

The other element of the organizational component ofthe structure of national regulation, i.e. the non-aviationgovernmental entities, the actions of which affect inter-national air transport, includes (but is not necessarilylimited to) those national authorities responsible for:

• customs controls, i.e. on the importation (and some-times the exportation) of goods;

• immigration controls, i.e. on the entry and departureof international airline passengers;

• public health standards (including inspection andquarantine which affect both passengers and goods);

• financial controls, i.e. on currency conversion andremittance, including the earnings of foreignairlines;

• taxation, i.e. of air carriers’ earnings, traffic, fuel,supplies, etc.;

• competition maintenance, which can involve theprohibition of certain activities by both national andforeign air carriers;

• environmental controls, for example, curfews at air-ports where aircraft noise is a concern;

• tourism development, i.e. to promote air travel byforeigners to the State; and

• labour, whose actions can affect the terms and con-ditions of employment of air carrier staff, both ofnational and, in some instances, of foreigncompanies.

Air carriers can also expect a certain degree of regu-lation by local authorities under laws and rules applied toall commercial activities, for example, regarding the safetyof premises on or off airports used for sales offices, ware-houses, etc. Certain other actions taken by a governmentbelow the national level in a federal State can also affectinternational air services. One example is the imposition oflocal taxes on fuel and supplies used in international air ser-vices. Another is the levy of income taxes on the earningsof international air services by foreign air carriers. Suchactions can be very controversial and may or may not beaffected by international agreements on taxation.

The legal component of the structure of national regulationof international air transport is embodied in each State’s:

• basic aviation laws, which typically govern otherregulatory actions such as rule-making, licensing,and enforcement, as well as provide the legal foun-dation for the organizational structure and processemployed;

• pertinent national laws which affect particular regu-latory actions (for example, a law requiring that dueprocess be followed in any licensing matter);

THE LEGAL COMPONENT

Part 1 — National RegulationChapter 1.2 — Structure of National Regulation 1.2

1.2-3

• international agreements, multilateral and bilateral,to which the State is a party, to the extent that theinternational rights and/or obligations they containmust be taken into account in the basic process ofnational regulation of international air services;

• policy statements or directives in various forms (forexample, as in a White Paper, i.e. an authoritativereport which provides information about the poli-cies, positions and intended course of action of theissuing party), which set forth goals, objectives,approaches or general or specific guidelines forinternational air transport regulation;

• rules and/or regulations which implement its basicaviation laws by specifying particular requirementswhich are imposed on air carriers or others (forexample, to provide traffic data, information on therights of air transport users, filing schedules andtariffs, etc.);

• judicial decisions on specific air transport matters(for example, a court or competition authorityruling in a dispute between companies on computerreservation system issues);

• licences and/or permits which authorize the ongoingoperation of international air services by nationaland foreign air carriers, in particular to the extentthese permissions constitute or contain precedentswhich may influence or determine future licensingactions;

• ad hoc decisions (for example, approval of a com-mercial arrangement for cooperation between twoairlines) which may become precedents for futureregulatory action in similar situations; and

• ad hoc authorizations (for example, approval of aschedule or a tariff) which remain a part of the legalcomponent while they are in effect.

Transparency (the making known of governmentallegal decisions to the public) is often carried out bypublication in a gazette, register, or journal, i.e. aperiodic (often daily) official government publi-cation which sets out laws, rules, regulations anddecisions taken by the government during theperiod of time covered by the particular issue(except for minor ad hoc decisions), including thosepertaining to civil aviation.

Because of differences between each State’s govern-mental structure, legal system, culture and customary prac-tices, national rules and/or regulations tend to differ inrelation to:

• terminology (for example, an authorization forongoing air services by a foreign air carrier may becalled a licence by one State and a permit byanother);

• subject matter (for example, some States have rulesand/or regulations for computer reservation systemsbut many do not);

• the treatment of subject matter (for example, mostStates have distinctive policies and practices for theauthorization, withholding, denial or conditioningof international charter flights);

• format (for example, there is no standardizationamong States in writing their national regulations);and

• language or languages used.

The topics covered by national rules and regulationsaffecting the commercial aspects of air transport arelikely to include, inter alia:

• the provision of air carrier (and airport) traffic andfinancial and other data as may be required inclu-ding definitions, deadlines, filing formats, etc.;

• the organization, pricing, authorization and oper-ation of charter flights and other non-scheduled airservices;

• the filing of tariffs for monitoring or approval;(Formats developed by ICAO which may be usedby national air transport authorities for the filing ofairline passenger tariffs can be found in Appendix 2of the manual.)

• the application for and processing of licences, per-mits and ad hoc authorizations for air services; and

• the protection of users, such as in rules requiringcompensation for denied boarding of aircraft.

In some States the governmental requirements on many ofthe above matters may be set forth in decisions or ordersissued by the air transport authorities.

1.3-1

Chapter 1.3

KEY ISSUES OF NATIONALREGULATORY PROCESS

AND STRUCTURE

This chapter discusses two of the key issues of the processand structure of national regulation of international airtransport: first, how international air transport regulatorsshould deal with interested governmental or non-govern-mental parties and their different input in the regulatoryprocess and, second, where the international air transportregulatory function can best be located in the governmentalstructure.

In the national regulatory process (i.e. legislating, policy-making, licensing and ad hoc authorization), internationalair transport regulators are likely to receive input from atleast some members of the following three types ofinterested parties:

• governmental entities which have not necessarilybeen assigned the international air transport regulat-ory function but have a direct interest in the out-come of that function and which may at times seekto control or shape particular policies or decisions;these entities include departments responsible forforeign affairs, tourism, trade and commerce, andtransport and communications;

• non-aviation governmental entities whose actionsmay intentionally or otherwise impact upon airtransport regulation; these include departmentsresponsible for customs, immigration, public health,taxation, finance, currency control, the environment,competition regulation and, in some cases, sub-

national (e.g. provincial/state) authorities or supra-national authorities such as those of a grouping ofStates; and

• interested non-governmental parties which mayseek to influence policy or decision making; theseinclude airlines, airports, consumers, communities,business or tourism interest groups, air carrierlabour and possibly aircraft manufacturers.

Each of these parties has its own interests in and emphasisto place on the formulation of policies, decisions, rules andregulations vis-à-vis international air transport. Nationalregulation is also influenced by the policies and actions ofother States. The issue faced by the international air trans-port regulators is how to deal with these parties and theirvarious, often conflicting, input.

As far as the parties in the first group (aviation-relatedgovernmental entities) are concerned, the decision on whichentity to consult and how much weight to give to its viewsmay depend largely on their respective primary regulatoryfunctions relative to that of international air transport regu-lation, taking into account the priority accorded to foreignpolicy goals, tourism, national development considerations,trade and commerce interests, and any government require-ment for formal or informal intergovernmental coordination.

Of the parties in the second group (non-aviationgovernmental entities), the customs, immigration, publichealth, finance and taxation departments are traditionallythe ones whose actions affect certain aspects of inter-national air transport regulation. In recent years, air trans-port activities have become increasingly affected byregulatory actions taken by other government bodies,particularly those dealing with trade, competition law,

THE RELATIONSHIP BETWEENAIR TRANSPORT REGULATORS

AND INTERESTED PARTIES


1.3-2

taxation and the environment. The primary function/responsibility of these bodies includes regulatory actionsoutside the aviation field and therefore their policy objec-tives may not be the same as those of the air transport auth-orities. Consequently, their regulatory actions can have asignificant impact on the operating environment of the airtransport industry. The overlapping of certain regulatoryfunctions and responsibilities may also give rise to potentialconflicts between governmental entities. In such situations,national air transport regulators may need to strengthencoordination with these other government bodies toharmonize their international air transport regulations,policies and decisions.

Among the parties in the third group (interested non-governmental parties), international air transport regulatorstraditionally consult national airline(s) on most mattersrelating to international air services and give considerableweight to their views since the regulation of these mattersdirectly affects the livelihood of the airline(s). However, asthe air transport industry matures in many countries, otherparties are likely to become interested in influencing theprocess, increasingly seeking to have their views taken intoaccount in decision making because international air trans-port regulation can have a direct or indirect economicimpact on them; for example:

• airport development depends on revenues earnedfrom air traffic;

• passengers and shippers are the direct users andrevenue generators of air services;

• communities see an important role for air servicesin local economic development;

• local commerce or tourism benefit from increasedair transport services;

• aircraft manufacturers depend a great deal on air-craft orders from airlines which may be affected byregulatory decisions;

• airline labour’s well-being is affected by the finan-cial health of the airlines; and

• other modes of transport (such as road and rail)might have concerns about competition from airservices.

Should air transport regulators change their traditionalattitude? Should they broaden the basis for their policies

and decisions? On the one hand, giving greater weight tothe interests of above parties may help to formulate morebalanced air transport policies and decisions. On the otherhand, consultation with more parties may lead to a longer,more complicated process, possibly requiring more staff tohandle the increased workload.

The decision on which party to consult may depend onthe subject matter. A major policy decision such as themaking of the government’s basic international air transportpolicy may involve consultation with all three types of par-ties. For licensing decisions, consideration may be givenprimarily to input from those parties directly involved; forexample, input on the safety record of the airline applicantfrom the office for aviation technical regulation and/or com-ments on possible effects on competition in the market fromairline(s) which may be affected by the grant of the licence.In making specific authorizations such as approving sched-ules, tariffs or charter flights, the decision-making processmay involve only those parties concerned with the particu-lar matter in question; for example, an air navigation officeor airport authority for input on the availability of take-offand landing slots, and competing airlines for capacity ortariff matters.

Certain air transport regulatory actions taken by foreigngovernments may also influence national air transport pol-icy and decision making; for example, the international airpolicy or competition law decisions of another countrywhich is a major market for the national air carrier(s). Insome cases, national air transport regulators will need totake into account regulations of a supranational authorityconstituted by a group or union of States to which the Stateis a party; for example, the requirement to apply the inter-nationally agreed criteria in licensing a national air carrierfor international air services.

Each State is in the best position to determine the optimumlocation for its international air transport regulatory func-tion within its national governmental structure, taking intoaccount its general structural division of responsibilities,the degree of its national development, its economic policy,the state of its air transport industry and the availablehuman and physical resources. States have found a variety

THE OPTIMUM LOCATION OF THEINTERNATIONAL AIR TRANSPORT

REGULATORY FUNCTION

Part 1 — National RegulationChapter 1.3 — Key issues of National Regulatory Process and Structure 1.3

1.3-3

of such locations and from time to time individual Statesre-evaluate and change their optimum locations for airtransport matters.

When the optimum location of the international airtransport regulatory function becomes an issue, the basicconsideration is whether the entity (of whatever size)performing such a function should be:

• independent of or under the control of an entity thatregulates the technical aspects of civil aviation;

• separate from or a part of the domestic air transportregulatory entity;

• part of a larger government organization (e.g. adepartment of transport or a ministry of tourism);

• a quasi-judicial body; or

• an autonomous or semi-autonomous authority.

In many States, air transport regulation, both economicand technical, is carried out through a single governmentalentity, under the overall control of a minister or directorgeneral of civil aviation. The advantages of having a singleentity handling all aspects of civil aviation regulationinclude consistent, coherent and efficient discharge of func-tions; closer coordination between aviation economic andtechnical regulation, both national and international; andpossibly more responsiveness to the needs of the air trans-port industry. One weakness may be that too much emphasison promotion of civil aviation could result in insufficientattention being paid to its role in serving broader nationalinterests.

In States where domestic air transport activity islimited, the office responsible for international regulationmay have reasons to incorporate any relevant domestic airservice regulations into its own regulations. On the otherhand, the placement of international regulation in an officein charge of domestic regulation could result in lessenedresponsiveness to distinctly international matters.

As regards whether the international air transport regu-latory function should be placed within some other govern-mental entities having different or broader responsibilitiesthan air transport, each possibility has its distinct strengthsand weaknesses.

A department or ministry of transport or communi-cations may argue that it should be responsible for

international air transport regulation because a singlegovernmental body which regulates all modes of trans-portation (i.e. road, water, railways, air, etc.) could bettercoordinate the different forms of transport to build anintegrated national transport network. The weakness of thisargument may be that the activities of other modes of trans-port are mostly domestic, that they have few characteristicsin common and that interface between these modes isrelatively rare in cases other than that of intermodal freightmovements.

A department or ministry of tourism may also see itselfbetter placed to assume the functions of international airtransport regulation, particularly in States where foreigntourism is a major component of the national economy. Therationale is likely to be that the two industries are closelyrelated and largely interdependent because air service maybe the primary means to bring in foreign tourists; thus thebenefits of both could be maximized by close coordinationunder the same governmental entity. However, decisionsmade primarily on tourism promotion considerations maybe perceived as compromising the interests of the nationalairline(s) (for example, by permitting unreciprocated mar-ket access to the State by foreign airlines) and could alsohave implications for air freight and mail services.

A department or ministry of trade may find logic inhaving international air transport regulation under itsresponsibility because international air services are animportant part of international commerce (particularly in aState where air services are largely or totally international).Furthermore, because air transport has come to be one ofthe sectors in trade in services, putting it under a tradedepartment’s control may help to achieve a better overalltrade balance. However, there is the possibility that airtransport interests may be subordinated to other economicinterests and may even be “traded-off” and that air transportregulations produced under influence of trade policies maycreate potential regulatory conflicts with other States wherethe airline industry is still being operated largely under adifferent regulatory regime than that of trade.

A department or ministry responsible for foreign affairsmay believe that it should have some or even a predomi-nant role in international air transport regulation because ofthe international relations aspects and its expertise indealing with other countries. It may assert that bilateral airservice agreements and their negotiation are a part ofbroader international relations and thus involve foreignpolicy consideration or coordination. However, the foreignaffairs officials may not be familiar with the specificities ofcivil aviation and lack the necessary knowledge of the


1.3-4

technical or economic aspects of air transport operationsand regulation. They could even subordinate air transport toother foreign policy goals.

A department or ministry of defence may (rarely) claima role in civil air transport regulation based on the strategicmilitary importance of the national airline(s) and theaviation experience found in the State’s air force. Yet, theneeds of strategic defence and international air transport areunlikely to coincide and the commercial experience andexpertise required in air transport regulation are notnormally found in military organizations.

Some States, typically where the air transport industryis well developed with multiple air carriers of differentownership and size and in different stages of development(e.g. well-developed incumbents, new entrants, etc.), mayfind it preferable to establish a quasi-judicial body to per-form certain or all air transport regulatory functions, forexample, to license air carriers and award route authority.The main reason for this is to achieve fairness in regulationand avoid decisions being made based purely on politicalrationales. A weakness may be that such an independententity may not take full account of government policieswhich are different and/or envision a different role for airtransport.

Some other States may find it desirable to set up anautonomous or semi-autonomous civil aviation authority, apartially or fully independent, perhaps even quasi-private,entity entrusted by the State with some or many of civilaviation functions. This has the attraction of possibly greater

operating efficiency and flexibility and an ability to be atleast partially supported by funds generated by its servicesand facilities (as well as non-aviation revenues) rather thanfull government funding. Such an authority, with more con-trol of its human and financial resources, could functionunder government policy guidance with due regard toeconomic factors and thus may achieve better results both inair transport regulation and in the financial viability of itsoperation. The major disadvantage is a structural inability(inherent in autonomy from its government) to perform thefunctions required of that government under internationaltreaties and agreements.

Along with the trend of liberalization and privatization,recent years have seen a growing number of States establishautonomous authorities, particularly in the provision of air-ports and air navigation services. Experience gained world-wide indicates that where airports and air navigationservices have been operated by autonomous entities(commercialized or even privatized), their overall financialsituation and managerial efficiency tend to improve. ICAOtherefore recommends that where this is in the best interestof providers and users, States consider establishing suchautonomous entities (ICAO’s Policies on Charges for Air-ports and Air Navigation Services (Doc 9082)). ICAO hasalso developed guidance material on the establishment ofsuch entities (e.g. their organizational structures, scope andresponsibilities), which may be found in the AirportEconomics Manual (Doc 9562), the Manual on Air Navi-gation Services Economics (Doc 9161) and Privatization inthe Provision of Airports and Air Navigation Services(Cir 284).

Part 2

BILATERAL REGULATION

2.0-1

Chapter 2.0

INTRODUCTION TOBILATERAL REGULATION

Bilateral regulation is regulation undertaken jointly by twoparties, most typically by two States, although one or bothparties might also be a group of States, a supra-State (i.e.a community or other union of States acting as a singlebody under authority granted to it by its member States), aregional governmental body or even two airlines (forexample, in the determination of capacity or prices).

The goal of bilateral regulation in the international airtransport field is typically the conclusion, implementationor continuance of some kind of intergovernmental agree-ment or understanding concerning air services between theterritories of the two parties.

A brief history of the evolution of the bilateral regu-lation of international air services follows this introduction.

A significant amount of intergovernmental bilateralregulatory activity involves formal consultation undertakento conclude, interpret, expand or amend, or resolve a dis-pute under an intergovernmental agreement, arrangement orunderstanding concerning international air services. Themany steps and aspects of this process are identified anddiscussed in Chapter 2.1 of the manual.

Unlike national and multilateral regulation, the bilateralregulation of international air transport has no organiz-ational structure. It does have an extensive legal regulatorystructure composed of several thousand bilateral agree-ments and understandings. Chapter 2.2 explains this struc-ture by identifying the basic document types used inbilateral regulation, by defining and describing the typicalprovisions of bilateral air transport agreements and byidentifying several types of bilateral agreements on subjectsclosely related to air transport.

The bilateral regulation of international air transporthas not evolved without challenges and persistent issues.Chapter 2.3 sets forth certain key issues of process orstructure in bilateral regulation.

In recent years, States have chosen to relate to oneanother in new and different ways, especially with the for-mation of economic communities or other unions of States.As its definition indicates, bilateral regulation can now, andcould increasingly in the future, involve States in variousrelations other than simply one-to-one. Chapter 2.4 presentsa typology of existing and possible future air servicesnegotiations.

The content subjects of bilateral regulation, for example,traffic rights, capacity, pricing, etc., are presented in Part 4of the manual.

The bilateral regulation of international air services evolvedover many decades. Although international air transport ser-vices were first developed in the 1920s, few bilateralintergovernmental agreements were concluded in thoseearly decades due to the small volume of international airtransport activities and then to the virtual cessation of manycommercial flights during the 1939–1945 (World War II)period.

Bilateral agreements now in force, which constitute thelargest volume of international air transport regulatory doc-uments, largely date from after the 1944 International CivilAviation Conference held in Chicago (see Chapter 3.0).This extensive use by States of bilateral agreements toregulate international air transport is a consequence ofagreement in the Convention on International Civil Avi-ation (hereinafter referred to as the Chicago Convention) onthe principle of national sovereignty over territorial air-space (Article 1), agreement on the requirement for special

EVOLUTION OF THEBILATERAL REGULATION OF

INTERNATIONAL AIR SERVICES


2.0-2

permission or other authorization to operate scheduledinternational air services over or into the territory of aContracting State (Article 6), and the lack of success ofefforts to establish a multilateral regulatory regime for thecommercial aspects of international air transport. Thusbilateral negotiations and the agreements they producedemerged as the preferred method for States to exchangecommercial rights for air services and to agree on ways ofregulating capacity, tariffs and other matters.

Among the post-1944 bilateral air agreements, the mostsignificant and influential to the development of inter-national air transport regulation was the 1946 agreementbetween the United Kingdom and the United States (nowknown as the Bermuda I Agreement). This agreement wasthe result of a compromise between the two broadapproaches to the regulation of international air transportservices that had emerged at the Chicago Conference andbeen left unresolved. At one extreme it was held that thereshould be no regulation of capacity or tariffs nor narrowdefinitions of routes. The opposite view was that capacityshould be predetermined, tariffs regulated by an inter-national agency and routes specified. Under the compro-mise agreement, tariffs were to be established by theairlines through the International Air Transport Association(IATA), subject to the approval of both parties. Capacitywas to be determined by airlines subject to certain agreedprinciples and to possible joint review by the parties ortheir aviation authorities after a period of operation. Routeswere specified.

Many agreements of the Bermuda type were sub-sequently signed by each of the original partners with otherStates, and by other pairs of States. The Bermuda Agree-ment thus became a model which predominated during thenext four decades although a large number of agreements,while incorporating the Bermuda principles, also employed

predetermination of capacity. Bilateral agreements produceda relatively stable and balanced regulatory foundation onwhich the international air transport system has sustainedsteady growth.

In the 1970s and 1980s various States adopted moreliberal policies for the regulation of international air trans-port. As a consequence, some new liberal bilateralagreements were concluded, generally characterized by aremoval of capacity restraints, greatly reduced governmentinvolvement in tariff matters, increased market access andthe ability of each party to name more than a single airlineto use that access.

The 1990s witnessed rapid changes in both theregulatory and the operating environments of internationalair transport, as well as structural changes to the airlineindustry. Liberalization became widespread. To adapt to thechanges, many States made regulatory adjustments andadopted more liberal policies, typically by relaxing regu-lation to varying degrees. Some States concluded newliberal bilateral agreements which essentially remove allrestrictions on market access, capacity and pricing (so-called “open-skies” agreements). There was also growingregionalism in international air transport regulation, con-verting some bilateral regulations to regional or subregionalmultilateral regulations.

In the decade which began in the year 2000, liberaliz-ation is expected to continue and grow, both under new orrevised bilateral agreements and under other new arrange-ments, including collective regulation by groups of States,for example, on a regional or subregional multilateral basis.It could also include the use of new types of agreementssuch as a plurilateral agreement among like-minded States(see Chapter 2.4).

2.1-1

Chapter 2.1

PROCESS OFBILATERAL REGULATION

The process involved in bilateral regulation is very differ-ent from that of national or multilateral regulation. Ittypically begins when one State (or organization of States)proposes a joint quest for an air services agreement orunderstanding with another State (or organization of States)and the involved parties undertake their preparations. Itcontinues through the actual meetings and negotiationsbetween their representatives. The process does not endwith the formal signing of a binding document; the formalconclusion marks the first step in managing the implemen-tation of what was agreed. In that activity, States oftenreturn to the cycle of preparation, talks and outcomes tointerpret, amend or expand their understandings, or at timesto terminate them.

Thus the basic process of bilateral regulation is that ofconsultation, the communication and interaction betweentwo parties, typically but not always two States, carried outover a period of time to question or inform, to establish orchange a relationship or to resolve a dispute between them.The term consultation (or consultations) is applied to a broadrange of such bilateral communications and interactions.

Formal consultation typically involves meetings ofmulti-person delegations led by designated chairpersons,each having appropriate delegated powers.

Informal consultation, on the other hand, may involvesolely written, solely oral, or a combination of written andoral communication. It can take place in meetings betweenonly two or a few persons (for example, an embassy civilaviation attaché of one State and a civil aviation official ofthe host State) at which a paper or papers may be providedor exchanged. Alternatively, it may occur by telephone, byelectronic transmission of a message or, more traditionally,by the sending and receiving of an official document,usually through diplomatic channels.

A negotiation is a consultation, usually a formal one,which has become (or which, from the beginning, wasintended to be) a process of bargaining between the parties.Thus, although all negotiations are also consultations, notall consultations are negotiations.

The next three sections of this chapter discuss theinitiation of and preparation for a formal bilateral consul-tation, the types of meetings and documents employed inconsultations and negotiations, and the strategic and tacticalconsiderations involved in consultations and negotiations. Itshould be noted that the information provided in these threesections represents the optimum in States’ practices; theprocess may well be less sophisticated in many bilateralconsultations/negotiations. The final section describes theformal conclusion of an agreement and the processesinvolved in the implementation, management, dispute resol-ution and amendment or termination of an agreement.

A formal bilateral consultation usually begins with arequest by one governmental party to another governmentalparty to hold talks. In the vast majority of cases, each partywill be a national government; however, one or both couldbe an organization of States which has requisite authorityfrom its members to hold the consultation. An informalconsultation is then likely to take place about the venue anddates of the initial meeting, or possibly to determinewhether a consensus exists about the desirability of holdinga formal consultation.

Prior to requesting a formal consultation, the potentialinitiator has numerous determinations to make internally.

INITIATION OF AND PREPARATIONFOR A FORMAL

BILATERAL CONSULTATION


2.1-2

The most fundamental determination is that of thecharacter or kind or basic type of consultation (and poten-tial negotiation) that could occur. In the field of inter-governmental international air transport relations five suchtypes are distinguishable by their basic objective.

An innovation consultation is one by which the initiat-ing party seeks to establish a relationship for the first time(such as that characterized by a first air transport agreementbetween the parties) or to very significantly alter thatrelationship (such as by entry into an entirely newagreement in place of an existing one).

A modification consultation is one by which theinitiating party seeks some mutually beneficial alteration inan established relationship (such as a mutual expansion inaccess, a mutual change in agreed capacity, or the additionof an aviation security article).

A redistribution consultation is one by which theinitiating party seeks to obtain some net increase in oppor-tunities or benefits for itself under an established relation-ship (such as new market access, carrier revenues or othergains measurably greater than its possible new concessions)so as to correct a perceived imbalance.

A dispute resolution consultation is one by which theinitiating party seeks normalization, i.e. conformity of asituation to what that party perceives as appropriate undertheir agreement (for example, a situation such as that of acapacity increase by a carrier or carriers of the other partywhich the first party deems objectionable).

An extension consultation is one by which the initiatingparty seeks continuation of an agreed arrangement beyonda previously agreed date (such as the termination date of anagreement or some side understanding, for example onewhich established a temporary capacity regime).

Some consultations may possess the attributes of morethan one type; however, certain attributes are likely topredominate. Knowing the character of a potential formalconsultation is likely to be useful at all stages of the process.

Timing is another important preliminary consideration,not so much as regards detailed administrative arrange-ments and the availability of personnel, but as regards thebroader setting or context:

• Are the parties involved in some major dispute inanother (non-aviation) area?

• Is either party in a period of possible or actualchange in government during which its internal pol-icies and/or decision-making capabilities are intemporary flux?

• Would a time-related linkage of air transport con-sultations to some major future event (for example,visit by a head of State or head of government)have probable adverse or favourable effects on theoutcome?

• Are the parties allied in some cooperative andimportant diplomatic effort during which one orboth feels compelled to avoid any confrontationabout an air transport dispute?

These considerations are likely to be undertaken by the dip-lomatic/foreign office component of a State’s air transportauthorities. While unlikely to be determinative of timing inmost cases, they can be significant in some cases.

Other preliminary (although not necessarily determi-native) considerations include:

• the degree of internal consensus (both within therequesting government and with and among itsnational air carriers and other interested parties);

• an assessment of the negotiating leverage available;

• some idea of what would constitute a successfulconsultation; and

• the probability of success.

Upon receipt of a request for formal consultation (oreven in advance of a possible request) the other party hasmuch the same determinations to make, but in many casesclearly from very different perspectives. For example, thereceiving party in a dispute resolution consultation maywell perceive its conduct to be fully in accord with theagreement. It may wish to avoid or defer consultationwithin the constraints of the dispute resolution proceduresin the case of an existing agreement. In another example,the receiving party in a redistribution consultation maywish to avoid entirely, or at least to defer for the longesttime possible, the outcome sought by the requesting party.However, most bilateral agreements contain a provision toreply to a request for consultation within a specified periodof time (e.g. within 30 or 60 days).

If both parties agree to initiate a formal consultation,they are likely to consult informally on relevant adminis-

Part 2 — Bilateral RegulationChapter 2.1 — Process of Bilateral Regulation 2.1

2.1-3

trative arrangements such as the date of initiation of thetalks, the likely maximum period of availability of therespective delegations at the talks (or at the opening round)and the negotiating venue, a site in the territory of one ofthe two parties, typically a seat of government, or someother mutually agreed location. Some States follow a cus-tom whereby the delegation of the requesting party travelsto the territory of the bilateral partner for the first round,with subsequent rounds alternating between the two terri-tories. In addition, the rank of an intended delegation chiefcan be a matter of concern to the other party, particularly ifit is perceived to be too low or too high for the intendedconsultation.

Also as part of pre-consultation contacts, one or bothparties may provide the other with proposed concepts oreven proposed texts for consideration. This provision couldinclude, when no agreement is already in place, a party’smodel bilateral air transport agreement, a standard formatdocument which contains the regulatory arrangements theproviding party typically seeks to include in such agree-ments, and the wording formulations it prefers.

During the pre-consultation contacts, the parties arealso likely to indicate to each other the topics they wish tohave considered and even a preferred order of consider-ation. Disagreements about the topics and their consider-ation may arise and persist or an informal or formal agendamay be agreed. Arrangements for interpretation mayrequire agreement.

The amount and kinds of preparation undertaken by theparties during the pre-consultation period may differwidely. They will depend upon perceptions of the import-ance of the consultations, available personnel resources andthe degree of time and effort the State is willing and ableto apply to the task. Generally, each party gathers andanalyses relevant quantitative and qualitative data.

The quantitative data gathered and analysed in prep-aration for a consultation are likely to include, inter alia:

• existing and projected air service and trafficvolumes, market shares and relevant load factors(overall, in particular city-pair markets and onparticular types of air services);

• historic or potential carrier revenues; and

• airports, tourism and trade data;

as related to known or anticipated issues.

The qualitative data gathered and analysed in prep-aration for a consultation are likely to include:

• facts about each party’s relevant policies and overallair transport negotiating objectives;

• the known concerns of the air carriers of each partyand of other interested entities;

• detailed information about matters in dispute orpotentially at issue;

• information about positions taken or results achievedby the other party in similar circumstances;

• historical information on the bilateral air servicesrelationship;

• information about members of the other delegationand how their particular interests might divergefrom the general interests of that delegation; and

• information about bilateral air transport relation-ships of the other party with third parties (the Digestof Bilateral Air Transport Agreements (Doc 9511)contains summaries of the main provisions of allbilateral air transport agreements filed by Contract-ing States and a computer database maintained byICAO keeps the information updated).

To prepare for the talks, each party is also likely to holdinternal consultations (or further internal consultations)among the concerned governmental entities (typically thoseresponsible for civil aviation and for foreign affairs, andsometimes others), as well as with the national airline(s)and interested non-governmental parties. Based on suchconsultations, and the prepared data, each party develops itsconfidential negotiating position. A negotiating position orposition paper is an expression of international negotiatingobjectives and priorities which reflects the party’s air trans-port policies, as well as possible negotiating fall-backs oralternative objectives, if any. It may also set out the majorissues, scenarios for their outcome, strategies to be fol-lowed, data and analyses, the relevant views of interestedparties, as well as comments on the anticipated positions ofthe other party. It usually requires the approval of higherauthorities. When approved, it constitutes the instructionsof the delegation.

The delegation or negotiating team is typically com-posed of civil aviation and diplomatic officials, represen-tatives of the national airline(s) and in some cases other


2.1-4

interested parties (e.g. airport, city, labour, tourism), and isusually chaired by a designated civil aviation or foreignaffairs official. When the consultation takes place outsidethe home territory, an embassy official is likely to be on theteam. In some States, officials of relevant organizations willrepresent groups such as airlines, airports, cities and labour.

Decisions made when putting together the negotiatingteam can have important consequences both during theconsultation and for its outcome:

• Should the head of delegation be the highestranking official or should that person be an officialfrom the customary lead ministry or department,even if of a lower rank? Alternatively, should dip-lomatic and negotiating knowledge, experience andskills be determinative of the selection?

• Should individual team members be chosen orassigned based solely upon required knowledge,experience and skills (such as in route analysis ortariff evaluation) or should the selection criteriainclude and give weight to the adequate represen-tation of interested departments, bureaux, or interestgroups?

• Should the number of individuals on the team bemaximized within available resources so as toensure a variety of potential contributions to theteam effort or should it be minimized for greaterefficiency in internal team decision making duringthe consultation or negotiation?

• When consultation with a second party tends tooccur with some frequency, if not regularity, is itmore important to maintain continuity of experi-ence with the issues involved with that second partyby assigning the same people, or more important toassign people on some other basis?

In practice, a scarcity of available personnel resourcesmay dictate the team composition for all or many consul-tations. Alternatively, the decisions taken on team compo-sition may reflect adherence to established practices and/orpractical compromises.

The names and positions of the delegation or negotiat-ing team are usually provided in advance to the other party,both as a matter of courtesy and for practical administrativeconsiderations, such as for entry into secured premises,seating at the meeting table and representational socialevents.

A formal bilateral consultation or negotiation usuallybegins with welcoming remarks by the chairperson of thehost delegation and the chairperson of the visiting del-egation, which are likely to include or be followed byintroductions of the members of each delegation.

Administrative arrangements, such as agreed workinghours and the availability of rooms where delegations maycaucus privately, are indicated and possibly discussed.Agreement may be sought on what confidentiality the talksshould have, in particular on whether there should beindependent or joint statements to the communicationsmedia. The order in which topics are to be considered,which may or may not constitute a formal agenda, is likelyto be mutually determined (if not done in advance). Socialarrangements are announced.

Substantive oral communication between the delegationscan take place in various fora, the most common being theplenary, any formal meeting between the two delegations.This contrasts with a principals’ meeting, which is onelimited to the chairpersons and most senior members of thedelegations, or a chairpersons’ meeting, a private meetingof the heads of delegations. The chairpersons may alsoappoint as appropriate, a working group, or expert groupconsisting of one or a few expert members from each del-egation who are given the task of working out matters ofdetail or technical issues. When agreement on major issuesis imminent or is reached in the plenary, the chairpersonsmay appoint a drafting group, which is composed of one ora few experts from each side who prepare the relevant textscovering the matters being agreed.

The terms round, round of consultations, round ofnegotiations, consultation round and negotiating roundare imprecise ones variously used to denote either a periodof time, usually one of days or weeks, during which theconsulting or negotiating teams are together at the samevenue or (alternatively) a series of such gatherings spacedover a longer period and held for a single purpose such asthe conclusion of a new air services agreement.

Documents examined during a consultation or nego-tiation (after having been previously transmitted) or other-wise employed during or at the conclusion of a round oftalks, are likely to have names used in diplomatic practice

CONSULTATIONS ANDNEGOTIATIONS: TYPES OF

MEETINGS AND DOCUMENTS


2.1-5

which may be unfamiliar to air transport regulators, airlineofficials and other non-diplomats on or in communicationwith the negotiating team.

The diplomatic note, or simply note, is the most widelyused form of written communication between an Ambassa-dor or Embassy of one State and the host State’s foreignminister (secretary) or ministry (department). The diplo-matic note takes various forms. A formal note or firstperson note is a diplomatic note from the signer or initial-ling person which is likely to begin “Excellency (Sir), Ihave the honour to ... etc.” as distinct from a third personnote, which is a signed or initialled communication notwritten in the first person, a form which is most oftenreserved in modern practice for routine messages. It typi-cally begins “The Embassy of ... presents its complimentsto the Ministry of Foreign Affairs and ... etc.” or “TheMinistry of ... etc.”. A note verbale is a note in the thirdperson which, as a rule, is neither addressed nor signed.Some States consider a third person note to also be a noteverbale, i.e. that there are only two types of notes, formalnotes and notes verbales.

During a consultation or negotiation, one party to thediscussion may present to the other an aide-mémoire, apaper which serves as a memorandum or written referenceregarding the topic(s) of discussion. Alternatively, a non-paper, a rarely used document type which serves the samepurpose but has no identified source, title, or attributionand no standing in the relationship involved, may bepresented.

In the course of a formal consultation or negotiation,either delegation or both may employ some form of con-sultation (negotiation) working paper, however titled, apaper which provides information, sets forth a proposal,suggests draft language or serves some other temporarypurpose confined to the talks themselves. In modern prac-tice, in the course of a consultation or negotiation, whetherformal or informal, either party’s representatives maysimply address the other party’s representatives by letter,delivered by hand or electronically.

An agreed minute is an official record, agreed by bothparties (typically State delegations to a consultation ornegotiation) of what was said or done at a meeting. Amemorandum of consultation is a less formal record of theoutcome of a meeting which typically, but not invariably,does not constitute in itself an agreement or an under-standing. An agreed press release or an agreed joint pressrelease is sometimes issued to inform the public aboutprogress in a consultation or negotiation.

When a consultation or negotiation results in anagreement on substance and text, the chairperson of eachdelegation will initial each page and each correction of theprepared text. This exercise of initialling their agreementserves as a guarantee of the text’s authenticity prior to itsreproduction in a form suitable for formal signature. An adreferendum agreement or agreement ad referendum isone which has been initialled and is being examined andreviewed by the competent authorities of each party (eitherbecause the negotiators do not have the power to committheir governments to the agreement or wish to have itreviewed by their governments, a process during whichmodifications of an editorial/technical nature, and some-times agreed substantive changes, may be made) before ittakes effect.

There are numerous strategic considerations and decisionswhich a head of delegation is likely to have to resolve, oneswhich may well have lasting impacts upon the entire roundof meetings.

All negotiations and some consultations concern issuesof actual or potential conflict between the parties and alldeal with common interests. The common interests may beidentical (for example, in the provision of needed air ser-vices by a carrier of one party to an airport in the territoryof the other party), or complementary (for example, theopening of one new route by a carrier of one party andanother new route by a carrier of the other party).

Each head of delegation has a basic choice betweenattempting to focus discussion on the issues in conflict,setting out the position of that delegation and perhaps thedistinctions between it and that of the other party or, on theother hand, identifying and focusing on aspects of commoninterest which could form bases for agreement while de-emphasizing or remaining silent on the areas of conflict.The former approach may be seen as evidence of a firmresolve not to back down or compromise. The latterapproach can produce a less confrontational and morepositive climate. Its use, however, requires care to avoidconveying unintentionally an erroneous impression, eitherone of lack of resolve and determination to achieve objec-tives, or one of unimportance of the issues involved.

CONSULTATIONS ANDNEGOTIATIONS: STRATEGIC

AND TACTICAL CONSIDERATIONS


2.1-6

Some heads of delegation prefer to have statements ofposition or objectives on every issue “on the table” early inthe round. Others prefer to remain silent or vague on theirpreferred or possible positions on various issues until theycan assess the results achieved on other issues.

In a complex negotiation either or both negotiators maytake the position that all issues must be resolved before anyare agreed. This has the advantage of assuring interestedparties that certain individual interests will not be forsakenin order to achieve agreement on other matters which mightbe deemed of greater importance. The principal disadvan-tage of this approach is that it stretches out the overallnegotiating period and in so doing increases the risk thatunforeseen outside factors may intervene to unravel theindividual understandings reached but not definitivelyagreed pending an overall understanding on all issues.

Also, in a complex or otherwise difficult negotiation inwhich an impasse has been reached, either negotiator maysuggest an exchange of papers presenting new ideas on howto overcome the impasse and proceed with the negotiation.Fresh ideas can have a positive aspect. The danger is that acomprehensive paper may be prepared by each side whichis likely to focus on and exacerbate issues of conflict whilelocking in (assuming the position was achieved by aninternal consensus) the party to a particular position fromwhich compromise may not be possible. An even morerisky result could come about should one party agree tonegotiate on the basis of the other’s idea (position) paper.

A negotiator’s own role perception is also quite import-ant. One view is that the principal role should be one ofdefender and advocate of the position of the negotiator’sgovernment. An alternative view holds that the principalrole of a negotiator is one of solving the other negotiator’sproblems (in ways which, of course, resolve the problemsand meet the objectives of the first negotiator).

Some negotiators may focus on reaching agreement toemploy a particular regulatory arrangement or regulatorydevice (for example, a specific capacity formula). Othersmay focus on the broader objectives behind the use of aregulatory arrangement or device, thus increasing the prob-ability of finding common grounds for agreement throughsome alternative arrangement or device.

Where negotiations are deadlocked after several rounds,some States have found it helpful to each assign, as negoti-ators/team leaders, higher level officials or appropriatelyexperienced professionals not previously involved. Fresh,and without memories of failed bargaining efforts, yet with

the same or greater negotiating authority, they could employnew skills, strategies, tactics, etc. to break the impasse.

Alternatively, or additionally, negotiators could makegreater or exclusive use of delegation chairpersons’ meet-ings, principals’ meetings, working groups or expert groups(all previously defined). Using yet another approach, eachState could assign a prominent and experienced person notinvolved in the negotiations who would communicate pri-vately with each other, attempting to devise a frameworkagreement, in this situation a document containing thebroad outlines of a package of mutually acceptablesolutions, with the details left to be inserted later, possiblyby a drafting group (with the risk, however, of a futuredeadlock over some details). Such an agreement could, intheory, also be reached using any of the above types of sub-delegation meetings, but in practice, a successful outcomeby that route is less likely.

Another strategic consideration is whether or not to useany confidential side understanding(s). Such use deniestransparency to the agreement and either means that a con-fidential understanding would lose its confidentiality whenit became available to the public upon filing with ICAO (asrequired by Article 83 of the Chicago Convention) or thatit would not be filed with ICAO and consequently eachState’s obligation to file would not be fulfilled.

On the tactical side, a negotiator is likely to consider itobjectionable for the other side to introduce a new issue ofconflict or to make a new demand without adequate warn-ing or an opportunity for that negotiator’s team to fullyconsider the matter. One approach which ameliorates thiseffect is to present the issue or demand as one which couldbe examined in a future round.

A negotiator may choose to employ warnings, threats,bluff or commitments. A warning is an effort to make theother negotiator or negotiating team aware of the conse-quences that are likely to follow from a failure on theother’s part to act in a certain way. A threat, on the otherhand, is an assertion that the negotiator or the governmentthe negotiator represents will act explicitly in some way tobring about some loss to the government represented by theother negotiator. A bluff is a threat which the threatener isnot determined to carry out. A commitment, in this context,is some action taken or to be taken by a negotiator, or thegovernment of that negotiator, to lock either one into adifficult-to-change position (for example, one created bynew legislation which is difficult to amend or repeal).When presented as a warning or a threat before any actionis taken, a commitment may provide negotiating leverage.


2.1-7

The use of specificity and ambiguity have both tacticaland strategic considerations. Each has different purposes.

Specificity can lock in one party’s interpretation of aparticular arrangement and make the arrangement clear toall. The danger is that as specificity increases, the useful-ness of the text can be reduced when circumstances changeover time.

Ambiguity, in which each party may be tacitly left freeto provide its own interpretation, is an often useful tacticaldevice to get around some issue which cannot be resolved.To the extent a text is purposely ambiguous, it might betermed equivocal. Strategically, like a partial agreement itintentionally leaves some issue for possible future conflictand possible future resolution. (Note that equivocation inexpressing a negotiating position is quite a different matterand adds to the user’s flexibility while increasing the diffi-culties of the other negotiator.)

The text(s) of a formal agreement, as prepared during thead referendum process, will normally be identical for eachparty in all respects except one. That is, each State isentitled to precedence, i.e. placement of the name of oneState in the title, opening, and signature block, before thatof the other State in the basic agreement document retainedby the first State.

The formal signing of an agreement sometimes takesplace at a ceremony at which designated officials of thegovernments party to the agreement sign the agreement.Before a formal signing, the designated officials of eachparty may make available to the other their Full Powers,i.e. a document emanating from the competent authority ofa State designating a person or persons to represent thatState for negotiating and concluding a treaty/agreementwith another State. Agreements can also be formally con-cluded by an exchange of diplomatic notes. Some Stateshave a national requirement that bilateral agreements besubject to ratification, a process of examination andapproval by the appropriate governmental elements orlegislature which must be concluded before the agreementcan take effect definitively.

States may decide, for practical reasons, to have theagreement enter into force on a provisional basis immedi-ately after the signature, followed by a final entry into forceafter each party has notified the other that it has performedthe acts necessary for ratification.

A State may also assume the rights and obligations ofan agreement between two other States by succession to abilateral agreement, a formal statement by a State formerlyunder the jurisdiction of a party to a bilateral agreementthat it will assume the rights and obligations that pertain toit under that agreement. This arrangement is often tem-porary, for example, until a State newly independent of thejurisdiction of one of the parties can negotiate its ownagreements, but in some cases the arrangement may con-tinue indefinitely. Succession to air transport agreementshas been accomplished by unilateral declaration to thateffect made to the Secretary General of the United Nationsor by entry into a memorandum of understanding orexchange of notes with the former sovereign party or theother party to the relevant agreement.

Typically the first action taken by a State to implementa bilateral air transport agreement is the designation orformal naming of its air carrier(s) to perform services underthe agreement. It is normally done by diplomatic note. Thecarrier(s) may then apply to the second State for appropriateoperating authority.

States use consultation on a continuing basis to managethe relationships established by their bilateral air transportagreements. Technical problems in bilateral air servicesrelationships are typically handled by routine consultationbetween the air transport authorities of the two States.

Consultation is virtually the only means of disputeresolution used between parties to bilateral air transportagreements. The principal advantage of consultation fordispute resolution is the use of a familiar method, usuallyby people who understand the issues. The principal disad-vantage is that the only parties involved are those who arelikely to have well-established views on the issues and arethus less likely to be sufficiently objective and flexible toresolve the dispute.

Bilateral agreements may also provide for arbitration,a means of dispute settlement where the issues are referredto an arbitral tribunal for resolution. An arbitral tribunalis usually made up of three arbitrators, one nominated byeach party and the third (usually a national of a third State)nominated by the first two, the third person acting as its

CONCLUSION, IMPLEMENTATION,MANAGEMENT, DISPUTE RESOLUTION,AMENDMENT AND (EXCEPTIONALLY)

TERMINATION OF AN AGREEMENT


2.1-8

President, who decide specific, mutually agreed question(s)concerning actions in dispute under the bilateral airtransport agreement.

Some agreements provide that if the parties or theirnominees fail to name their arbitrators within the specifiedtime a prominent person such as the President of theCouncil of ICAO or the President of the International Courtof Justice be requested to do so. The tribunal usuallydecides on its own procedures. The two States may, how-ever, negotiate the questions to be decided, what documentswill be presented and the order in which each State willpresent its witness(es) and written and oral arguments. Adecision of an arbitral tribunal is binding on both parties.Arbitration is rarely used because it is a costly and time-consuming process.

The use of good offices, i.e. impartial assistance by athird State, an international organization, or prominentindividual to persuade the two parties to negotiate theirdifferences is rare in air transport dispute resolution. Simi-larly exceptional is the use of mediation, i.e. conciliatoryefforts by a third State, an international organization, or aprominent individual which not only bring about negotia-tion between the parties but do so on the basis of proposalsmade by the mediator.

Some States consider that an adverse unilateral actionin a bilateral dispute (for example, suspending a foreign air-line’s authorization) is not permissible until the disputeresolution procedures of the agreement (including arbi-tration if agreed) have been exhausted. Other States main-tain that a proportionate action, i.e. one taken by a partywhich preserves or restores but does not enhance that

party’s position, may be taken before or during consultationor arbitration, or failing the implementation of an arbitraldecision.

Amendments or modifications to the bilateral agree-ments are agreed upon through consultation between theparties. They may be embodied in a memorandum ofunderstanding, agreed minute, exchange of letters, or pro-tocol, but are usually effected by an exchange of diplomaticnotes.

Most bilateral air transport agreements do not have anexpiry date, but almost all have a termination article ordenunciation article. (Certain parts of a bilateral agreement,for example possible temporary understandings on capacity,may expire on their own terms after a specified period oftime or some agreed occurrence.) Denunciation of anagreement is the formal notice given by one party to theother party to the agreement of the first party’s intent tocease being bound by the agreement, usually as of the endof a period specified in the agreement. (In a rare case, itmay be possible to denounce an agreement only in part.)

Denunciation is uncommon, but may follow a failure ofdispute resolution procedures. The normal expectation isthat during the period between denunciation of an agree-ment and its consequent expiry, the parties will be able tonegotiate a new agreement. Should renegotiation fail, in theabsence of a new agreement States are likely either to makead hoc arrangements to enable air services to continuebetween the two countries or choose to end air servicesbetween their territories by the respective air carriers andrely upon the air carriers of third countries to provideservices.

2.2-1

Chapter 2.2

STRUCTURE OFBILATERAL REGULATION

The structure of bilateral regulation of international airtransport is that of a large and growing body of documents,each of which constitutes an agreement, understanding orarrangement between two States, and thus a part of inter-national law. In contrast to both national and multilateralregulation, bilateral regulation involves no permanentinstitutions or organizations.

To explain the structure of bilateral regulation, the firstsection of this chapter identifies the basic document typesused in the bilateral regulation of international air transport.The second section defines or describes the typical pro-visions of bilateral air transport (services) agreements. Thefinal section identifies several types of bilateral agreementson subjects closely related to air transport.

A bilateral Air Transport Agreement or Air ServicesAgreement, the basic document most often used by States tojointly regulate their international air services relation-ships, is likely to consist of a textual body (preamble,articles, signatures), an annex or annexes, possible attach-ments and any agreed amendments. Such an agreement isoften referred to by those who work regularly in the regu-lation of international air transport simply as a “bilateral”.

Most bilateral air transport agreements cover onlyscheduled international air services, but a few also regulatenon-scheduled international air services. A Non-scheduledAir Services Agreement or a Charter Agreement regulatesnon-scheduled or charter air services separately fromscheduled international air services. A Memorandum ofUnderstanding (MOU) is a less formal type of agreementwhich, notwithstanding the lesser formality, may be as

binding as a formal agreement and may cover either orboth types of international air services.

A Chicago Agreement or Chicago-type Agreement isone patterned on a standard form bilateral international airtransport agreement drafted at the 1944 Chicago Confer-ence for use as an interim measure to exchange routes andtraffic rights pending the conclusion of a multilateral airtransport regulatory regime, an objective which was notreached. (The text may be found in Recommendation VIIIof the Final Act of the Chicago Conference, 7 December1944.) Capacity and tariffs were not to be regulated undersuch a regime, therefore a Chicago Agreement typicallydoes not have capacity and tariff provisions, with anassumption that their exclusion implies non-regulation ofthese matters by either party. Relatively few Chicago-typeagreements remain in effect.

The Bermuda Agreement between the United Kingdomand the United States, signed at Bermuda on 11 February1946, effected a compromise between advocates of detailedregulation and those of non-regulation of basic matterssuch as capacity and tariffs and in effect, established theBermuda-type Agreement as a model for many other bilat-eral air transport agreements worldwide. However, a largenumber of agreements subsequently concluded betweenStates (over half of the bilateral agreements registered withICAO), while incorporating the Bermuda principles andterminology (see Chapter 2.0), also employ a predeter-minist approach to capacity regulation. On 23 July 1977 theoriginal Bermuda Agreement was replaced by a more com-plex and detailed Bermuda II Agreement, thus the originalagreement and agreements patterned after it have come tobe known as the Bermuda I Agreement and the Bermuda Itype Agreement respectively.

Soon after conclusion of the Bermuda II Agreement,and following the start of deregulation in the United Statesin 1978, a number of States entered into agreements

BASIC DOCUMENT TYPES


2.2-2

generally known as liberalized air agreements which arecharacterized by greater market access, minimal (if any)capacity regulation and significantly reduced governmentalcontrols on air carrier pricing. Some include other liberal-izing provisions as well, on matters such as charter flights,all-cargo services, and computer reservation systems.

With the spread of liberalization in the 1990s and in areturn to an idea first espoused in 1942, and subsequentlyduring and immediately after the Chicago Conference,some partner States have concluded a so-called Open SkiesAgreement, a type of agreement which, while not uniformlydefined by its various advocates, would create a regulatoryregime that relies chiefly on sustained market competitionfor the achievement of its air services goals and is largelyor entirely devoid of a priori governmental management ofaccess rights, capacity and pricing, while having safe-guards appropriate to maintaining the minimum regulationnecessary to achieve the goals of the agreement.

To facilitate and assist States in their regulatory reformand adjustment, ICAO has developed, for optional use byStates, two template air services agreements (TASAs), onefor the bilateral context and the other for regional orplurilateral situations; each includes provisions on tra-ditional, transitional and most liberal approaches,including optional wording, to the various elements in anair services agreement of its type. Explanatory notes arealso provided for the use of the corresponding options oralternative approaches. The TASAs can be found inDoc 9587 — Policy and Guidance Material on theEconomic Regulation of International Air Transport.

Although bilateral air transport agreements and air servicesagreements, which number in the thousands, generally tendto have the characteristics of a particular type of agreement,each one is unique. Nevertheless, these agreements typi-cally have in common numerous types of essential pro-visions most of which, while not identical, have a similarthrust. Such commonly found provisions are identified inthe following paragraphs.

The Preamble, which is the initial part of the agree-ment, identifies the contracting parties or simply parties(the two involved governments), presents their reasons for

entering into the agreement, and declares that they haveagreed to what will follow in subsequent parts of theagreement.

An article is the primary sub-part of the agreement, istypically numbered sequentially, and may or may not betitled; may in some cases identify several such sub-partstaken collectively when they deal with aspects of the samesubject (such as capacity or tariffs); and, in the latter sense,is identical in meaning to bilateral clause (although clausealso identifies a subsection of an article).

A definitions article, often the first article of the agree-ment, assigns meanings for the purposes of that agreementto terms used in the text, typically those used more thanonce.

A grant of rights article expresses the main purpose ofthe agreement, that of the grant by each contracting partyto the other contracting party of rights specified in thatarticle or elsewhere, such as in the route schedule(s), tooperate the agreed air services.

A fair and equal opportunity article (or some variantthereof such as “fair and equitable” or “fair”) sets forth ageneral principle which each party to an agreement mayrely upon to ensure against discrimination or unfaircompetitive practices affecting its designated carrier(s).Alternatively, the principle may be stated in a clause in thecapacity article or elsewhere in the agreement. The articleis sometimes expanded to specifically require considerationof the interests of the other party and its air carrier(s). Theopportunity provided is for the designated carrier(s) of eachparty and may be stated as “to compete” or “to operate”.

A designation and authorization article grants theright to name an air carrier, or more than one air carrier,to operate the agreed services and establishes the limitedconditions under which the other party may deny anoperating authorization to such carrier(s). The conditionsfor denying (including withholding) of an operating auth-orization are typically those of substantial ownership andeffective control not being vested in the designating partyor in its nationals, and/or an insufficient disposition to con-form to the laws and regulations of the receiving partyand/or an inability to meet airworthiness standards. Morerecently, some agreements have used an alternative to thetypical ownership and control requirement by allowing theacceptance of a designated airline which is incorporatedand has its principal place of business in the territory of thedesignating State.

TYPICAL PROVISIONS OFBILATERAL AIR TRANSPORT

(SERVICES) AGREEMENTS

Part 2 — Bilateral RegulationChapter 2.2 — Structure of Bilateral Regulation 2.2

2.2-3

A revocation or suspension of operating authorizationarticle grants each party a right to revoke or suspend theoperating authorization already granted to an air carrier ofthe other party if the carrier no longer meets a specifiedcondition, usually one of the same conditions establishedfor the grant of such authorization.

A capacity article lays down the agreed principles ormethod for regulation of the amount(s) of services offeredor to be offered under the agreement. Detailed models of apre-determination type capacity article, a Bermuda I typecapacity article, and a free-determination type article weredeveloped by ICAO to provide guidance on three alterna-tive regulatory approaches to capacity clauses and may befound in Doc 9587.

A tariff article establishes procedures for the establish-ment and regulation of prices on the agreed air services.Detailed models of a double approval clause, a country oforigin clause and a dual disapproval clause were developedby ICAO to provide guidance on three alternative regulat-ory approaches to tariff clauses or articles and may befound in Doc 9587, along with discussion of furtheralternative approaches to tariff regulation, such as “tariffzone” and “country of designation”.

A statistics article typically provides for exchange ofairline traffic data related to the agreed services, eitherperiodically or as needed for the regulation of capacity, forroute evaluations, or for other purposes.

A commercial operations article or commercial oppor-tunities article (or articles) specifies the rights granted toeach party’s designated air carrier(s) to carry out com-mercial activities in the territory of the other party. Theserights are sometimes referred to as “doing business rights”or “soft rights” and are likely to include the establishmentand extent of foreign staffing of airline offices, sales inlocal or convertible currency, ground handling options,currency conversion and remittance of funds by airlines,and in some cases, airline cooperative arrangements suchas codesharing and/or leasing arrangements. It may alsocover access to landing and take-off slots at airports and/oruse of computer reservation systems (CRS). An airportslots article and/or a computer reservation systems articleare sometimes used to cover these two “soft rights”separately.

“Hard rights” has come into some use as a collectiveterm of contrast to include route, traffic, operational andcapacity rights which are considered more valuable andenduring, hence “hard”. Pricing rights are sometimes

placed in one category and sometimes in the other. In someagreements, one or more of the “doing business rights”listed above are given their own distinct articles.

A fair competition article, a relatively new inclusion insome recent bilateral agreements, especially liberal ones,lays down agreed general principles and/or specific pro-visions governing competition in the provision of airservices by the parties’ designated airlines.

An airworthiness article typically provides for themutual recognition by the parties of each other’s certifi-cates of airworthiness, certificates of competency andlicences. This provision is sometimes placed in a safetyarticle, which also covers an agreed course of action forthe parties to take concerning the maintenance of safetystandards (such as consultation procedures and correctiveaction requirements).

An aviation security article, an addition in recent yearsto many bilateral air transport agreements, sets forth pro-cedures for cooperation between the parties to avoid ordeal with situations involving acts or threats of unlawfulinterference with the security of civil aviation. In 1986 theCouncil of ICAO adopted a model bilateral aviationsecurity clause for the use of Contracting States (seeDoc 9587).

A customs duties and taxes article requires each partyto exempt from duties, taxes and charges, the aircraft fuel,spare parts and supplies used by the other party’s aircarrier(s) (see also ICAO’s Policies on Taxation in theField of International Air Transport (Doc 8632)).

A taxation article (in the absence of a separate taxagreement) exempts from taxation the corporate earningsof the air carrier(s) of the other party and may, in somecases, extend to cover the earned incomes of air carrieremployees (see also Doc 8632).

A user charges article sets forth agreed principlesregarding charges for the use of airports and route airnavigation facilities by the designated air carrier(s) of theother party (see also ICAO’s Policies on Charges for Air-ports and Air Navigation Services (Doc 9082).

An application of laws article establishes that thenational laws of one party related to the operation, navi-gation, and admission and departure of aircraft apply to theair carrier(s) of the other party.

A consultation article sets forth the agreed proceduresfor consultation between the parties or their aeronautical

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authorities (often with a time requirement for the consul-tation to take place) and may include an amendmentclause (sometimes a separate amendment article) whichestablishes procedures for amending or modifying theagreement.

A settlement of disputes article sets forth agreedmeasures for resolving disputes between the parties. Suchmeasures routinely include consultation and sometimesarbitration.

A termination article or denunciation article specifieshow a party may end its commitments under the agreement,typically one year after receipt by the other party of a for-mal notice to that effect. Some agreements provide for ashorter notice period, such as six months, or in exceptionalcases, allow for denunciation or termination of only parts ofthe agreement.

A multilateral agreement article provides that if amultilateral agreement accepted by both parties, concerningany matter covered by the agreement, enters into force, theagreement shall be amended so as to conform with theprovisions of the multilateral agreement.

A registration article reiterates the obligation of thecontracting parties (when both are Contracting States ofICAO) to register the agreement with ICAO, as requiredunder Articles 81 and 83 of the Chicago Convention.

An entry into force article establishes how and whenthe agreement will take effect, typically upon the conclusionof an exchange of diplomatic notes. It may specifyprovisional effectiveness and may or may not anticipate aprocess of ratification by either or both parties.

The signature provisions at the end of the agreementindicate the date and place of signature and specify thelanguage versions. Although most agreements having morethan one language version provide that each version isequally authentic, agreements can provide that in the eventof conflict between the language versions, the text of onespecified language will prevail.

The agreement may have one or more than one annex,an attachment usually considered to be part of the agree-ment, which typically sets forth route, traffic and oper-ational rights but may also or separately cover other topics(e.g. capacity, charter flights). The subjects of an annex areusually ones which, in contrast to the articles in the mainbody of the agreement, are likely to be modified from timeto time by the parties or their aeronautical authorities to

respond to changed circumstances. An annex can usually beamended more quickly than an article of an agreement,particularly if formal ratification of an amendment to anarticle is required under the laws of either party. The mostcommon annex is the route annex which contains the routeschedule(s) or descriptions of the routes over which thedesignated airline(s) of each party may operate the agreedservices, and the conditions or restrictions applicable tocertain or all routes.

To facilitate and assist States in their regulatory liberal-ization, ICAO has developed a comprehensive bilateraltemplate air services agreement which has all the articlestypically found in a bilateral air services agreement (Policyand Guidance Material on the Economic Regulation ofInternational Air Transport (Doc 9587)).

A protocol is an attachment to an agreement whichclarifies, adds to, or in some cases, amends it. An exchangeof letters, or more than one such exchange, supplements anagreement or understanding, typically by setting forth in theinitiating letter one party’s statement on a particular action,interpretation, policy, supplemental understanding, etc., andin the letter of response, the other party’s acceptance oracknowledgement.

In addition to bilateral air transport agreements, States haveconcluded certain other types of bilateral agreement on sub-jects closely related to air transport.

An agreement on the avoidance of double taxationrelating to air transport services is an agreement not to taxthe corporate earnings of airlines of the other party, and insome cases, the incomes of the airline employees of theother party. Alternatively, two States may have a moregeneral agreement on taxation which obviates the need forone limited to air services tax matters.

A preclearance agreement is an agreement whichpermits some or all of each party’s or only one party’s entryformalities (e.g. customs, immigration, agriculture, publichealth) to be carried out in the territory of the other State.

An agreement on airline crew visas is one which facili-tates the entry of airline crew members of one party into theterritory of the other party, often by waiving the visa

TYPES OF BILATERAL AGREEMENTSON SUBJECTS CLOSELY RELATED

TO AIR TRANSPORT

Part 2 — Bilateral RegulationChapter 2.2 — Structure of Bilateral Regulation 2.2

2.2-5

requirement or by granting multiple entries. Some Statesmay extend such treatment to resident airline staff of theother State.

Agreements on certificates of airworthiness, agree-ments on communications, agreements on duties on fuel(now rare, this topic typically being included in air transportagreements), agreements on meteorology and agreements

on search and rescue cover the topics indicated by theirtitles and may also be concluded by those who negotiate airservices agreements.

An aviation security agreement serves the samefunction as an aviation security article in the absence of acomprehensive air transport agreement or air servicesagreement.

2.3-1

Chapter 2.3

KEY ISSUES OFBILATERAL REGULATORY

PROCESS AND STRUCTURE

This chapter discusses five key issues of the bilateralregulatory process and structure:

1) balancing benefits in a liberalizing environment;

2) the shortcomings of bilateral regulatory structure,such as lack of transparency and inadequacy ofdispute resolution mechanisms;

3) bilateral relations involving groups of States;

4) application of competition law to air transport; and

5) effects of State aids/subsidies.

The practice of using bilateral agreements and arrange-ments to regulate international commercial air services iscontent-neutral, that is, the regulatory regime may rangefrom one of detailed governmental regulation of tariffs,capacity and routes, to one where the bilateral partnersallow their airlines wide latitude to serve the market as theywish. Thus, the question is not whether bilateral agreementsare, by their nature, restrictive or liberal, but whether or notStates wish to continue to use such agreements (and if so,how) to meet their need to participate in a more competitiveinternational air transport system marked by newcommercial and marketing initiatives of air carriers.

States have consistently used the bilateral regulatory pro-cess to create bilateral regulatory structures to achieve the

numerous benefits they seek. The negotiating process thusnecessarily seeks such benefits, and the resulting structures(i.e. air transport agreements) thus necessarily are devisedto provide such benefits. When concluding the negotiatingprocess, each Party independently satisfies itself that abalance of benefits (or an imbalance favourable to it) hasbeen achieved.

While “fair and equal opportunity” has been acceptedby many States as a general principle in the bilateralexchange of rights, traditional bilateral air service agree-ments are often based in practice on the concept of abalance of measurable benefits (traffic carried or revenuesearned or projected to be carried/earned) by the respectiveair carriers of each State. Market access is thus granted (orrestricted) in an effort to achieve an approximate equalityof results for those air carriers in the carriage of trafficbetween the two States (the “penetration” approach). How-ever, many other bilateral air service agreements are basedon a balance of opportunities or equal access to the marketsin each State, without an expectation that the air carriers ofthe respective States should or would achieve a quantitativebalance in results (the “access” approach).

Bilateral regulation of international air transport has theflexibility to accommodate the policies of a wide range ofStates of different sizes and at different stages of economicdevelopment, with air carriers of varying strengths andcapabilities. States often rely on bilateral air service agree-ments to promote and/or protect the international air serviceof their national air carrier(s). Consequently, a State’sparticipation in the international air transport system islargely measured in terms of the commercial operations ofits national carrier(s).

The tendency of international air carriers to seek tomaximize their access to and penetration of global and

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2.3-2

regional markets by using cooperative commercial arrange-ments (such as pooling and interlining) with otherinternational air carriers has always been present but is nowtaking new forms (joint ventures, code sharing, alliances,mergers, franchising) with several implications for theprocess and structure of bilateral regulation.

The implications of these developments for the processof bilateral regulation include the following:

• Where the air carriers involved in cooperativearrangements such as code sharing have extensivemarket access in third States, they can substantiallyaffect traffic flows to and from such States. Thismay require either or both bilateral partner States toconsult or negotiate with a substantial number ofthird States to secure any necessary authorizationfor the aspect of the cooperative activity whichoccurs in their jurisdictions.

• Negotiating a bilateral balance of benefits becomesmore difficult when a substantial portion of thebenefits are derived in third States and when ben-efits must be apportioned between and among aircarriers in, for example, a joint venture. In thefuture, negotiators may have difficulty in deter-mining on behalf of which air carrier(s) they arenegotiating, for example, where there is substantialinvestment by a foreign air carrier in a national aircarrier.

• The value of the benefits themselves becomes moredifficult to quantify when several international aircarriers are involved in, for example, a jointmarketing arrangement.

The implications of these developments for the structureof bilateral regulation include the following:

• Some cooperative arrangements, for exampleinvolving air cargo, can be seen as efforts to avoidrestrictions in bilateral air services agreements andthereby, in effect, to operate outside the bilateralframework.

• Other cooperative activities, such as code sharing,could be prevented on some routes and permittedon others because of the inconsistent treatment ordefinition of traffic rights among the bilateralagreements with involved third countries.

• Extensive investment by foreign air carriers innational ones could undermine the concept of abilateral balance of benefits based on nationallyowned and controlled airlines.

The growth in the number of bilateral air servicesagreements itself has tended to undermine the traditionalconcept of a balance of benefits between air carriers of thetwo States. As bilateral air services agreements proliferate,there are more and more potential opportunities for air car-riers of third States to serve bilateral city pairs indirectly,via their homeland. This increase in opportunities for so-called “sixth freedom” services may be heightened by aircarriers resorting to “hubbing” operations within theirStates. As more and more traffic between city-pairs ofbilateral State partners moves indirectly via third countries,it becomes more difficult to measure the bilateral trafficflow which has its true origin/destination in the twobilateral partner States.

Adapting bilateral air services agreements to new coop-erative activities of international air carriers may requirethe use of new criteria to determine a bilateral balance ofbenefits. These might include, for example, measuring thebalance in terms of international air services per se (regard-less of which air carrier provides them) or in terms ofaccording the same market access in both countries for alldesignated air carriers (without the need, for example, tobalance the opportunities in terms of an equal number oftraffic points for the designated air carriers of the respectiveStates). At present, in some instances, States consider thebenefits of increased tourism and/or exports by air to besufficiently important, in effect, to justify exceptions to theprinciple of a bilateral balance of benefits measured interms of the results for the respective designated aircarriers.

Use of the foregoing criteria may overcome or amelior-ate the balance of benefits issue. It would not, however,eliminate a need in some circumstances to deal with a sub-stantial number of third States which are affected by coop-erative arrangements authorized bilaterally. This couldperhaps be lessened somewhat if States could agree onstandard definitions of terms which reflect the rights aircarriers seek via cooperative arrangements. For example, ifa substantial number of States were to agree that the term“traffic rights” included the right to code share or use ablocked space arrangement to serve a market, there wouldbe less need to deal bilaterally with all the States affectedby a cooperative air carrier activity.

Part 2 — Bilateral RegulationChapter 2.3 — Key Issues of Bilateral Regulatory Process and Structure 2.3

2.3-3

One shortcoming of the bilateral regulatory structure is alack of transparency, i.e. openness of agreements andunderstandings reached and accessibility by non-partyStates and individuals with an interest in their contents.Although States are required by Articles 81 and 83 of theChicago Convention to file all aeronautical agreementswith ICAO where they are open to inspection, some agree-ments, especially side agreements such as memoranda ofunderstanding, are kept confidential and not filed withICAO, other agreements are filed only after delays of manyyears and some agreements are not filed by either party.

Full compliance with the requirement of the ChicagoConvention to file all agreements with ICAO could signifi-cantly increase badly needed transparency. One possibleway to improve this situation, as recommended by ICAO,is to include a provision in their bilateral agreement whichclearly designates a party (for example, the party of theplace of signature of the agreement) to be responsible forthe registration of their agreement upon its signature orentry into force (which can be found in Doc 9587).

A second and perhaps more serious shortcoming is theinadequacy of the dispute resolution mechanisms containedin bilateral air transport agreements. These agreementsgenerally provide a consultation mechanism, arbitrationprocedures and a termination clause. When a dispute arisesbetween the parties that is resolved in a fairly short time byinformal or formal consultation procedures, no shortcomingexists. If, however, the parties remain deadlocked in theconsultation process, their only options are:

• to consult again, with the probability that positionswould not have changed and the additional consul-tation would fail; and/or

• to invoke arbitration, a process so costly and time-consuming that its use in air transport regulationhas been extremely rare; and/or

• to take unilateral action which the other party ismost likely to regard as a violation of the agreementand a basis for similar action on its part; and/or

• to give notice of termination of the agreement (typi-cally one year’s notice is required) and, followingtermination, to attempt to resolve the problem onthe basis of comity and reciprocity.

This shortcoming could possibly be overcome by the use ofimpartial experts (acting as individuals or in panels), pref-erably independently selected, under rules and proceduresdesigned for very rapid dispute resolution at minimal cost.Based on this concept, ICAO has developed a mediationmechanism, in the form of a model clause, for optional useby States additional to and in between the traditional con-sultation and arbitration processes (which can be found inDoc 9587).

A third and significant shortcoming stems from its adhoc character. Although the use of bilateral air servicesagreements allows States to take into account each other’sdiffering circumstances and situations, it also produces awide variation in how certain key issues, such as trafficrights, capacity and tariffs, are treated. Thus, each bilateralair transport agreement tends to be somewhat unique innature and can only be reliably implemented with an under-standing of its particular circumstances rather than by ref-erence to standard terminology. For example, an agreementmay:

• adhere to the standard format of preamble, articlesand one or more annexes, yet have its own particu-lar order of articles, subject titles, placement ofagreed elements, annex structure, etc.; and/or

• mix standard texts for capacity and price regulationbut have deviations or inconsistencies (such asincorporating so-called “Bermuda principles” ofcapacity regulation yet intending or allowing for thepredetermination of capacity); and/or

• have been intended to be a State’s standard form ormodel text, yet contain many deviations sought bythe partner State that reflect compromises reached.

A fourth shortcoming that can create significantproblems for multi-country operations is the difficulty inobtaining and maintaining the essential consistency in routedescriptions in each of the agreements involved. Forexample, an air carrier would generally find it helpful andperhaps necessary, when operating a long linear routewhich requires stops in several countries, to have the abilityto take on and discharge passengers and cargo at each stop.This would require the State designating the air carrier tosecure the appropriate rights from each State where a stopis made which may take an inordinate amount of time orwhich may not be possible. However, with the trend ofliberalization, this situation may be improved when Statesconcerned conclude liberal (e.g. open skies) agreementsproviding for more open market access and route rights.

SHORTCOMINGS OF BILATERALREGULATORY STRUCTURE


2.3-4

A fifth shortcoming is the lack of standard definitionsof terms, i.e. the terminology employed in various bilateralagreements may be defined differently, even in conflictingways, by different States (for example, fifth and “sixth”freedoms).

One way to ameliorate or overcome these shortcomingswould be to continue to expand the practice of using“model clauses” (such as various ones developed by ICAO)in addition to certain standard terminology taken from theChicago Convention. A second way might be to create amultilateral framework agreement composed of standard-ized articles or clauses on relatively non-controversial sub-jects to serve as an “umbrella” for bilateral agreementswhich would contain provisions for sensitive topics such asagreed market access and capacity and pricing regulation.A third way would be to create a well drafted plurilateral ormultilateral agreement text; however, its design would haveto ensure adequate recognition of the differences betweenparticular bilateral relationships that are now reflected bythe ad hoc character of bilateral agreements. In this regard,the template air services agreements recently developed byICAO (Doc 9587) could be a useful tool that will assist inthe standardization process.

With the growth of regionalism, at times accompanied bysome unification in the economies, as well as the inter-governmental relations of the States involved, issues ariseover whether, and if so how, other member States of agroup (such as an economic union) or the regional bodyitself should become involved in the extraregional bilateralair transport relations of individual member States. Eachascending level of such involvement presents separateissues.

The first level of involvement by a non-party (to abilateral relationship between a member State of a regionalgroup and an extraregional State) could occur when such amember State consults and/or coordinates with another orother member State(s). Such consultation and/or coordinationcould:

• help standardize the extraregional bilateral agree-ments of member States;

• mitigate possible concerns of other member Statesthat the results of the consultation or negotiationcould prejudice their interests;

• lengthen and/or complicate the consultation ornegotiation; and

• increase the difficulties of reaching agreementbecause non-party interests are involved.

A second level of involvement could be the physicalpresence at the bilateral consultation or negotiation of arepresentative or representatives of other member States ofthe group or of a group representative, as observer(s). Con-siderations for both parties to the bilateral meeting include:

• what would be the benefits or disadvantages;

• whether the non-member party would accept thepresence of any such observer(s);

• how would the role of non-party observer bedelineated; and

• which non-party States would be represented, withthe assumption that the interests of those not rep-resented would either be adequately represented ornot be affected by the negotiation.

Note that the above considerations would not exist in jointbilateral negotiations where one member of a regionalgroup has been duly authorized to negotiate on behalf of allmembers of the group.

A third level of involvement could be the actualconduct of the bilateral consultation or negotiation by arepresentative of the regional group on behalf of a memberparty. Such involvement could raise questions of:

• acceptability to the extraregional party of dealingwith a non-party negotiator;

• potential uneasiness on the part of the memberState party about being represented by a non-national negotiator; and

• possible doubts on the part of the extraregionalparty about the ability and willingness of the mem-ber State party to fully carry out the terms of anyagreement reached.

Note that the above questions need not arise in a jointbilateral negotiation with member State parties on one sideand an extraregional party on the other.

A fourth level of involvement could be the conduct ofthe bilateral consultation or negotiation by a representative

BILATERAL RELATIONSINVOLVING GROUPS OF STATES


2.3-5

of the regional group where the two signatory parties are orwould be the extraregional State and the regional group asa single entity. Such a potential consultation or negotiation:

• may have, as a raison d’être of the regional group,the perception of greater negotiating leverage thanpossessed by member States acting individually;

• may well be perceived by outside States, inparticular developing countries, as threatening;

• can only be undertaken by a supra-State that haspowers over member States sufficient to ensure thatwhat it has agreed will be carried out; and

• may produce an agreement which could beperceived by the group members as benefiting oneof the member States more than (or to the detrimentof) another.

Note that a regional body that lacks the legal and institu-tional structure of a supra-State and thus could not be anobligated signatory party could nevertheless conduct jointbilateral negotiations, i.e. at the third level of involvement.

A final consideration is that while consultations ornegotiations at the above levels are or could be consideredas being multinational, they are all bilateral or joint bilat-eral, not multilateral, in character. The distinctions are that:

• multilateral consultations/negotiations/agreementsdeal with binding relationships of each party toeach other party or to all other parties as a collec-tive, whereas at each of the above levels theregional group member State parties maintain sep-arately governed relationships with each other; and

• the relationships at each of the above levels arewith only one outside party; therefore, withdrawalby that party from the agreement would terminate it(as in the case of any other bilateral agreement andin contrast to a multilateral agreement which wouldnormally continue after denunciation by a singleparty).

International air transport is a commercial activity wherestrongly differing views exist among States as to desirable

levels of protection, competition and industry cooperation.Prior to the 1990s, States, individually or collectively,generally either did not apply national competition laws tointernational air transport, or exempted it from the scope ofsuch laws, sometimes with certain conditions designed tomitigate perceived anti-competitive effects. Consequently,bilateral air transport agreements contained no clauseswhich dealt specifically with the application of competitionlaws, although some agreements did contain certain com-petition principles and commitments to avoid unfair orpredatory practices.

Since then, with increasing globalization and wide-spread adoption of the market economy, there has been amarked rise in the adoption of competition laws by States,spreading gradually from developed economies to otherparts of the world. By 2003, some 90 countries had compe-tition laws of some sort. As liberalization progresses andtakes hold in more States, the traditional concepts to ensurefair competition tend to gradually give way to the appli-cation of competition laws, particularly in cases whereStates have agreed to an open competition system.

In recent years, the use of such laws to deal with airtransport has occurred not only with more frequency butalso has encompassed an increasing number of issues,ranging from antitrust immunity, mergers and alliances,abuse of dominant position, capacity dumping and preda-tory pricing, sales and marketing, to airport charges andfees, State aid and loan guarantees.

A major challenge facing air transport regulators is howto define or distinguish between normal and anti-competi-tive practices. While efforts have continued at national andinternational levels to devise competition guidelines,reliance has increasingly been placed on analyses anddevelopment of standards through a case-by-case approach.To address this issue, ICAO has developed, as part of asafeguard mechanism in the form of a model clause, anindicative list of possible anti-competitive practices whichStates may use in identifying unacceptable behaviour in themarketplace and in considering appropriate regulatoryaction (which can be found in Doc 9587).

One of the potential problems associated with theapplication of national competition laws is the differing,sometimes even conflicting, regimes employed by States(for example, regulations dealing with mergers or alliances,denied boarding). This could cause particular difficultiesfor airlines operating international air services when theyhave to cope with different rules in different countries.While repeated efforts have been made at the international

APPLICATION OFCOMPETITION LAWS TO

AIR TRANSPORT


2.3-6

level with a view to harmonizing competition regimes, glo-bal consensus has proven to be difficult to obtain, due tothe different legal systems involved and the disparity intheir scope and content. It is therefore important that States,when dealing with competition issues involving foreign aircarriers, give due consideration to the concerns of otherStates involved and avoid taking unilateral action.

The extra-territorial application of national competitionlaws could also undermine certain airline cooperativearrangements (for example, interlining, tariff coordination)which are regarded by many as essential for the efficiency,regularity and viability of international air transport. Whereantitrust or competition laws apply to such arrangements,States often grant immunity or exemptions, sometimes withcertain conditions, to permit inter-carrier cooperation wherethey benefit users and air carriers.

With respect to disputes that may arise from applyingnational competition laws or the various safeguardmeasures, States usually rely on the consultation processavailable under relevant air services agreements. In thisregard, ICAO has also developed a number of specificguidelines for States and a model clause for air transportagreements on the avoidance or resolution of conflictsbetween States over the application of national competitionlaws (which can be found in Doc 9587).

While national and regional approaches to competitionlaws continued to differ, a number of bilateral antitrustenforcement cooperation agreements have been entered intoby States, particularly between developed countries. Theseagreements have proven useful for dealing with matterssuch as cartels and mergers/alliances. At the same time,there has been recognition that enforcement cooperationalone would not resolve some significant areas of pro-cedural and substantive differences among antitrust regimes,and that these differences would need to be addressed.

Unlike other commercial sectors, participation is an expec-tation in international civil aviation. This could be traced toArticle 44 of the Chicago Convention which mandatesICAO, as an objective of the Organization, to “Insure thatthe rights of contracting States are fully respected and thatevery contracting State has a fair opportunity to operateinternational airlines.”

The ability of an airline to sustain its operations andcontinue participating in international air transport is notonly dependent upon its relative input cost base andproductive efficiency, realized under different market cir-cumstances, but also is often supported by various direct,indirect or implicit State assistance.

State aids/subsidies to air carriers by governments haveexisted since the beginning of commercial air transport.They have been provided at all stages of national or aviationdevelopment and have taken a wide variety of forms.

At the bilateral level, State assistance has also in effectbeen common because the bilateral air transport frameworkitself has conventionally provided a non-monetary form ofimplicit assistance to national air carriers in their ownmarkets by limiting the scope of competition. Liberal airservices agreements concluded in recent years have sub-stantially reduced or eliminated such implicit assistance bya State in some markets.

The objectives of State assistance are varied, but asregards the international arena, have often been aimed atmaintaining the participation of national air carriers in theair transport markets concerned and at ensuring continuityof air services to/from their territories. Developingcountries, in particular, are concerned about overdepen-dence on foreign carriers to provide international airservices, especially in bad times when the services may beadversely affected. Some States also regard the survival oftheir own air carriers as a definite means of providing aneffective assurance of services.

However, State aids/subsidies which confer financialbenefits on national air carriers that are not available tocompetitors in the same international markets could distorttrade in international air services and can constitute orsupport unfair competitive practices.

For example, a national air carrier which receives a fuelsubsidy for all international flights would potentially enjoyan unfair competitive advantage in all international marketsin which it competes directly or on an interline basis. If thenational air carrier uses its fuel subsidy to consistentlycharge less on routes on which it is a significant competitor,there would be an adverse impact on competing air carriers.

There are a number of different State aids/subsidies thatmay distort competition. In the form of financial aids tonational air carriers, they include but are not limited to:

• the provision of State funds for the purposes ofcovering operating losses, avoiding insolvency,financing of restructuring or expansion;

EFFECTS OFSTATE AIDS AND SUBSIDIES


2.3-7

• partial or full cancellation of air carrier debt to thegovernment;

• the guarantee of loans;

• the giving of “soft” loans (i.e. at below-market ratesof interest or with insufficient collateral); and

• the assumption of air carrier debt owed to otherparties.

Other State aids/subsidies may take a less direct form,yet still provide the air carrier with a financial benefit.These include such items as:

• preferential tax treatment;

• funding of unemployment benefits to national aircarrier workers whose services are declaredredundant;

• measures in bankruptcy laws which, after adeclaration of insolvency, grant legal relief fromcertain financial obligations for extended periods inorder to permit the air carrier to continue operationswhile attempting to reorganize; and

• cross-subsidization measures, for example, charginghigher airport fees for international than domesticflights, thereby benefiting national air carriers whichoperate both types of flights.

All the foregoing State aids/subsidies have the potentialto enable the air carrier receiving them to engage inanti-competitive actions, such as excessive capacity, andpredatory pricing.

There are also State aids/subsidies which can adverselyand unfairly affect competing non-national air carriers.These include, for example, State aids/subsidies of a directnature, such as payment of security costs for national aircarriers (but not those of foreign air carriers).

Other types of State aids/subsidies may distort compe-tition and adversely impact competing international aircarriers by reserving certain segments of the market tonational air carriers. Examples include the requirement thatoriginating international mail be shipped only or predomi-nantly on national air carrier(s) and so-called “buy national”policies, which require that all or most governmentally paidair transport be on a national air carrier.

In an increasingly competitive environment, anincreasing number of air carriers, particularly privatizedones, are concerned about competitors that continue toreceive State aids/subsidies. To minimize the potentialadverse effects on competition in the marketplace, particu-larly in the case of direct financial aids/subsidies, severalStates (and groups of States) have developed rules on Stateaids/subsidies, which provide criteria to meet very specificobjectives only where better alternatives are unavailable.

The major practical complication is the difficulty inquantifying the full scale of State assistance owing to theexistence of various indirect or implicit assistance measures.Only direct aids/subsidies in monetary form can be quanti-fied to some extent, although different accounting methodsand reporting practices make it difficult to produce a com-parative assessment of them. Furthermore, actions by Statesover perceived levels of assistance that may be consideredto distort competition have the potential to lead to retaliatoryactions by other States in view of differing attitudes towardssuch assistance.

The legitimacy of a State aid or subsidy depends uponits capacity to cause an adverse or distortive effect on com-petition. It can do so, for example, by enabling the benefitedcarrier to offer a below-cost tariff. Yet objectively thecorrect cost data to back up a claim of distortive effect isproblematic. The allocation of costs to particular city-pairsinvolves an arbitrary decision. There may be a plethora ofdiscount fares and conditions. Modern yield managementtechniques and marginal pricing allow some seats on a flightto be sold below fully allocated cost while still covering themarginal cost of filling an otherwise empty seat.

It is also very difficult to determine the impact of a one-time State aid granted to certain carriers in order tocompensate them for losses incurred in situations such asgovernment-imposed closure of airspace or an airport. Thesituation becomes worse in cases where such financial aidis considered by competing foreign carriers as beneficial tothe recipient carriers to the extent that it represents a figurethat is more than the actual loss incurred by the compen-sated carriers. An anti-competitive effect may also comefrom a State’s (typically a developed State) provision ofunlimited war risk insurance coverage to its airlines. Simi-larly, State aid in the form of an unfair allocation of scarceairport landing and take-off slots can be considered distor-tive of competition. Again, a variety of assumptions andarbitrary conclusions could be involved in any assessment.

In a situation of transition to liberalization or in analready-liberalized market, there may be exceptional


2.3-8

circumstances where State assistance can produce econom-ic and/or social benefits even though such assistance mayaffect market competition. So far as the ad hoc aids/sub-sidies are concerned, financial restructuring may serve tofacilitate the transforming process of less efficient airlinesas was the experience in the European Union.

The government decisions on airline restructuringfinances are usually made against a background of socialand political pressures to save national airlines and to ensurethat the transition to more efficient operations is achieved atthe lowest cost to those most affected, in particular to labourand creditors. However, without well-defined conditions(including goals, adequate time frame and long-term plans)and stringent regulatory mechanisms for enforcement, infor-mation disclosure and monitoring, restructuring financescould have the effect of simply protecting less productiveairlines without fostering internal efficiency. Restructuringfinance of airlines, therefore, needs to be accompanied byclear criteria and methodology if it is to achieve its intendedpurpose.

Some forms of subsidies in support of minimum levelsof air services to remote areas may also be justified fromthe social interest perspective, provided that they are allo-cated transparently and effectively. In such circumstances,they can ensure the provision of a service satisfying fixedstandards of continuity, regularity, capacity and pricing,standards which the air carrier may not assume if it weresolely considering its commercial interest.

A traditional method to meet such social needs hasbeen to rely on implicit ways such as cross-subsidizationacross the network through the strict regulation of marketentry and tariffs, but the regulatory cross-subsidization sys-tem is considered neither transparent nor likely to stimulateefficiency.

A more effective and transparent alternative may be toprovide direct financial subsidies for non-remunerativelocal services with institutional arrangements such as com-petitive tendering/bidding systems that clearly defineselection criteria applicable to the ways in which subsidiesare awarded. Since the tendering/bidding systems grantsubsidies and operating rights to the most efficient carriers,

they may serve to keep the costs of subsidies low, as dem-onstrated by the domestic experiences in several States. Atissue is to what extent this mechanism used in domesticcontexts could be applied to international services.

With respect to participation aspects of State assistancethrough air services agreements, some special supportivemeasures deviating from the traditional bilateral arrange-ments based strictly on reciprocity may be justified to helpinstil the required level of confidence among various Statesto pursue diligently the processes of liberalization.

For example, in the case of air services arrangementswith a developing country, such assistance may take theform of preferential measures, i.e. non-reciprocal regulat-ory arrangements which States in a regulatory relationshipagree are needed by a developing country for its effectiveand sustained participation in international air transport.

In other cases, States may consider participationmeasures, i.e. regulatory arrangements which are availableto all States and are designed to build confidence for Statesinvolved in progressively moving to a less restrictive regimeand to ensure that the results of increasing competition,while not equal, do not become too unequal (e.g. in respectof capacity, tariffs and market access).

In this regard, ICAO has developed a list of potentialpreferential measures and participation measures which canbe found in Doc 9587. In addition, a model clause has alsobeen included in the ICAO template air services agreements(also contained in Doc 9587) to address the participationissues as transitional measures. All these are designed toprovide less competitive carriers with an unreciprocatedright or preparation time to enable them to develop a servicethat cannot be contested fully by competitors in a certainperiod. In this way, States with less competitive carriers maybe more likely to commit to stepping forward to progressiveliberalization. For example, preferential measures can pro-vide a “head start” for less-competitive airlines wishing tohave greater opportunities (for example, by granting moretraffic points), and allow a developing country to introduceliberalization progressively (for example, to open up itsmarket at a later stage).

2.4-1

Chapter 2.4

TYPES OF INTERNATIONALAIR SERVICES NEGOTIATIONS

The growth of regional economic communities or unions ofStates, and the public consideration being given in somesuch communities and by individual States to group nego-tiations involving an organization of States (and/or intra-group consultations regarding negotiations by a memberState), has created a need for a typology of possiblepatterns. The initial diagrams in this chapter show a typicalbilateral negotiation (Type 1), i.e. a negotiation betweentwo parties, most often between two sovereign States, and amuch less typical joint bilateral negotiation (Type 2), i.e.a simultaneous negotiation between one State and two ormore other States regarding separate bilateral agreements(which are likely to occur when two or more States havethe same airline). They then set forth various types whichdo or would involve an organization or organizations ofStates (Types 3 through 8). The diagrams identified asTypes 9a, 9b and 9c show variants of ways to develop anew form of agreement, one which could arise through aprocess which overlaps the typical bilateral negotiation andthe multilateral negotiation (Type 10).

The type of international air services negotiation thatoccurs most frequently is the typical bilateral negotiationbetween two sovereign States (see Type 1).

In some situations, joint bilateral talks may facilitatereaching separate but similar agreements, particularly whencertain States have the same airline (for example, Denmark,Norway and Sweden) (see Type 2).

Bilateral agreements can sometimes be facilitated byworking through an organization of States. This occurred,for example, in the negotiation of detailed annexes to the1982–1991 Memorandum of Understanding between theUnited States and certain European Civil AviationConference (ECAC) States about North Atlantic pricing(see Type 3).

A State which is a member of an organization of Statesmay consult with and receive input from partner States ofa group as it carries on bilateral talks with a non-groupmember State (for example, negotiations between oneEuropean Union State and a non-EU State) (see Type 4).

A variant of this could be negotiation between twoStates, each being a member of a group of States and eachconsulting with and receiving input from partner States oftheir respective organizations (for example, talks between aState in the Caribbean Community (CARICOM) and aState in the European Union) (see Type 5).

Another type of bilateral negotiation could involve aState on the one hand and a group of States on the other(for example, the negotiation between the European Unionand Switzerland concerning the integration of the latter intothe European Economic Area (EEA)) (see Type 6).

Similarly, it could involve two States jointly negotiatingseparate agreements (with much in common) with a groupof States, but wishing to exclude air services between theirterritories (for example, possible talks between two NorthAmerican States and the European Union) (see Type 7).

Future bilateral negotiations could even occur betweentwo groups of States (for example, between the AndeanPact and the European Union) (see Type 8).

Negotiations could also occur for a plurilateral agree-ment, i.e. an agreement that could initially be bilateral butbe capable of being expanded to involve additional parties(the so-called “expanding bilateral”) (see Type 9a) orcould, from the start, involve three or more parties, in bothcases parties that share similar regulatory objectives whichare not so widely held as to make feasible a typical multilat-eral negotiation (see Type 9b). It would likely be open toother States to join. This is exemplified in the “open skies”


2.4-2

agreement concluded by several members of the Asia-PacificEconomic Cooperation Forum (the “Kona Agreement”).

A variant of the plurilateral agreement could comeabout if certain parties wish to exclude the coverage of airservices between their territories (see Type 9c).

In contrast to all of the above types, the typical multi-lateral negotiation involves many more parties within aglobal, regional or other multi-party grouping, which mayor may not all share similar regulatory objectives but nego-tiate together to create an agreement, usually one open toother States to join (see Type 10).

Typicalbilateral

negotiation

Bilateralagreement

StateA

StateB

Type 1

Process: Negotiation between two sovereign States.

Jointbilateral

negotiations

Bilateral agreement

Bilateral agreement

Bilateral agreement

StateA

StateC

StateD

StateB

Type 2

Process: Joint simultaneous negotiation of separate agreements.

Part 2 — Bilateral RegulationChapter 2.4 — Type of International Air Services Negotiations 2.4

2.4-3

Facilitatedbilateral

negotiations

Bilateral agreement

Bilateral agreement

Bilateral agreement

Bilateral agreement

Bilateral agreementStateA

StateC

StateD

StateE

StateF

StateB

Type 3

Organizationof

States

Process: Multilateral organization provides common framework for separate bilateral negotiations.

Bilateral negotiation with one partyconsulting with and receiving input from

partner States of a group

Bilateral agreement

StateB

StateA

StateD

StateE

StateF

StateG

StateC

Type 4

Organizationof

States

Process: Multilateral organization provides common framework for intra-organizational consultations before, during and/or after bilateral negotiation.


2.4-4

Bilateral negotiation with each partyconsulting with and receiving input from

partner States of a group

Bilateralagreement

StateB

StateA

StateD

StateJ

StateE

StateK

StateF

StateL

StateG

StateM

StateH

StateN

StateC

StateI

Type 5

Organizationof

States

Organizationof

States

Process: Multilateral organizations provide common frameworks for intra-organizational consultations before, during and/or after bilateral negotiation.

Bilateral negotiation betweenone State and a group

Bilateralagreement

StateB

StateA

StateD

StateE

StateF

StateC

Type 6

Organizationof

States

Process: Group of States yields negotiating powers to a common organization or supra-national authority.


2.4-5

Joint bilateral negotiationsbetween more than one State and a group

much commonality

Bilateralagreement

Bilateralagreement

StateBState

A

StateD

StateE

StateF

StateH

StateC

Type 7

Organizationof

States

Air services bycarriers of A and Hbetween A and H

not covered

Process: Group of States yields negotiating powers to a common organization or supra-national authority.

Bilateral negotiationbetween two groups of States

Bilateralagreement

StateF

StateA

StateH

StateC

StateI

StateD

StateJ

StateE

StateG

StateB

Type 8

Organizationof

States

Organizationof

States

Process: Two groups of States each yield negotiating powers to their respective organization or supra-national authority.


2.4-6

Development ofplurilateral agreement

Plurilateral agreementStateA

StateC

StateD

StateB

Type 9a

Bilateral open to subsequent adherence

Adherence by other State(s) over time

Process: Two States sharing similar regulatory objectives which are not widely held conclude agreements so drafted as to permit subsequent adherence by other States.


Plurilateral agreement

StateB

StateA

StateF

StateE

StateD

StateC

Type 9b

Multilateral open to subsequentadherence


Process: Three or more States sharing similar regulatory objectives which are not widely held conclude agreements to which other States may later adhere.


2.4-7


Plurilateral agreement

StateA

StateC

StateD

StateB

Type 9c

Open to subsequent adherence


Air services bycarriers of A

and C betweenA and C not

covered

Process: That of Type 9a or Type 9b. Certain States wish to exclude coverage of their air carriers’ services between their territories.

Multilateral negotiation

Multilateral agreement

StateF

StateA

StateH

StateC

StateI

StateD

StateJ

StateK

StateX

StateE

StateG

StateB

Type 10

Process: Global, regional or other multilateral negotiation.

Part 3

MULTILATERAL REGULATION

3.0-1

Chapter 3.0

INTRODUCTION TOMULTILATERAL REGULATION

Multilateral regulation is regulation undertaken jointly bythree or more States, within the framework of an inter-national organization and/or a multilateral treaty or agree-ment, or as a separate specific activity, and may be broadlyconstrued to include relevant regulatory processes andstructures, outcomes or output written as treaties or otheragreements, resolutions, decisions, directives, or regulations,as well as the observations, conclusions, guidance and dis-cussions of multinational bodies, both intergovernmentaland non-governmental.

The goal of multilateral regulation in the air transportfield is, for the most part, the conclusion, implementation,or continuance of common arrangements, policies, agree-ments or regulations on matters of interest to the variousparties. This chapter provides a brief history of themultilateral regulation of international air transport.

The most basic process of multilateral regulation is thatof communication and interaction at multinational meetingsundertaken to examine issues, adopt recommendations orresolutions, or conclude or amend intergovernmental ornon-governmental agreements. Multilateral processes alsoinclude ad hoc and recurrent interactions between inter-national organizations as well as activities particular to theoperation of treaties. Chapter 3.1 explains process in thefield of multilateral regulation.

The structure of multilateral regulation has an institu-tional component made up of many intergovernmental andnon-governmental organizations. In addition, the structureof multilateral regulation has a legal component embodiedin numerous multilateral treaties and similar instruments as

well as in binding and non-binding resolutions, recommen-dations and decisions of international organizations.Chapter 3.2 explains the first component by describing fea-tures such organizations have in common and the second byidentifying certain generic terminology of the legal compo-nent as well as relevant worldwide and regional treaties andagreements.

Chapter 3.3 examines certain key issues of process andstructure in the multilateral regulation of international airtransport.

Chapter 3.4 is devoted exclusively to the InternationalCivil Aviation Organization (ICAO).

Chapters 3.5 to 3.7 identify certain other intergovern-mental organizations: Chapter 3.5, worldwide intergovern-mental organizations other than ICAO; Chapter 3.6,regional intergovernmental civil aviation organizations; andChapter 3.7, other regional and trans-regional intergovern-mental organizations.

Chapter 3.8 is devoted solely to the International AirTransport Association (IATA).

Chapter 3.9 identifies other worldwide, regional andtrans-regional non-governmental organizations which rep-resent air carriers or other aviation interests or otherwisehave air transport interests.

Part 4 of the manual presents the topics which make upthe subject matter or content of regulation.


3.0-2

A BRIEF HISTORY OF THE MULTILATERAL REGULATION OFINTERNATIONAL AIR TRANSPORT

The history of multilateral regulation in the field of international air transport could be said to have begun in 1910when the Government of France invited twenty-one European States to an International Conference of AirNavigation in Paris. This was the first multilateral diplomatic conference convened to consider international aspectsof flight across State boundaries. No agreement was reached, but the notion arising from and debated at the meetingthat States have and should exercise sovereignty over their airspace ultimately became the basis for air transportregulation.

The 1910 conference laid the groundwork for a 1919 diplomatic conference during which an AeronauticalCommission of the Peace Conference drafted the Paris Convention for the Regulation of Aerial Navigation, alsoknown simply as the Paris Convention, an accord (adopted by the 1919 Paris Peace Conference) which, inter alia,confirmed the notion of States’ sovereignty over their airspace. Ultimately, 38 States became parties to this accord.The International Commission on Air Navigation (ICAN), a permanent Paris-based organization with a full-timeSecretariat, was entrusted with the execution, administration and updating of the Paris Convention. Due to seriousshortcomings of the Paris Convention, however, several major aviation States of that time chose not to ratify it andsome States sought alternative accords.

In 1926, an abortive attempt was made at Madrid, Spain, to create an Ibero-American Convention Relating toAir Navigation, also known as the Madrid Convention, an accord virtually identical to the Paris Convention butwith equality for States rather than weighted voting. It did not enter into force. A Pan-American Convention onCommercial Aviation, also known as the Havana Convention, similar to the Paris Convention in content but withno provisions for a governing body, was signed in 1928 and subsequently ratified by 16 States in the Americas. Inthe 1930s several other multilateral conventions to regulate international civil aviation were concluded forapplication mainly on a regional basis including, in Latin America, the Buenos Aires Convention of 1935 and, inEurope, the Bucharest Convention of 1936 and the Zemun Agreement of 1937.

The Chicago Conference, called by the United States at the time of World War II and opened at Chicago on1 November 1944, had as its most important outcome the signing of the Convention on International Civil Aviation(the Chicago Convention) at the ending of the Conference on 7 December 1944. This Conference also produced theInternational Air Services Transit Agreement, the International Air Transport Agreement, drafts of 12 technicalAnnexes to the Chicago Convention and a Standard Form of Bilateral Agreement. The Interim Agreement onInternational Civil Aviation, also produced at the Chicago Conference, brought into being the ProvisionalInternational Civil Aviation Organization (PICAO). PICAO as well as its permanent successor, the InternationalCivil Aviation Organization (ICAO), sought, inter alia, to produce a more widely acceptable alternative to theInternational Air Transport Agreement, but without success.

The negotiation and conclusion of a relatively large body of worldwide air law conventions, chiefly involvingliability and security, then became the focus of multilateral activity in this field. Also, the increasing regionalizationof international economic activities came to be reflected in the development of air transport policies, regulations andeven air transport agreements at a regional level. Increasing internationalization, globalization, liberalization andtrans-nationalization, as well as the inclusion of some aspects of air transport under a General Agreement on Tradein Services (see Chapter 3.3), have created renewed interest in new multilateral arrangements for the regulation ofinternational air transport.

3.1-1

Chapter 3.1

PROCESS OFMULTILATERAL REGULATION

The multilateral regulatory process is very different fromthat of national or bilateral regulation. The chief distinctionsare that:

• more entities are involved (governments, inter-national organizations, companies) and they arebased in numerous States;

• the decisions taken and agreements reached havelimited enforceability, if any, in most cases; and

• relatively little use is made of this process toexchange air transport market access rights or toregulate their use.

The basic process of multilateral regulation is that ofcommunication and interaction:

• among parties from three or more States at formalor informal meetings (typically but not always con-ducted by or under the auspices of an inter-governmental organization or a non-governmentalorganization) undertaken to exchange informationand views on matters of common regulatoryconcern and/or to develop and seek agreement onjoint policies and/or practices regarding aspects ofregulation;

• between an international organization and otherentities (such as its members or other organizations)in other than a meeting context; and

• between entities involved in a multilateral treaty.

The multilateral meeting is the most fundamentalelement of the multilateral regulatory process. The first sec-tion of this chapter describes, in generic terms, the basicsteps, procedures and documentation likely to occur atformal multilateral meetings. (Informal multilateral meetingsare likely to have many of the same elements.)

The next section identifies, also in generic terms, thebasic processes likely to be undertaken by an internationalorganization having a formal structure and staff andinvolving itself in some way with multilateral regulation.

The final section discusses the multilateral treatyprocess.

A formal multilateral meeting called by and held under theauspices of an international organization (intergovern-mental or non-governmental) is the most typical way takento exchange information and views on matters of commonregulatory concern to participating entities from variousStates and/or to develop and seek agreement among suchparties on joint policies and/or practices regarding aspectsof regulation. The meeting could be convened as well by aState or States, especially when no appropriate organizationexists or when an objective of the meeting is to create suchan organization.

Multilateral meetings are convened at regular, predeter-mined times or as needed for specific purposes. A multi-lateral agreement establishing an international organizationusually specifies when regular meetings of the principalbody or bodies will be held and the procedure to befollowed in convening such meetings.

Any meeting among numerous parties having equalstatus requires a more formal process than that typicallyfound in national or bilateral regulation (which requiressome formality due to diplomatic protocol and agreedconsultation procedures). The multilateral process typicallyinvolves a large number of parties having equal status(which are likely to have varying outlooks and objectives)

FORMAL MULTILATERAL MEETINGS


3.1-2

and thus requires a far more structured order if it is tosucceed. Questions of what is to be discussed, in whatorder, with what documentation, in which languages andwith what kind of record keeping can assume much greatersignificance in a multilateral context. An absence or failureof an agreed, orderly process can introduce confusion andan unproductive shift in discussion and debate fromsubstantive topics to procedural questions.

Once a decision has been taken to convene a meeting,invitations are extended and invitees are informed about thepurpose, dates, venue, provisional agenda and/or topics tobe discussed, as well as administrative arrangements, andare requested to name those who will attend as represen-tatives of the invited entity.

The formal multilateral meeting may use anaccreditation process to ensure that participants do in factrepresent the particular invited entities. Accreditation is anofficial designation, made by the accrediting government,organization or other entity, of a person or persons torepresent it at the meeting concerned.

Delegations may be asked to submit their credentials,i.e. documents naming them and signed by or on behalf ofthe entity they represent which provide evidence of theiraccreditation. A very formal and large meeting may estab-lish a credentials committee to ensure that only thoseauthorized to do so participate in the meeting.

The accredited participants from a State or organizationare referred to collectively as a delegation. A large formalmultilateral meeting is likely to register participants and toclassify them, e.g. as chief delegates, delegates, alternates,advisers or observers.

A formal multilateral meeting is likely to be conductedunder some pre-established rules which may govern:

• what constitutes a quorum, i.e. the agreed minimumnumber of delegations required to be present at themeeting before it can validly conduct business;

• discussion procedures;

• voting procedures;

• the use and establishment of subsidiary bodies ofmeetings, e.g. working groups or committees;

• situations in which the meeting is open to thegeneral public and/or the communications media;and

• other possible activities or occurrences.

The documentation of the meeting will be in one or morepre-agreed languages. Translation and/or simultaneousinterpretation may also be provided.

The documentation used at a formal multilateral meetingis likely to have been prepared by a secretariat, a delegationor delegations or, in some cases, by a rapporteur, a personappointed to prepare reports, studies, etc., for a meeting orconference. Each kind of documentation for a formal multi-lateral meeting is likely to have a particular type namecustomarily assigned to it; however, certain document typenames have acquired widespread international usage. Theyinclude:

• agenda, a list of topics to be discussed/decided atthe meeting, including a possible provisionalagenda which, after review and acceptance by themeeting, becomes an adopted agenda;

• order of business, or provisional order of business,a paper which indicates the order or tentative orderin which agenda items and various papers relevantto them are to be discussed;

• working paper, a paper which provides information,sets forth a proposal, suggests draft language orserves a similar purpose and invites action by themeeting;

• information paper, a paper intended solely to pro-vide information, not to be acted upon, but to benoted;

• flimsy, a brief paper having no formal statustypically used to provide a written formulation of aproposal or statement made during the discussion;

• reference or background material;

• delegation list;

• administrative announcement;

• addendum, an addition to any paper;

• corrigendum, a correction to any paper; and

• other documentation as required.

The discussion, debate and decision making at a formalmeeting is typically managed by an elected or appointed

Part 3 — Multilateral RegulationChapter 3.1 — Process of Multilateral Regulation 3.1

3.1-3

chairperson who grants or withholds recognition to a del-egate or delegation wishing to make an intervention, anoral statement of fact or opinion and/or a question to thechairperson of the meeting or to another delegate throughthe chairperson. In large multilateral meetings delegates areexpected, out of courtesy, to limit their interventions and tomake them brief so that all delegations have an opportunityto speak. Given that a chairperson, to be fair, usually“recognizes” delegations, i.e. calls upon them to speak, inthe order in which they request that opportunity, and giventhat numerous interventions may occur between the time adelegation requests that opportunity and the time it isgranted, multilateral discussions can be somewhat disjointedand discontinuous compared to bilateral discussions. Duringthe discussion minutes, a chronological record of the dis-cussion and actions of a meeting (but not a verbatim record)may be taken and subsequently provided to participants.

At the conclusion of each item on the agenda, the chair-person of a meeting often will summarize the results of thediscussion of that topic and, if a decision is called for,determine whether a consensus exists or a vote is necessary.Decisions not made by consensus are likely to be made bya simple majority of votes cast, each delegation typicallyhaving a single vote. In certain specified circumstancesestablished rules may require a qualified majority (e.g. two-thirds or three-fourths of the votes cast or some minimumnumber within a category of voters) to reach a decision. Adecision by a meeting of an international body is likely totake the form of a resolution or recommendation and maybe embodied in a report of the meeting. The decision(s) ofa diplomatic conference may be set forth in a final act, adiplomatic conference document which includes the treatyor treaties and/or other agreements(s) reached.

An organization engaged multilaterally in some aspect ofair transport regulation, whether as an intergovernmental ora non-governmental body and having a formal structure andstaff, is likely to undertake several or all of the followingbasic, generically identified functions:

• supportive functions in advance of and duringformal and informal meetings, such as the prep-aration of working papers and other documentation,translation and interpretation services as necessaryand physical arrangements at the venue;

• relational functions with its members, the hostState(s) in which its office(s) is/are located, poten-tial members, other organizations, the public andcommunications media;

• continuous substantive functions, such as thecollection and dissemination of data and themonitoring of relevant external activities;

• recurrent substantive functions, such as thepreparation of annual reports;

• discrete substantive functions, such as undertakingnon-recurrent studies;

• legal functions associated with organizationalactivities;

• administrative functions, such as those of personneland finance; and

• associative functions or activities performed in sup-port of or in association with other organizations.

A treaty is typically the final product of a diplomatic con-ference, a meeting of sovereign States convened for thepurpose of adopting a multilateral legal instrument (e.g.the Convention on International Civil Aviation, the Inter-national Air Services Transit Agreement, and other multi-lateral treaties). The meetings process involved in draftinga treaty is likely to be that described in the first section ofthis chapter, with some important variations, which include:

• the likelihood of there being a preparatory phase inwhich States, groups of States and other interested/affected parties seek to build a consensus on thepurpose and basic outline of the contemplated treatyvia a variety of means, including the use of diplo-matic channels, bilateral and multilateral meetingsand supportive activities within the internationalorganization(s);

• the possibility of advance circulation of a draft textof the treaty (typically prepared by the internationalorganization concerned) for the views and commentsof States; and

PROCESS WITHIN FORMALINTERNATIONAL ORGANIZATIONS

THE MULTILATERAL TREATYPROCESS


3.1-4

• the probability that each delegation will have fullpowers.

The preparations and the strategic and tactical consider-ations involved are likely to be similar to those of thebilateral negotiating process.

Once the conference participants agree to the text of adraft treaty, the next step is adoption of the text by therepresentatives of all States present or by some agreedvoting majority. This is followed by authentication of thetext in one or more languages. The authentication of thetext of a treaty is usually done by the signature, signature adreferendum or initialling of the text (or of a final act of theconference which contains the text) by the representatives ofthe States attending the meeting who are so empowered. Asignature ad referendum must be confirmed by the signer’sState, for example, by that State’s subsequent action ofratification of the treaty.

The treaty itself may provide that it will enter into forceor effect only after the deposit of a certain minimum num-ber of instruments of ratification, acceptance or approval,documents which formally express the consent of a State tobe bound by a treaty. Acceptance or approval are ways bywhich a State that participated in the diplomatic conferencebut did not sign or initial the treaty may express its consentto be governed by it. An accession is the giving of the for-mal consent of a State, which did not participate in thedrafting and adoption of a treaty, to be bound by it.Accession can take place only if the treaty so provides orall the parties have agreed that consent to be bound may beexpressed in such a way.

The depository of a treaty, a State or internationalorganization as stipulated in the treaty, assumes aresponsibility to maintain the official record of which Statesare parties to a treaty and to inform other participatingStates when new expressions of consent to be bound by thetreaty are deposited or other actions calling for such noti-fication occur. If the diplomatic conference at which thetreaty was drafted was held under the auspices of a State oran international organization, that State or organization islikely to be named the depository.

A State, when signing, ratifying, accepting, approvingor acceding to a treaty, may declare a reservation, i.e. astatement indicating other than full acceptance of thetreaty, which has the effect of modifying, interpreting, or

simply not applying certain provisions in so far as thereserving State is concerned. A treaty may prohibit reser-vations, may provide that only specified reservations maybe made, or may not provide for reservations. A reservationshould not be incompatible with the object and purpose ofthe treaty. The treaty may require acceptance of any reser-vation by other parties, either tacit or explicit.

All of the above can occur at any time after the text ofa treaty has been adopted. A treaty may also be appliedprovisionally pending its entry into force if this is providedfor in the treaty or is otherwise agreed by the parties. Some-times, it may take a long time for a treaty or an amendmentto a treaty to enter into force because of the difficulty inobtaining the requisite number of ratifications.

Once a treaty has entered into force a copy is sent to theUnited Nations Secretariat for registration or filing andrecording. An aviation-related treaty involving any ICAOContracting State is required to be registered with theCouncil of ICAO.

The most fundamental action in the treaty process isthat of observance by the parties of what they have agreed.The international law principle of pacta sunt servandameans that every treaty in force is binding upon the partiesto it and must be performed by them in good faith. Otheractions in the treaty process may include interpretation ofthe terms of the treaty and dispute resolution, each under-taken by the means provided for it under the treaty.

Once in force, a treaty may be changed in two ways. Amodification to a treaty is a change to it brought aboutwhen certain of the parties conclude an inter se agreement,i.e. an agreed alteration of some part of the application ofthe treaty solely as between those parties. An amendmentto a treaty is a change to it, likely to be negotiated by allor most of the parties, that takes effect when an agreednumber of parties have formally accepted it.

There are essentially two ways for a State to ceasebeing a party to a treaty. Denunciation of a treaty is thegiving of formal notice of withdrawal of consent to bebound by the treaty after the period of time provided forsuch action by the treaty. Withdrawal from a treaty by aparty may take place with the consent of all the parties asa result of an occurrence such as a material breach, theimpossibility of performance of a treaty obligation, or afundamental change of circumstances affecting the party.

3.2-1

Chapter 3.2

STRUCTURE OFMULTILATERAL REGULATION

The structure of multilateral regulation of international airtransport has:

• an organizational component consisting of a largeand growing number of international organizations,including intergovernmental and non-governmental,worldwide and regional, trans-regional, formal andinformal organizations; and

• a legal component embodied in multilateral treatiesand similar instruments as well as relevant resolu-tions, recommendations and decisions of inter-national organizations, both binding or non-bindingon their members.

The first section of this chapter discusses the basicelements of the organizational component of that structurethat are generic to most international bodies.

The second section defines the basic generic terms usedto identify the legal component of multilateral regulation.

The third section identifies the three principal multilat-eral instruments produced by the Chicago Conference.

The fourth section lists and briefly identifies the majorcomponents of the Warsaw System and the MontrealConvention of 1999.

The fifth section identifies other air law instrumentsrelated to air transport.

The final section identifies the principal regionalmultilateral agreements that regulate specific aspects ofinternational air transport.

An international organization, in the narrow meaninggiven in the Vienna Convention, is an intergovernmentalorganization, i.e. a body composed of two or more States,and in the broader idiomatic sense (used in the manual)means any organization having chiefly internationalactivities and membership from more than one State, thusincluding the non-governmental organization (NGO), aprivate body having international activities and member-ship (such as an association of air carriers from variousStates). An international organization can:

• be a formal one, with some written constitutionalarrangement, or an informal one;

• have membership criteria, responsibilities andprivileges;

• be worldwide, regional or trans-regional (i.e. lessthan worldwide but not confined to a single region);

• have or not have a headquarters;

• have or not have other than headquarters offices;

• have or not have a secretariat, a staff workingwithin an established organizational structure insupport of the organization;

• have a sovereign body, such as an assembly or ageneral membership meeting, however titled, whichis convened regularly or at an agreed time andconstitutes the final authority of the organization,setting its policy and conducting its business;

BASIC ELEMENTS OF THEORGANIZATIONAL COMPONENT


3.2-2

• have or not have a governing body, a group whichdirects and carries out the work of the organizationwhen the sovereign body is not in session; and

• have or not have subsidiary bodies or advisorybodies on a standing basis, or special bodies toserve ad hoc purposes, usually set forth in terms ofreference, i.e. an approved statement of the goals,objectives, tasks and constraints or limitations ofthe endeavour.

The most basic term in the legal component of the structureof multilateral regulation is “treaty”. The word treaty:

• is defined in the Vienna Convention on the Law ofTreaties as “an international agreement concludedbetween States in written form and governed byinternational law, whether embodied in a singleinstrument or in two or more related instruments andwhatever its particular designation” (the ViennaConvention on the Law of Treaties, which cameinto force on 27 January 1980 and is widely but notuniversally accepted, is a primary source of inter-national law applicable to treaties between States);

• is sometimes designated as an act, agreement,arrangement, charter, convention, covenant,declaration, final act or protocol;

• in the broadest meaning of the term, is any writteninternational agreement concluded between two ormore States, even an exchange of letters or amemorandum of understanding; and

• in a more narrow meaning, designates only themost formal (and typically multilateral) agree-ments, particularly those which require ratification.

A multilateral treaty is likely to be structured to include:

• a preamble which typically expresses the under-lying reasons for, and aims and objectives of, thetreaty;

• a main body (which may be divided into severalparts) having sequentially numbered articles which

provide definitions, substantive content (i.e. par-ticular agreed rights and obligations) and modalitiesfor the entry into force and continued operation ofthe treaty itself; and

• possible annexes and/or accompanying relateddocuments forming part of the treaty.

While some form of treaty is the intended decisionaloutput of a diplomatic conference, the decisional output ofa formal meeting of an international organization is likelyto be:

• a resolution, which is a formal expression of thecollective opinion or will of an internationalorganization, having a binding character, typicallyconcerned with a single topic and includingpreambular clauses (typically beginning with“whereas”) which explain the background, circum-stances and reasons for the decisions found in thesubsequent resolving clause(s), which set forth thedecision(s) reached by the meeting; or

• a recommendation, which refers to an action whichis advisory in nature rather than one having anybinding effect; or

• a decision in some other form customarily used bythe international organization.

Certain Latin words are used without translation invarious international treaties, agreements and other regu-latory contents. Those most frequently encountered, but notdefined elsewhere, include:

• a posteriori — based on observation or experience,for example, a review of the progress achieved inimplementing a particular regulatory arrangement(see also ex post facto);

• a priori — before examination or analysis, orbefore actual experience, for example, an a prioridecision taken without first gaining actualexperience with that activity;

• ab initio — from the beginning, for example, thediscussion of a regulatory topic restarted from thebeginning;

• bis — literally means twice or second, used toinsert a new provision without affecting the

BASIC TERMINOLOGY OF THELEGAL COMPONENT

Part 3 — Multilateral RegulationChapter 3.2 — Structure of Multilateral Regulation 3.2

3.2-3

subsequent numbering, for example, Article 83 bisof the Chicago Convention inserted betweenArticle 83 and Article 84;

• de facto — in actual fact but not by legal establish-ment or official recognition, for example, an airservice being offered but not yet lawfully approved;

• de jure — by law, lawful, legally established, forexample, a fully licensed and approved air service;

• de minimus — very small, for example, too minorto be included in a treaty text;

• ex parte — on, or in the interests of one side only,for example, an ex parte representation regarding aregulatory proceeding, or by an interested non-party,for example, by a non-governmental organizationregarding the negotiation of a treaty;

• ex post facto — after the fact, for example, abilateral review of the capacity offered and trafficcarried on an agreed air route (see also a posteriori);

• inter alia — among other things;

• mala fide — bad faith;

• mutatis mutandis — with the necessary changesbeing made, for example, to adapt the terms of amultilateral arrangement clause for use in a bilateralclause;

• per se — as such, by itself;

• prima facie — at first sight, before further examin-ation, for example, an initial interpretation of atreaty based on what it appears to say (that maylater be contradicted and overcome by otherevidence such as the negotiating record);

• status quo — as things are;

• status quo ante — as things were (before someevent); and

• suo moto — in its own way.

The Chicago Conference, held from 1 November to7 December 1944, produced, inter alia, three major agree-ments of significance to the multilateral regulation of inter-national air transport, the most important being theConvention on International Civil Aviation, signed atChicago on 7 December 1944, also known simply as theChicago Convention (Doc 7300), which provides thefundamental legal foundation for the regulation of worldcivil aviation, is the constitution of ICAO, and containsseveral articles which bear on the economic regulation ofinternational air transport including:

• Article 1 on State sovereignty over airspace;

• Article 5 on non-scheduled flight;

• Article 6 on scheduled air services;

• Article 7 on cabotage;

• Article 15 on airport and similar charges;

• Articles 17 to 21 on nationality and registration ofaircraft;

• Article 22 on facilitation;

• Articles 23 and 24 on customs and immigration;

• Articles 37 and 38 in so far as standards andrecommended practices regarding facilitation areconcerned;

• parts of Article 44 on the aims and objectives ofICAO;

• Articles 77 to 79 on joint operating organizations;

• Articles 81 and 83 on the registration of agree-ments; and

• Article 96 on air transport related definitions.

Two amendments to the Chicago Convention, which areof air transport regulatory significance, are Article 83 bis

THE CHICAGO CONFERENCEDOCUMENTS


3.2-4

which allows the transfer of certain functions and dutiesfrom a State of registry of an aircraft to the State of theoperator in case of lease, charter, or interchange, andArticle 3 bis which reconfirms the prohibition against theuse of weapons against civil aircraft in flight andsovereignty over airspace.

The other two Chicago Conference documents ofimportance to the multilateral regulation of international airtransport are:

• the International Air Services Transit Agreement(Doc 7500; also reproduced in Doc 9587), alsoknown as the Two Freedoms Agreement, whichprovides for the multilateral exchange of rights ofoverflight and non-traffic stop for scheduled airservices among its Contracting States; and

• the International Air Transport Agreement (repro-duced in Doc 9587), also known as the Five Free-doms Agreement, which established five freedomsof the air for scheduled international air servicesbut had no provisions on fair competition or for theregulation of capacity or fares and rates and cameinto force for nineteen States, eight of whichsubsequently denounced it.

The Warsaw System, a group of air law documents,governs air carrier liability with regard to passengers andconsignees, and includes:

• the Warsaw Convention,1 which is in force andunified the rules concerning the documents ofcarriage and the liability of air carriers;

• The Hague Protocol,2 which is in force and sub-stantially redrafted, modernized and simplified therules relating to the documents of carriage as wellas doubled the limit of carrier liability (specified inthe Warsaw Convention) with respect to persons;

• the Guadalajara Convention,3 which is in forceand extended the application of the Warsaw Con-vention to the carrier actually performing the

transport by air when a passenger or shipper con-tracted with a charterer or freight forwarder;

• the Guatemala City Protocol,4 which is not yet inforce and would, inter alia, subject the carrier tostrict liability regardless of fault, with respect topersonal injury and damage and destruction or lossof baggage;

• the Additional Protocol No. 1,5 which is in forceand replaces the “gold clause” by the SpecialDrawing Rights (SDR) (i.e. a kind of internationalmoney created by the International Monetary Fund(IMF) to supplement the use of gold and hardcurrencies in settling international payment imbal-ances), without increasing the actual limits of liabil-ity specified in the original Warsaw Convention(gold having been demonetized and no longer beingan objective, reliable and stable yardstick of value);

• the Additional Protocol No. 2,6 which is in forceand replaces the gold clause by the SDR, withoutincreasing the actual limits of liability specified inThe Hague Protocol;

• the Additional Protocol No. 3,7 which is not yet inforce and would also replace the gold clause by theSDR, without increasing the actual limits specifiedin the Guatemala City Protocol; and

• the Montreal Protocol No. 4,8 which is in force andfurther amends the Warsaw Convention as Amendedat The Hague, 1955, in respect of postal items andof cargo, by simplifying cargo documentation, intro-ducing strict liability for cargo, and replacing itscurrency unit by the SDR, without increasing theactual limits of liability (specified in The HagueProtocol).

The so-called Montreal Agreement of 1966, which isnot an international agreement but only an arrangementregarding the liability among the air carriers operatingpassenger transport to, from, or with an agreed stoppingplace in the United States, was adopted by the then-CivilAeronautics Board of the United States on 13 May 1966 andfollowed by a withdrawal of the denunciation of the WarsawConvention by the United States which was to take effect on16 May 1966. By this agreement, the parties thereto havede facto amended the application of the Warsaw Conventionas amended at The Hague (1955) by providing for a limit ofliability for each passenger in the case of death or bodily

THE WARSAW SYSTEM AND THEMONTREAL CONVENTION OF 1999


3.2-5

injury of U.S.$75 000 inclusive of legal fees and costs andU.S.$58 000 exclusive of legal fees and costs.

The Montreal Convention of 19999, which enters intoforce on 4 November 2003, in effect, modernizes andconsolidates all Warsaw System instruments, and prevailsover all Warsaw System instruments, as between two Statesboth Parties to the Convention. As between two States notboth Parties to the Convention, the relevant Warsaw Systeminstruments will remain in effect, if such States are bothParties thereto. This Convention enhances the rights ofclaimants in cases involving the death or injury ofpassengers engaged in international air travel.

The relationships between the conventions and proto-cols comprising the Warsaw System/Montreal Conventionof 1999, as well as the limits of liability for the air carriers,can be seen in Figure 3.2-1. Further information on theWarsaw System and the Montreal Convention may beobtained from the Legal Bureau of ICAO.

Other international air law regulatory documents whichaffect international air transport include:

• the Geneva Convention,10 which is in force andrecognizes various rights in aircraft (property,acquisition, possession, etc.);

• the Rome Convention,11 which is in force andentitles any person who suffers damage on thesurface caused by an aircraft in flight or by anyperson or thing falling from the aircraft to claimjust compensation;

• the Tokyo Convention,12 which is in force andestablishes jurisdiction of the State of registrationof the aircraft over offenses and acts that do or mayendanger the safety of the aircraft in flight or ofpersons or property therein;

• The Hague Convention,13 which is in force andoriginated the concept of universal jurisdiction overunlawful acts of seizure or exercise of control of air-craft in flight (hijacking) and obliges ContractingStates to institute proceedings against such acts;

• the Montreal Convention,14 which is in force andexpands the concept of unlawful acts to offencesagainst aircraft in service, air navigation facilitiesand the safety of civil aviation in general;

• the Protocol Supplementary to the Montreal Con-vention of 1971,15 which is in force and is aimed atsuppressing acts of violence at international airportsthat endanger or are likely to endanger the safety ofpersons or the safe operation of such airports; and

• the Convention on the Marking of Plastic Explo-sives for the Purpose of Detection,16 which is inforce and is intended to prevent unlawful actsagainst aircraft undertaken by the use of plasticexplosives.

Although States have not succeeded in reaching a globallyacceptable multilateral agreement for the exchange of com-mercial air transport rights, certain regional multilateralintergovernmental agreements and arrangements have beendeveloped to regulate specific aspects of international airtransport. They include, in a chronological order:

• the Multilateral Agreement on Commercial Rightsof Non-scheduled Air Services in Europe con-cluded by the European Civil Aviation Conference(ECAC) member States, signed at Paris on30 April 1956, which established a policy that air-craft engaged in non-scheduled commercial flightswithin Europe which do not harm their scheduledservices may be freely admitted;

• the International Agreement on the Procedure forthe Establishment of Tariffs for Scheduled AirServices, signed at Paris on 10 July 1967, whichprovided ECAC member States with uniform princi-ples and procedures regarding tariff establishmentand supported the IATA conference machinery;

• the Multilateral Agreement on Commercial Rightsof Non-scheduled Air Services among the Associ-ation of South-East Asian Nations (ASEAN),signed at Manila on 13 March 1971, which liberal-ized non-scheduled air services within the subregion;

OTHER AIR LAW INSTRUMENTS

REGIONAL MULTILATERALAGREEMENTS


3.2-6

• the International Agreement on the Procedure forthe Establishment of Tariffs for Intra-EuropeanScheduled Air Services by ECAC member States,signed at Paris on 16 June 1987, which provideduniform principles and procedures for the estab-lishment of tariffs and introduced the zone system oftariff regulation;

• the International Agreement on the Sharing ofCapacity on Intra-European Scheduled Air Ser-vices by ECAC States, signed at Paris on16 June 1987, which provided uniform principlesand procedures for the sharing of capacity on intra-European scheduled services and introduced azonal scheme of capacity sharing;

• the Yamoussoukro Declaration on a New AfricanAir Transport Policy, signed by the ministers forcivil aviation of African States in October 1988 andrevised in September 1994, which established aprogramme for the integration of African airlinesand guidelines for cooperation in the air transportfield among States in Africa;

• Decision 297 of the Commission on the CartagenaAccord to implement the Act of Caracas, signed inMay 1991 and approved by the presidents of the fiveAndean Pact countries (Bolivia, Colombia, Ecuador,Peru and Venezuela), which established an “openskies” air transport arrangement for this subregion;

• the Multilateral Agreement Concerning theOperation of Air Services within the CaribbeanCommunity (CARICOM), commonly called theCARICOM Multilateral Air Services Agreement(MASA), which was concluded on 6 July 1996 by11 of its 14 member States and entered into force inNovember 1998;

• the Fortaleza Agreement, signed on 17 December1996, which liberalized intra-regional air servicesover routes not under bilateral agreements amongthe four MERCOSUR States and their two associatemember States;

• the Banjul Accord for an Accelerated Implementa-tion of the Yamoussoukro Declaration, commonlycalled the Banjul Accord, signed by Ghana,Gambia, Guinea, Nigeria and Cape Verde, in 1997,which liberalized air services between each State;

• the Agreement Among Directors General of CivilAviation of the Kingdom of Cambodia, the LaoPeople’s Democratic Republic, the Union ofMyanmar, and the Socialist Republic of Viet Namon the Establishment of Subregional Air Trans-port Cooperation, commonly called the CLMVAgreement, concluded 15 January 1998, byCambodia, Lao People’s Democratic Republic,Myanmar and Viet Nam, which established a sub-regional cooperation regime aimed at achieving airtransport liberalization;

• the COMESA Agreement among the 21 memberStates of the Common Market for Eastern andSouthern Africa (COMESA), which moved them in1999 from the full liberalization of cargo servicesin the first phase of their air services liberalizationprogramme to the second phase of liberalizationinvolving passenger service;

• a phased programme for the liberalization of airservices between members of the Arab Civil Avi-ation Commission (ACAC), which was finalized in2000 and envisages full liberalization of air servicesamongst member States by 2005;

• the Multilateral Agreement on the Liberalizationof International Air Transportation, also known asthe Kona Agreement, signed on 1 May 2001 byBrunei Darussalam, Chile, New Zealand, Singaporeand the United States, which is a plurilateral openskies arrangement among the signatory parties andwhich is open for accession by any APEC membersas well as other States (Peru and Samoasubsequently adhered to the Agreement); and

• the Protocol to the Multilateral Agreement on theLiberalization of International Air Transportation,signed on 1 May 2001 by Brunei Darussalam, NewZealand and Singapore, which provides for theexchange of cabotage and so-called “SeventhFreedom” rights;

• a Multilateral Air Services Agreement for Liberal-ization among States of the Pacific IslandsForum, endorsed in August 2003 by the Leaders ofthe Forum States, which provides for phased liber-alization of air services among Parties to theAgreement and is open for conditional accession byother non-member States.


3.2-7

Figure 3.2-1. The Warsaw system, the Montreal Convention of 1999, and the limits of carrier liability

WARSAW CONVENTION1929

per passenger 125 000 PF

hand carrygoods (per kg)

5 000 PF250 PF


MONTREAL CONVENTION1999

Two-tier liability regime for proven damage at or below100 000 SDR and over 100 000 SDR

THE HAGUE PROTOCOL1955

per passenger 250,000 PF


5 000 PF250 PF

GUATEMALA CITYPROTOCOL 1971

per passengerpassenger delayhand carrygoods (per kg)

1 500 000 PF62 500 PF15 000 PF

250 PF

ADDITIONAL PROTOCOLNO. 1 1975

per passenger 8 300 SDR

332 SDR17 SDR


per passenger 16 600 SDR


per passengerpassenger delayhand carrygoods (per kg)

100 000 SDR4 150 SDR1 000 SDR

17 SDR

GUADALAJARACONVENTION 1961

Provisions regarding actual carriers(chartereers or freight forwarders)


per passenger (per kg) 17 SDR

MONTREAL AGREEMENTOF 1966

per passenger U.S.$ 75 000

KEYS:

PF = Poincaré FrancsSDR = Special Drawing Rights

= Air law instrument not in force

= Not an international agreement but an arrangement among carriers

= Air law instrument in force

= De facto amendment

= Replacement (as between its Parties)

= Amendment


3.2-8

NOTES

1. Convention for the Unification of Certain Rules Relatingto International Carriage by Air signed at Warsaw on12 October 1929.

2. Protocol to Amend the Convention for the Unification ofCertain Rules Relating to International Carriage by Air Signedat Warsaw on 12 October 1929, signed at The Hague on28 September 1955 (Doc 7632).

3. Convention, Supplementary to the Warsaw Convention, forthe Unification of Certain Rules Relating to InternationalCarriage by Air Performed by a Person Other than the Con-tracting Carrier, signed at Guadalajara on 18 September 1961(Doc 8181).

4. Protocol to Amend the Convention for the Unification ofCertain Rules Relating to International Carriage by Air Signedat Warsaw on 12 October 1929 as Amended by the ProtocolDone at The Hague on 28 September 1955, signed atGuatemala City on 8 March 1971 (Doc 8932).

5. Additional Protocol No. 1 to Amend the Convention for theUnification of Certain Rules Relating to InternationalCarriage by Air Signed at Warsaw on 12 October 1929, signedat Montreal on 25 September 1975 (Doc 9145).

6. Additional Protocol No. 2 to Amend the Convention for theUnification of Certain Rules Relating to International Carriageby Air Signed at Warsaw on 12 October 1929 as Amended bythe Protocol Done at The Hague on 28 September 1955, signedat Montreal on 25 September 1975 (Doc 9146).

7. Additional Protocol No. 3 to Amend the Convention for theUnification of Certain Rules Relating to International Carriageby Air Signed at Warsaw on 12 October 1929 as Amended bythe Protocols Done at The Hague on 28 September 1955 and atGuatemala City on 8 March 1971, signed at Montreal on25 September 1975 (Doc 9147).

8. Montreal Protocol No. 4 to Amend the Convention for theUnification of Certain Rules Relating to International Carriageby Air Signed at Warsaw on 12 October 1929 as Amended bythe Protocol Done at The Hague on 28 September 1955, signedat Montreal on 25 September 1975 (Doc 9148).

9. Convention for the Unification of Certain Rules for Inter-national Carriage by Air, done at Montreal on 28 May 1999(Doc 9740).

10. Convention on the International Recognition of Rights inAircraft, signed at Geneva on 19 June 1948 (Doc 7620).

11. Convention on Damage Caused by Foreign Aircraft to ThirdParties on the Surface, signed at Rome on 7 October 1952(Doc 7364).

12. Convention on Offences and Certain Other Acts Committedon Board Aircraft, signed at Tokyo on 14 September 1963(Doc 8364).

13. Convention for the Suppression of Unlawful Seizure ofAircraft, signed at The Hague on 16 December 1970(Doc 8920).

14. Convention for the Suppression of Unlawful Acts against theSafety of Civil Aviation, signed at Montreal on23 September 1971 (Doc 8966).

15. Protocol for the Suppression of Unlawful Acts of Violence atAirports Serving International Civil Aviation, Supplementaryto the Convention for the Suppression of Unlawful Actsagainst the Safety of Civil Aviation, Done at Montreal on23 September 1971, signed at Montreal on 24 February 1988(Doc 9518).

16. Convention on the Marking of Plastic Explosives for thePurpose of Detection, done at Montreal on 1 March 1991(Doc 9571).

3.3-1

Chapter 3.3

KEY ISSUES OFMULTILATERAL REGULATORYPROCESS AND STRUCTURE

The key issues of multilateral regulatory process andstructure are long-standing ones which focus on whether toseek, and how to achieve, a viable multilateral agreement oragreements (either worldwide or trans-regional) to supplantor supplement bilateral air transport agreements. (Theseissues are distinct from those of regulatory arrangementswithin regional economic communities of States whosememberships are limited geographically and whose internalstructures and processes regulate other activities in additionto air transport.) ICAO Assembly Resolution A33-19 (inforce) states that “... multilateralism in commercial rights tothe greatest possible extent continues to be an objective ofthe Organization.”

The first section of this chapter presents arguments forand against seeking multilateral air transport regulation.The next section explores possible negotiating processesthat might be used to seek a multilateral agreement. Thethird section identifies likely generic structural elements ofsuch an agreement. A final section discusses the GeneralAgreement on Trade in Services and its Air TransportAnnex, an attempt at multilateral regulation outside anytraditional framework.

The arguments favouring and those opposing multilateralinternational air transport regulation both focus upon itsadaptation to broader economic phenomena, and its relativeefficiency compared to bilateralism.

The favouring arguments related to adaptation to broadereconomic phenomena include:

• that air transport is a service industry increasinglyaffected by the same forces changing other serviceindustries (i.e. the privatization of, and foreignequity holdings in, national companies; inter-company alliances aimed at global market access;and regulatory liberalization), yet it remains separ-ately and differently regulated from such otherservice industries in ways which retard the airtransport industry’s growth;

• that air transport does not require distinctive regu-lation because, having developed, it is no longer an“infant” or entirely “special” industry;

• that the bilateral bartering process tends to reducethe opportunities available to the level consideredacceptable by the least competitive and mostrestrictive party, thus bilateral air agreements areincreasingly seen by entrepreneurial airline man-agements as imposing unacceptable restrictions onindustry development;

• that air transport users, airports and airlines deserveto be freed from the constraints of bilateral airtransport regulation (which can sometimes hamperthe development of tourism and trade); and

• that such freedom can best be achieved by multi-lateralism, which can aggregate gains and offsetconstraints more easily than could a series ofbilateral agreements and thus is gaining increasedrecognition as a better vehicle than bilateralism forachieving widespread liberalization.

The favouring arguments which focus on relativeefficiency maintain that multilateralism could:

WHY THE MULTILATERALAPPROACH?


3.3-2

• rapidly create many new bilateral air servicerelationships within a single multilateral frameworkas each new party joined the multilateral arrange-ment without having to negotiate bilaterally withexisting parties to the agreement;

• thus end the waste of time and the expense ofnegotiating and renegotiating a large number ofbilateral air agreements, a process which strains thedevelopment of the air transport system;

• achieve more objective results (in particular asregards market access) than numerous bilateralnegotiations because the outcome of bilateral nego-tiations can be affected by the subjective circum-stances of differing negotiating capabilities andbargaining leverage of the parties;

• end incompatibilities in market access conditionswhich now complicate or preclude various multi-stop route operations; and

• further promote increased standardization ofnumerous regulatory arrangements included inbilateral air service agreements (on matters such ascustoms exemptions, aviation security, and currencyconversion and remittance).

The opposing arguments related to adaptation to broadereconomic phenomena include:

• that multilateral air transport agreements are notneeded because bilateralism has been used success-fully to achieve the liberalization of air servicesbetween partner States wishing to liberalize;

• that advocates of multilateralism are mistaken inbelieving that because it is likely to be very difficultunder a multilateral agreement to limit access toindividual bilateral markets (for example, in orderto seek some balance of benefits), such limitationswould necessarily be excluded;

• that if a liberal multilateral air transport agreementis achieved with few limitations it would mostlikely favour large and well-established airlines,advancing their interests against those of airlines ofthe developing countries (which may not be suf-ficiently helped to ensure their continued inter-national presence), thus threatening the continuingaccess of such countries to adequate air services;and

• that apart from the concerns it raises, multilat-eralism is simply not feasible in the foreseeablefuture in the absence of a broader consensus.

The opposing arguments related to relative efficiencymaintain that multilateralism:

• inherently tends toward a “least common denomi-nator” result which could reduce the scope andeffectiveness of any agreement;

• is less flexible because a revision to a multilateralagreement is much more difficult to achieve thanthat to a bilateral agreement (it requires not two, butnumerous parties to be motivated to bring it about);

• prevents States from tailoring each regulatoryarrangement to individual bilateral situations; and

• lessens the ability of a State to protect a national aircarrier or carriers by use of ad hoc and micro-levelbilateral controls.

The supporters of continued bilateralism also tend topoint out that international air traffic has grown at a pro-digious rate under bilateralism and that bilateralism has notinhibited technological and marketing innovations such asthe introduction of jet aircraft and computer reservationsystems.

Whether or not to pursue, or to support the pursuit of,some kind of multilateral air transport agreement entailsweighing the above (and possibly other) arguments (notingthat some on both sides are conjectural) in conjunction withan exploration of the possible multilateral processes and thelikely structural components involved.

The traditional and other processes that might be used in anattempt to reach some new multilateral agreement(s) orarrangement(s) to regulate international air transport include:

• a worldwide diplomatic conference to negotiate anddraft a multilateral agreement; or

• a conference of “like-minded” States at which amultilateral agreement, presumably one open to

POSSIBLE PROCESSESIN THE QUEST FOR A

NEW MULTILATERALISM

Part 3 — Multilateral RegulationChapter 3.3 — Key Issues of Multilateral Regulatory Process and Structure 3.3

3.3-3

accession by non-participating States, would benegotiated and drafted by participating parties; or

• a State-to-regional body or a regional body-to-regional body negotiation to produce an agreementbetween them designed to be open to accession bythird parties; or

• a negotiation and drafting of some form of compre-hensive multilateral air transport agreement undernon-air transport (presumably trade) auspices.

Each of these possible processes presents difficult andas yet unresolved problems:

• successful worldwide diplomatic conferences requiresome broad advance consensus on the goals to besought and the means to achieve them, a consensusnot yet evident in this field;

• a “like-mindedness” sufficient to bring together anysubstantial number of States from different regionsof the world to seek a new agreement has yet to bedemonstrated (given the disparity of national con-ditions and the need for each State to act in itsnational interest, an interest which is rarely if everidentical to that of any other State);

• a process by which a regional body can formulatea common negotiating position and carry out, as aunit, a bilateral negotiation with a second party, canbe a very difficult one to establish and can tend toraise legitimate concerns among smaller States anduninvited or otherwise non-participating parties thattheir interests could be prejudiced; and

• a non-air transport forum (the Group of Negotia-tions on Services under GATT auspices) explored abroad multilateral agreement to include air trans-port market access rights but failed to find morethan minimal support largely due to proposedmandatory (but not necessarily reciprocal) most-favoured nation treatment.

Some preliminary process of very detailed analysis anddesign (at an expert level) of the essential elements of acomprehensive multilateral regulatory structure, carried outover a period of time longer than typically devoted to aconference, could conceivably develop certain potentiallyviable regulatory arrangements. If such arrangements wereto have sufficient tentative acceptability, they could bringabout a consensus sufficient to begin one or more of theabove negotiating and drafting processes.

The structure of a new multilateral arrangement couldtheoretically be that of a traditional multilateral treaty: itwould enter into effect only when a predetermined numberof instruments of ratification, acceptance or approval by theStates that negotiated the agreement were deposited; it couldbe amended only by approval of a pre-agreed number ofparties; it could provide for limited reservations and foraccessions by other States; etc. Alternatively, the structurecould: take a non-traditional form; enter into effect (betweenconsenting parties) when as few as two instruments ofratification, acceptance or approval were deposited; haveflexibility sufficient to minimize the need for amendments;provide for the application of amendments as accepted byeach party; provide for accessions by other States; etc.

The principal objective of such an agreement presum-ably would be liberalization; however, it could haveadditional objectives such as increasing the participation ofdeveloping countries and achieving greater regulatoryefficiency. The agreement could be oriented towardsimmediate liberalization, towards progressive liberalizationor possibly to accommodate both liberalization and someaspects of more traditional regulation. It could be designedwith consideration of the needs of air transport users andworkers, of airports and their communities, and of tourismand trade interests as well as those of airlines and theirregulators.

A question fundamental to the design of the new agree-ment would be whether it would replace existing bilateralarrangements or complement them. If the multilateralagreement were to complement bilateral agreements, thequestion would arise of how such a hybrid regime wouldwork.

A multilateral agreement could:

• include both scheduled and non-scheduled airservices between the parties;

• cover only scheduled or only non-scheduled airservices between the parties;

• cover only certain traffic, initially or long term, i.e.only passengers or only freight and mail, or couldcover both;

THE LIKELY GENERICSTRUCTURAL ELEMENTS OF A

NEW MULTILATERALAIR TRANSPORT AGREEMENT


3.3-4

• include market access (route, traffic and operationalrights) possibly subject to further bilateral under-standing, but not necessarily access to all markets(e.g. the drafters might exclude so-called SeventhFreedom and exclude or limit cabotage rights); and

• very likely would include some regulatory arrange-ments specifically for use by a party when and ifever needed to respond to actions deemed contraryto the aims and terms of the agreement.

In addition to requiring much innovative work in orderto express, in a multilateral context, some kind and level of(presumably liberalized) regulation of the principal mattersof bilateral concern (chiefly market access rights, capacity,tariffs and commercial considerations), a new multilateralstructure may possibly:

• employ or adapt the language used in the ICAOtemplate air services agreement (TASA, containedin Doc 9587);

• employ or adapt some or many elements of multilat-eral agreements that are in effect (e.g. the KonaAgreement) or proposed (such as the model Multi-lateral Agreement for the Liberalization of AirCargo Services developed by the OECD Secretariat);

• employ, and perhaps adaptively improve upon,some concepts and approaches used, or proposed tobe used, in trade agreements (as explained in thefollowing section of this chapter);

• introduce new dispute resolution approaches nottraditionally found in bilateral air transportagreements; and

• include provisions for the possible collectiveconsent by States acting as a regional unit.

The General Agreement on Trade in Services (GATS), pro-duced by the Group of Negotiations on Services (GNS) (agroup of Contracting Parties set up by the GATT for thispurpose during the Uruguay Round), entered into effect on1 January 1995 and applies various trade principles andpractices to certain services including, in an Annex, certain

air transport services, a departure from their traditionalframeworks for regulation. At this writing, the GATS Annexon Air Transport Services excludes traffic rights, howevergranted, and services directly related to the exercise oftraffic rights, with exceptions for three soft rights:

1) aircraft repair and maintenance services, meaningsuch activities when undertaken on an aircraft or apart thereof while it is withdrawn from service; theseactivities do not include so-called line maintenance;

2) selling and marketing of air transport services,meaning opportunities for the air carrier concernedto sell and market freely its air transport servicesincluding all aspects of marketing such as marketresearch, advertising and distribution; these activi-ties do not include the pricing of air transportservices nor the applicable conditions; and

3) computer reservation system (CRS) services, mean-ing services provided by computerized systems thatcontain information about air carriers’ schedules,availability, fares and fare rules, and through whichreservations can be made or tickets may be issued.

The Annex further provides that the dispute settlementprocedures of the Agreement may be invoked only whereobligations or commitments have been assumed by the par-ties concerned and where dispute settlement procedures inbilateral and other multilateral arrangements have beenexhausted. It also confirms that any specific commitment orobligation assumed under the Agreement will not reduce oraffect a party’s obligations under bilateral or multilateralagreements that are in effect at the entry into force of theAgreement establishing the World Trade Organization (seeChapter 3.7). It also requires the Council on Trade in Ser-vices to “review periodically, and at least every five years,developments in the air transport sector and the operationof the Annex with a view to considering the possible fur-ther application of the Agreement in this sector.” (The firstreview of the Annex began in 2000.)

The GATS itself, under which the Annex on Air Trans-port Services functions, identifies four modes of supply ordifferent ways services can be supplied in markets that areforeign to the supplier, namely:

• cross-border, i.e. the supply of a service from theterritory of one Party to the territory of anotherParty (such as international flights or telephonecalls). This does not require the supplier of the firstParty to be admitted to the territory of the secondParty, only the service itself crosses national borders;

THE GENERAL AGREEMENT ONTRADE IN SERVICES (GATS) AND

ITS AIR TRANSPORT ANNEX

Part 3 — Multilateral RegulationChapter 3.3 — Key Issues of Multilateral Regulatory Process and Structure 3.3

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• consumption abroad, i.e. the supply of a service inthe territory of one Party to the service consumer ofany other Party. Typically this involves the con-sumer travelling to the supplying country, forexample, for tourism or study. Repair of aircraftoutside its home country is another example;

• commercial presence, i.e. the supply of a servicethrough the commercial presence of the foreignsupplier in the territory of another Party (e.g. anairline ticket office, a subsidiary or branch office todeliver such services as banking or legal advice);and

• presence of a natural person, i.e. the supply of aservice through the presence of foreign nationals orindividuals in the territory of another Party (e.g. alawyer, doctor, architect).

The focus of the GATS is on liberalization. There arethree GATS core liberalization principles, those of:

• market access or specification of the levels ofaccess to be granted other parties through the fourmodes of supply;

• national treatment, i.e. treatment of foreign servicesand suppliers of services no less favourable thanthat accorded a party’s own services and servicesuppliers; and

• most-favoured nation (MFN) treatment, i.e. non-discrimination, the provision of treatment to allparties no less favourable than that accorded to anyparty.

There is an important distinction between theseprinciples. Market access and national treatment arespecific principles under the GATS, i.e. principles whicheach individual party can choose to apply or not apply toany particular service or aspect thereof under conditionsand limitations contained in its specific commitment forthat service. In contrast, MFN is a GATS general obliga-tion, i.e. one applicable unconditionally to all services,including those for which a party has made no specificcommitment to market access or national treatment.

However, parties may make an exception to MFN forspecific services by including that service in their exemp-tion list. Thus, a party can vary the degree of its liberaliz-ation of a specific service by (1) filing an exemption fromMFN for that service or (2) making specific commitments

for market access and national treatment, including anyconditions and limitations. This can result in variations inthe obligations of different parties with respect to the sameservice, a circumstance that critics charge results in freeriders, parties which enjoy liberalized access with regard tosupplying a specific service in the territories of otherparties without having to provide the same degree of liber-alized access for that service in their own markets. Inresponse, those taking a broader view point out that liber-alization with respect to other services by parties which arefree riders tends to mitigate a lack of liberalization for aparticular service with respect to certain parties. They alsocontend that, over time, progressive liberalization throughfuture negotiations will result in the removal of MFNexemptions and additional specific commitments to marketaccess and national treatment, making the free-riderphenomenon less frequent.

Other general obligations in the GATS include those of:

• transparency, a requirement for prompt publicationof all relevant rules and regulations, administrativeguidelines and all other decisions, rulings, ormeasures of general application which pertain to oraffect the operation of the Agreement (except forcertain confidential information the disclosure ofwhich would impede law enforcement, or otherwisebe contrary to the public interest, or which wouldprejudice the legitimate commercial interests ofparticular enterprises);

• increasing participation of developing countries,to be achieved by improving their access to tech-nology, distribution channels and information net-works; by the liberalization of market access insectors, and modes of supply, of export interest tothem; and by taking particular account of theserious difficulty of the least-developed countries inaccepting negotiated commitments;

• not preventing (under certain circumstances)signatories from being a party to or entering intoeconomic integration agreements which liberalizetrade in services;

• ensuring that all measures of general applicationwith respect to domestic regulation affecting tradein services, in sectors or subsectors where specificcommitments are undertaken, are administered in areasonable, objective and impartial manner;

• according recognition to licences or certificationgranted, or to education or experience obtained or


3.3-6

requirements met, in a particular country, withoutdiscrimination between countries in the applicationof its standards or criteria for the authorization,licensing or certification of service providers;

• ensuring that monopoly service providers in itsterritory comply with MFN and specific commit-ments on market access and national treatment; and

• not applying restrictions on international transfersand payments for current transactions relating tospecific commitments under the GATS, except forrestrictions to respond to serious balance-of-payments difficulties (which must be applied in anon-discriminatory manner to all parties).

A trade negotiation procedure in the GATS of possibleuse in a broad multilateral or plurilateral air transport

agreement is that of offers and requests, a procedure inwhich each party lists the services it is prepared to liberal-ize and those it wishes other parties to liberalize. Bilateralor multilateral parties modify their lists in terms of offers tosecure from other parties liberalization of services whichthey have requested. The expansion of the offers lists of allparties reduces the lists of requests until parties are nolonger prepared to make further changes in their list ofoffers.

Applying the basic GATS principle of MFN to trafficrights remains a complex and difficult issue. While there issome support to extend the GATS Annex on Air TransportServices to include some soft rights as well as some aspectsof hard rights, there is no global consensus on whether orhow this would be pursued. Whether the GATS is aneffective option for air transport liberalization remains inquestion.

3.4-1

Chapter 3.4

INTERNATIONAL CIVILAVIATION ORGANIZATION (ICAO)

The International Civil Aviation Organization (ICAO) isthe worldwide intergovernmental organization created bythe Convention on International Civil Aviation signed atChicago on 7 December 1944 to promote the safe andorderly development of international civil aviation through-out the world (website: www.icao.int). A specialized agencyof the United Nations, it sets international standards andregulations necessary for safe, regular, efficient andeconomical air transport and serves as the medium forcooperation in all fields of civil aviation among its188 Contracting States (as of August 2003).

As with most intergovernmental organizations, policy isdeveloped in multinational meetings of various kinds. Thischapter deals only with those aspects relating to economicregulation. The first section identifies the various bodies ofICAO which, in their meetings, develop policy includingthat regarding the regulation of international air transport. Italso explains how these bodies are organized (structure)and carry out their work (process).

Policy development typically requires a significant vol-ume of preliminary research and analysis, the support ofmeetings of policy development bodies, and consequentimplementation and monitoring of the decisions taken. Themany related tasks involved for the Organization are largelyundertaken by the ICAO Secretariat, a permanent organiz-ational structure with staff recruited from the ContractingStates of ICAO. The next section of this chapter identifiesthose parts of this structure which are involved in inter-national air transport matters and describes their principalactivities.

The activities of both the policy development bodiesand the ICAO Secretariat produce policy, guidance andinformation for Contracting States. The final section of thischapter identifies the principal output of both the policydevelopment bodies and the Secretariat which are related tointernational air transport regulation.

The Assembly of Contracting States, the sovereign body ofthe Organization, is convened by the ICAO Council onceevery three years. An extraordinary session may be calledat any time by the Council or at the request of not less thanone-fifth of the ICAO Contracting States.

The work of each Assembly is carried out by accrediteddelegations from the ICAO Contracting States. Each Con-tracting State has one vote in the Assembly and in its sub-sidiary bodies. The accredited persons register as delegates,alternates or advisers, with one person on each delegationbeing designated as the Chief Delegate. Observers frominvited non-Contracting States and international organiz-ations may participate in the deliberation in open sessions,without votes. Communications media representatives andthe general public may also attend open meetings.Documentation used at an Assembly is provided in English,Arabic, Chinese, French, Russian and Spanish. Simul-taneous interpretation is provided for these languages aswell.

Each Assembly is opened by the President of theCouncil and meets in plenary sessions to: elect a presidentand various vice-presidents from among Contracting Statedelegations, adopt an agenda, establish various committeesand commissions and elect their chairpersons, elect States tobe Council members, review the work of the committees andcommissions, and adopt resolutions to establish policy aswell as a budget and work programme for the forthcomingtriennium.

The Economic Commission is the subsidiary bodywhich is generally established at each ordinary Session ofthe Assembly for discussion and resolution of economicissues (including those affecting regulation) in the field ofinternational air transport. The Economic Commission

POLICY DEVELOPMENT BODIES


3.4-2

examines all matters referred to it, usually on the basis ofworking papers submitted by Contracting States, the Coun-cil, the Secretariat, or accredited observers, and submitsreports on its work for consideration at plenary meetings ofthe Assembly.

The Council is the permanent governing body of ICAOresponsible to the Assembly, composed of 36 ContractingStates elected by the Assembly for a three-year term. Itusually convenes for three sessions per year. The Councilelects its President for a term of three years and three Vice-Presidents for a one-year term. The Secretary General ofICAO serves as the Secretary of the Council. Any Contract-ing State may participate, without a vote, in the consider-ation by the Council of any question which especiallyaffects its interests.

The Council submits annual reports to the Assembly,carries out the directives of the Assembly, and dischargesits duties and obligations as laid down in the Convention.In the air transport field, the Council implements relevantresolutions of the Assembly, adopts policy by Councilresolutions and decides the tasks and priorities for theICAO air transport work programme.

The Air Transport Committee is the standing subsidi-ary body of the Council which deals with air transportmatters. The Committee is composed of representatives ofthe Council Member States who are appointed by the Coun-cil and act in their individual capacities. Its duties andobligations are defined by the Council pursuant to the Con-vention. The Committee elects its Chairperson and Vice-Chairpersons for a one-year term. The Director of the AirTransport Bureau of the Secretariat is the Secretary of theAir Transport Committee. Its meetings are frequentlyattended by the President of the Council and the SecretaryGeneral.

The Committee has three groups of meetings each yearduring the Committee phase of each Council session,typically a period of several weeks preceding the Councilphase. Any Contracting State may participate, without avote, in the consideration by the Committee of any questionwhich especially affects its interests.

The work programme of the Committee for eachsession is decided by the Council. The Committee exam-ines working papers and reports on its work to the Councilwhenever relevant. From time to time, the Committee alsoexamines proposed changes to international standards andrecommended practices in Annex 9 — Facilitation — tothe Convention.

As the Committee is responsible to the Council, its roleis essentially a recommendatory one. It serves as a soundingboard for items on which a Council decision is necessary byallowing a free exchange of the personal viewpoints ofmembers and detailed discussion of items.

Apart from diplomatic conferences and meetings of theICAO bodies concerned with policy development in the airtransport field, special worldwide meetings are convened,from time to time, by ICAO for the same purpose, at whicheach Contracting State can be represented.

An air transport conference is a special worldwidemeeting held to discuss regulatory issues in the air trans-port field. (While it is at the same level as an air navigationconference, it does not share the same broad scope, since itdoes not encompass all air transport matters.)

A divisional session is a special worldwide meetingconvened for the purpose of discussing issues in a specificarea in the air transport field such as statistics orfacilitation.

The agenda of a conference is normally approved bythe Council and that of a divisional session by the AirTransport Committee. A special worldwide meeting mayestablish such committees, subcommittees and workinggroups as it may consider to be necessary or desirable. TheChairperson of a special worldwide meeting submits areport to the Council.

A panel is a group of qualified experts established toadvance, within specified time frames or on a standingbasis, the resolution of special problems which cannot besolved adequately or expeditiously by established ICAObodies or the Secretariat. The deliberations and conclusionsof a panel focus on the resolution of technical problems andare advisory in nature. When a panel is being formed, allContracting States are invited to nominate members.Between 12 and 15 persons are typically chosen fromamong the nominees to be panel members.

In the air transport field, a panel may be established bythe Council or by the Air Transport Committee (as were theAirport Economics Panel, the Panel on Air NavigationServices Economics and the Air Transport RegulationPanel).

When a panel is established, its terms of reference andwork programme are set in order to define clearly and con-cisely the nature and scope of the work assigned to thepanel, and to specify the objectives sought. A panel elects

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3.4-3

its Chairperson and Vice-Chairpersons for each meetingand conducts its work in the ICAO working languagesrequired by the participants. A Secretariat official serves assecretary of the panel. The Chairperson transmits the reportof each panel meeting to the Air Transport Committee,which usually considers the report in conjunction with aSecretariat paper regarding action on the conclusions orrecommendations reached.

A Secretariat study group is a less formal groupappointed by the Secretary General to provide the Sec-retariat with outside assistance and expertise in carryingout a particular task (e.g. the Study Group on ComputerReservation Systems (CRS) established in 1987 to assist theSecretariat in undertaking studies relating to computerreservation systems). A study group differs from a panel inseveral respects: its function is to advise the Secretariat; aSecretariat official leads the discussion of a study group;meetings are usually conducted in a single language; andstudy group reports are submitted by the appointedSecretariat official.

The Air Transport Bureau of the ICAO Secretariat isresponsible for the air transport programme of the Organ-ization and aviation security and provides expertise andassistance on air transport matters to the various bodiesand meetings of ICAO. More specifically, it is responsiblefor:

• the provision of expert assistance required by theAssembly, Council, Air Transport Committee, JointSupport Committee, Committee on Unlawful Inter-ference and the specialized divisional, conference,panel, working and study group meetings that maybe convened in the air transport field;

• the maintenance and amendment of the air transportand joint support work programmes, preparation ofstudies and documentation and the formulation ofrecommendations on these programmes for con-sideration, as appropriate, by the Air TransportCommittee, Committee on Unlawful Interference orJoint Support Committee;

• the preparation of statistical digests and otherstatistical publications;

• the preparation and revision of manuals on aviationsecurity, regulation of air transport services, airportand air navigation facility tariffs, route air navi-gation facility economics, airport economics, theICAO statistical programme, and air traffic fore-casting; preparation of documentation and meetingreports in the economic regulatory, statistical,aviation security, facilitation and joint financingfields; and preparation of annual publications ofThe World of Civil Aviation and Chapter I of theAnnual Report of the Council which provide aworldwide survey of international civil aviation;

• the planning of periodic air transport meetings andthe preparation of the agenda and supportingdocumentation; preparation, for publication, ofapproved amendments to Annex 9 — Facilitationand Annex 17 — Security, and the compilation andpromulgation of lists of differences to theseAnnexes which are notified by Contracting States;provision of advice and assistance to States onimplementation of these Annexes;

• the coordination of environment-related activities,both within the Secretariat and with other inter-national organizations; and

• the coordination of the work of the regional civilaviation organizations with ICAO air transportprogrammes; and liaison and cooperation with inter-national and regional organizations on air transportmatters.

The Bureau also provides technical support andassistance to other Bureaux of the Organization and con-tributes to the Organization’s work in multi-disciplinaryareas such as environmental matters and the implemen-tation of communications, navigation and surveillance/airtraffic management (CNS/ATM) systems. The Director ofthe Air Transport Bureau serves as the Secretary to the AirTransport Committee.

Outside of ICAO’s Montréal Headquarters, Air Trans-port Regional Officers are stationed at ICAO RegionalOffices in Bangkok, Cairo, Dakar, Lima and Nairobi toprovide assistance and expertise to the Contracting States towhich each office is accredited and to the regional civilaviation bodies based in Dakar and Lima. They regularlyattend meetings and conferences involving air transport aswell as make periodic visits to Contracting States in theirregions. They also provide liaison between ICAO Head-quarters and those States on air transport matters.

AIR TRANSPORT BUREAU


3.4-4

ICAO provides Contracting States with various publishedstatements of its policy on international air transportregulatory matters, as developed or endorsed by theAssembly or the Council, as well as guidance materials andinformation developed by ICAO bodies or the Secretariat.

The ICAO publication entitled Policy and GuidanceMaterial on the Economic Regulation of InternationalAir Transport (Doc 9587) is a comprehensive reproductionof the conclusions, decisions and guidance material pro-duced by ICAO on air transport which have received theendorsement of either the Assembly or the Council and areaddressed to States or which directly impinge on the con-duct by States of their air transport activities, and ofAssembly Resolutions which are directed to ICAO as wellas to States.

In addition to the present manual (Doc 9626), otherrelevant ICAO guidance material includes:

• ICAO’s Policies on Taxation in the Field ofInternational Air Transport (Doc 8632), whichcontains the consolidated Council Resolution ontaxation of international air transport, and anassociated commentary;

• Statements by the Council, such as ICAO’s Policieson Charges for Airports and Air Navigation Ser-vices (Doc 9082), setting forth its recommendationsand conclusions on these topics;

• definitions, such as the definition of a scheduledinternational air service (in Doc 9587) which, withnotes on its application, provides guidance toContracting States on the interpretation and appli-cation of the provisions of Articles 5 and 6 of theConvention;

• model clauses, such as those on capacity and tariffregulation found in Doc 9587;

• digests of information, such as the Digest ofBilateral Air Transport Agreements (Doc 9511), areference guide to the main provisions of existingbilateral agreements which Contracting Statesconcluded or amended and filed with ICAO. Adatabase of existing bilateral agreements is beingprepared for release in CD ROM format;

• manuals, such as this manual and the Manual on theICAO Statistics Programme (Doc 9060), which is aguide for reporting and using ICAO civil aviationstatistics, the Manual on Air Traffic Forecasting(Doc 8991), which sets forth forecasting methodsand case studies for civil aviation forecasters, theManual on Air Navigation Services Economics(Doc 9161), which provides guidance material toassist those responsible for the management of airnavigation services and the Airport EconomicsManual (Doc 9562), which provides guidance tothose responsible for airport management;

• studies, such as study on aircraft leasing and on theRegulatory Implications of the Allocation of FlightDeparture and Arrival Slots at InternationalAirports (Cir 283); and

• State Letters, for the timely dissemination ofinformation on particular topics, such as reports ondevelopments in trade in services.

From time to time, articles on air transport regulatorytopics are presented in the ICAO Journal, a monthly maga-zine which gives a concise account of ICAO activities andfeatures additional information of interest to ContractingStates and to the international aeronautical world.

Each item of ICAO policy, guidance and informationmaterial is usually disseminated in one of three types ofICAO publications: document, circular or digest.

An ICAO document is the publication type used formaterial considered to have a permanent character orspecial importance to all Contracting States, such as:

• resolutions, decisions and recommendations for-mally adopted by the Assembly or the Council, textsapproved by the Council, and the minutes of theand of the Council;

• Council Statements on policy relating to airtransport questions;

• reports of meetings such as worldwide conferencesand divisional sessions convened by the Council orby the Air Transport Committee; and

• guidance and information on international airtransport.

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3.4-5

An ICAO circular is the publication type used todisseminate specialized information of interest toContracting States.

An ICAO digest of statistics is the publication type usedwhen considerable quantitative information is involved.

In addition, an ICAO State Letter (which is not pub-lished as a saleable ICAO document) is used to conveyinformation on specific topics in a timely manner and oftencontains a request for a response or action by States.

Apart from the dissemination of printed materials anddistinct from the policy development bodies identifiedearlier, ICAO regional workshops are used to informpersons in national administrations or related autonomousagencies about relevant ICAO policies, advice and

information and to provide an opportunity to informallyexchange information and views.

ICAO Regional Workshops on Air Transport Regulat-ory Policy focus on current air transport regulatory issues,including international air transport regulation at thenational, bilateral and multilateral levels, both as regardsregulatory process and structure and particular areas ofregulatory content (e.g. market access, airline ownershipand control, codesharing, and airline product distribution)and issues of economic regulation and liberalization.

An ICAO Regulatory Policy Seminar has a purposesimilar to regional regulatory policy workshops but isshorter in duration and more focussed on the issues andneeds of a smaller group of States, typically in a subregionwhere the seminar is held.

3.5-1

Chapter 3.5

WORLDWIDE INTER-GOVERNMENTAL ORGANIZATIONS

Various worldwide intergovernmental organizations,although not primarily responsible for civil aviation mat-ters, may influence the regulation of international air trans-port, directly or indirectly, in the course of discharging theirbroader responsibilities. Most maintain relations with civilaviation bodies, in particular ICAO, on matters of mutualconcern. The following sections of this chapter identifythree types of such organizations: the organs of the UnitedNations, the specialized agencies within its system, andother worldwide intergovernmental organizations.

The United Nations (UN), headquartered in New York Cityin the United States, was established in 1945 under theCharter of the United Nations with the primary objectivesof maintaining international peace and security, developingfriendly relations among nations, and achieving inter-national cooperation (www.un.org).

The UN General Assembly is the sovereign body of theorganization, composed of its member States, whichconvenes every year to discuss and decide matters withinthe scope of the Charter. On occasion its resolutions onbroader matters have affected the regulation of internationalair services to and from various States.

The UN Security Council, consisting of five permanentmembers (China, France, Russian Federation, UnitedKingdom, United States) and ten non-permanent members,has primary responsibility for maintaining internationalpeace and security. When it deals with issues of armedconflict or sanctions, its decisions are likely to directly

affect international air transport to and from the relevantnational territory or territories.

The UN Economic and Social Council (ECOSOC),composed of 54 UN member States, coordinates theeconomic and social work of the United Nations. UNregional commissions established by the ECOSOC areheadquartered in Addis Ababa, Beirut, Bangkok, Genevaand Santiago. In Africa and Asia these commissions spon-sor United Nations Transport and CommunicationsDecades, each one a ten-year programme designed tomobilize States, intergovernmental organizations, the UNsystem and external support agencies for cooperative actionin the development of transport and communications in therespective regions, with air transport being one of the sevensectors involved.

The International Court of Justice (ICJ), composed of15 judges and located in The Hague, Netherlands, is theprincipal judicial organ of the UN and functions in accord-ance with the Statute of the ICJ. It has jurisdiction over alllegal disputes referred to it by States regarding the Charterof the United Nations and treaties in force. It has adjudi-cated matters involving international air transport regu-lation, such as the imposition of sanctions in cases ofunlawful interference with civil aircraft.

The UN Secretariat, headed by a Secretary-General,services the other UN organs, administers the programmesof the organization, and implements its policies. Amongother tasks it maintains the United Nations Treaty Series(UNTS), a formal collection of registered treaties andagreements, including air services agreements, on file withthe UN. The Secretariat also coordinates with ICAO andother UN specialized agencies on matters of mutual concern.

ORGANS OF THE UNITED NATIONS


3.5-2

Apart from the International Civil Aviation Organization,the specialized agency of the United Nations responsiblefor civil aviation, six other such agencies have certainlimited international air transport-related activities.

The International Labour Organization (ILO), head-quartered in Geneva, Switzerland, was established in 1919with the primary objective of raising working standardsthroughout the world and seeking to eliminate socialinjustice. The ILO is concerned, inter alia, with the socialand labour consequences of economic, regulatory andtechnological changes in civil aviation (www.ilo.org).

The International Organization for Standardization(ISO), headquartered in Geneva, Switzerland, was estab-lished in 1947 to promote the development of stan-dardization and related activities in the world with a viewto facilitating the international exchange of goods andservices and to developing cooperation. In the internationalair transport area, the ISO is involved, inter alia, in uniformspecifications for machine-readable travel documents (pass-ports and visas) as developed by ICAO (www.iso.ch).

The International Telecommunication Union (ITU),headquartered in Geneva, Switzerland, was established in1865 with the primary objective of maintaining andextending international cooperation between all memberStates for the improvement and rational use of all types oftelecommunications. The ITU’s air transport-related taskscentre on its management of the radio frequency spectrum,particularly those parts allocated to aeronautical services(www.itu.int).

The United Nations Conference on Trade and Devel-opment (UNCTAD), headquartered in Geneva, Switzerland,was established in 1964 to promote international trade andmore particularly, trade between and with developingcountries. It serves, inter alia, as a forum for the discussionof air transport issues, particularly those facing the leastdeveloped, land-locked and island developing countries(www.unctad.org).

The Universal Postal Union (UPU), headquartered inBerne, Switzerland, was established in 1874 to promote thedevelopment of communication between peoples by theefficient operation of postal services. The UPU is involvedin airmail matters such as conveyance rates, the carriage of

dangerous goods by mail and adaptation of postal servicesto the increasing competition from private couriers andexpress/small package operators (www.upu.int).

The International Bank for Reconstruction andDevelopment (IBRD), headquartered in Washington, D.C.,USA, part of the World Bank Group, has a mission ofstrengthening economies and expanding markets to improvethe quality of life for people everywhere, especially thepoorest, by lending money to developing countries forprojects, inter alia, that build or upgrade airports and othercivil aviation related facilities. It was conceived duringWorld War II in meetings at Bretton Woods, New Hamp-shire, USA, and initially helped rebuild Europe after thatwar. It does not make grants (www.worldbank.org).

The World Trade Organization (WTO-OMC), head-quartered in Geneva, Switzerland, came into being on1 January 1995 as the global forum for multilateral tradenegotiations and the facilitator of the implementation,administration and operation of multilateral trade agree-ments. It replaced the entity, also headquartered in Geneva,Switzerland, informally known as the General Agreementon Tariffs and Trade (GATT), one dedicated to the promo-tion of freer trade worldwide (taking this name from themultilateral trade treaty of the same name which enteredinto force in January 1948 and remains in effect), and lessknown by its formal name of Interim Commission of theInternational Trade Organization. Although provisionaland intended to last only until its replacement by a pro-posed specialized agency of the United Nations to be calledthe International Trade Organization (ITO), it continuedto function as the world’s only global trade organizationuntil the WTO-OMC came into being. The WTO-OMCwas established by an agreement within the Final Act of theUruguay Round of GATT trade negotiations which beganat Punta del Este, Uruguay, in 1986, ended at Marrakesh,Morocco, on 15 April 1994, and was the first series of tradenegotiations to consider trade in services (including airtransport) in addition to trade in goods (www.wto.org).

The World Tourism Organization (WTO-OMT), head-quartered in Madrid, Spain, was established in 1975 andentrusted by the United Nations to promote and develop

SPECIALIZED AGENCIESOF THE UNITED NATIONS

OTHER WORLDWIDEINTERGOVERNMENTAL

ORGANIZATIONS

Part 3 — Multilateral RegulationChapter 3.5 — Worldwide Inter-governmental Organizations 3.5

3.5-3

tourism. Leading this field, it serves as a global forum fortourism policy issues and a practical source of guidance.WTO-OMT’s membership includes States and territoriesand, by affiliation, representatives of local governments,tourism associations and private sector companies,including airlines, hotel groups and tour operators(www.world-tourism.org).

The Organisation for Economic Cooperation andDevelopment (OECD), headquartered in Paris, France,was established in 1961 to offer its member States a uniqueforum to discuss, develop and refine economic and socialpolicies. It provides input to policy debates on current and

emerging issues. In air transport (air cargo), the key issuesrevolve around regulatory reform and trade liberalization(www.oecd.org).

The United Nations Framework Convention onClimate Change Secretariat (UNFCCC Secretariat), head-quartered in Bonn, Germany, was established in 1995 asthe permanent Secretariat to the UNFCCC to offer itsmember States practical arrangements for sessions ofConvention bodies. It is institutionally linked to the UnitedNations and administered under the UN rules and regu-lations; however, the UNFCCC is not a specialized agencyof the United Nations (www.unfccc.int).

3.6-1

Chapter 3.6

REGIONAL INTERGOVERNMENTALCIVIL AVIATION ORGANIZATIONS

Three regional intergovernmental civil aviation organiz-ations (in Africa, Europe and Latin America and the Carib-bean) are headquartered in three ICAO Regional Offices(Dakar, Paris and Lima respectively). These organizations,which bring together national civil aviation officials, seekcommon regional policies and approaches on air transportregulatory matters. (Appendix 4 of Doc 9587 summarizespolicies adopted by these regional organizations.) The threeregional organizations, as well as certain subregional onesand that of the Arab States, are identified in the followingthree sections of this chapter.

The African Civil Aviation Commission (AFCAC), aspecialized agency of the Organization of African Unity(OAU) now known as (AU), was established in AddisAbaba, Ethiopia, in January 1969. Membership is open toall African States which are members of the OAU, and toother member States of the United Nations Economic Com-mission for Africa (ECA), subject to the approval of theOAU. Forty-three States are members of AFCAC (as at thiswriting) (www.afcac-cafac.org).

AFCAC provides members with a framework for coor-dination to achieve better utilization and development ofthe African air transport system and to encourage the appli-cation of ICAO standards and recommendations.

The AFCAC Plenary is the sovereign body of theorganization which convenes every three years to establishthe work programme and budget, and to conduct otherbusiness. The AFCAC Bureau, composed of a Presidentand five Vice-Presidents (representing Northern, Eastern,Central, Western and Southern Africa) who are elected bythe Plenary, directs and coordinates the work programmebetween Plenary sessions.

AFCAC’s general air transport policy emphasizes theintegration of African airlines via mergers, joint operations,the formation of consortia, the liberal exchange of trafficrights among member States and a common external policy.

AFCAC is a sponsor of the African Air Tariff Confer-ence, which was designed to negotiate, coordinate and actupon all air tariff matters of concern to its members. Since1982, pending ratification of the convention establishingthe Conference, the African Airlines Association (AFRAA)has used the Tariff Conference machinery, envisioned in theconvention, on an experimental basis for annual meetingsin which airline officials discuss and coordinate positionson a variety of tariff issues, generally in advance of IATAtariff coordination meetings.

The European Civil Aviation Conference (ECAC) wasestablished in Strasbourg in 1954 pursuant to an initiative byICAO and the Council of Europe. The primary objective ofECAC is the development of European civil aviation throughcoordination and cooperation. Forty-one States are membersof ECAC (as of August 2003) (www.ecac-ceac.org).

The ECAC Plenary Conference is the sovereign bodyof the organization which meets in Triennial and Inter-mediate Sessions to consider the work programme and totake basic policy decisions. ECAC Meetings of DirectorsGeneral of Civil Aviation (DGCA) are held frequently forconsultations, sometimes on a relatively informal basis, todeal with urgent matters. ECAC also uses numerous work-ing groups, task forces and groups of experts. The ECACCoordinating Committee harmonizes the work of the fourStanding Committees and the Meetings of the DGCA, andalso supervises the finances of ECAC.

AFRICA

EUROPE


3.6-2

The Conference issues ECAC resolutions and ECACpolicy statements which may be incorporated into thenational regulations of each member State. For example,the Conference adopted a Code of Conduct on ComputerReservation Systems in March 1989 with the objective ofits unified application among member States. It also acts asa forum for joint discussions between Europe and otherregions or States and concludes international agreements,arrangements and memoranda of understanding.

Associated with ECAC is the Joint Aviation Auth-orities (JAA), a body established in 1979 responsibleregionally for air safety including airworthiness, operationsand maintenance.

In December 1991, 12 Commonwealth IndependentStates (CIS) (i.e. Armenia, Azerbaijan, Belarus, Georgia,Kazakhstan, Kyrgyzstan, Republic of Moldova, RussianFederation, Tajikistan, Turkmenistan, Ukraine andUzbekistan) signed at Minsk, Belarus, the Intergovern-mental Agreement on Civil Aviation and Airspace Use,which established the Council on Aviation and AirspaceUse (CAAU) and the Interstate Aviation Committee (IAC),a subordinate body responsible for the implementation ofthe Agreement and coordination of a wide spectrum of civilaviation activities including safety regulation and airtransport policy development.

The Latin American Civil Aviation Commission (LACAC)was established at the Second Conference of AeronauticalAuthorities of Latin America, held in Mexico City in 1973.Membership is open to all American States. Twenty-oneStates and associates are members of LACAC (as atAugust 2003).

The primary objective of LACAC is to provide the civilaviation authorities of member States with an appropriateframework within which to discuss and plan cooperativemeasures and to coordinate their civil aviation activities.

The LACAC Assembly, the sovereign body of the Com-mission, is convened every two years to establish the work

programmes for the Commission and subordinate bodiessuch as committees, working groups and groups of experts.

The LACAC Executive Committee, composed of aPresident and four Vice-Presidents elected by the LACACAssembly, administers and coordinates the work pro-gramme established by the Assembly. It is assisted by anumber of working groups including, in the field of airtransport regulation, the LACAC Group of Experts on AirTransport Policies (GEPTA) and the LACAC Group ofExperts on Costs and Tariffs (GECOT).

The Andean Committee of Aeronautical Authorities(CAAA), composed of national civil aviation authorities ofthe subregion, was created by a Resolution of the FifthMeeting of Ministers of Transport, Communications andPublic Works of member States of the Andean Pact (Bolivia,Colombia, Ecuador, Peru and Venezuela). It is responsible,inter alia, for ensuring compliance with the “Open SkiesPolicy” adopted by the Commission of the CartagenaAgreement in May 1991, and its overall application.

The Central American Air Transport Commission(COCATRAE) was established in September 1991 underthe auspices of the Permanent Secretariat of the GeneralTreaty on Central American Economic Integration (SIECA)as a subregional forum on air transport matters.

The Arab Civil Aviation Commission (ACAC) was estab-lished in 1995 under the auspices of the League of ArabStates and succeeded the Arab Civil Aviation Council. Six-teen States are members of ACAC (as at August 2003).Headquartered in Rabat, Morocco, its membership is opento all States that are members of the League of Arab States.Objectives of ACAC are: to establish a plan to developArab civil aviation and ensure its safety; to promote coop-eration and coordination among member States in the fieldof civil aviation and set the necessary rules and regulationsto achieve its uniformity; and to ensure the growth anddevelopment of civil aviation to meet the needs of Arabnations for safe, efficient and regular air transport.

LATIN AMERICA ANDTHE CARIBBEAN

MIDDLE EAST

3.7-1

Chapter 3.7

REGIONAL AND TRANS-REGIONALINTERGOVERNMENTAL ORGANIZATIONS

AND TRADE AREAS

In addition to worldwide intergovernmental organizations,there exist numerous regional and trans-regional multilateralintergovernmental organizations and trade areas. Certain ofthese organizations, from time to time, or in a few cases ona continuous basis, participate in the regulation of inter-national air transport. They typically do so by seeking con-sensus among member States on uniform approaches topolicy matters affecting air services of concern to them,and/or through the use of regulations or directives. Othersmay undertake or sponsor studies, the conclusions of whichcould affect international air transport regulation. Still othersare not active in air transport matters, but could becomeactive or may establish policies which affect such matters.

The first section of this chapter identifies, by worldregion, regional intergovernmental organizations andarrangements. More extensive information has beenprovided about the European Union because of its size,complexity and significant involvement with air transportregulation.

A second section identifies various formal trans-regional groups of States. A third section identifies a num-ber of informal trans-regional intergovernmental groups.

AFRICA

Arab Maghreb Union (AMU)Founded: 1988.Members: Algeria, Libyan Arab Jamahiriya,

Mauritania, Morocco, Tunisia.

Central African Economic Union (CAEU)Founded: 1964 as the Central African Customs andEconomic Union (CACEU).Headquarters: Yaoundé, Cameroon.Members: Cameroon, Central African Republic, Chad,Congo, Equatorial Guinea, Gabon.

Council of the Entente (CE)Founded: 1959.Headquarters: Abidjan, Côte d’Ivoire.Members: Benin, Burkina Faso, Côte d’Ivoire, Niger,Togo.

Economic Commission for Africa (ECA)United Nations regional body.Founded: 1958.Headquarters: Addis Ababa, Ethiopia.Members: 53 States of the region.Website: www.uneca.org/E-mail: [email protected]

Economic Community of CentralAfrican States (ECCAS)

Founded: 1981.Headquarters: Libreville, Gabon.Members: Burundi, Cameroon, Central AfricanRepublic, Chad, Congo, Equatorial Guinea, Gabon,Rwanda, Sao Tome and Principe, Democratic Republicof the Congo.

Economic Community of theGreat Lakes Countries (CEPGL)

Founded: 1976.Headquarters: Kigali, Rwanda.Members: Burundi, Rwanda, Democratic Republic ofthe Congo.

REGIONAL INTERGOVERNMENTALORGANIZATIONS


3.7-2

Economic Community of WestAfrican States (ECOWAS)

Founded: 1975.Headquarters: Abuja, Nigeria.Members: 16 States of the subregion.Website: www.ecowas.int/E-mail: [email protected]

Indian Ocean Commission (IOC)Founded: 1982.Headquarters: Quatre-Bornes, Mauritius.Members: Comoros, France (Réunion), Madagascar,Mauritius, Seychelles.Website: www.coi-info.org E-mail: [email protected]

Organization of African Unity (OAU)Founded: 1963.Headquarters: Addis Ababa, Ethiopia. Co-founder ofthe African Civil Aviation Commission (AFCAC).Members: 54 African States.Website: www.oau-oua.org

Common Market for Eastern and Southern AfricaFounded: 1994.Replaced: the Preferential Trade Area for Eastern andSouthern African States (PTA), founded in 1981.Headquarters: Lusaka, Zambia.Members: 20 member States of the subregion.Website: www.comesa.intE-mail: [email protected]

Southern African Development Community (SADC)Founded: 1992.Replaced: the Southern African Development Coor-dination Conference (SADCC), founded in 1980.Headquarters: Gaborone, Botswana.Members: Angola, Botswana, Democratic Republic ofthe Congo, Lesotho, Malawi, Mauritius, Mozambique,Namibia, South Africa, Seychelles, Swaziland, UnitedRepublic of Tanzania, Zambia, Zimbabwe.Website: www.sadc.intE-mail: [email protected]

Southern Africa Transport and CommunicationsCommission (SATCC)

Founded: 1980 as a Sectoral Commission of theSADCC with the same membership as SADCC. Headquarters: Maputo, Mozambique.Website: www.satcc.orgE-mail: [email protected]

West African Economic Community (CEAO)Founded: 1994.Replaced: the West African Economic Community(CEAO), founded in 1959.Headquarters: Ouagadougou, Burkina Faso.Members: Benin, Burkina Faso, Côte d’Ivoire, GuineaBissau, Mali, Niger, Senegal, Togo.

ASIA AND THE PACIFIC

Asean Free Trade Area (AFTA)Regional trade accord among ASEAN member States.A larger regional group, to be known as the East AsianEconomic Caucus (EAEC), has been under consider-ation to include all the ASEAN members, China, Japanand some other Asian countries. Website: www.aseansec.orgE-mail: [email protected]

Asia-Pacific Economic Cooperation (APEC)Founded: 1989.Members: Australia, Brunei Darussalam, Canada,Chile, China, Indonesia, Japan, Malaysia, Mexico, NewZealand, Papua New Guinea, Peru, Philippines, Repub-lic of Korea, Russian Federation, Singapore, Thailand,United States, Viet Nam, and two non-State members,Chinese Taipei and Hong Kong.Website: www.apecsec.org.sgE-mail: [email protected]

Association of South East Asian Nations (ASEAN)Founded: 1967.Headquarters: Jakarta, Indonesia.Members: Brunei Darussalam, Cambodia, Indonesia,Lao People’s Democratic Republic, Malaysia,Myanmar, Philippines, Singapore, Thailand, Viet Nam.Website: www.aseansec.orgE-mail: [email protected]

Economic and Social Commission for Asiaand the Pacific (ESCAP)

United Nations regional body.Founded: 1947.Headquarters: Bangkok, Thailand.Members: Governments of 38 countries of the region,but not including those of certain Western Asian coun-tries which belong to ESCWA (see FORMAL TRANS-REGIONAL GROUPS).Website: www.unescap.orgE-mail: [email protected]

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Pacific CommunityFounded: 1947.Former name: South Pacific Commission (SPC).Headquarters: Noumea, New Caledonia.Members: 27 States/territories of the subregion.Website: www.spc.org.ncE-mail: [email protected]

South Asian Association forRegional Cooperation (SAARC)

Founded: 1985.Headquarters: Kathmandu, Nepal.Members: Bangladesh, Bhutan, India, Maldives, Nepal,Pakistan, Sri Lanka.Website: www.saarc-sec.orgE-mail: [email protected]

South Pacific ForumFounded: 1972. Former name: South Pacific Bureau for EconomicCooperation (SPEC).Headquarters: Suva, Fiji.Members: 16 States/territories of the subregion.Website: www.forumsec.org.fjE-mail: [email protected]

EUROPE

Central European Initiative (CEI)An intergovernmental forum, founded in 1989, fordialogue and cooperation among 17 Central andEastern Europe countries and the European Bank forReconstruction and Development (EBRD).Website: www.ceinet.orgE-mail: [email protected]

Council of Europe (CE)Founded: 1949.Headquarters: Strasbourg, France. Was instrumental inthe establishment of the European Civil Aviation Con-ference (ECAC). The Parliamentary Assembly of theCouncil of Europe is the principal legislative body ofthe CE.Website: www.coe.intE-mail: [email protected]

Economic Commission for Europe (ECE)United Nations regional body.Founded: 1947.

Headquarters: Geneva, Switzerland.Members: 55 States of the region.Website: www.unece.orgE-mail: [email protected]

European Economic Area (EEA)The EEA Agreement unites the 15 EU member Statesand the three EFTA EEA States (Iceland, Liechtensteinand Norway) into one single market governed by thesame basic rules which facilitate free movement ofgoods, capital, services and persons and competitionrules.

European Union (EU)A unique, treaty-based, institutional framework thatdefines and manages economic and political cooper-ation among its 15 European member States (expectedto expand to 25 by 2004).

The EU’s origins go back to 9 May 1950, when FrenchForeign Minister Robert Schuman proposed poolingEuropean coal and steel production under a commonauthority. Building upon this idea, on 18 April 1951, theEuropean Coal and Steel Community (ECSC) wasestablished by six European States (Belgium, France,the Federal Republic of Germany, Italy, Luxembourgand the Netherlands) and given portions of their sover-eign powers. Its success led to the creation by the six, bymeans of the Rome Treaties signed on 25 March 1957,of the European Atomic Energy Community (EAEC orEURATOM) to further the development of nuclearenergy for peaceful purposes and the European Econ-omic Community (EEC) to merge national markets intoa single market. Collectively, the three became knownin 1967 as the European Communities, the institutionsof which were merged into the dominant EEC by treatysigned on 8 April 1965. The United Kingdom, Ireland,and Denmark joined in 1973; Greece in 1981; Spain andPortugal in 1986; and Austria, Finland and Sweden in1995. Ten additional eastern European States areexpected to join in 2004.

The Treaty on European Union, also known asthe Maastricht Treaty, which entered into effect on1 November 1993, significantly changed the foundingtreaties and created the European Union (EU). Thethree founding treaties of the European Communitiesnow formed the European Community (EC), one ofthree parts of the EU, the other parts being theCommon Foreign and Security Policy (CFSP) andJustice and Home Affairs (JHA), the latter two oper-ating by intergovernmental cooperation rather than by


3.7-4

the Community institutions. The Maastricht Treaty alsocleared the completion of the Economic and MonetaryUnion (EMU), which launched the Euro currency on1 January 1999. The treaty additionally created aEuropean Central Bank.

The EC operates with five principal institutions, eachwith a specific role:

The European Commission, consisting of 20 Com-missioners, proposes policies and legislation, ensuresthat provisions of treaties and Community decisions areimplemented and is supported by an administrativestaff divided into 23 administrative departments calledDirectorates-General (DG). Those which are mostinvolved in air transport matters are DG VII (Trans-port), DG IV (Competition), and DG XI (Environ-ment, Consumer Protection and Nuclear Safety).Draft legislation is usually developed within one ormore of these directorates-general, and then submittedfor approval to the Commission. The Commissionrepresents the EC at ICAO meetings.

Once approved by the Commission, legislativeproposals are submitted to the Council of theEuropean Union, a decision-making body composed ofministers of member States (changing according to thesubject discussed) which, inter alia, exercises legislativepower, coordinates economic policies, and concludesinternational agreements. Proposals which have beenadopted by the Council usually take the form of Coun-cil Regulations, which apply directly to member Statesand/or other entities, or Council Directives, which laydown compulsory objectives for member States toachieve by regulation. Where it has been given thenecessary powers on certain subjects the Commissionmay itself issue Commission Regulations for directapplication to member States and/or other entities,without following the above process.

The third principal institution, the European Parlia-ment (EP), its 626 members directly elected by thecitizens of the EU, acts as a public forum on issues ofimportance, has limited legislative and budgetary rolesshared with the Council, and exercises democraticsupervision over the Commission.

The other two such institutions are the European Courtof Justice (ECJ), comprised of 15 judges assisted by9 advocates-general, which interprets EU law, and theEuropean Court of Auditors (ECA), with 15 appointedmembers, which monitors the EU’s finances.

Two advisory bodies to the Council also exist: theEconomic and Social Committee (ECS), which has222 members who represent employees, farmers, con-sumers and other such groups and express views oneconomic and social issues; and the Committee of theRegions (COR), which also has 222 members, in thiscase representing local and regional authorities whoexpress views on regional policy, the environment andeducation.Website: www.europa.eu.int

European Free Trade Association (EFTA)Founded: 1960 under Stockholm Convention.Headquarters: Geneva, Switzerland.Members: Austria, Finland, Iceland, Liechtenstein,Norway, Sweden, Switzerland.Website: www.efta.intE-mail: [email protected]

Nordic Council (NC)Founded: 1952.Headquarters: Stockholm, Sweden.Members: Denmark, Finland, Iceland, Norway, Swedenand three autonomous territories (the Aaland Islands,the Faeroe Islands, Greenland).Website: www.norden.org E-mail: [email protected]

Single European MarketA unified economic area with the free movement ofgoods, persons, services and capital among memberStates of the EU. The EU’s single market for air trans-port is based on a phased programme of three “liberal-ization packages”, the last of which took effect on1 January 1993. A transitional period was laid down foraccess to intra-community air routes, which becamereality on 1 April 1997. Community policy on liberal-izing air transport covers four main areas: marketaccess, capacity control, fares and the issue of operatinglicenses for companies.

LATIN AMERICA ANDTHE CARIBBEAN

Andean CommunityFounded: 1969 under Cartagena Agreement.Headquarters: Lima, Peru.Members: Bolivia, Colombia, Ecuador, Peru, Venezuela.(See Decision 297 of the Commission on the Cartagena

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3.7-5

Accord, which established an “open skies” air transportpolicy for the Andean Pact member States, in Chapter3.2 of the manual.)Website: www.comunidadandina.orgE-mail: [email protected]

Caribbean Community and Common Market (CARICOM)

Founded: 1973 under Treaty of Chaguaramas.Headquarters: Georgetown, Guyana.Members: Antigua and Barbuda, Bahamas, Barbados,Belize, Dominica, Grenada, Guyana, Jamaica,Montserrat, Saint Kitts and Nevis, Saint Lucia, SaintVincent and the Grenadines, Suriname, Trinidad andTobago.Associate members: British Virgin Islands, Haiti, Turksand Caicos Islands.Website: www.caricom.orgE-mail: [email protected]

Central American Common Market (CACM)Founded: 1960.Headquarters: Guatemala City, Guatemala.Members: Costa Rica, El Salvador, Guatemala,Honduras, Nicaragua. The same group signed a frame-work free trade agreement with Mexico in 1992.

Economic Commission for Latin Americaand the Caribbean (ECLAC)

United Nations regional body.Founded: 1948.Headquarters: Santiago, Chile.Members: 41 States of the region.Website: www.eclac.orgE-mail: [email protected]

Latin American Economic System (SELA)Founded: 1975.Headquarters: Caracas, Venezuela.Members: 28 States of Latin America.Website: www.sela.orgE-mail: [email protected]

Latin American Integration Association (LAIA)Founded: 1980 under Montevideo Treaty.Headquarters: Montevideo, Uruguay.Members: Argentina, Bolivia, Brazil, Chile, Colombia,Cuba, Ecuador, Mexico, Paraguay, Peru, Uruguay,Venezuela.Website: www.aladi.orgE-mail: [email protected]

Central American Integration SystemFounded: 1951 as Organization of Central AmericanStates (OCAS).Headquarters: San Salvador, El Salvador.Members: Costa Rica, El Salvador, Guatemala,Honduras, Nicaragua.

Organization of Eastern Caribbean States (OECS)Founded: 1981.Headquarters: Castries, Saint Lucia.Members: Anguilla, Antigua and Barbuda, Dominica,Grenada, Montserrat, Saint Kitts and Nevis, SaintLucia, Saint Vincent and the Grenadines, British VirginIslands.Website: www.oecs.orgE-mail: [email protected]

Permanent Secretariat of the General Treaty on CentralAmerican Economic Integration (SIECA)

Founded: 1960.Headquarters: Guatemala City, Guatemala.Members: Belize, Costa Rica, El Salvador, Guatemala,Honduras, Nicaragua, Panama.Website: www.sieca.org.gt

Southern Cone Common Market (MERCOSUR)Founded: 1990 under Mercosur Treaty.Headquarters: Montevideo, Uruguay.Members: Argentina, Brazil, Paraguay, Uruguay. Associate member: Bolivia.

MIDDLE EAST

Cooperation Council for the Arab States of the Gulf(GCC) (Also referred to as Gulf Cooperation Council)

Founded: 1981.Headquarters: Riyadh, Saudi Arabia.Members: Bahrain, Oman, Kuwait, Qatar, Saudi Arabia,United Arab Emirates.Website: www.gcc-sg.org

NORTH AMERICA

North American Free Trade Agreement (NAFTA)Founded: 1994.Members: Canada, Mexico, United States.Website: www.nafta-sec-alena.orgE-mail: [email protected]


3.7-6

African, Caribbean and Pacific Group of States (ACP Group)

Founded: 1975 under Lomé Convention.Headquarters: Brussels, Belgium.Members: 78 developing countries which relate throughthis group to the European Community.Website: www.acpsec.orgE-mail: [email protected]

Arab Common Market (ACM)Founded: 1964.Headquarters: Amman, Jordan.Members: Egypt, Iraq, Jordan, Libyan Arab Jamahiriya,Mauritania, Syrian Arab Republic, Yemen.

Economic and Social Commission forWestern Asia (ESCWA)

United Nations regional body.Founded: 1973.Headquarters: Beirut, Lebanon.Members: Bahrain, Egypt, Iraq, Jordan, Kuwait,Lebanon, Oman, Palestine, Qatar, Saudi Arabia, SyrianArab Republic, United Arab Emirates, Yemen.Website: www.escwa.org.lbE-mail: [email protected]

Economic Cooperation Organization (ECO)Founded: 1984 under the Treaty of Izmir.Headquarters: Tehran, Islamic Republic of Iran.Original members: Islamic Republic of Iran, Pakistan,Turkey. Expanded in 1992 to include Afghanistan,Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan,Turkmenistan, Uzbekistan.Website: www.ecosecretariat.orgE-mail: [email protected]

League of Arab States (LAS)Founded: 1945.Headquarters: Cairo, Egypt.

Members: 22 Arab States. The Council of ArabMinisters of Transport deals with civil aviation.Website: www.leagueofarabstates.org

Organization of American States (OAS)Founded: 1890 as the International Union of AmericanRepublics, which became the Pan American Union in1910, then the OAS in 1948.Headquarters: Washington, D.C., United States.Members: 35 States of North and South America andthe Caribbean.Website: www.oas.orgE-mail: [email protected]

Group of Eight (G-8)Group of major industrialized States. Formerly theGroup of Seven (G-7) until joined by the RussianFederation.Members: Canada, France, Germany, Italy, Japan,Russian Federation, United Kingdom, United States.

Group of Seventy Seven (G-77)Group of developing States organized to promote theirviews on international trade and development inUNCTAD.Members: 133 States (originally established with77 States).Website: www.g77.orgE-mail: [email protected]

Paris Club or Club of ParisA forum for officials of creditor governments to collab-orate on debt collection and debt forgiveness policies.The composition of the group is likely to vary accord-ing to the particular creditor States involved and thedebtor States in question. Based in Paris, the “club” isrun by the French Treasury.Website: www.clubdeparis.orgE-mail: [email protected]

FORMAL TRANS-REGIONALGROUPS

INFORMAL TRANS-REGIONALGROUPS

3.8-1

Chapter 3.8

INTERNATIONAL AIRTRANSPORT ASSOCIATION (IATA)

The International Air Transport Association (IATA) is theworldwide non-governmental organization of scheduledairlines established in 1945 to promote safe, regular andeconomical air transport, to provide means for collabor-ation among air transport enterprises, and to cooperatewith ICAO, other international organizations and regionalairline associations (website: www.iata.org). IATA has twomain offices (one in Montreal and the other in Geneva) andover 90 regional offices.

IATA membership is open to any operating companywhich has been licensed to provide international air service.IATA active membership is open to airlines engageddirectly in international operations, while IATA associatemembership is open to domestic airlines. IATA has over270 member airlines.

The first section of this chapter identifies the maincomponents of the IATA organizational structure.

The second section explains the IATA TrafficConference structure.

The third section provides a brief general description ofthe process of multilateral tariff coordination within theIATA Traffic Conferences. The final section identifiesvarious trade association activities (other than ProceduresConferences, which are explained in the second section).

The IATA Annual General Meeting (AGM) is the sover-eign body of the association. All active members have anequal vote in its decisions. It is convened every year as the“World Air Transport Summit” in recognition of its status

as the premier, industry-wide platform for the debate ofcritical issues at the highest level.

The IATA Board of Governors (BG), composed ofelected Chief Executives of member airlines, provides year-round policy direction.

IATA Special Committees are established from time totime, with the approval of the Board of Governors, toadvise on subjects of special concern to the industry. Otherbodies such as subcommittees, boards, panels and workinggroups are also established from time to time with specificterms of reference.

The four IATA Standing Committees (Financial,Industry Affairs, Operations and Cargo) are composed ofexperts nominated by individual member airlines. TheIATA Industry Affairs Committee (IAC) advises the Boardof Governors and the Director General on all commercialmatters connected with international air transport andoversees the work of the Traffic Conferences (as explainedin the next two sections).

The IATA Secretariat, a staff headed by the DirectorGeneral and Chief Executive Officer, supports general andcommittee meetings and the various Traffic Conferencesand also performs several functions for, and provides vari-ous services to, member airlines and others. Some of thesefunctions and services are identified in the final section ofthis chapter.

The IATA Traffic Conference structure consists of Pro-cedures Conferences and Tariff Coordinating Conferences

MAIN COMPONENTS OF THE IATAORGANIZATIONAL STRUCTURE

THE IATA TRAFFICCONFERENCE STRUCTURE


3.8-2

and is governed by the Provisions for the Conduct of TrafficConferences, which provide government-approved terms ofreference for conferences.

The IATA Procedures Conference structure coordi-nates commercial practices (a trade association activity)and includes the:

• IATA Passenger Services Conference (PSC) whichtakes action on passenger services includingpassenger and baggage handling, documentation,procedures, rules and regulations, reservations,ticketing, schedules and automation standards;

• IATA Passenger Agency Conference (PAConf)which takes action on relationships betweenairlines and accredited passenger sales agents andother intermediaries but excluding remunerationlevels;

• IATA Cargo Services Conference (CSC) whichtakes action on facilitating and improving theprocessing of air cargo through standardization ofprocedures, data exchanges and systems; and the

• IATA Cargo Agency Conference (CAConf) whichtakes action on relationships between airlines andintermediaries engaged in the sale and/or pro-cessing of international air cargo but excludingremuneration levels.

The IATA Tariff Coordinating Conference (TC) struc-ture conducts tariff negotiations (an optional-participationactivity) and includes the:

• IATA Passenger Tariff Coordinating Conferences(PTCs) which develop passenger fares and relatedconditions; and

• IATA Cargo Tariff Coordinating Conferences(CTCs) which develop cargo rates and relatedconditions.

Both the PTCs and the CTCs consist of a number ofArea Conferences based on three geographical conferenceareas:

• Area 1, which encompasses all of the North andSouth American continents and the islands adjacentthereto, Greenland, Bermuda, the West Indies and

islands of the Caribbean Sea, the Hawaiian Islands(including Midway and Palmyra);

• Area 2, which encompasses all of Europe (includingthat part of the Russian Federation in Europe) andthe islands adjacent thereto, Iceland, the Azores, allof Africa and the islands adjacent thereto, AscensionIsland, and that part of Asia lying west of andincluding the Islamic Republic of Iran; and

• Area 3, which encompasses all of Asia and theislands adjacent thereto except the portion includedin Area 2, all of the East Indies, Australia, NewZealand and the islands adjacent thereto, and theislands of the Pacific Ocean other than thoseincluded in Area 1.

Area Conferences TC1, TC2 and TC3 determine tariffswithin the respective areas 1, 2 and 3. Area ConferencesTC12, TC23, TC31 and TC123 determine tariffs betweenAreas 1 and 2, 2 and 3, 3 and 1, and those involving allthree Areas, respectively. Each Area Conference is furtherdivided by so-called Sub-Area Conferences based on sub-areas within and between the above three areas.

In addition to the Area/Sub-Area Conferences, there areComposite Meetings of the PTC and the CTC, which dealwith global features of tariff levels and conditions such asfare/rate construction and currency rules, conditions of ser-vice, baggage allowances and charges, and remunerationlevels.

The IATA tariff coordination process is one of nego-tiations among participating airlines of passenger fare andcargo rate levels and conditions to develop and adoptagreements (in the form of resolutions) for submission togovernments for approval.

A TC member, i.e. an airline that has chosen toparticipate in passenger and/or cargo tariff coordination,automatically becomes a voting member of each Area Con-ference (and Sub-Area Conference) in which it operatesservices under Third and Fourth Freedom traffic rights. ATC member may also elect to become a voting member ofany Area/Sub-Area Conference in which it operates a ser-vice under Fifth Freedom traffic rights. Additionally, a TC

TARIFF COORDINATION PROCESS

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3.8-3

member may elect to become a voting member of TC12,TC23, TC31 and TC123 if it does not operate in such anarea, but does operate as a voting member in a componentarea; for example, a voting member operating only in TC2may elect to become a voting member in TC12, TC23,TC123 but not TC31.

Each Tariff Coordinating Conference meeting must becalled at least once every two years on 90 days’ notice. Inpractice, however, most meetings of Passenger Area/Sub-Area Conferences are held once a year in areas where themarkets are reasonably stable. Areas with rapidly changingfares may need to meet up to three times a year. CompositeMeetings are usually held once a year. Special meetings canbe called at short notice (as little as 15 days in advance) todiscuss urgent tariff-related issues as required, globally oron an area basis.

In principle, each Conference meeting aims to reach aconsensus on both the general levels of tariffs and specifictariff proposals on a full conference basis. Whenever itdoes, the agreements reached apply to all TC members,whether or not represented at the meeting.

All agreements of a Conference must be adopted by aunanimous vote. However, if a full conference agreementcannot be achieved, “sub-area” agreements and/or “limited”agreements (limited in respect of the TC members partici-pating in the agreements and/or the countries covered bythe agreements), may be reached to meet particular needsof TC members operating services in the region concerned.

Towards the end of a meeting, a Package which con-sists of changes to rules/conditions that are shown in theform of draft Resolution Documents (Res. Docs.) andchanges to fare/rate levels/structures that are shown in anattachment of the Resolution, is presented by the chairmanto the attending TC members. The Package stipulates thepositions of each TC member up to final voting, andreflects all the agreements and any compromises tentativelyreached during the Conference meeting. If adopted, thePackage is converted into Resolutions, which together withthe minutes of the meeting, tables of fares and/or rates andmemoranda reflecting the agreement, are circulated to TCmembers and submitted for approval to governments. If notadopted, the conference area or any sub-area concernedbecomes an open area, i.e. one in which there is no formalIATA agreement.

Resolutions agreed at a Conference are assigned a filingperiod by the Conference. Each TC member determines

which resolutions must be submitted to its own governmen-tal authorities with a request for action on them within thatperiod. TC members must notify IATA of any action,intended action, or extension of the time being taken forconsideration by its authorities. IATA notifies TC membersof the government approval status. When all known andnecessary government approvals have been received, IATAdeclares the agreement effective and TC members are ableto implement it.

TC members may change existing agreements betweenConference meetings by:

• using specified Conference-adopted procedures tointroduce “innovative” passenger fares or cargorates without necessarily affecting a passenger faresor cargo rates agreement in the area concerned;and/or

• making a tariff proposal to be circulated for mailvote consideration by all TC members concernedwho have relevant voting rights (which can bedeclared adopted if no negative vote is cast).

In common with similar organizations, IATA conducts tradeassociation activities in which all member airlines partici-pate. Apart from tariff coordination (which is not a tradeassociation activity) and the previously explained Pro-cedures Conferences, IATA engages in three distinct typesof trade association activity:

• certain core functions, including representation onbehalf of industry, governmental and consumerrelations, technical activities, legal support andindustry automation;

• various other industry coordination activitiesincluding facilitation and fraud prevention; and

• numerous self-financing services such as publi-cations, financial services, agents accreditation,aviation training, yield management programmesand symposia.

Among the most noteworthy IATA services which arerelated to air transport regulation are:

TRADE ASSOCIATION ACTIVITIES


3.8-4

• the IATA Schedules Conference, held twice yearly,where airlines coordinate their schedules and air-port slots (specific times allotted for an aircraft toland or take off);

• the Billing and Settlement Plan (BSP), which pro-vides for the computerized processing of accountsbetween airlines and their passenger agents;

• the Cargo Accounting Settlement System (CASS),which provides for the computerized processing ofaccounts between airlines and their cargo agents;

• the Clearing House, which includes prorationservices and enables airlines (and suppliers) tosettle credits and debits between themselves at onelocation, thus minimizing the need to make actualtransfers of money on a worldwide basis;

• the IATA/SITA baggage tracing (BAGTRAC)system, to recover checked baggage that is lost ormisdirected; and

• the Multilateral Interline Traffic Agreement(MITA), i.e. a legally binding agreement relating toissuance of passenger tickets and cargo waybillsand the acceptance of each other’s passengers,baggage and cargos.

The Electronic Data Interchange for Administration,Commerce and Transport (EDIFACT) is used by IATA todevelop message formats for the exchange of passenger,cargo, fuel invoice and fuel delivery information amongairlines and their business partners. Recently, IATA andSITA have joined together to offer connectivity betweenairlines using EDIFACT messaging to facilitate the use ofelectronic tickets (e-tickets) in the interline environments.

3.9-1

Chapter 3.9

NON-GOVERNMENTAL ORGANIZATIONS

Apart from intergovernmental organizations, there existnumerous worldwide, regional and trans-regional non-governmental organizations. Some of these organizations,from time to time, or in some cases on a recurring basis,seek to influence the governmental regulation of inter-national air transport directly or indirectly. Many typicallydo so by aggregating the commonly held views of theirmembers on matters relating to international air transportand articulating such views, publicly and/or through com-munications with (and participation in various meetings of)governmental and intergovernmental bodies. Others under-take or sponsor studies which can inform or influence thoseconducting international air transport regulation. Theirdegree of focus on air transport issues, as distinct fromother issues, varies by organization.

This chapter identifies numerous non-governmentalorganizations which may influence air transport regulation.The list is not necessarily exhaustive.

The first section of this chapter identifies air carrierorganizations (except for the International Air TransportAssociation (IATA) which is treated separately inChapter 3.8).

The second section identifies other aviationorganizations.

The final section identifies other organizations interestedin air transport.

African Airlines Association (AFRAA)Founded: 1968.Headquarters: Nairobi, Kenya.Members: air carriers owned by member States of theOAU or controlled by nationals of OAU States.Website: www.afraa.orgE-mail: [email protected]

Air Charter Carriers Association (ACCA)Founded: 1971.Members: non-scheduled operators based in Europewhich are affiliates or subsidiaries of IATA airlines.

Air Transport Association of America (ATA) Founded: 1936.Headquarters: Washington, D.C., United States.Members: 22 principal airlines in the United States and5 associate non-US airlines.

Arab Air Carriers Organization (AACO)Founded: 1965 under the auspices of the League ofArab States.Headquarters: Beirut, Lebanon.Members: airlines of States which are members of theLeague.Website: www.aaco.orgE-mail: [email protected]

Association of Asia Pacific Airlines (AAPA)Founded: 1966, as the Orient Airlines ResearchBureau. In 1970 it became the Orient Airlines Associ-ation (OAA).Headquarters: Kuala Lumpur, Malaysia.Members: seventeen scheduled international airlines inthe region.Website: www.aapairlines.orgE-mail: [email protected]

Asociación Internacional de TransporteAéreo Latinamericano (AITAL)

Founded: 1980.Headquarters: Bogotá, Colombia.Members: airlines based in Latin America.Website: www.aital.orgE-mail: [email protected]

Association Internationale deTransporteurs Aériens (ATAF)

Founded: 1950.

AIR CARRIER ORGANIZATIONS


3.9-2

Headquarters: Paris, France.Members: 16 airlines based in Francophone AfricanStates, France and overseas territories.E-mail: [email protected]

Association of European Airlines (AEA)Founded: 1954 as the European Airlines ResearchBureau (EARB).Headquarters: Brussels, Belgium.Members: major European scheduled airlines.Website: www.aea.beE-mail: [email protected]

Association of South Pacific Airlines (ASPA)Founded: 1979.Headquarters: Nadi, Fiji.Members: 16 regional airlines, 2 associates and18 industry providers in 15 countries and territories.

European Regions Airlines Association (ERA)Founded: 1980.Headquarters: Chobham, United Kingdom.Members: some 70 airlines and 160 associate and affili-ate members comprising regional airports, aircraft andengine manufacturers, and avionic suppliers and serviceproviders.Website: www.eraa.orgE-mail: [email protected]

International Air Carrier Association (IACA)Founded: 1971.Headquarters: Brussels, Belgium.Members: air carriers engaged in non-scheduled airservices.Website: www.iaca.beE-mail: [email protected]

Airports Council International (ACI)Previously known as the Airports Association CouncilInternational (AACI), a union of the former AirportOperators Council International (AOCI) and the formerInternational Civil Airports Association (ICAA).Founded: 1991.Headquarters: Geneva, Switzerland.Members: over 400 international airports, airportauthorities and national airport associations in over110 States.

Website: www.airports.orgE-mail: [email protected]

International Business Aviation Council (IBAC)Founded: 1981.Headquarters: Montreal, Canada.Members: business aviation companies in over20 States and territories.Website: www.ibac.orgE-mail: [email protected]

International Council of Aircraft Owner andPilot Associations (IAOPA)

Founded: 1964.Headquarters: Frederick, Maryland, United States.Members: national general aviation organizationsrepresenting 400 000 pilots in over 53 States.Website: www.iaopa.orgE-mail: [email protected]

International Federation of Air LinePilots’ Associations (IFALPA)

Founded: 1948.Headquarters: Surrey, United Kingdom.Members: national airline pilots associations in over70 States and territories.Website: www.ifalpa.orgE-mail: [email protected]

Consumers International, formerly known as the Inter-national Organization of Consumers Unions (IOCU)

Founded: 1960.Headquarters: London, United Kingdom.Members: consumer associations, government-financedconsumer councils, labour unions and similar groups.Website: www.consumersinternational.orgE-mail: [email protected]

Federation of Air Transport User Representatives inEurope (FATURE)

Founded: 1983, as the Federation of Air TransportUser Representatives in the European Community.Headquarters: Paris, France.Members: various user organizations in the Europeancommunity.

OTHER AVIATION ORGANIZATIONS

OTHER ORGANIZATIONSINTERESTED IN AIR TRANSPORT

Part 3 — Multilateral RegulationChapter 3.9 — Non-governmental Organizations 3.9

3.9-3

Institut du Droit International (IDI)Founded: 1873.Headquarters: Geneva, Switzerland.Members: individuals and national associations in49 countries concerned with international law includingair transport studies.E-mail: [email protected]

Institut du Transport Aérien (ITA)Founded: 1954.Headquarters: Paris, France.Members: individuals and national organizations con-cerned with air transport studies in over 70 States.Website: www.ita-paris.comE-mail: [email protected]

International Business Travel Association (IBTA)Headquarters: Brussels, Belgium.Members: European national business travel feder-ations of travel services in industrial and commercialenterprises.Website : www.ibta.comE-mail: [email protected]

International Chamber of Commerce (ICC)Founded: 1920.Headquarters: Paris, France.Members: national committees representing commerce,industry, transportation and finance in over 50 States.Website: www.iccwbo.orgE-mail: [email protected]

International Federation of FreightForwarders Associations (FIATA)

Founded: 1926 as International Federation of For-warding Organizations.Headquarters: Zurich, Switzerland.Members: national associations of freight forwardersin some 90 States and territories.Website: www.fiata.comE-mail: [email protected]

International Federation of Tour Operators (IFTO)Founded: 1970.Headquarters: Lewes, United Kingdom.Members: national associations of tour operators.

International Foundation of AirlinePassengers’ Association (IFAPA)

Founded: 1985.Headquarters: Geneva, Switzerland.Members: airline passengers’ associations.

International Law Association (ILA)Founded: 1873.Headquarters: London, United Kingdom.Members: individuals and national associations con-cerned with international law, including aviation law.Website: www.ila-hq.orgE-mail: [email protected]

International Transport Workers’ Federation (ITF)Founded: 1896 as the International Federation ofShip, Dock and River Workers.Headquarters: London, United Kingdom.Members: national transport workers’ unions in over80 States and territories.Website: www.itf.org.ukE-mail: [email protected]

Pacific Asia Travel Association (PATA)Founded: 1951.Headquarters: Bangkok, Thailand.Members: governments, airlines, travel agents, hotels.Website: www.pata.orgE-mail: [email protected]

Société Internationale de TélécommunicationsAéronautiques (SITA)

Founded: 1949.Headquarters: Paris, France.Members: over 400 airlines and air transport relatedorganizations (including telecommunication and infor-mation processing services).Website: www.sita.intE-mail: [email protected]

Universal Federation of Travel Agents’Associations (UFTAA)

Founded: 1966.Headquarters: Monaco.Members: national associations representing over 50 000travel agents in more than 80 States and territories.Website: www.uftaa.comE-mail: [email protected]

World Travel and Tourism Council (WTTC)Headquarters: Brussels, Belgium.Members: about 40 chief executive officers from com-panies in all sectors of the travel industry includingtransportation, accommodation, catering, recreation,cultural and travel services.Website: www.wttc.orgE-mail: [email protected]

Part 4

REGULATORY CONTENT

4.0-1

Chapter 4.0

INTRODUCTION TOREGULATORY CONTENT

Regulatory content is defined in the Foreword as “theparticular subjects being regulated (such as market access,pricing and capacity)”. Part 4 of the manual deals with sub-jects which make up the regulatory content in the economicfield of international air transport. Air transport regulatorsface these regulatory content subjects in all three venues ofregulation, i.e. national, bilateral and multilateral. Thoughdistinct from one another, these subjects, in practice, arerarely treated in isolation because of their interrelationships.

Chapter 4.1 uses a building block approach to identifyand explain the three basic market access rights, i.e. route,operational and traffic rights, which are the most importantelement of international air transport regulation. The chap-ter also discusses market access in terms of the so-called“Sixth Freedom”.

The subject of capacity, an important element of airtransport regulation, is examined in Chapter 4.2. This chap-ter describes the involvement of governments in air carriercapacity regulation, and capacity regulation viewed from anair carrier perspective.

Air carrier tariffs, another principal element in econ-omic regulation, are discussed in Chapter 4.3. Tariff-relatedterms, different types and characteristics of tariffs, andmethods for regulating tariffs, as well as some key tariffissues are examined.

Chapter 4.4. discusses air carrier ownership and control,a subject that has evoked considerable interest in recenttimes because of the changes in the airline industry broughtabout by globalization, liberalization and privatization(which often involves transnational investment in air car-riers). The chapter describes the traditional criteria used byStates for airline designation and authorization, the ration-ale for their use, and some exceptions. It also briefly dis-cusses the implications of foreign investment in air carriers

and, lastly, examines some key issues in liberalizing airlineownership and control.

Chapter 4.5 deals with air cargo, an increasingly impor-tant component of international air transport, identifyingthe distinct features of air cargo and describing how aircargo service is regulated.

The subject of non-scheduled air services is covered inChapter 4.6. It describes the characteristics which set itapart from scheduled air services, identifies the numerouskinds of international non-scheduled operations anddiscusses how governments regulate them.

Chapter 4.7 is devoted to airline commercial activities(sometimes referred to as “doing business” matters) whichcan be important in the provision of international air servicesin a foreign country. The activities described in this chapterare currency conversion and remittance of earnings, employ-ment of non-national personnel, sale and marketing of inter-national air transport, airline product distribution andelectronic commerce, and aircraft leasing. They can, incertain circumstances, be regarded by air carriers and Stateswith the same degree of importance as the three principalregulatory elements of market access, capacity and tariffs.

Chapter 4.8 provides information on three major airlinecooperative activities, namely, airline alliances, codesharingand franchising, and discusses their regulatory implications.

Chapter 4.9 is devoted to air passengers. It discussespassenger rights, the relatively new topics of unruly or dis-ruptive passengers, and improperly documented passengers.

Chapter 4.10 covers airport-related matters. It containsinformation on ground handling, slot allocation at inter-national airports and privatization of airports.

4.1-1

Chapter 4.1

BASIC MARKET ACCESS

An air transport market between any two places consists ofthe actual and potential traffic in persons and goods thatdoes move or may move between such places on commer-cial air services. International air transport markets can fallinto four categories in a hierarchical structure: a city-pairmarket, i.e. the air route linking two cities (e.g. New York-London); a country-pair market, consisting of all city-pairroutes linking two countries (e.g. United States-UnitedKingdom); a region-to-region market, one that includes allroutes linking two regions (e.g. North America-Europe,also known as the North Atlantic market); and the globalmarket which includes all points served in the world by theairline industry. A scheduled air service is likely to carrytraffic moving in numerous city-pair markets on eachflight; a non-scheduled air service typically, but not always,serves a single city-pair market on each flight.

Air transport market access, by any particular aircarrier or carriers, is the nature and extent of the basicrights (with any accompanying conditions and limitations)that are granted/authorized by the relevant governmentalauthorities (and identified and discussed in this chapter) aswell as ancillary rights such as those covering productdistribution. Air transport market penetration by any par-ticular air carrier or carriers is the extent to which accessis actually used to obtain and carry traffic. Rights can besubject to numerous constraints (outside the scope of thischapter) such as aircraft range and payload limitations,airport congestion and distribution system problems.

Access by an air carrier to a State’s domestic air trans-port market is typically obtained (with relatively fewexceptions) only if it is a carrier of that State and is usuallyacquired by a licensing process. Access to an internationalair transport market is also usually acquired by a licensingor approval process in each State involved. The reason forthis dates back to the earliest period of flight when Statesrecognized that every State has and may exercise completeand exclusive sovereignty over the airspace above its terri-tory. This principle is reaffirmed in Article 1 of the ChicagoConvention, and this exercise of sovereignty is usually

expressed in a licensing or approval process. Thus, primar-ily because of the need to use the territorial airspace ofanother State in order to serve an international market,access to such air transport markets by foreign air carriershas come to be regulated in very different ways than accessby foreign entities in other service industries (e.g. hotelchains and telecommunications companies).

Commercial air transport services, when performed asother than scheduled international air services involvingICAO Contracting States, are subject to Article 5 of theChicago Convention. Under that Article, the foreign air-craft of such a State have the right to fly into or in transitnon-stop across the territory of any other ICAO ContractingState and to make stops for non-traffic purposes (such asrefuelling or repairs) without the necessity of obtainingprior permission, and subject to the right of the State flownover to require landing. That Article also extends the privi-lege of taking on or discharging traffic (i.e. obtainingaccess to the non-scheduled market), subject to the right ofany State where such embarkation or discharge takes placeto impose such regulations, conditions or limitations as itmay consider desirable. In actual practice, such impositionsmay result in denial of or various constraints on marketaccess by non-scheduled services, and in the absence ofagreement between the States concerned, it is regulated uni-laterally, usually on the basis of comity and reciprocity.

Scheduled international air services are regulated in abasic way by Article 6 of the Chicago Convention. ThatArticle prohibits such services without the special per-mission or other authorization of the foreign State involved.In practice, a State extends such permission or authorizationfor scheduled international services by foreign air carriers inlicences or permits of fixed or conditioned duration anddoes so (with rare exceptions) on the basis of the servicebeing the utilization of market access rights which that Statehas granted to the home State(s) of the air carrier.

A basic market access right is a conditioned or limitedright or privilege (usually set out in an international


4.1-2

agreement) granted by one State to another State for use byan air carrier or carriers designated by that other State andmay consist of agreed: geographic specifications of routesalong which the air service may take place; physical speci-fications regarding designation of an air carrier or carriersand how a designated carrier may employ aircraft; andphysical and/or geographic specifications of what kinds oftraffic may be carried. Such rights in total determine theextent of market access granted.

Market access rights are usually granted in exchangefor similar rights by means of some agreement(s) orarrangement(s) between States and are usually limited toscheduled international air services. Although a marketaccess right fundamentally provides an opportunity to servea market, it is also a limitation on market access because ofits specifications. States limit market access for variousreasons including to bring about some perceived balance inrights exchanged; to retain leverage for possible futureexchanges; to avoid or minimize competitive impacts ontheir national carriers; to be precise in order to avoid mis-interpretation; and to promote or favour some market seg-ment (such as that of a particular city or national region).Ancillary rights, which relate to how an air carrier mayconduct its business in a foreign State, are sometimestreated by States as elements of market access. These areidentified and discussed separately in the manual.

Foreign investment or inward investment in the aircarrier(s) of a State, including investment by foreign aircarriers, i.e. the purchase of equity holdings with somepossible degree of influence in management decisions if notcontrol, is an additional means of obtaining market access.Yet another is that of obtaining a right of establishment,i.e. the freedom to establish an air carrier in the territoryof a foreign State. Both additional means are in limited usein liberalized markets, either as exchanges between oramong States or unilateral grants. (See also Chapter 4.4.)

This chapter uses a building block approach to identifyand explain three types of basic market access rights which,in practice, States tend to intermix rather than keep separatein the annexes, articles, paragraphs and sentences of their airtransport agreements and sometimes even intermingle withcapacity or other subjects. The treatment accorded the manytypes of market access conditions and limitations in currentuse is fairly comprehensive; however, this chapter does notexplore the topics of liberalization of market access, simpli-fication of its regulation, or bilateralism versus multilat-eralism. Neither does it examine new concepts ofprogressive liberalization in the grant of basic marketaccess, i.e. the incremental removal of regulatory restraints,

or of a safety net, i.e. some regulatory arrangement for usein the exceptional event of a clear threat to the ability of aState to sustain some level of market participation.

The first section of this chapter identifies various kindsof geographic specifications of the routes along which anair service may take place. The next section focuses on car-rier designation and various specifications regarding theuse of aircraft on such routes. The third section deals withspecifications of categories of traffic that may be trans-ported on the routes. The final section discusses marketaccess as affected by the so-called “Sixth Freedom”.

A route right is a market access right which is expressedas an agreed geographic specification, or combination ofgeographic specifications, of the route or routes over whichan air service or services may be held out and performedand of the order in which authorized places may be served.Generally, route rights are found in the route annex of anair transport or air services agreement between States, theannex itself setting forth separately a route or routes for useby the airline or airlines of each party to the agreement. Inall following examples, “A” represents the State receivingthe route right and “C” the State granting the route right(typically in exchange for a similar right or rights).

The most basic way of describing the grant of a routeright to a State is to name one city in the territory of thatState and a second city in the territory of the State grantingthe right, for example:

From City A1 to City C1.

The basic approach need not be limited to a single cityin each State, for example:

From City A1 to City C1/City C2.

From City A1/City A2 to City C1.

From City A1/City A2 to City C1/City C2.

A point is a city, named or unnamed, on the routegranted. The basic approach can be expanded to describe aroute as:

From any point or points in State A to City C1.

ROUTE RIGHTS

Part 4 — Regulatory ContentChapter 4.1 — Basic Market Access 4.1

4.1-3

A more expansive variation of the basic grant is:

From any point or points in State A to any point orpoints in State C.

An intermediate point is a point outside but betweenthe territories of the granting and recipient States. (Inexceptional cases, points within the territory of the recipi-ent State lying along the general path of the route may beconsidered as intermediate points.) When the territories ofthe States involved in the grant are not adjacent and the ter-ritories and cities of other States lie between them, the routedescription may include an intermediate point or points, forexample:

From City A1, via City B1, to City C1.

There are many other ways to indicate the grant of anintermediate point or points on a route with varying degreesof specificity, for example:

… via City B1 and City X1 …

… via City B1, City B2 and City X1 …

… via State B …

… via State B or State X …

… via State B and State X …

… via an intermediate point …

… via two intermediate points …

… via an intermediate point or points …

In the latter three examples, greater specificity may beachieved when desired by adding a particular continent,region, or country, for example:

… via an intermediate point in Africa …

… via two intermediate points in Europe …

… via an intermediate point or points in the IndianOcean …

The provision of an intermediate point or points on aroute also serves to indicate a general direction that theroute must follow. There may be an implicit or explicitexpectation that the route employed on an actual operation

will be a reasonably direct one (between “A” and “C” in theexamples). There may also be a desire to specify one gen-eral route in order to exclude another, for example:

… via the South Pacific … to exclude …via the North Pacific …

… via a Polar route … to exclude …via a trans-Pacific route …

… via the North Atlantic … to exclude …via the mid-Atlantic …

In lieu of various specifications, the parties may make ageneral grant of the right to serve intermediate points onany routes granted.

A beyond point is a point on a route which is generallymore distant from the territory of the route recipient thanthe territory of the granting State (i.e. is situated beyond thelatter) and which forms a part of a route description. Forexample, a basic route description for use by State A —from City A1, via City B1, to City C1 — may have addedto it:

… and beyond to City D1.

… and beyond to one (two) (three) point(s).

… and beyond to a point or points in Asia.

Note that the latter example, apart from setting a generaldirection for continuation of the route, confines the beyondpoints to a single continent. Note also that the “beyondrights” on the route may be stated simply as:

… and beyond.

Additional flexibility may also be provided by allowingthe air carrier operating the route to choose intermediatepoints, exchange them, omit them, or vary the order inwhich they are used. A rover point is an intermediate point,a second country destination point, or a beyond point to bechosen by the recipient State from among several named orunnamed points, the choice being notified to (and, if sostated, needing the concurrence of) the granting State, thatchoice then precluding service to other such points untilsome future change of points is made. For example:

… and beyond to any two points to be chosen fromamong City X1, City X2, City Y1, City Y2 and City Z1.


4.1-4

A route granted to a State in a traditional agreement ismost likely to begin in the territory of the recipient State,follow a single general direction and be capable of beingoperated (and anticipated to be served) both outbound fromthe recipient State and inbound to it on a return service. Aroute granted to a State in an “open skies” agreement maywell be described as beginning in or behind the territory ofthe home State. It is extremely rare for a route to bedescribed for use in a single direction only, and when thatoccurs, it is likely to be for air freight service and to beeither circular in structure or continuing around the world.In other unusual cases a State may be granted cargo flexi-bility, i.e. the right of a designated carrier or carriers toserve points outside the right-granting and right-receivingStates with complete flexibility in the order of points servedas intermediate and beyond points for the purpose ofpicking up and/or discharging international traffic in cargoand/or mail. It is much less unusual to allow a named pointto be served either as an intermediate or as a beyond point(as in example route 7 on Table 4.1-1) on a given flight, par-ticularly where relatively little deviation from the generalpath of the route is involved.

The majority of route descriptions in bilateral agree-ments are in sentence form. However, numerous routeexchanges use an alternative tabular format as shown inTable 4.1-1.

A behind point is any point outside the route asdescribed and usually geographically “behind” the

beginning point or points of the route. “Behind points” canbe points within the territory of the route recipient and/orpoints in third countries. They are usually not included intraditional route descriptions. However, there may be anexplicit or implicit understanding that either or both kindsof behind points may be served (explicit regarding thirdcountry behind points in typical “open skies” agreements),and the through service held out and advertised as such.Alternatively, such services involving points in thirdcountries may be subject to conditions or be proscribed.

Other terms used in route right grants include:

• gateway or gateway point, i.e. any point of lastdeparture/first arrival of an air service in the terri-tory of the recipient State or the granting State;

• route terminal or terminal point, which may be agateway or gateway point or a behind point;

• co-terminal or co-terminal point, i.e. any one oftwo or more points on the same route and in thesame territory (of the recipient State or of thegranting State) which may be served separately orin combination on any service over the route;

• double tracking, a term borrowed from the railroadindustry to describe establishing a double trackroute, i.e. a route for use by a carrier or carriersdesignated by one State party to a bilateral agree-

Table 4.1-1. Routes for State A (tabular format)

Route Points in State A Intermediate points Points in State C Beyond points

1 City A1 City C1

2 City A2 City B1 City C1

3 City A3City A4

City C2City C3

Country D

4 City A1 City B2 City C1 City D1

5 Any point or points in A North Africa Cities C1, C2, C3 One point

6 Any point or points in A Middle East and South Asia Any point or points in C Australasia

7 City A3 City B2 City C1 City B2


4.1-5

ment which has a mirror-image counterpart routefor use by a carrier or carriers designated by theother State party to such agreement; and

• single tracking, also a term borrowed from the rail-road industry to describe establishing a singletrack route, i.e. a route for use by a carrier or car-riers designated by one State party to a bilateralagreement which has no mirror-image counterpartroute for use by a carrier or carriers designated bythe other State party to such agreement. A routethat has some sector that is not matched may still beconsidered as a double-tracked rather than single-tracked route if the principal sector between the twoStates is double-tracked.

An operational right is a market access right which isexpressed as an agreed physical specification of how manycarriers may be designated; of how aircraft may be oper-ated; or of what aircraft types, parts of aircraft, or sub-stitute conveyances may be employed and assigned flightdesignators over an agreed route or routes. In practice,operational rights may be found in air transport agreementsin the route annex, in various articles or in side under-standings, or may or may not be implicitly included.

One of the most basic operational rights is that ofcarrier designation. Designation is the formal notificationby one State to another State, usually by diplomatic note, ofthe name of an air carrier chosen by the designating Stateto use all or certain of the market access rights received bythat State under its air transport agreement with the secondState. Depending upon the terms of the relevant agreement,a designation may be made for use of any or all marketaccess rights granted, for a particular route or routes or fora particular part of a route.

Single designation is the right to designate only onecarrier (with an implicit right to substitute another car-rier). Dual designation is the right to designate up to twocarriers (with the right to substitute). Multiple unlimiteddesignation is the right to designate any number of car-riers. Multiple controlled designation is the right to desig-nate a specified number of airlines in total or a certainnumber per route, per gateway, or per route sector (withthe right to substitute).

Bilateral agreements usually do not contain the explicitright for one State to reject the other’s designation, carrierchoice being a sovereign right of the other State, but typi-cally do include the right of the first State to deny, revoke,suspend, or impose conditions on operating authorizationsfor such designated airline on specific grounds. Thesegrounds normally are limited to a failure to satisfy therequirement that substantial ownership and effective con-trol of the airline be vested with the designating State or itsnationals, or a failure to comply with the national laws andregulations (of the State receiving the designation) whichare applicable to the operation of such services.

* * *

Operational rights which deal with how aircraft may beoperated over an agreed route or routes include those ofoverflight, technical stop, optional omission of stops, man-datory stop, positioning flight, extra section flight andchange of gauge.

An overflight right or right of overflight is the right orprivilege granted to a State of flying across the territory ofthe State making the grant, without landing, on a scheduledor other than scheduled international air service. TheInternational Air Services Transit Agreement identifies therelated term of First Freedom of the Air — the right orprivilege, in respect of scheduled international air services,granted by one State to another State or States to fly acrossits territory without landing (also known as a FirstFreedom Right).

A technical stop right or right of technical stop is theright or privilege granted to a State to land in the territoryof the granting State for non-traffic purposes, on a sched-uled or other than scheduled international air service. Thisright is most commonly exercised to refuel the aircraft, tomake unexpected essential repairs or to respond to someemergency need to land the aircraft. It may also be used insome instances to carry out the national entry requirementsof a State before proceeding to a traffic point in that State.Even though a technical stop is, by definition, not made fortraffic purposes, it may be necessary or desirable to dis-charge traffic for a time (even for an overnight stay) with arequirement to reboard it for onward movement (whichcould be accomplished on a substitute aircraft or other con-veyance). The International Air Services Transit Agreementidentifies the related term of Second Freedom of the Air —the right or privilege, in respect of scheduled internationalair services, granted by one State to another State or Statesto land in its territory for non-traffic purposes (also knownas a Second Freedom Right).

OPERATIONAL RIGHTS


4.1-6

A right of optional omission of stops or optional stopright is a right or privilege, normally granted for use on aroute, authorizing multiple traffic points, provided at leastone stop is made in the recipient State and one in the grant-ing State on each flight. For example: Any point or pointsspecified on the route may be omitted on any or all ser-vices at the option of the designated airline(s); however,all flights must originate or terminate in the territory ofthe Contracting party designating the airline(s).

On the other hand, a mandatory stop requirement isused to clearly establish the general path of a route or topreclude a non-stop operation. The first use clarifies theintended extent of the grant. The second use provides pro-tection for the granting State’s national carrier(s) — themandatory stop makes the service of the foreign carrier lessattractive to traffic.

A positioning flight is, in the broad meaning of theterm, any flight, whether revenue-earning or non-revenue,whether scheduled or other than scheduled, flown toposition the aircraft to be used on some revenue-earningservices and is also, in the narrow meaning of the term, anyferry flight, i.e. a non-revenue flight flown for a positioningor other purpose (such as to enable the aircraft to undergomaintenance).

An extra section flight, typically a second sectionflight, is a revenue flight in scheduled service operated tocarry overflow traffic on essentially the same schedule asthat of the flight being augmented. The terms “extrasection” and “second (third, etc.) section” were borrowedfrom the railroad industry. The right to operate extra sec-tion flights is normally considered as implicit under airtransport agreements even when capacity is predetermined;however, this right does not extend to operating extra ser-vices at times entirely unrelated to those of the basic flightbeing augmented.

A change of gauge is a change of aircraft, at an en-route point on an international flight outside the hometerritory of the carrier, to (on an outbound trip) or from (onan inbound trip) another aircraft having a smaller capacity.A “Y” change of gauge is a change of gauge to (outbound)or from (inbound) two such aircraft. A “fan” change ofgauge is a change of gauge to (outbound) or from (in-bound) more than two such aircraft. A second-countrychange of gauge is a change of gauge, as seen in the con-text of an air service relationship between two States, car-ried out in the territory of one bilateral partner State by anair carrier of the other bilateral partner State. A third-country change of gauge is a change of gauge, as seen in

the context of an air service relationship between twoStates, carried out in the territory of a third State, which isincluded in an authorized international route.

A change of gauge enables an air carrier to operatemore economically over international route sectors distantfrom its home territory by more closely matching thecapacity of its flights on such sectors to the lower volumesof traffic to and from its home State normally expected inthe case of the more remote sectors of a long-haul route.The international term “change of gauge” is not applied toa change of aircraft within the home territory of the carrierin that such change is domestic or national in character andunder the sole jurisdiction of the sovereign State involved.Nor is any change of aircraft, wherever made, to one of thesame size or capacity considered to be a change of gauge.Historically, the term “change of gauge” derives from therailroad term for the changing, at an en-route point on a railroute, from operations over tracks with one fixed distance(or gauge) between the two rails to operations over trackswith a different gauge, usually undertaken by replacing thewheel units (bogies or trucks) with those of appropriategauge for the onward movement of the train.

A bilateral air services agreement may not specificallymention change of gauge because one or both partner Statesmay consider it as implicitly allowed or disallowed; alter-natively, it may be expressly provided for under specifiedconditions or it may be expressly prohibited. When Statesagree to specify the right of change of gauge in a bilateralair services agreement, they are likely to include an oper-ational right grant along the lines of the following provisionand one of the five options below:

An air carrier designated by one Contracting partymay make a change of gauge in the territory of the otherContracting party, or at a point on the specified routeintermediate to or beyond the territory of the other Con-tracting party, provided that:

option (a)operations beyond the point of change of gaugeshall be with an aircraft having a capacity less, foran outbound service, or more, for a service return-ing to its home territory, than that of the arrivingaircraft;

or option (b)operations beyond the point of change of gaugeshall be with one aircraft having a capacity, or withtwo aircraft having a combined capacity, less, for anoutbound service, or more, for a service returning toits home territory, than that of the arriving aircraft;


4.1-7

or option (c)operations beyond the point of change of gaugeshall be with one or two aircraft each having acapacity less, for an outbound service, or more, fora service returning to its home territory, than that ofthe arriving aircraft;

or option (d)operations beyond the point of change of gaugeshall be with any number of aircraft, each having acapacity less, for an outbound service, or more, fora service returning to its home territory, than that ofthe arriving aircraft;

or option (e)for an outbound service, operations beyond thepoint of change of gauge are the continuation of aservice from the territory of the Contracting partywhich has designated the air carrier and, for aninbound service, a continuation of a service to suchterritory, in both cases without limitation as to typeor number of aircraft, or capacity thereof, to andfrom such point.

* * *

Operational rights which are specifications of what aircrafttypes, parts of aircraft, or substitute conveyances may beemployed and of what flight designators may be assignedtake numerous forms.

As regards specifications of aircraft types, States may,for example, agree that certain rights may be exercised onlywith narrow-bodied aircraft, only with wide-bodied aircraft,only with “small” aircraft or “large” aircraft (as defined bythe States concerned), only with all-cargo aircraft or onlywith combination (passenger/cargo) aircraft. Note that suchspecifications, while they affect capacity, are generallyintended for purposes other than capacity regulation (forexample, to preclude significant freight carriage on a route).

As regards parts of aircraft, States may, for example,proscribe the use of aircraft (such as a combination aircraft)to carry cargo on the main deck or may specify that cargomay be carried in the belly-hold only. Similarly, they mayexplicitly or tacitly agree that a service may be performedusing blocked space, i.e. a number of passenger seatsand/or specified cargo space purchased by an air carrierfor the carriage of its traffic on an aircraft of a second aircarrier. They may also agree to permit codesharing, i.e. theuse of the flight designator code of one air carrier on aservice performed by a second air carrier, whose service is

usually also identified (and may be required to be ident-ified) as a service of, and being performed by, the secondair carrier.

Codesharing, where authorized, may occur on any partsof a route and may involve a second country air carrier, athird country air carrier or a domestic air carrier. States maychoose to grant and receive certain access rights that maybe used solely on a codesharing basis. Generally, States willrequire that both carriers in a codesharing arrangementhave proper authorization.

Codesharing and blocked-space arrangements areusually, but not always, found together. The use ofcodesharing permits the holding out and sale of transpor-tation involving more than one airline (interline) as if itwere transportation on one airline (online), in particular inan airline distribution system such as a computer reser-vation system. This topic is discussed in more detail inChapter 4.8 of this manual.

Closely related to codesharing is the concept of fran-chising, i.e. the granting by an air carrier of a franchise orright to use various of its corporate identity elements (suchas its flight designator code, livery and marketing symbols)to a franchisee, i.e. the entity granted the franchise to mar-ket or deliver its air service product, typically subject tostandards and controls intended to maintain the qualitydesired by the franchiser, i.e. the entity granting the fran-chise. Unlike codesharing which has become a widespreadpractice for both domestic and international air services,franchising is still not common for international routes (seealso Chapter 4.8 for more detailed discussion).

A joint service flight is a flight identified by thedesignator codes of two airlines that typically have agreedwith each other to share revenues and/or costs with the con-currence of their respective States. Some States consider ajoint service flight as a codesharing flight and some do not.

The aircraft used to exercise market access may beowned by the carrier or may be leased. The use of a leasedaircraft may or may not entail a need for some specialauthorization to exercise a right of access. Generally, whenan aircraft is performing the air service of one air carrierbut is under the operating control of another air carrier, anyState whose territory is involved has a right to require thatboth carriers have its authorization of the arrangement.Such State may also require that both the State of the aircarrier in operational control of the aircraft and the State ofthe air carrier holding out the service have received from ita right of market access of the route involved. A more


4.1-8

detailed discussion of this topic including its safety andeconomic implications is presented in Chapter 4.7.

Aircraft interchange arrangements normally present noneed for specific access rights, conditions or limitations. Anaircraft interchange or interchange flight is a regularlyscheduled, single-plane through service linking a route ofone air carrier at the interchange point to a route of a sec-ond air carrier, with the same aircraft being crewed by andunder the operational control of the respective authorizedcarrier on each route. An interchange provides passengerswith the benefit of a single-plane service on what is essen-tially an interline operation and may provide additionalbenefits to the carriers involved in terms of better aircraftutilization.

An intermodal right is a right of access granted by aState for use by a designated carrier or carriers of anotherState to extend, substitute for or supplement air services byuse of surface conveyances. Examples of surface convey-ances used intermodally (along with their IATA generaltype designators) include bus (BUS), hovercraft (HOV),launch (LCH), limousine (LMO), train (TRN) and truck/road feeder service (RFS). Specific market access rightsand/or authorization by the air transport authority may ormay not be required for the use of surface conveyances tocarry traffic under air transport tickets or waybills,depending upon the circumstances of each case. In oneexample, the area in which a foreign air carrier may carryout its own pickup and delivery services may be limited bya State to a certain radius of the airport used. In a secondexample, an air carrier’s international services to/from aparticular State, when carried out entirely by surfaceconveyances, even when such services are assigned an aircarrier designator code and “flight” numbers for productdistribution purposes, may require the authorization ofsurface transport authorities only or, if carried out under acontract with an authorized surface carrier, may require nospecial authorization. In a third example, surface move-ments between two points of an air route authorized to theair carrier, which are held out as substitution for or sup-plementation of flights over the route, may be considered asutilizing the market access rights associated with the routeand may be subject to air transport regulation.

A traffic right is a market access right which is expressedas an agreed physical or geographic specification, or

combination of specifications, of who or what may betransported over an authorized route or parts thereof in theaircraft (or substitute conveyance) authorized. Note, how-ever, that the term traffic rights is, in one usage, appliedcollectively to have about the same meaning as marketaccess rights.

The most basic way a traffic right is expressed as aphysical specification is that of the right to transportpassengers, cargo and mail, separately or in any combi-nation. If the agreed right is limited to the carriage of pass-engers only, it would normally include implicitly thebaggage or courier pouches accompanying passengers orcouriers and could include unaccompanied baggage notshipped as air freight. Similarly, cargo normally meansfreight and express shipments; however, a right to carrycargo only of necessity includes human attendants whenrequired, in particular for live cargo. Traffic rights encom-pass revenue traffic and certain non-revenue traffic (ifunder a passenger ticket, freight waybill or other appropri-ate documentation) such as the carrier’s company cargo orcompany mail.

* * *

The most basic way traffic rights are expressed as geo-graphic specifications is that of one of the freedoms of theair which relates to traffic (the first two freedoms beingoperational ones). Figure 4.1-1 provides a graphic represen-tation of the Freedoms of the Air.

The Third Freedom of the Air is the right or privilege,in respect of scheduled international air services, grantedby one State to another State to put down, in the territoryof the first State, traffic coming from the home State of thecarrier (also known as a Third Freedom Right).

The Fourth Freedom of the Air is the right or privi-lege, in respect of scheduled international air services,granted by one State to another State to take on, in theterritory of the first State, traffic destined for the home Stateof the carrier (also know as a Fourth Freedom Right).

The Fifth Freedom of the Air is the right or privilege,in respect of scheduled international air services, granted byone State to another State to put down and to take on, in theterritory of the first State, traffic coming from or destined toa third State (also known as a Fifth Freedom Right).

Difficulties arise in assigning a freedom classificationto a particular movement or part of a movement becausesome States classify particular traffic movements by their

TRAFFIC RIGHTS


4.1-9

Figure 4.1-1. The Nine Freedoms of the Air

Home State

Home State

Home State

Home State

Home State

Home State

Home State

Home State

A

A

A

A

A

A

A

A

A

Home State

B

B

B

B

B

B

B

Nine Freedoms of the Air

1. Overfly

2. Technical stop

3. Set down traffic

4. Pick up traffic

5. Carry traffic to/fromthird State

6. Carry traffic via Home State

7. Operate from second State to/from third State

8. Carry traffic between two points in a foreign State

9. Operate only in a foreign State


4.1-10

true origin and destination, i.e. ticket or waybill originand destination, the origin being the first point named onthe transportation document and the destination being thelast point on a one-way movement or the point located fur-thest from the point of origin on a return (round trip) move-ment. Other States assign a freedom classification bycoupon or flight sector origin and destination, i.e. theorigin being any boarding point (initial or en route) atwhich traffic is first taken on board a particular flight andthe destination being the first subsequent point at which itis put down (without regard to where the traffic initiallybegan and ultimately will end its movement on the sameticket or waybill).

This difference in freedom classification under the twoapproaches can be seen in the case of a traffic movementthat starts in State A and ends in State C with a flightchange en route at State B, either directly or after a stop-over at State B, when there are three possible carriers:carrier AA of State A; carrier BB of State B; and carrier CCof State C. Note that using the true origin and destinationmethod produces no change in freedom classification, evenwhen a different carrier is used on each flight sector (seeFigure 4.1-2), whereas the coupon or flight sector originand destination method always produces a change infreedom classification (see Figure 4.1-3).

The so-called Sixth Freedom of the Air is the right orprivilege, in respect of scheduled international air services,of transporting, via the home State of the carrier, trafficmoving between two other States (also known as a SixthFreedom Right). The so-called Sixth Freedom of the Air,unlike the first five freedoms, is not incorporated as suchinto any widely recognized air services agreement such asthe “Five Freedoms Agreement”. It is a contentious subjectwhich is discussed in the final part of this chapter.

The so-called Seventh Freedom of the Air is the rightor privilege, in respect of scheduled international air ser-vices, granted by one State to another State, of transportingtraffic between the territory of the granting State and anythird State with no requirement to include on such oper-ation any point in the territory of the recipient State, i.e. theservice need not connect to or be an extension of anyservice to/from the home State of the carrier.

The terms cabotage and cabotage traffic in air trans-port usage:

• are derived, respectively, from maritime terms forthe prohibition of coastwise carriage of traffic byforeign carriers and from the traffic thus prohibited

which could be equated with domestic traffic, i.e.traffic moving on a single transportation document(ticket or waybill) involving no origination, stop-over or termination outside the territory of oneState;

• are sometimes expanded to also include (and thusprohibit) certain portions of international move-ments such as those between two points on aninternational route which are located in the terri-tory of the same State (of which the carrier is not anational), before or after a connection or stopoverat one such point, with an exception sometimesmade to allow online on-route connections andstopovers;

• are sometimes erroneously applied to traffic movingbetween two States in the same group of States oreconomic union of States, when the group or uniondecides to reserve such traffic for its own aircarriers; and

• can be applied to a traffic movement that consti-tutes prima facie cabotage such as a movement byair or surface across a national border followedimmediately by a similar movement back across thesame border, even when pursuant to separatetickets or waybills.

A cabotage right or cabotage privilege is a right orprivilege, granted to a foreign State or a foreign carrier, totransport otherwise prohibited cabotage traffic. Petitcabotage involves traffic movements between two ports onthe same coast of the same country (in maritime usage)and, by extension to air transport, between two airports inthe same contiguous territory of a State. Grand cabotageinvolves traffic movements beginning and ending on differ-ent coasts of the same country (in maritime usage) and, byextension to air transport, movements between a State anda noncontiguous territory of that State.

The so-called Eighth Freedom of the Air is the right orprivilege, in respect of scheduled international air services,of transporting cabotage traffic between two points in theterritory of the granting State on a service which originatesor terminates in the home territory of the foreign carrier or(in connection with the so-called Seventh Freedom of theAir) outside the territory of the granting State (also knownas an Eighth Freedom Right or “consecutive cabotage”).

The so-called Ninth Freedom of the Air is the right orprivilege of transporting cabotage traffic of the granting


4.1-11

State on a service performed entirely within the territory ofthe granting State (also known as a Ninth Freedom Rightor “stand alone” cabotage).

* * *

Another way by which traffic rights at a given point or ina given market are specified is by according different treat-ment (i.e. authorization or limitation) to enplaning trafficvis-à-vis direct transit traffic to be transported over a givenflight sector. Enplaning traffic is traffic being taken onboard a flight for the first time and consists of:

• originating traffic, i.e. traffic which is beginning itsoutbound movement by air or its return movementby air after a stay at its final outbound destination;

• connecting traffic, i.e. traffic which arrives at apoint on one flight and departs the point (transits

the point) on another flight as part of a continuousmovement under a single air ticket or waybill,without a stopover at the point; and

• stopover traffic, i.e. traffic which has taken a stop-over, an intentional interruption of movementthrough a point under a single air ticket or waybillfor a period of time beyond that required for directtransit through or, when changing flights, for aperiod normally extending to the departure time ofthe next connecting flight and (exceptionally)including an overnight stay. (Note that for the pur-pose of clarifying the number of stopovers that maybe allowed for certain round trip travel, an airlinemay count the period spent at the final or most dis-tant destination on such journey as a “stopover”.)

Direct transit traffic is traffic which both arrives anddeparts the point (transits the point) as part of a continuous

Figure 4.1-2. True origin and destination method

Figure 4.1-3. Coupon or flight sector origin and destination method

3rdAA

5thBB

4thCC

3rdAA

5thBB

4thCC

State A State B State C

5thAA

3rdBB

4thCC

3rdAA

4thBB

5thCC

State A State B State C


4.1-12

movement under a single air ticket or waybill, without astopover, on the same or different aircraft identified by thesame airline designator and flight number. A flight sectorconsists of any two points along a route at which a take-offand/or landing is made and may involve one or more flightstage(s), i.e. operation of an aircraft from take-off to itsnext landing.

The right to enplane traffic may be denied or restrictedon a particular flight sector or flight sectors other than theprincipal international flight sector of the route. On a two-sector or multi-sector route, the traffic that may be pro-hibited is all or some part of the enplaning traffic. Whenenplaning traffic is restricted, a “blind sector” or a “partialblind sector” is created. A blind sector is a flight sector forwhich no traffic may be enplaned. A partial blind sector isa flight sector for which only specified traffic may beenplaned, such as connecting and stopover traffic only orconnecting traffic only. These two categories may befurther limited to:

• online stopover traffic, i.e. stopover traffic whichcontinues its onward movement (after the interrup-tion of the journey) on the same airline, as distinctfrom interline stopover traffic, i.e. stopover trafficwhich continues its onward movement (after theinterruption of the journey) on a different airline;and/or

• online connecting traffic, i.e. traffic connectingbetween aircraft identified by the same airline des-ignator but different flight numbers, as distinct frominterline connecting traffic, i.e. traffic connectingbetween aircraft identified by different airline des-ignators and flight numbers. Note that “localtraffic” is sometimes prohibited on a given flightsector. Local traffic is an ambiguous term and cansignify all enplaning traffic or all originating trafficor all traffic other than transit traffic, i.e. direct(same flight number) transit traffic plus connectingtraffic.

A blind sector or partial blind sector restriction on aninternational route inevitably limits the traffic opportunitiesof an air carrier, with resultant economic costs to its oper-ation. A State, in its bilateral air service relationship withanother State, may nevertheless insist on a blind sector orpartial blind sector restriction between two points on aninternational route or routes of the other State to safeguardthe revenues of its own carrier(s) (and possibly thecarrier(s)’ pool partners), to reduce the value of the agreedroute(s) for the other State so as to achieve some perceived

overall balance of benefits between the two States or, ifboth the points named are in its own territory, to impose acabotage restriction.

Note that one State requires foreign air carriers toobtain the prior permission of its authorities to transportwhat it calls “blind sector traffic”, by which it means traf-fic enplaned and deplaned on flight sectors between foreigncountries that are “blind” only in the sense that they arenot otherwise authorized by the agreed route descriptionand the corresponding licence or permit granted by thatState.

Flight sectors entirely within a foreign country may ormay not be blind sectors or partial blind sectors. Forexample, a carrier’s operation of a circle flight, i.e. a flightthat initially serves one point in a second State, goes on toanother point in that State, then returns to the home Stateof the carrier, is likely to entail the authorized deplanementof inbound international traffic and the enplanement ofreturn international traffic bound at the first point, and thefurther deplanement of inbound international traffic and theenplanement of return international traffic at the secondpoint. Similarly, if a State that determines the freedomclassification of traffic by its initial origin and final desti-nation, rather than by its coupon origin and destination,wishes to be consistent, it will treat online stopover, inter-line stopover, online connecting, and interline connectingtraffic with a foreign initial origin or final destination asinternational traffic, rather than as cabotage traffic, andallow its carriage by second country air carriers on flightsectors within its territory.

In 1944 the Chicago Conference formally established onlyfive “freedoms” of the air, two concerning aircraft oper-ations and three involving movements of traffic. The threetraffic-related freedoms, the Third, Fourth and Fifth Free-doms, encompassed the full range of possible opportunitiesfor international carriage by air (although, as set forth in theInternational Air Transport Agreement, their exercise waslimited to movement of traffic having both origin anddestination in a signatory State on through services over areasonably direct route to/from the carrier’s homeland).The creation of three such freedoms (distinguished fromeach other by the national origin and destination of the traf-fic) rather than of a single freedom to pick up and set down

MARKET ACCESS AS AFFECTEDBY THE SO-CALLED“SIXTH FREEDOM”


4.1-13

international traffic in the territory of any signatory Stateencouraged subsequent development of the concept of“ownership” by pairs of States (and by extension by theirairlines) of air traffic picked up in the territory of one andset down in the territory of the other. The Bermuda prin-ciples of 1946 strengthened that concept by establishing theprimacy (and primary “ownership” claim) of each pair ofStates to such traffic and built upon it by relegating to asecondary and subsidiary role traffic picked up or set downin the territories of third States.

As carriers, routes and traffic volumes grew, so too didthe opportunities for airlines to attract varying amounts oftraffic moving between two foreign States via their homeStates. Given the further entrenchment of the concept ofnational “ownership” of traffic resulting from the bilateralprocess of exchanging market access rights, it was inevi-table that the “freedom” classification of such “homelandbridge” traffic had to be established.

Rather than agree that this traffic between two foreignStates constituted secondary Fifth Freedom traffic to whichthey may not be entitled, States whose airlines benefitedfrom such homeland bridge carriage developed the conceptof a new “freedom”, the so-called “Sixth Freedom of theAir”. (ICAO characterizes all “freedoms” beyond the Fifthas “so-called” because only the first five “freedoms” havebeen officially recognized as such by international treaty.)The creators of this new concept maintained that the so-called “Sixth Freedom” consisted of a combination of theFourth and Third Freedoms. Thus, by this definition, thetraffic originating in a second State moved as Fourth Free-dom traffic to the homeland of the carrier, then as ThirdFreedom traffic to the State of final destination. In so doing,by this definition, the traffic was “primary” for thehomeland bridge carrier on each segment of the passenger’sjourney.

The second and third States involved, to the extent oftheir concern with this capture of some or much of “their”rightful traffic (and to the extent their own carrier(s) hadfew or no opportunities to attract homeland bridge traffic inother markets), had every incentive to maintain that the so-called “Sixth Freedom” was nothing more than “Fifth Free-dom” and that such traffic could at best provide only a“secondary” justification for air service capacity providedby the homeland bridge carrier. By extension, this point ofview contended that the “freedom” classification of a pass-enger should be determined by the ticket or “true” originand destination, not the coupon/flight sector origin and des-tination. Those with the opposing point of view maintainedthe opposite position.

As the regulation of bilateral air transport developed,States concerned with the potential or actual diversion of“their” traffic by a homeland bridge carrier undertook var-ious strategies to attempt to prevent, cope with, or end suchdiversion. These strategies included:

• declining to negotiate any routes to/from the home-land of the bridge carrier;

• severely limiting the capacity allowed the home-land bridge carrier if such routes were established;

• refusing to allow the homeland bridge carrier toparticipate in some or all discount tariffs authorizedto their own carrier(s) in markets between theirhome territories;

• prohibiting the homeland bridge carrier from hold-ing out and advertising any single-plane services ona so-called Sixth Freedom basis in their country;

• attempting to compromise by treating traffic havinga “legitimate” stopover in the bridge carrier’s home-land for one or a few days more favourably thandirectly connecting traffic for capacity regulationpurposes; and

• refusing to grant Fifth Freedom rights to the govern-ment of a homeland bridge carrier or limiting theability of the carrier to exercise such rights.

Generally, such regulatory strategies were only margin-ally successful. The reasons for this included the difficultyin countering the natural inclinations of carriers to maxi-mize their profitable carriage by seeking traffic from allsources, and the preference of air transport users (who arenot concerned about esoteric concepts of “freedoms of theair” or of the national “ownership” of air traffic) toaccomplish their travel in the most convenient manner,usually by movement on a single airline. (This inclination touse online rather than interline connections is reinforcedwhen free overnight accommodations/tours, etc., are offeredat the homeland base of a bridge carrier.)

Notwithstanding the above, the reasons why homelandbridge operations attract traffic, when they do, involvemore than airline market promotion or passenger desires. Acarrier can participate substantially in homeland bridgecarriage only when two other factors are present: its hometerritory is geographically situated to permit it to do so, andthe relevant traffic flows have certain characteristics.


4.1-14

The first factor, the geographic one, comes into playbecause only those States well situated on a reasonablydirect routing between other States which originate or ter-minate significant traffic volumes have opportunities toserve as bridges. For example, airlines based in southernAfrica, southern South America and Australia have virtuallyno “Sixth Freedom” opportunities because there is literallyno place for them to find or take traffic behind their home-lands. Carriers based in northeastern Asia can attract NorthAmerica-East Asia/Southeast Asia traffic flows on a bridgebasis. Carriers based in the Middle East, South Asia andSoutheast Asia have opportunities to attract Europe-otherSouth Asia/Southeast Asia and Australasia traffic. Carriersbased in North America are best situated to attract thelimited volumes of available Asia-South America trafficand some Europe-Latin America traffic. Western Europe-based carriers are best located to have access to the mostbridge traffic flows, i.e. Africa to/from North America,South Asia/Middle East to/from North/South America,Eastern Europe to/from North/South America and otherWestern Europe to/from the rest of the world.

The geographic location of a carrier’s home base alsoplays a role in its ability to attract intraregional bridgetraffic. Thus a carrier based at or near the centre of WesternEurope is well placed to attract Baltic-Mediterranean traffic;one centre-based in North America to attract northernclimate traffic to Mexico/Central America/Caribbean sundestinations; and one based in eastern Asia near the Tropicof Capricorn to attract Northeast Asia-Southeast Asia traffic.

The second factor is that of the volume of traffic orcapacity on the flight sectors on either side of the bridgeState relative to the direct second-third State flight sectorsize and strength. In the following diagrams the width ofthe sectors indicates relative traffic and/or airline capacityvolumes; States A and C provide the origin/destinationpoints for the traffic; State B constitutes the bridge and itscarrier the homeland bridge carrier; price and airlinepreference factors are assumed to be neutral.

In Figure 4.1-4, a State B-based carrier (BB) is unlikelyto attract sufficient A-C traffic away from carriers AA andCC to cause concern to either State A or State C, as longas both its AB and BC markets and services remain smallrelative to AC services.

In Figure 4.1-5, the relative thinness of the A-C trafficand services (in both directions) enhances the attractivenessof movement via State B on carrier BB. States A and Cmay have to wait until the A-C traffic volume merits directservice competitive with or better than that given via StateB and its carrier BB. In some circumstances the movementof traffic via State B on carrier BB may stimulate the mar-ket sufficiently to actually encourage services between Aand C by their respective airlines.

A third situation may pertain. Assume that the carriersof both States A and B have agreed access to the A-Boriginating/terminating traffic. Assume that State A’s geo-graphic situation is near the far tip of a continent and itscarrier thus has virtually no opportunity to attract anybridge traffic through its home base, but that State B’s geo-graphic situation is such that its carrier can attract bridgetraffic to numerous countries behind its home territory. Theadditional “flow” traffic thus gives State B’s carrier(s) aclear advantage in serving the A-B market.

In the situation portrayed in Figure 4.1-6, carrier AAcould attempt to attract traffic moving via State B, but notwithout difficulties, because passengers generally prefer tomove on a single carrier rather than on an interline basis.While difficulties are unlikely to be fully overcome, Statesand carriers are increasingly turning to relatively newerapproaches such as codesharing, blocked-space arrange-ments and operating a second country hub which, properlyused, can ameliorate the relative disadvantages of the non-bridge carriers. Because geographic facts are immutable,this problem and efforts to deal with it promise to be on theregulatory scene for some time.


4.1-15

Figure 4.1-4

Figure 4.1-5

State B

State A State C

BB BB

AA,CC

State B

State A State C

BB BB

AA,CC


4.1-16

Figure 4.1-6

State BState A

BB

AA

BB

C

D

E

F

G

4.2-1

Chapter 4.2

AIR CARRIER CAPACITY

Air carrier capacity is the quantitative measure of airtransport services offered or proposed to be offered by oneor more air carriers in a city-pair or country-pair marketor over a route. It may be expressed in terms of aircraftsize, aircraft type, number of seats and/or cargo space (byweight and/or volume), frequency of operation, or somecombination of such terms.

Capacity regulation is any method used by govern-ments, separately or jointly, to control the capacity that isbeing or may be offered.

Although capacity regulation is a concern of bothgovernments and airlines, it presents different issues foreach, reflecting their different interests and concerns. Thefirst section of this chapter describes the involvement ofgovernments in air carrier capacity regulation. The nextsection presents capacity regulation from an air carrier per-spective. When applied to an airport, capacity is usuallymeasured in terms of the number of aircraft movements(i.e. take-offs or landings) the airport can safely accommo-date in a specified period of time. Airport capacity can alsobe measured by passenger/freight throughput (expressed inpassengers/freight tonnes per hour).

Governments typically regulate the capacity of inter-national air services through negotiation and implemen-tation of their bilateral air transport agreements. Statesoften consider international traffic originating in their terri-tories as national property and as an article of internationalcommerce which must be traded on the best possible terms,whether involving reciprocal rights or other considerations.In bilateral air services negotiations, this “ownership oftraffic” concept has enabled States to claim a capacity shareproportional to their homeland originating traffic in the

market and to treat such traffic between the bilateral partnerStates as “belonging” to them.

National governments generally view capacity in abroader context than do air carriers. Consequently, capacityregulation inevitably involves a wide spectrum of nationalinterests extending beyond the economics of air transport.In making capacity decisions, governments must take intoaccount national policy goals (such as promoting inter-national trade, tourism and economic development) andtheir general responsibility for the public interest. Forexample, governments may want more capacity for pass-engers and/or cargo to be provided in certain areas or oncertain routes than airlines believe economically justified.

National airlines designated to perform international airservices are often regarded as national instruments or flagcarriers and are treated as part business enterprise and partpublic utility. In this role, they may at times be required tooperate in accordance with the needs of their country’sforeign or other general commercial policies rather than theneeds of an economically viable air service. Thus, althoughStates generally give high priority to the interests of theirown national airlines, they must also bear in mind the airtransport capacity requirements of their tourism industriesand international trade.

Terms commonly used with respect to air carriercapacity and its regulation include the following:

• load factor, i.e. the percentage of available capacitythat is actually sold and used by revenue passen-gers and/or freight, on a single flight over a singleflight sector;

• passenger load factor or seat factor, i.e. the loadfactor applied solely to utilized passenger capacity;

• average load factor, i.e. the mean load factorachieved over a period of time, on a given flight,flight sector or route; in a particular market; or bya particular air carrier;

CAPACITY REGULATIONBY GOVERNMENTS


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• break-even load factor, i.e. the load factor at whichrevenue achieved equals the operating cost, aver-aged to reflect results over a specified period oftime;

• authorized capacity, i.e. the amount of capacity,determined by a regulating State or States, that maybe operated on a specific flight or route, betweencity-pairs or between two States;

• conversion factor or formula, which is used toequate capacity when aircraft of different capacitiesare employed in circumstances in which frequencyis used as the unit for capacity regulation by Statesseeking to maintain a strict balance in the capacityoffered by competing airlines (for example, twoB767 aircraft might be considered to have the samecapacity as one B747 aircraft);

• capacity allocation, i.e. the amount of capacityeach airline is permitted to operate when more thanone designated airline from a State wishes to usethe authorized capacity.

In developing capacity policy or positions for bilateralair services negotiations, which usually involve directparticipation of or input from their national airlines, airtransport regulatory authorities face three basic decisions:

• how capacity for each type of service (scheduledand non-scheduled, passenger, cargo, combination,etc.) will be regulated;

• how capacity will be apportioned among airlinesproviding those types of services; and

• how adjustments in capacity will be made.

As policies on commercial air transport regulation vary(sometimes widely) from State to State, the attitudes andapproaches of States toward capacity regulation also differ.Over the last five decades, States have developed manyforms of capacity regulation in their bilateral relations.However, the methods used fall into three basic categories,for which model clauses have been developed by ICAO asguidance to States and for possible inclusion in their bilat-eral agreements. Each model clause is accompanied by aset of criteria, related objectives and guidelines. (See Part 1,Section C, of Doc 9587.) The three categories are:

• the predetermination method, which requires thatcapacity be agreed upon prior to the commencement

of operation, either by governments or their aero-nautical authorities, or between their designatedairlines subject to governmental approval;

• the Bermuda I type method, which is a form ofcapacity control modelled after the one negotiatedbetween the United Kingdom and the United Statesin Bermuda in 1946, in which the governments setout the capacity principles for the designatedairlines to follow but allow each airline the freedomto determine its own capacity, subject only to expost facto review by the governments through theirconsultation procedure; and

• the free-determination method, which allowscapacity to be decided by air carriers free of gov-ernment control, but may require each party toeliminate all forms of discrimination or unfairpractices that would adversely affect competition.

In the bilateral negotiation of capacity regulationarrangements, difficulties are likely to arise between Stateswith differing policies or views on:

• the interpretation of “reciprocity” and “fair andequal opportunity” to operate or compete; and/or

• the need for capacity to be predetermined and forair carrier coordination of capacity; and/or

• the probable effects of increasing or decreasingcapacity (e.g. on load factor, yields and quality ofservice); and/or

• the provision and validity of traffic data as a meansof determining capacity requirements; and/or

• non-aviation considerations involved in capacitynegotiation (e.g. international trade balance, devel-opment of exports, tourism needs).

In such situations, the involved parties have to makecompromises to narrow or overcome their differences, of-ten resulting in agreements which contain combinations orvariations of the three basic methods of capacity regulation.For example, some agreements on capacity reached byStates after 1980 combine aspects of predetermination ofcapacity with the flexibility and rapid adjustment associ-ated with the free-determination method. These arrange-ments essentially give air carriers freedom to determinecapacity within predetermined limits. Included among themethods used are:

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• giving advance approval for minimum levels ofservice (such as daily) and for annual or seasonalincreases in the number of frequencies in specificcity-pair markets;

• allowing an air carrier to operate a specified per-centage, for example 150 per cent, of the capacityoperated by competitor(s) from another State, or tomatch the capacity offered by competitor(s), or tooperate the unused capacity assigned to another aircarrier;

• allowing the capacity shares between airlines ofeach State on a route or city-pair to vary by up to,for example, forty per cent for one and sixty percent for the other;

• utilizing formulas which provide for specifiedincreases in capacity provided a certain averageload factor is achieved during a specified period oftime; and

• allowing air carriers to determine capacity providedthat the aircraft used does not exceed a specifiedcapacity (e.g. sixty seats).

One major problem in capacity regulation concerns thecapacity for the carriage of Fifth Freedom traffic. Althoughthe right to carry Fifth Freedom traffic is generally regardedas supplementary to that of the right to carry Third andFourth Freedom traffic, it is at the same time considered bymany to be essential to the economic viability of multi-stopinternational services. In bilateral negotiations, the Stategranting Fifth Freedom rights is often concerned about thepotential effect of the capacity offered by the Fifth Freedomair carrier(s) of the other State on traffic to/from the thirdState which may be served by its national airline(s) on aThird and Fourth Freedom basis. The problem also stemsfrom the fact that it is difficult to define precisely when thecapacity offered by Fifth Freedom carrier(s) has become sosubstantial that it is no longer supplemental and isadversely affecting the Third and Fourth Freedom trafficshare of national air carrier(s).

Regulation of scheduled and non-scheduled services inthe same markets used to be a major problem to someStates. In the 1960s and 1970s, non-scheduled servicesgrew rapidly and had become quite important in somemajor markets (e.g. Europe and the North Atlantic), com-peting directly with scheduled services. The absence of anagreed capacity regime for non-scheduled operationsaroused serious concerns among some governments and

scheduled air carriers. It was claimed that the significantcapacity then offered by non-scheduled operators had orcould have an adverse impact on scheduled air carriers and,therefore, should be subject to stricter control. To addressthe issue with a view to maintaining a reasonable balancebetween the involved interests, States developed severalregulatory devices for authorizing capacity for non-sched-uled services, including:

• permitting a fixed number of flights by type (pass-enger, cargo, combination) per year or per season;

• adopting directional ratios for specific markets peryear or per season;

• using a criterion of no undue effect on scheduledservices, while preserving a desired balancebetween scheduled and non-scheduled services;

• allowing air carriers operating non-scheduled ser-vices to operate only or primarily between pointswhich do not have scheduled services;

• allowing air carriers to operate only certain types ofnon-scheduled flights (e.g. cargo, inclusive tourcharters); and/or

• limiting non-scheduled capacity to a fixed percent-age (e.g. 20 per cent) of scheduled service flights.

As liberalization progresses and along with the recognitionthat scheduled and non-scheduled services generally caterto distinct markets, the capacity of non-scheduled serviceshas now become less of a regulatory issue. An additionalfactor has been the blurring of the regulatory distinctionbetween the two types of services in certain markets.

Capacity is of vital operational and financial importance toair carriers mainly because of the nature of the commercialair transport business, which has several distinctive featuresin terms of the economics of its operations:

• the means of production (commercial transport air-craft) it uses are very expensive and must be utilizedeffectively to generate sufficient revenue to coverthe investment;

CAPACITY AS VIEWED BYAIR CARRIERS


4.2-4

• the product (passenger seats and cargo space) itoffers is perishable (though in a sense renewable)and, unlike manufactured goods, cannot be storedbecause once an aircraft leaves the terminal, seatsor space cannot be sold and are therefore lost; and

• the customers (passengers and freight shippers) itserves are time and/or price sensitive and havedifferent service requirements.

As a consequence, the financial success of an air carrierwill depend largely on how efficiently it utilizes its aircraftand how well it matches capacity to demand.

Where possible, air carriers seek to match capacity totraffic demand in order to maximize profits and minimizeunused capacity on each flight. This is relatively easy fornon-scheduled service operators, since the entire capacityof the aircraft (or major portions thereof) are usually sold(or contracted for) well in advance of operation. However,it can be very difficult for scheduled air carriers because:

• a scheduled service by definition must maintain aregular pattern of operation and generally isexpected to fly according to the published timetableregardless of how much of the capacity has beensold;

• there is normally a need to provide sufficientcapacity to cater to on-demand traffic (usuallyhigher yield passengers) with seats which may bebooked near or up to the time of departure;

• where a multiple stop service is involved, certainseats/space may need to be left vacant for use byen-route joining traffic;

• while traffic demand may vary by direction andtime of day, operational constraints may require useof the same type of aircraft (with a fixed capacity)for all flights in both directions; and

• while increases or decreases in demand for a par-ticular service often occur gradually and may not beconcentrated at a specific day and time, capacitycannot be added or subtracted in small amounts, butonly by an entire aircraft.

Due to these reasons, scheduled air carriers generally pro-vide on average more capacity than the actual traffic (forexample, the average passenger load factor worldwide forinternational scheduled services was 70 per cent in 2001).

Individual air carriers use historical experience andtheir best estimates of future demand as well as other tech-niques to determine the capacity to be offered on a route orin a particular market. However, scheduling the rightamount of capacity can be difficult because the process issubject to, or complicated by, many factors outside the aircarrier’s control.

One significant factor is the regulatory regime withinwhich the air carrier is operating. Certain aspects of theregime may inhibit its freedom of action. For example, theair carrier may be required to agree with its competitor(s)on the capacity to be offered on a route. Alternatively, itmay be forbidden for competitors to agree on the capacityto be offered on a route. Desired capacity increases mayneed to be approved by government(s) and/or competitor(s).

A second and important factor is the nature of demandfor international scheduled air services. Traffic demand canbe affected by numerous factors, many of which are inter-related and some subject to regulatory constraints, such as:

• price (a tariff, if set too high, may discourage use,while a low tariff may result in a higher load factorbut produce lower yields);

• frequency (a high frequency service which providesmore choices could attract more users, but may notbe economically viable on a route with a lowvolume of traffic);

• route structure (a multiple-stop service is not asattractive as a non-stop service serving the sametwo cities);

• service via a hub (the required en-route change ofaircraft lessens the attraction although the increasedfrequency typically provided adds to the attraction);

• type of aircraft (passengers generally prefer a wide-body to a narrow-body aircraft, or a jet to a propelleraircraft);

• season (summer may see more people travellingthan winter, warm destinations are more popular inwinter; a pre-holiday period may produce morefreight and a holiday period may produce morepassengers);

• the state of the economies of each involved Stateand/or the regional or global economy (demand willbe less during an economic recession);

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• the security situation in the destination State which,if adverse, can reduce demand; and

• concerns about flight security in general.

A third factor is the capacity and pricing actions, actualand potential, of competing air carriers in the same market.In a competitive market, capacity becomes an essentialmeans for an air carrier to maintain its market share. Wherecompeting carriers are allowed to decide, independently,capacity and tariffs, there is a tendency that under competi-tive pressures each carrier seeks to operate more capacitythan the other, or to match another’s capacity in order tomaximize or maintain its share of the traffic. This may leadto a situation of excessive capacity. Viewed strictly fromthe airline’s standpoint, excessive capacity may not be con-sidered to exist in terms of economics if the airline canachieve sufficient revenue to cover cost, even at a low loadfactor, for example 50 per cent. To individual air carriers,excessive supply means waste of product (i.e. emptyseats/space) and tends to cause prices to go down, resultingin reduced yield and financial losses; conversely, inad-equate capacity risks turning away passengers/shippers,hence losing potential sales.

Other factors which may have a potential impact on thedemand and supply relationship include the availability ofother capacity in the form of indirect routings between theinvolved States (e.g. services provided by Fifth Freedom or“Sixth Freedom” operators) or in the form of air charteroperations and, in some cases, the availability of alternativemeans of transport, such as high-speed rail.

Yet another predicament for air carriers in adjustingcapacity to demand is the lead time usually required toacquire new aircraft (i.e. new capacity). Air carriers usuallyorder additional aircraft according to their forecast of futuredemand and arrange deliveries over a number of years. Asdemand has a close relationship to the performance ofnational economies, and collectively to the global economy,which influences airline traffic forecasts, air carriers tend toplace their orders when the economy is growing or at itspeak. However, because the performance of the economy isusually cyclical and sometimes beyond accurate prediction,it may happen that years later when the carriers’ newcapacity arrives, the economy is in a slump or at the bottomof the cycle and traffic demand has fallen off. To mitigatesuch situations, air carriers are increasingly adjusting theircapacity by leasing aircraft, deferring delivery, or evencancelling orders.

Given all these features of the industry, air carriersgenerally deal with capacity in three ways. First, air carriersparticipate in, or seek to influence, government policy anddecision making with respect to capacity regulation in orderto secure a favourable regulatory environment and toensure that their interests are taken into account. They alsogenerally participate in the bilateral consultation processinvolving capacity arrangements and often rely on govern-ment assistance in solving capacity problems or settlingdisputes which they themselves are not able to resolve.

Second, in order to achieve optimum operating results,individual air carriers seek to enhance their aircraft capacityutilization through:

• better fleet planning based on more accurate trafficforecasts so that capacity will better match demand;and/or

• better scheduling, e.g. flying at user-preferred timesto the extent possible, minimizing the ground timeof an aircraft spent at arrival/departure gates, andotherwise maximizing aircraft utilization; and/or

• adjusting the configuration, i.e. the seating and/orcargo space arrangement of an aircraft to bettercater to currently perceived market demands; forexample, a passenger aircraft can be arranged tohave a multiple class seating (e.g. first and/or busi-ness, and economy class), or a single class seating(e.g. business only or all economy class).

Optimum operation results may also be sought byemploying yield management, a widely used form ofinventory control involving the allocation and frequentadjustment of seat availability for the booking of each ofmany booking classes (fare types, e.g. normal economy,various discount tickets, free frequent flyer, etc.) andorigin/destination combinations, in ways calculated to pro-duce the maximum revenue for each flight sector at the faresoffered. Revenue management adds close and ongoingcoordination between the price managers who create thefares and yield managers.

Yet another tool to achieve optimum operating results isoverbooking, i.e. accepting more reservations than theactual seating capacity of one or more classes of serviceson a given flight sector, typically placing some limits on thevolume of overbooked seats, with the expectation that therewill be a sufficient number of cancellations or “no shows”by departure time to avoid or minimize denied boardingwith the passenger compensation costs it entails. When


4.2-6

actual denied boarding is about to occur the carrier willtypically seek volunteers to give up their seats for compen-sation (such as a free future trip) and re-booking on a laterflight, usually of the same carrier. Alternatively, a carriermay reduce or not utilize overbooking but employ standbylists of potential passengers who, shortly before departure,may be assigned the seats of confirmed passengers whohave failed to appear. Costs can be reduced because stand-by passengers are not entitled to compensation; however,this can entail ensuring that the standby passenger’schecked baggage/luggage is loaded, but only if the standbypassenger is allowed to and does board the aircraft.

Third, air carriers coordinate among themselves, wherepermitted, capacity and tariffs on routes they operate so asto avoid excessive capacity supply and destructive compe-tition or to obtain benefits from their alliance. Some air car-riers also enter into pooling arrangements, commercialagreements which may involve agreed capacity, conditionsof operation, and the sharing between the parties of one ormore of the elements of traffic, frequencies, equipment,revenues and costs. Though this method has been endorsedand sometimes required by governments, it has now becomeless important in capacity regulation and is not permitted inan increasing number of markets.

4.3-1

Chapter 4.3

AIR CARRIER TARIFFS

Air carrier tariffs are one of the three major elements in theregulation of international air transport (the other two beingmarket access and capacity), although their regulatoryimportance has gradually decreased along with the generaltrend of air transport liberalization.

ICAO has done extensive work on tariffs anddeveloped relevant guidance which is reflected in Part 4(International Fares and Rates) of Policy and GuidanceMaterial on the Economic Regulation of International AirTransport (Doc 9587).

This chapter lists some of the reasons why States regu-late tariffs, defines the term “tariff”, provides informationon different types and characteristics of tariffs includingterms and expressions used by the airline industry,describes methods for establishing tariffs as well as inter-national and national regulatory mechanisms, and discussessome key tariff issues.

Among the reasons why a State regulates internationaltariffs are the following:

• to ensure that its national carrier or carriers have afair opportunity to compete in providing inter-national air services;

• to support pertinent national goals and objectives,such as encouraging international tourism and trade;

• to promote competition in international air transportby, for example, seeking flexibility for individualair carriers to use tariffs of their choice; and

• to respond to the needs of users of international airtransport.

The types of tariff regimes States have developed reflectboth their reasons for regulating tariffs and the fact thatthose reasons are often not shared by all States concerned.Thus, several tariff regimes are compromises which reflectthe different reasons States have for regulating internationalair tariffs.

This situation, combined with air carrier efforts to usetariffs which respond to different markets and to differentsegments of the same market, has resulted in a complexsystem of international air tariffs which is described inmore detail in the sections below.

The regulatory importance of how a tariff is defined lies inwhat aspects of pricing are included (and are therefore sub-ject to the applicable international and national regimes)and what aspects are in effect left to air carriers’ commer-cial practices. A State’s definition of a tariff will thereforereflect the extent it wishes to regulate this aspect of inter-national air transport. States wishing to control all aspectsof tariffs will use a broad, all-encompassing definition.States wishing to liberalize air carriers’ pricing will use amore limited definition.

A tariff is: 1) the price to be charged for the carriageof passengers, baggage or cargo (excluding mail) in airtransportation, including any other mode of transportationin connection therewith, if applicable, charged by airlines,and the conditions governing its availability and use; and,in some States, 2) the document (also known as a tarifffiling) containing such prices and conditions which a car-rier or its agent files (either in electronic or paper form)with the appropriate regulatory authorities.

WHY STATES REGULATE TARIFFS

DEFINITION OF TARIFF


4.3-2

An international tariff is for transportation betweentwo or more States (and includes as well any domestic seg-ment of an international journey); a domestic tariff is fortransportation between two or more points of a single State.The international tariff between Canada and the UnitedStates is specifically called a transborder tariff.

Both international and domestic tariffs are divided intotwo categories, based on what is being transported. Gener-ally, a fare is a tariff for the carriage of passengers and arate is a tariff for the carriage of cargo. The term rate alsoapplies to the charter of an entire aircraft or a part thereof(on scheduled services, referred to as blocked space).

The ICAO definition of an international tariff (seeDoc 9587, Part 4) was developed with emphasis on sched-uled services as well as with the aim to include all relevantareas while removing all areas of uncertainty as to what isencompassed by the term “tariff”. This definition includesa tariff rule or condition, i.e. an expressed restriction orcondition governing the applicability of the tariff or theprice for carriage.

There are two types of tariff rules. General rules arethose which are applicable to many different types of tariffs,for example, fare/rate construction rules, currency conver-sion rules, refund and claims procedures, conditions ofservices, baggage allowances and excess baggage charges,reservation/ticketing conditions, rules of discounts, anddenied boarding compensation. Each tariff filing will havereference to the general rules which apply to it. Specificrules are those which are associated with each fare andrate or those which override the general rules for a specificfare or rate. With respect to a passenger tariff, specific rulesgovern the elements of, inter alia, reservation/ticketing,length of stay (maximum and minimum stay), stopovers,transfers, fare combination, re-booking/re-routing, andcancellation (refund, if any).

In some cases, general rules contain conditions ofcarriage, i.e. the terms and conditions established by an aircarrier in respect of its carriage. Conditions of carriage areincorporated by reference into conditions of contract, i.e.the terms and conditions shown on the travel documents,i.e. the passenger ticket or freight air waybill. Both con-ditions spell out the various benefits and limitations associ-ated with the air transportation being provided. Thesebenefits and limitations, along with the price, constitute acontract for carriage between the air carrier and the user.Often associated with the use of an air waybill are the termconsignee, i.e. a person or an entity named as the receiver

of a shipment (one to whom the shipment is consigned) andthe term consignor, i.e. one who designates the person orentity to whom goods are to be sent (usually the shipper).

The ICAO definition of “tariff” also includes com-missions or standard commissions, i.e. a fixed public levelof remuneration paid by an airline to intermediaries suchas travel agents and freight forwarders/consolidators, andthe conditions governing the applicability of the com-mission payment; any significant benefits provided tousers, such as reduced rates on lodging and car rental, andfrequent flyer programmes, in which members earn free orreduced fare transportation or other benefits on the basis ofthe amount of their travel on certain airlines or for theirpurchase of certain goods and services; and a visit anothercountry tariff, i.e. a kind of domestic or international tariffnot available in the country or region visited and sold onlyabroad in conjunction with an international carriage.

In contrast to surface modes (such as rail and water), inter-national air transport has developed a wide variety of tariffsfor several reasons. For example, this variety may resultfrom efforts by air carriers to fashion tariffs to respond todifferent markets as well as to different segments of thesame market. The price disparity among air carriers mayreflect the degree of competition and carriers’ relativestrengths in the marketplace, which may depend on the net-work scale, flight schedules and frequency, market pen-etration, goodwill and service levels, etc., of each carrier.The prices maximizing revenue, therefore, may not be thesame for each airline. In addition, States’ reasons for regu-lating tariffs and the different tariff regimes developed as aconsequence have further complicated the international airtariff situation.

Passenger fares

There are broadly two types of passenger fares — publishedand unpublished — from the air carriers’ pricing perspec-tive. A published fare or a public fare is a fare publiclydisplayed and distributed and if necessary filed with a gov-ernment or governments for approval. An unpublished fareor a private fare (sometimes also called a market fare or anoff-tariff fare) is a fare which is neither publicly distributednor submitted to the government for approval. A published

TYPES AND CHARACTERISTICSOF TARIFFS

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fare is distinguished by the following five main criteria,which sometimes overlap.

First, there is a distinction based on how publishedfares are developed. An IATA fare is a published faredeveloped by the Traffic Conferences of the InternationalAir Transport Association (IATA), while a non-IATA fare isany published fare other than an IATA fare. A non-IATAfare includes a bilateral/multilateral fare collectively deter-mined through bilateral or regional tariff consultationamong two or more airlines, a government order farewhich is introduced by order of a government, and a so-called carrier fare which is determined individually basedon each airline’s judgement or is jointly determined by thecooperation of a group of allied airlines. Carrier fare usagehas grown rapidly in recent years because of liberalization.The term agreed fare or fare agreement refers to both anIATA fare and a bilateral/multilateral fare.

Second, published fares can be classified in terms of thenumber of air carriers which transport the passenger. Aninterline fare or a joint fare is one which applies for inter-line carriage and which is published as a single amount,while an online fare or a local fare is one for transpor-tation on one air carrier. The term interlining refers totransportation on more than one air carrier (see also thesection on key tariff issues). All IATA fares, most bilateral/multilateral fares and government order fares, and somecarrier fares (for example, alliance partners fares) are inter-line fares, although the scope of interlining may vary. Mostcarrier fares are online fares.

Third, there is a distinction of published fares in termsof the specification of a through fare, i.e. a total fare frompoint of origin to point of destination. In general, airlinesspecify through fares between a limited number of gatewaycity-pairs. The amount of each such specified fare, i.e. athrough fare specifically set out either as a one-way fare ora round trip fare, is different depending on the point oforigin from which the passenger’s journey begins. Throughfares for other city-pairs are constructed by combining aspecified fare and an add-on, an arbitrary or a proportionalfare which are specific amounts used only to constructunspecified through fares to be displayed and quoted. Forexample, normal fares from Tokyo to Montreal are con-structed over Vancouver by combining a specified normalfare from Tokyo to Vancouver and an applicable add-onfrom Vancouver to Montreal. These unspecified throughfares created by the use of add-ons are known as construc-ted fares. When there are neither specified fares nor appli-cable add-ons to create constructed fares from point oforigin to destination, through fares can be constructed for

the purpose of applying fare construction rules by using thelowest combination principle, i.e. the lowest combinationof separate specified fares or specified fare(s) and appli-cable domestic fare(s) over an intermediate ticketedpoint(s).

Fourth, there is also a distinction based on the routingcontrol method. A mileage fare is a direct route fare gov-erned by the mileage principle in calculating the applicablethrough fare amount for indirect travel. The mileage prin-ciple compares the passenger’s actual itinerary or sum ofeach ticketed point mileage (TPM), i.e. the shortest oper-ated mileage between each sector, with the comparablemaximum permitted mileage (MPM) from point of originto destination, which is generally 120 per cent of the short-est operated mileage. If the sum of TPMs for each sectoris less than the MPM from point of origin to destination,the direct route fare is used. If the sum of the TPMs is inexcess of the MPM, a graduated table of percentages from5 to 25 per cent is used to calculate a surcharge to be addedto the direct route fare. In contrast, a routing fare or asingle-factor fare is a direct route fare governed by thespecified diagrammatic or linear routing, disregarding themileage principle. As long as the passenger’s itinerary is inline with the specified routing, a direct route fare can beused.

Fifth, published fares are divided into two generalcategories — normal and special — based on the avail-ability of certain benefits and how they are priced. Anormal fare is a fully flexible fare established for first-,business- (intermediate), or economy- (coach, sometimesalso premium economy) class service, which allows maxi-mum flexibility in terms of reservation/ticketing, length ofstay, stopovers, transfers, fare combination, re-booking/re-routing and cancellation, etc. In some markets, there is alsoa restricted normal fare or a point-to-point normal fare,which retains most of the characteristics historicallyassociated with normal fares but has restrictions, forexample, on the availability or number of stopovers and, insome cases, on the ability to interline transfers. While anormal fare is regarded as a bundled fare, which includesall the primary facilities for the passenger for a singleprice, a restricted normal fare is regarded as an unbundledfare, one which is based on the provision of point-to-pointtravel only with additional charges for use of extra facilitiessuch as stopovers and transfers.

A special fare is any fare other than a normal fare.There are two types of special fares — non-promotionaland promotional. A non-promotional-type special fare or astatus fare is a discount fare the availability of which is


4.3-4

restricted to persons having specified personal attributes,such as student, youth, child, spouse, family, senior citizen,disabled, government official, military, seaman, voter,worker, refugee, emigrant, travel agent, airline employee,or pilgrim, some of which have traditionally been estab-lished by government orders. Status fares are targeted onlyto narrow groups of the population so that airlines caneffectively minimize the number of passengers who wouldhave previously paid higher-priced fares. In contrast, apromotional-type special fare is a discount fare availableto anybody who can meet conditions on reservation/ticket-ing, length of stay, cancellation, etc. The restrictions at-tached to lower-priced fares act as “fences” to minimize therevenue dilution from higher-priced fares. The typicalexamples include:

• excursion fare, which is usually the highest andmost flexible special fare but with some travel con-ditions such as restrictions on length of stay andstopovers;

• special excursion fare (or instant purchase fare,public excursion fare, PEX fare), i.e. a specialfare at a lower level but with more restrictiveconditions than an excursion fare in terms ofreservation/ticketing, length of stay, stopovers, re-booking/re-routing and cancellation, etc.;

• advance purchase excursion fare (APEX fare), i.e.a special fare with the condition that the passengerbooks and pays for a ticket within a specifiedperiod of time before travel begins in addition tosimilar conditions to those of a PEX fare;

• group inclusive tour fare (GIT fare), i.e. a specialfare used by travel agents for groups of specifiedminimum sizes consisting of passengers who havepurchased an inclusive tour; and

• individual inclusive tour fare (IIT fare), i.e. aspecial fare used by travel agents for individualpassenger travel as part of an inclusive tour.

In many markets, airlines apply peak-load pricing, i.e.pricing calculated to smooth the fluctuation of demandwhere peak hours/days are experienced. The level and avail-ability of special fares, especially lower-priced ones, mayhave two or more seasonal variations known as season-alities based on the time of year. Some normal and specialfares also vary depending on the day of the week on whichtravel begins. Airlines also develop a sell-up tariff

structure, i.e. one with a stepped series of restricted,capacity-controlled special fares in addition to normal fares.The fares are arranged in booking classes for purposes ofinventory control, and typically the lower the fare level, themore onerous the fare conditions. When the limited capacitydevoted to the lower, more restrictive fare is filled, passen-gers are offered only higher, less restrictive fares. Thisdynamic seat allocation process is dealt by the latest yieldmanagement (revenue management) system, which aims tomaximize revenue by ensuring that passengers buying lowerspecial fares (mainly leisure passengers) are not allocatedseats which passengers buying higher normal fares (mainlybusiness passengers) might otherwise occupy (seeChapter 4.2).

Published fares are disseminated in paper format, suchas tariff manuals and publications, and more widely in elec-tronic format through the computer reservation systems(CRSs) and the Internet websites. For this purpose, mostairlines use the electronic systems operated either by theAirline Tariff Publishing Company (ATPCO) or SITA (for-merly Société Internationale de Télécommunications Aéro-nautiques), which collect information on published faresfrom airlines and distribute it to CRSs and tariff publishersand, in some cases, submit it to governments as a filingagent. Then, published fares are sold to passengers directlyby airlines and indirectly through travel agents (includingthird-party websites) at the same prices without regard towhere or by whom. Travel agents will receive standardcommissions on published fares from the airline, thoughsome airlines have abolished commissions altogether or foronline sales.

In contrast to a published fare, an unpublished fare hasa limitation on distribution and use, based on a specialnegotiation or contract deal between an airline and a travelagent (including a consolidator, i.e. an intermediary whopurchases blocks of airline seats and resells them to otherretail agencies and a wholesaler, i.e. an intermediary whocoordinates air travel and land content and sells the pack-age mostly to other travel agents), an electronic reservationservice provider including an Internet website, or otherentity such as a corporation and an organization.

Most unpublished fares fall into negotiated fares, i.e.unpublished fares which are offered selectively to cus-tomers and generally have three layers of linked fareamounts — gross, net and selling. A gross fare is a fullamount of a published fare, which is often shown on theactual ticket’s passenger coupon. A net fare or a startingnet is an amount charged by an airline to a contracting


4.3-5

travel agent or other entity, exclusive of any commissionpaid at the back end, i.e. after the sales reports are pro-cessed. The net fare takes various forms from a specific flatrate to a fixed amount (so-called knock-off value) deduc-tion or a percentage discount from gross fares. Airlines alsousually pay a commission override, i.e. an amount overand above the standard commission according to route,sales volume, etc., as an incentive and bonus at the backend. The amount due to the airline after payment of allthese back-end commissions, bonuses and incentives iscalled a net/net. A selling fare which a contracting travelagent offers to an end-customer is set at a price higher thana net fare, not only giving the agent its margin but alsogiving the end-customer a discount from the published fare.

The most prevailing unpublished fare is a so-calleddiscounted fare or a discount ticket, i.e. a fare availableonly through travel agents at an amount below a gross fare.Discounted fares are rarely sold by consolidators andwholesalers, but by their retail agents including so-calledbucket shops, i.e. no-frill smaller agents selling heavilydiscounted fares. Other examples of unpublished faresinclude contract discounts for corporations, bulk discountsfor conventions and meetings, auction fares, promotionaloff-tariff products such as direct-mail special offers and up-grade coupons for customers. Recently, more airlines useATPCO to disseminate their unpublished fare informationthat is transmitted only to their contracting travel agentsand other entities.

Since an unpublished fare differs from any publishedfare with respect to fare level and/or conditions, someunpublished fares may constitute a tariff malpractice, i.e.excessive discounting, under certain jurisdictions. Thisraises a matter of tariff enforcement, i.e. measures taken toensure that international air transport is sold only atapproved prices and conditions. The particular regulatoryfocus has been placed on fares sold directly to passengersby airlines through the new distribution outlets. Forexample, some States believe that an Internet fare or aWeb fare, i.e. a fare available only through the Internet, ifit is offered via the websites of individual airlines oralliances, is no different from any other published fare andso require airlines to file such Internet fares for approval.

Cargo rates

Cargo rates have some of the same distinctions made withrespect to passenger fares and are determined using similarpricing practices and concepts, but with different terminol-ogy. The general cargo rate varies with weight by applying

different prices per kilogram depending on whether theweight of the shipment falls above or below a break pointwhich is a specified weight level at which the price perkilogram changes. General cargo rates do not vary accord-ing to the nature and value of the property transported andare used when the property being shipped does not qualifyfor any other cargo rate. As a reference for calculating otherrates, the general cargo rate serves a similar purpose to anormal economy-class fare.

A rate which combines the pricing features of bothpremium and special fares is a class rate, one determinedby applying a discount or surcharge to a general cargo ratefor certain commodities (for example, a discount for news-papers and a surcharge for commodities requiring specialtreatment during shipment, such as livestock, gold andsecurities).

A rate which has a similar purpose to special fares is aspecific commodity rate, used for certain types of cargo,which is generally lower in price than the general cargorate at comparable weights but may also include restric-tions (such as minimum shipment size). As in the case ofspecial fares, airlines use restrictions to minimize thedilution of revenue from general cargo rates. Where morethan one mode of transport is involved, fares for air/sea orair/rail transport are similar to the intermodal rate, i.e. therate for the transportation of cargo by more than one mode(air, rail, road, maritime).

Some rates have no counterpart on the fares side. Forexample, a container rate is applied to cargo shipped incontainers. Two container rates are: 1) a ULD (unit loaddevice) discount rate which provides reductions on generalcargo, class or specific commodity rates for cargo inowner-supplied and owner-packed containers; and 2) afreight-all-kinds rate which is not calculated by applying adiscount or a surcharge to other rates but is determinedseparately and applied to cargo in airline-owned or ship-per-owned containers.

Charter rates/fares

A charter rate is a tariff for the charter or lease of all ora part of the capacity of an aircraft. In contrast, a charterfare is the price charged an individual passenger on acharter flight by the charter organizer or charter touroperator. Charter fares have some of the characteristics ofcomparable fares on scheduled services. For example, agroup inclusive tour charter fare and an individual inclusivecharter fare are comparable to GIT and IIT fares on


4.3-6

scheduled services, although charter fares are usually lowerand more restrictive, inter alia, in terms of changes in itin-erary and refund availability.

There exist two different but interrelated regulatory mech-anisms governing air carrier tariffs. The first one is aninternational framework based on the relevant tariff pro-visions of bilateral or multilateral air services agreements.The second one is a national tariff regulatory regime basedon relevant national laws, regulations or policies, whicheach State applies to the tariffs used for the air servicesgenerally touching its territory.

International tariff regimes

In the bilateral or multilateral agreements, States havedeveloped different tariff regimes based on how manyStates must approve a tariff before it becomes effective.These include double approval in which both Statesconcerned must approve a tariff; country of origin inwhich only the State in which the transportation originatesneed approve the tariff; double disapproval or dual disap-proval in which both States concerned must disapprove atariff to prevent it from coming into effect; flexible pricingzones in which States agree to approve tariffs falling withina specified range of prices and meeting correspondingconditions (outside of the zone, one or a combination of theabove-mentioned regimes may apply); and free pricing inwhich tariffs shall not be subject to the approval of anyStates, though some agreements may allow States to requirenotification of tariffs for informational purposes only.(Model clauses and explanatory notes for the doubleapproval, country of origin and dual disapproval regimesare contained in Part 4 of Doc 9587.)

The traditional type of double approval regime hasusually been accompanied by the requirement that desig-nated airlines have to consult with other air carriers todevelop an agreed tariff or a tariff agreement on all or partof the route, if necessary and possible. It also has required,implicitly or explicitly, that air carriers use an appropriateinternational rate fixing mechanism (often within the IATATraffic Conferences) wherever possible. If the designatedairlines cannot agree on tariffs, or if the required approvalis not given to agreed tariffs, the States themselves seekagreement on the tariffs concerned. More recent bilateral

agreements, however, liberalize the procedure of doubleapproval by relaxing such requirement. In this case, desig-nated airlines are allowed to develop any tariffs unilaterallyat their option, while the governments refrain from exer-cising disapproval authority unless filed tariffs are contraryto the pre-determined relevant factors.

Both regimes, country of origin and flexible pricingzones, generally have a transitional nature towards more lib-eral regimes such as double disapproval and free pricing. Atthe bilateral level, few agreements contain both theseregimes. As explained below, flexible pricing zone arrange-ments are often adopted unilaterally at the State level. At themultilateral level, the country of origin regime has beenintroduced by two regional agreements — the Andean Pactin 1991 and the Forteleza Agreement in 1997. On the otherhand, the zone pricing arrangement within the EuropeanUnion was replaced by a free pricing regime in 1993, andone by the Memorandum of Understanding (MOU) onNorth Atlantic Pricing between the United States and mem-ber States of ECAC expired without further renewal in 1991.

The double disapproval regime allows the prices of airtransportation to be established by each designated airlinebased upon commercial considerations in the marketplace.Unilateral intervention by each State is limited to, forexample, prevention of predatory or discriminatory pricesor practices, protection of consumers from prices that areunreasonably high or restrictive due to the abuse of a domi-nant position, and protection of airlines from prices that areartificially low due to direct or indirect governmental sub-sidy or support. Each State may request consultation withthe other State regarding tariffs for which a notice of dis-satisfaction has been given, but the tariff in question shallgo into or continue in effect if mutual agreement is notreached.

There are also an increasing number of hybridapproaches of more than one regime. One example is a dis-tinction between the approval process of passenger andcargo tariffs. In this approach, a liberal scheme is appliedonly to cargo tariffs. Another notable example of hybridsystems is a country of designation arrangement, underwhich each State agrees to follow double disapproval,country of origin or zone pricing schemes, subject to thecondition that each State can unilaterally disallow any tar-iff in question filed by one of its own designated airlines.By taking this approach, even under the double disapprovalregime, each State can effectively preserve its disapprovalauthority against its designated airlines’ tariffs subject tocertain conditions.

METHODS FORREGULATING TARIFFS


4.3-7

Some recent agreements also developed a single disap-proval regime, under which one State may unilaterally dis-approve a tariff, but only when it believes that such tariff iscontrary to pre-established conditions. By nature, thisregime is a variation of the double disapproval regime. Theonly difference is in that the tariff in question may not gointo or continue in effect when States cannot reach mutualagreement during consultation. This regime can also beused in conjunction with the free pricing regime. Forexample, within the European Economic Area, communityair carriers have been allowed to set their tariffs freely since1993, but each member State can withdraw a basic fare, i.e.the lowest fully flexible fare available on a one-way andround trip basis, which is excessively high to the disadvan-tage of users. In a non-discriminatory way, a member Statecan also stop further fare decreases that would result inwidespread losses among all air carriers on a route or groupof routes for the air services concerned, taking into accountthe long-term fully allocated relevant costs of the aircarriers.

National tariff policies and practices

Most States have national laws, regulations or policies forevaluating tariffs or deciding whether to approve or dis-approve tariffs filed by air carriers. If a State choosesunilaterally not to exercise its right to regulate tariffs, thatright would in effect pass to the bilateral or multilateralpartners, leaving regulation in their hands. However, part-ners would have as their primary concern the interests oftheir airlines and users. It is therefore important for a Stateto be able to intervene, whenever necessary, to protect itsinterests under any bilateral and multilateral agreements.

Similar to the terms used in the bilateral or multilateralagreements, the terms used in the national laws, regulationsor policies are generally vague and subjective in nature. Forexample, the term predatory tariff may be applied by aparty alleging injury from a tariff such party believes isintended to drive it out from a market, yet predation isparticularly difficult to define with any degree of certainty,and there is no definitive approach to distinguishingbetween anti- and normal competitive pricing actions. Inorder to avoid such ambiguity and administrative difficult-ies in implementation, some practical schemes have beendeveloped. Examples are:

• limitation of price leadership, i.e. the ability toinitiate new fares or changes in existing ones in amarket. States sometimes commit themselves bilat-erally or unilaterally to limit price leadership to air

carriers exercising Third and Fourth Freedom traf-fic rights, although the extent of price leadership orpricing flexibility they wish to permit varies. Priceleadership by other air carriers is allowed on a case-by-case basis or on the condition of reciprocal treat-ment for their air carrier(s). In contrast, Statesgenerally approve matching tariffs, i.e. fares at thesame level and with virtually similar conditions tothose already approved for use in a market, for allair carriers including ones exercising Fifth, “Sixth”and “Seventh” Freedom rights;

• a sum of sectors policy, under which any throughfare to or from a non-gateway behind point shouldbe constructed as the sum of an international farebetween gateway points and one or more domesticfares (or approved add-ons) between the gate-way(s) and the behind point(s). The applicabledomestic fare chosen (such as a published fare withthe same conditions as the international fare withwhich it is combined) is one which can be used onan interline basis by the foreign State’s airline,thereby allowing it to compete for passengers incities other than the gateway(s) it serves in anotherState. This policy is used by States that wish theirair carriers to compete on an interline basis fortraffic to and from cities in the territory of anotherState other than those being served directly by theirair carriers. If this policy is strictly applied,commonrating, i.e. applying the same fare level totwo or to more cities (e.g. Miami and Fort-Lauder-dale), is not allowed even if the gateway and behindpoints are in general proximity to each other andapproximately the same distance from the origincity; and

• various zone fare systems based on the concept offlexible pricing zones, the most detailed versionrelying on a series of so-called zones of reason-ableness or zones of flexibility for different types offares. A certain range of percentages relating toreference levels defines each zone, which in somecases has certain types of tariff conditions. Auto-matic or prompt approval is granted for fares fallingwithin their appropriate bands and conforming tothe prescribed conditions, though this approval doesnot guarantee the similar treatment by other Statesconcerned. There are several derivative versions,for example, the so-called fare-band system, underwhich airlines are obliged to file a specified rangeof prices instead of actual selling levels for eachfare that can be decided at their discretion without


4.3-8

any further filing, and the maximum tariff system,under which airlines are obliged only to file a maxi-mum level of fare, and at their option they can thensell, either directly or indirectly, at any price belowthat maximum level. Both fare-band and maximumtariff systems are used by States that wish to legiti-mize discounted fares in the marketplace.

Processes for tariff approval/disapproval

The term proposed tariff is applied to a tariff in the initialphase of a government approval process. Filing or notifi-cation of tariffs may be required by applicable nationallaws, regulations or policies, and/or bilateral or multilateralagreements, except when a filing requirement is specificallyexempted by them. A statutory-notice filing is a tariff filingwith the appropriate authorities a specific period prior toits proposed effective date in accordance with the governingrequirements. In contrast, a short-notice filing is a tarifffiling in less than the statutory notice period, usuallypursuant to permissive provisions in the governing require-ments. In some recent bilateral and multilateral agreementscontaining dual disapproval or free pricing tariff regimes,States have agreed to dispense with the requirement forformal tariff filing altogether for their designated airlines.Even when States are allowed to require notification orfiling of tariffs, such tariffs will be notified or filed forinformational purposes only. Also some States unilaterallyeliminate an entire tariff filing requirement or exempt a partof the requirement on a case-by-case or reciprocal basis incertain circumstances.

A few airlines file tariff material for themselves, butmost use tariff agents such as ATPCO to handle the filingprocess. Airlines transmit their instructions to their agents,who have some discretionary authority to manipulate thedata to comply with regulatory specifications. As for thetariff agreements resolved by IATA Traffic Conferences,depending on the States, filings are handled by nationalcarriers or by IATA on behalf of the industry. For manyyears, tariff filing has been based on manual procedures.Generally, a page in a paper tariff manual is replaced by anew one whenever a single item on that page is changed.Faced with the sheer volume of tariff changes, some Stateshave introduced an electronic tariff filing system, an auto-mated system that enables airlines and their agents totransmit tariff changes to a central database via atelecommunication network or an Internet and to providepublic access to tariff information in an electronic format.

The form of approval of tariffs by States may be eitherexplicit, in which there is a specific action taken to approvetariffs; or tacit, in which tariffs are deemed approved if nonegative action is taken within a specified period of time.Generally, the tariff agreements resolved by IATA TrafficConferences are subject to explicit approval and to the clear-ance of applicable antitrust or competition laws. Onceapproved, the tariffs in such agreements may also have to befiled separately with governments to comply with the appli-cable national laws, regulations or policies. Disapproval isnormally explicit.

Each tariff filing contains an effective date, the earliestdate on which the tariff can be used for transportation, anda selling date, the earliest date on which the tariff may besold. States often permit tariffs that have been filed, but notyet approved, to be sold subject to government approval(except IATA fares and rates which can be implementedonly after receiving all the necessary States’ approvals). Anapproved tariff has received the required regulatoryapprovals; it becomes an established or effective tariff onits effective date. Generally, established or effective tariffsremain in force until replaced by another approved tariff.Some tariffs, however, include expiry dates, a date beyondwhich the tariff may not be used, as a result of an airline’sown volition, of multilateral tariff coordination, or becauseof a requirement of a State.

Since the late 1970s, many States have relaxed theirregulatory control of air carrier tariffs, leaving pricingmatters to each airline’s discretion based on commercialconsiderations in the marketplace. The relaxation of tariffregulation, which is often regarded as one of the majorelements of overall liberalization of international air trans-port regulation, might also be necessitated by States’administrative difficulties in exercising control due to theincreased complexity and technicality of tariffs. In addition,the proliferation of unpublished fares has significantlyundermined the effectiveness of the existing tariff regu-lations on published fares, which States might consider nolonger appropriate or enforceable.

This section highlights four key issues in the current regu-latory and competitive environments, namely multilateraltariff coordination, interlining, Internet fares, and predatory

KEY TARIFF ISSUES


4.3-9

pricing. The order of presentation of these key issues doesnot indicate their relative importance.

Multilateral tariff coordination

Tariff coordination or tariff consultation refers to theprocess by which two or more airlines negotiate passengerfare and cargo rate levels and conditions to develop andadopt agreed tariffs or tariff agreements for submission togovernments for approval. The oldest and most widely usedsystem of tariff coordination is that provided by the IATATraffic Conferences (see Chapter 3.8). In addition, severalregional airline associations, such as the African AirlinesAssociation (AFRAA), the Arab Air Carriers Organization(AACO) and the International Association of LatinAmerican Air Transport (AITAL), have taken actionsinvolving, or related to, tariff coordination within theirrespective regions, often prior to meetings of the applicableIATA Traffic Conference.

The IATA system of multilateral tariff coordination hasevolved over the years into a more flexible, transparent andless compulsory means of determining international inter-line tariffs. No tariff discussed gives rise to a binding agree-ment that must be implemented, and thus participating aircarriers may file different tariffs. Under certain cir-cumstances, air carriers that are not tariff coordinationmembers may participate in the meeting. These changes,although required by States, also reflect a response to anincreasingly competitive international air transport environ-ment. Consequently, one issue is whether the changes in theprocess of multilateral tariff coordination will permit theIATA system to adapt to a more competitive environmentor make it ultimately incapable of producing effectiveresults which satisfy the needs of air carriers, consumersand governments.

Since inter-carrier activities through the IATA TrafficConferences involve competitors cooperating, in somejurisdictions exemptions from competition laws have beengranted, where necessary, especially recognizing the publicbenefit of the multilateral interline system. In recent years,however, more States have introduced competition laws orlooked more closely at the application of existing rules tothe IATA system. With the aim of mitigating the anti-competitive aspects of the process, some States, individu-ally and collectively, have conditioned or limited theirexercise (for example, by requiring that airlines partici-pating in one of the immunized alliance agreements with-draw from IATA tariff coordination activities on certaincountry-pair routes, or that coordinated tariffs be available

to all airlines on an interline basis). This raises the issue ofwhether the IATA system can function effectively if one ormore major air transport States choose not to authorize it inwhole or in part. In 2001, IATA decided to end cargo tariffconsultations for shipments between points in the EuropeanEconomic Area after failing to secure exemption fromcompetition law requirements for such activity from theEuropean Commission.

Interlining

The interline system is a global network of scheduled inter-national air transport services linking most cities in theworld. On a worldwide basis, for a large proportion of jour-neys, the services of two or more airlines are necessary fora passenger to complete a single air trip. No single airline,no matter how large a network it may have, can serve everypoint in the world. Relatively few pairs of internationalcities have direct online air services. The rest depend ononline or interline connecting services. The interline systemprovides choice and, in so doing, enhances competition. Itis supported by agreed standards and procedures for inter-carrier reservations, ticketing, baggage, passenger/cargohandling and financial clearance. Technically, there existstwo different types of interline methods: IATA interliningand non-IATA interlining known as club interlining orbilateral interlining.

IATA interlining occurs multilaterally based on IATAfares fixed at the same levels regardless of airline, whichsimplifies administrative procedures for the interchange-ability of tickets. The revenues for interline carriage are pro-rated in accordance with either the Multilateral ProrateAgreement (MPA) operated by the IATA Prorate Agency orthe Special Prorate Agreement (SPA) concluded individu-ally by two or more airlines (Appendix 4 to this manualexplains briefly how this is accomplished). The importantpoint here is that almost all IATA carriers, including non-tariff coordinating members, assume that passengers usingIATA fares can have a full interline privilege with generallyhigh booking availability as long as the transporting carrieris a party to the Multilateral Interline Traffic Agreement(MITA) or has a bilateral interline traffic agreement with anissuing carrier, i.e. a carrier whose ticket is issued to thepassenger. This industry commitment has served to facili-tate a wide-ranging multilateral interline system, eventhough the actual membership does not cover all the airlines.

Non-IATA interlining occurs based on carrier fares evenwithout any pre-agreements about fare levels and conditions


4.3-10

as well as scope of transporting carriers and available rout-ing options. Routing is determined solely by the issuingcarrier and thus the transporting carrier does not know it inadvance (except in the case of joint fares determined bymember airlines of an alliance where all the participatingcarriers know the fare levels and conditions in advance).The transporting carrier simply accepts any ticket issued byanother carrier subscribing to MITA or bilateral interlinetraffic agreements (normally, except a voluntary change ofcarrier that is not written on the original coupons), andreceives the prorate revenues for interline carriage from theissuing carrier in accordance with the MPA or SPA. If thetransporting carrier finds its interline revenue too small afterthe accounting report is processed, then it would ultimatelystop further acceptance of such interline tickets or limit thenumber of seats providing for interline carriage by down-grading the booking classes on an ad hoc basis. Comparedto IATA interlining, the flexibility to change routing or useother carriers is therefore limited, but the fare levels areusually lower than IATA fares.

The issue here is whether tariff coordination through theIATA machinery is an indispensable element in order for themultilateral interline system to work efficiently, or whetherthe same or similar interline benefits from the current IATAtariff coordination could be secured by a less restrictive sys-tem. The proliferation of inter-carrier alliances and theliberalization of tariff setting are creating a rapidly changingcompetitive environment, with non-IATA interlining grow-ing more popular. To respond to a decline in the scope ofimmunized activities through the IATA machinery and toenhance the attractiveness of IATA’s multilateral interlinesystem, IATA has developed the concept of IATA standardpremium service fares (SPS fares), i.e. revamped and sim-plified IATA fares that guarantee a full multilateral interlineprivilege at levels more closely related to costs.

Internet fares

Airline fares shown on the Internet come through differentchannels. Most of the fares shown are published faresdistributed through the CRSs. Unpublished fares such as acontract discount for corporations and organizations areposted on the private websites of airlines and the CRSs,which are visible only to contracting travel agents and otherentities who have negotiated them. Some travel agents’websites sell discounted fares on their own initiative. Air-lines directly offer auction fares to bid-based websites. Inaddition, airlines sell Internet fares to the public, quite oftenlower than any other published and unpublished fares,exclusively on their own website and on specific third-party

websites in which they participate. Since airlines do notusually provide the CRSs with complete information onInternet fares, the CRSs do not display Internet fares as partof their normal offering to travel agents (but third-partysearch software allows travel agents to access a significantnumber of Internet fares).

Among the issues concerning Internet fares is whethertravel agents should be given full access to Internet faresoffered outside the CRSs. On the one hand, the airlines’refusal to make lower Internet fares available to travelagents through the CRSs and the lack of integrated infor-mation on Internet fares may be an impediment to theoperations of travel agents, undermining the quality of ser-vices they provide to their customers in comparing faresand generating best travel options. On the other hand,airlines have traditionally made use of limited distributionchannels to sell specific types of inventory to target marketsegments. Examples are unpublished fares, which are avail-able only to contracting travel agents and some of which arenot available in public retail channels. Internet fares are nodifferent from these unpublished fares by nature. Mandatingacross-the-board access to Internet fares, therefore, wouldeliminate lower Internet fares altogether by discouragingairlines from marketing them.

Another contentious issue is a most-favoured nation(MFN) type of agreement between a specific third-partywebsite and its participating airlines. Under such an agree-ment, participating airlines must provide a website in whichthey participate with all the Internet fares offered throughtheir own website and other third-party websites. In theory,there is a potential risk that such an agreement might reducecompetition and make competing distributors less attractiveto consumers. For example, a MFN agreement may under-cut the participating airlines’ incentives to compete byoffering lower Internet fares, and may also provide aconvenient means for participating airlines to monitor eachother’s Internet fares, facilitating collaboration and coordi-nation of their prices. Recent regulatory attention to third-party websites (particularly those jointly owned by groupsof airlines) reflects these competition concerns.

Predatory pricing

The practice of predatory pricing had been regarded as a rel-atively unlikely or irrational event simply because it wouldbe costly and not credible. Along with liberalization, how-ever, more States have expressed their concern that a majorairline with a dominant market position might reduce fares


4.3-11

specifically to drive out smaller rivals, or to discouragefuture entry, expecting to recoup any losses incurred by sub-sequently raising its fares above competitive levels. Adominant airline might also engage in predatory pricing todevelop its reputation as a tough competitor and to send a“signal” to current and prospective rivals that the potentialfor profitable entry is slight. In addition, an airline, whichreceives a subsidy directly or indirectly from the State,could reduce their fares down to levels otherwise impossibleto offer.

In dealing with predatory pricing through competitionlaws and consultation mechanisms, overly inclusive assess-ment rules may impose a restraint on the ability of airlinesto compete vigorously on price, while a no-rule approachmay have a risk of greater monopoly power or more col-lusion among competitors. Although there is no universallyaccepted clear-cut or so-called “bright-line” rule about whatconstitutes predatory pricing or how to prove its occur-rence, many courts have used an Areeda-Turner rule, i.e.a firm’s pricing is predatory if its price is less than itsshort-run marginal cost, i.e. an increment to cost thatresults from producing one more unit of output in a brieftime period such that some factors of production cannot bevaried without cost, or its average variable cost, i.e. avariable cost divided by output, as a more practical proxy.In the airline industry, however, a short-run marginal costof adding some extra passengers is close to zero at anygiven time once capacity is provided. Therefore, some havesuggested the use of a long-run marginal cost, i.e. an

increment to cost in a sufficiently lengthy period of timesuch that all factors of production can be varied withoutcost, as a yardstick for judging predatory pricing. Since thelonger the planning horizon the more likely it is that a fixedcost will become a variable cost, a marginal cost or anaverage variable cost becomes greater in the long-run.

In addition to these simple cost-based rules, severalmore complex rules have also been developed. Forexample, some argue that a firm’s pricing is predatory if itsoutput is expanded in response to entry and its price is lessthan its average variable cost, while others suggest that aprice cut made in response to entry is not predatory if afirm keeps its price for a considerable period of time aftera new entrant has been driven off. There is also a two-tierapproach that focusses first on market structures to examinewhether predatory pricing is a workable strategy, followedby a number of cost-based tests.

Most of these rules which try to define illegal actioncan, however, be difficult to implement in a straightforwardway because of the data limitations and the existence ofrelated factors (such as capacity changes, yield manage-ment for seat allocation, sales and marketing activities).Given these difficulties, States (and groups of States) tendto rely on a rule-of-reason approach, which involvestaking each case on its merits with a thorough examinationof the factual circumstances such as market structures anddominant airlines’ conduct in a relevant market, as astarting point for assessing alleged cases (see Chapter 2.3).

4.4-1

Chapter 4.4

AIR CARRIER OWNERSHIP

States regulate air carrier ownership and control at theinternational level primarily in terms of discretionarycriteria for licensing air carriers to use the market accessrights granted under the relevant air services agreements.At the national level, regulation of air carrier ownershipand control can have implications both for discretionarycriteria and for other aspects of international air transport.

The first three sections describe the criteria traditionallyused by States for airline designation and authorization,their use and some exceptions. The fourth section brieflydiscusses the implications of transnational investment in aircarriers, and the last section examines some key issues inthis area and possible ways to liberalize.

To establish an international air service, a State, under thebilateral regulatory regime, must not only secure thenecessary market access rights from all its partner Statesbut also their acceptance of the airline(s) it has designatedto use those rights.

The criteria used by States in most bilateral air servicesagreements for airline designation and authorization havebeen that the airline must be substantially owned and effec-tively controlled by the designating State or its nationals.States also generally retain the right to withhold, revoke orimpose conditions on the operating authorization if theforeign designated airline does not meet such criteria; how-ever, use of this provision by the State receiving thedesignation is discretionary.

Some of the main reasons for this approach are that thecriteria will allow a State:

• to refuse to authorize air services by air carriersowned or controlled by certain other States;

• to establish a link between the air carrier usinginternational commercial rights and the State towhich these rights pertain, thereby preventing asituation of potentially non-reciprocated benefitswhen an air carrier from one State uses anotherState’s rights;

• to implement a balance of benefits policy in termsof the air carriers of the States involved;

• to ensure, in certain circumstances, that national aircarriers do not use the rights of a foreign State toserve their own State.

With respect to regulation of airline ownership andcontrol at the national level, many States, in their nationallegislation or regulations dealing with air carrier licensingor foreign investment, set statutory limits on permissibleforeign ownership in national carriers (e.g. not more than49 per cent). Some of the reasons for such rules include:

• national carrier(s) are considered to be a strategicasset;

• foreign-owned airlines should be excluded from thedomestic market;

• aircraft of nationally owned firms are readily avail-able for national defence or emergency needs.

The use of the criteria for airline designation and authoriz-ation involves a two-fold test to determine:

a) who has substantial ownership; and

b) who exercises effective control.

THE DISCRETIONARY CRITERIA

USE OF THE CRITERIA


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In assessing what constitutes “substantial ownership”,States generally focus on the amount of ownership of theair carrier held by certain parties, usually considering thatmore than 50 per cent of the equity in an air carrier consti-tutes “substantial ownership”. States having a national lawor regulation that specifies the percentage of equity in anational air carrier that may be held by non-nationals con-sider that ownership in excess of this specified limit is“substantial”.

Defining “effective control” has generally been moredifficult than defining “substantial ownership” because,while ownership is usually transparent and can often bedetermined by public or other records of shareholders,effective control may be exercised in a variety of ways,many of which may not be readily apparent. Moreover,“effective control” may be exercised by different entitiesdepending on the activity of the air carrier. For example, aircarrier management may exercise effective control over cer-tain operations, such as opening a new route, while financialentities, shareholders or a government might exercise effec-tive control for the purpose of increasing the air carrier’scapital, merging it with another air carrier or dissolving thecompany. Consequently, some States have used the abilityto take or to prevent certain actions (such as increasing thecapital of the air carrier) as evidence of “effective control”.Most States rely on a case-by-case approach, using eitherthe applicable national laws and regulations concerning cor-porate responsibility for decision making; or special laws,regulations and policies specifically related to determiningwho exercises control of air carriers, or a combination of thetwo.

While the substantial ownership and effective controlrequirement are the most prevailing criteria used by States,some exceptions or deviations have long existed, includingthe following:

• Parties to the International Air Services TransitAgreement (IASTA) grant overflight rights forscheduled air services to an “air transport enter-prise” that is substantially owned and effectivelycontrolled by nationals of a Contracting State to theIASTA. (The text of the IASTA may be found inDoc 9587.)

• Multinational carriers created by intergovernmentalagreement, such as the Scandinavian Airline System

(SAS) established by 3 Scandinavian countries; AirAfrique (now defunct) created by 11 African States;Gulf Air founded by 4 Middle East States. Whenone of these States wishes to designate their multi-national air carrier to serve a third State, a modifiedownership and control provision or other means canbe used to ensure that the multinational air carrierwill be authorized to use the commercial rightswhich the designating State has negotiated with thatthird State.

• A regulation of the Council of the European Union,effective 1 January 1993, allows a community aircarrier (i.e. an air carrier majority owned and effec-tively controlled by member States of the Unionand/or their nationals, with its principal place ofbusiness and registered office located in a memberState) to operate air services anywhere within theEuropean Common Aviation Area (ECAA).

• Under the Andean Pact (concluded by 5 LatinAmerican States), an air carrier entitled to operateservices within the Pact will be determined bynational law of the Pact State designating the airline.

• The Caribbean Community Air Service Agreementrequires that a CARICOM airline providing ser-vices under the agreement be owned and controlledby one or more member States or their nationals.

• The bilateral agreements involving Hong Kong,China, as a party allow the airlines designated byHong Kong to be those which are incorporated andhave their principal place of business in HongKong, China. The designated airlines of the otherparty may, however, be subjected to the traditionalsubstantive ownership and effective control criteria.

• The plurilateral open skies agreement concluded bysome APEC members in 2001 permits the desig-nated airline of a party to be one whose effectivecontrol is vested in the designating party and isincorporated and has its principal place of businessin the territory of the designating party. Thetraditional substantial ownership requirement is nolonger a condition.

• The single aviation market (SAM) arrangementbetween Australia and New Zealand allows a“SAM carrier” (an air carrier at least 50 per centowned and effectively controlled by Australianand/or New Zealand nationals, with its head office

SOME EXCEPTIONS

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and operational base in Australia or New Zealand)to operate air services within and between bothcountries, but with limits on beyond rights.

In addition, some States have used the discretionaryright under the bilateral agreement to accept, on an ad hocbasis, foreign designated carriers that do not meet thetraditional national ownership and control criteria, althoughusually this involves negotiated concessions as a quid proquo for the acceptance.

The other area of airline ownership that has implicationsfor international air transport is the extent of foreign own-ership in national air carriers providing international airservices. Where the extent of foreign ownership raisesquestions of substantial ownership and effective control,the discretionary criteria will be a factor. However, theextent of foreign ownership has other implications forinternational air transport which can also be present with orwithout the discretionary criteria.

Recently there has been increased activity and regulat-ory interest in foreign investment in national air carriers.Some of the reasons for this include:

• in some instances foreign international air carriershave acquired an equity interest through the priva-tization of formerly nationally owned air carriers;

• some international air carriers have made trans-national investments in national air carriers as anindirect means of market access (for example, toincrease their ability to compete to/from domesticcities beyond an international gateway through acloser relationship with a domestic carrier servingthose domestic cities to and from the samegateway);

• in some instances, cooperative marketing arrange-ments, joint ventures, franchise operations, alliancesand mergers between international air carriers orbetween international and domestic air carriers haveinvolved transnational investment intended toincrease both the effectiveness of the specific coop-erative arrangements as well as the commercialbenefits for all parties concerned.

Among the factors that States consider with respect toforeign investment in their national airline(s), other than thepotential effect on the discretionary ownership and controlcriteria, are:

• the identity of the foreign investor; in particular,when it is an air carrier, what management exper-tise and commercial benefits might accompany theinvestment;

• reciprocity with respect to the State that is thesource of the investment; and

• the potential effect on international air servicesincluding, for example, competition.

Individual States will apply these and other factors thatare consistent with their particular goals for internationalair transport and the means chosen to achieve them. Atti-tudes toward the permissible limits of foreign investment innational air carriers will therefore vary widely, dependingon the State and its specific circumstances.

The traditional nationality-based ownership and controlcriteria were widely accepted during the time when mostnational carriers were owned by the designating State or itsnationals, and viewed as having important strategic,economic and developmental roles. However, along withthe trend of liberalization and globalization as well asregional economic unification since the late 1980s, signifi-cant changes have taken place in both the operating andregulatory environment of international air transport.

International air carriers have sought to adapt toincreasing cost pressures, the need for capital, andheightened competition in a number of ways, includingthrough cooperative arrangements such as airline alliances,codesharing, joint ventures and franchise operations, someof which have involved transnational investment (obtainingequity in air carriers from other States). Many States haveadjusted their policies to relax restrictions on foreigninvestment in national carriers, particularly when priva-tizing them. Transnational investments in air carriers havealso occurred against a backdrop of widespread multi-national ownership in other service industries, for example,hotels and the travel industry.

FOREIGN INVESTMENT INAIR CARRIERS

KEY ISSUES


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As a result of these developments, the ownership ofnational air carriers has become increasingly diverse, manyare no longer State-owned, and some are approaching thepoint where homeland nationals hold a bare majority ofshares. However, most bilateral agreements including lib-eral open skies agreements have continued to use thetraditional criteria. This phenomenon is seen by many asincreasingly at odds with the changed global businessenvironment in which the airline industry must operate.There is a growing call both from airlines and governmentsfor regulatory change in this area and for the application ofbroadened criteria beyond national ownership and controlto obtain market access.

From the perspective of an air carrier, the traditionalcriteria can pose severe limitations for its operations, forexample, limiting capital sources, expansion opportunitiesor rationalization possibilities.

Some developing countries recognize that their econ-omies and markets may not be able to sustain a nationalcarrier without regional cooperation and/or outside capital.Others have adopted a policy of welcoming new servicesfrom all sources to promote tourism. Some developedStates advocate change because they have policies aimed atdeveloping the overall market and economy; many see aneed for cross-border investment and industry rationaliz-ation; some others see more open rules as a means ofcreating competition for national carriers.

Liberalizing air carrier ownership and control couldproduce many benefits. For example, it could provide aircarriers with wider access to capital markets and reducetheir reliance on government support. It could permit air-lines to build more extensive networks through mergers andacquisitions or alliances. It could also help improve econ-omic efficiency of the airline industry by enabling morecompetitive carriers and a greater variety of services in themarket, which in turn could feed through into consumerbenefits.

At the same time, liberalization also carries certainrisks which may be cause for concern, such as: the potentialemergence of “flags of convenience” (explained below) inthe absence of effective regulatory measures to preventthem; potential deterioration of safety and security stan-dards with increasing emphasis on commercial outcomes;and possible flight of foreign capital which could lead toless stable operation.

There could be impacts on labour, national emergencyrequirements and assurance of service. Finally, and in the

long run, there may also be potential implications for air-line competition as a consequence of industry concentration(i.e. the air transport system being dominated by a fewmega-carriers through mergers or acquisitions), a realitythat exists in most other service sectors. Therefore, whenconsidering liberalization, each State needs to take intoaccount all the benefits and risks.

From a regulatory perspective, the debate on liberalizingair carrier ownership and control in international air serviceshas revolved mainly around two major issues: a) the linkwith the designating State; and b) the ability to liberalize.

As explained in the first section of this chapter, one ofthe main reasons for the traditional criteria is that it helpsto establish the link between the carrier and the designatingState. Under the current regulatory regime for internationalcivil aviation, which is well established and has been func-tioning since 1944, the lack of, or weakening of, such a linkcould have both safety and economic implications.

On the safety side, a clear link is essential in main-taining safety standards because the Chicago Conventionimposes upon each ICAO member State the responsibilityfor compliance with standards and practices related to safetyand security, including regulatory oversight of its nationalcarriers.

One main concern about liberalizing the traditional cri-teria is that it may lead to the possible emergence of “flagsof convenience”, a term derived from the maritime industrywhich denotes a situation in which commercial vessels,owned by nationals of a State but registered in anotherState (i.e. the flag State) are allowed to operate freelybetween and among other States. As safety is of paramountimportance in civil aviation, there is a need for safeguardmeasures to prevent any weakening of safety and securitystandards.

With respect to economic rights, there is concern that aircarriers may improperly gain access under broadened cri-teria to routes which they would not be allowed to operateotherwise. Therefore, there is also a need to prevent “flagsof convenience” in order to ensure an orderly economicregulatory regime.

With respect to the second issue, the ability to lib-eralize, the continuing use of the traditional criteria is seenby some States as a constraint to liberalization. It is arguedthat each State should be allowed to pursue air transportliberalization at its own choice and own pace, but thetraditional provision, by virtue of the right of refusal held

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by other States, effectively prevents a State which choosesto liberalize more rapidly from doing so in respect of airlinedesignation for the use of market access.

In this regard, the current bilateral mechanism createstwo distinctive yet interlocking issues for States: a) forthose who wish to liberalize, how to remove the potentialrisk that their designated airlines might be rejected by thebilateral partners; and b) for those who want to retain thenational ownership and control requirement for their owncarriers, whether to accept foreign designated airlines withliberalized ownership and control, and if so, how to ensurethat they could still identify the link between the airline andthe designating State to prevent “flags of convenience”, andfor matters of safety and security.

In the case of a), a State would be reluctant to liberalizeif it might risk losing its traffic rights because of its desig-nated airline’s foreign ownership. As for the case of b), theapproach of the State to accepting designations can help orhinder the liberalization efforts of the designating States. Amajor challenge is how to have States that do not wish toliberalize at present not inhibit others from doing so.

The objective of regulatory liberalization in this areashould be to create an operating environment in which aircarriers can operate efficiently and economically withoutcompromising safety and security. Liberalization shouldalso help increase the participation opportunities of States,particularly developing countries, in international air trans-port while ensuring that change will not adversely affect theinterest of all stakeholders.

There are a number of ways States can liberalize orfacilitate the liberalization of air carrier ownership andcontrol regulation. For example, States may mutually agreeto apply certain broadened criteria for airline designationand authorization, including the following alternativearrangements developed by ICAO:

• The airline is and remains substantially owned andeffectively controlled by the nationals of any one ofmore States that are parties to an agreement, or byone or more of the parties themselves.

• The airline is and remains substantially owned andeffectively controlled by the nationals of any one ofmore States that are not necessarily parties to anagreement but are within a predefined group with acommunity of interest.

• The airline has its principal place of business and/orpermanent residence in the territory of the desig-

nating State; and is under effective regulatory con-trol by the designating State. In the context of thisarrangement, the evidence of principal place ofbusiness may be predicated upon the following: theairline is established and incorporated in the terri-tory of the designating party in accordance withrelevant national laws and regulations, has a sub-stantial amount of its operations and capital invest-ment in physical facilities in the territory of thedesignating party, pays income tax, registers andbases its aircraft there, and employs a significantnumber of nationals in managerial, technical andoperational positions.

The evidence of effective regulatory control may bepredicated upon but is not limited to the following:the airline holds a valid operating licence or permitissued by the licensing authority such as an airoperator certificate (AOC), meets the criteria of thedesignating party for the operation of internationalair services, such as proof of financial health, abil-ity to meet public interest requirements, obligationsfor assurance of service; and the designating partyhas and maintains safety and security oversightprogrammes in compliance with ICAO standards.

States may also treat the ownership and control require-ment of foreign designated airlines with more flexibility toaccommodate the needs of other States wishing to liberalizein this area. Some of the measures a State may take include:

• allowing its bilateral partners to use the broadenedcriteria for those partners’ designated carriers whileretaining the traditional criteria for its own desig-nated carriers (such as that practised in the bilateralagreements involving the Hong Kong SpecialAdministrative Region of China as a party);

• accepting the designated carriers of its bilateralpartners which may not meet the traditional owner-ship and control criteria if that carrier meets otheroverriding requirements such as safety and security;and

• making public its position on the conditions underwhich it would accept foreign designations. Suchinformation, when available from a large number ofStates (for example, via ICAO), would greatlyenhance transparency and help bring about the cer-tainty needed by governments, from the regulatoryperspective, and the airlines for the planning andoperation of international air services.

4.5-1

Chapter 4.5

AIR CARGO

Air cargo or freight refers to any property carried on anaircraft other than mail, stores and passenger baggage (seeAnnex 9 to the Convention on International Civil Aviation).The term air cargo is also used in a broader sense by theairline industry to mean any property (freight, express andmail) transported by air except baggage. An all-cargoservice is an air service that carries cargo only, whetherscheduled or non-scheduled.

In the field of international air transport, attention isoften paid to passenger air services, yet air cargo is also animportant component of air transport. To many States, aircargo services are important to their national developmentand international trade, for example, landlocked countriesand States whose main export commodities are high valuegoods or perishables.

To freight shippers, air services render a competitivealternative to other forms of transport (rail, trucking orshipping) in meeting their shipping requirements in termsof speed, quality (much less en-route damage) and cost. Asmore companies adopt the philosophy of “just in time” (i.e.goods arrive when needed for production or for use ratherthan being stockpiled and becoming expensive inventory),aircraft will be used increasingly as, in effect, airborneextensions of warehouses in order to reduce inventorycarrying cost.

To airlines, air cargo can be an important revenuegenerator. On some major international routes (e.g. acrossthe North Atlantic, between Europe and Asia and across theNorth/Mid Pacific), air cargo has contributed roughly one-fifth of the total revenue on international scheduled airservices.

A more recent development that adds importance to aircargo is the huge expansion of the courier and express/small package business, which offers door-to-door airservice for time-sensitive documents or small packages,usually with the delivery guaranteed within specified timelimits (e.g. same day or next day) but subject to size or

weight limitations. Some airlines have also become moreinvolved in door-to-door services, rather than limitingthemselves to provision of the air component. Air cargotransportation has become increasingly integrated andglobalized via cross-equity investments between airlinesand cooperative arrangements such as co-branding (i.e. acommercial arrangement under which involved air carriersmarket a service under one brand name, but carry out theoperation with each carrier’s own aircraft bearing both thebrand name and its own carrier identity) and franchising.

This chapter identifies some distinct features of aircargo transportation and provides information on howgovernments regulate air cargo operations.

Cargo, by nature, is generally less sensitive than passengersto time between origin and destination (except express),routes and stops. While passengers must be transported totheir destinations without delay, cargo can often wait ifspace is not immediately available, can move on differentroutes and make numerous stops.

While passengers tend to make round trips, air cargogenerally moves only one way. There are few routes wherethe volume of cargo traffic is the same or similar in bothdirections, but many where the volume is several timesgreater in one direction than the other.

Air cargo tends to use more intermodal transport, i.e.more than one form of transport, e.g. aeroplane, truck, railor ship between origin and destination. Special devices areoften used for air cargo, such as standardized pallets (i.e.platforms on which goods are assembled and secured bynets or straps) and containers (i.e. specially designedreceptacles that fit in the cargo compartments of the wide-

DISTINCT FEATURES OFAIR CARGO


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body aircraft) — such devices are often referred to by thegeneric term ULDs (unit load devices). The use of thesedevices has not only helped enhance efficiency, but has alsofacilitated interlining and intermodal transport.

Most scheduled international airlines regard air cargocarried in the aircraft’s lower deck compartment as anadditional source of revenue, treating it as a by-product oftheir passenger services. However, air cargo can assumegreater importance on a route with a sufficient volume ofcargo traffic to justify using a combi aircraft (which carriesboth passengers and cargo on the main deck) and is the solegenerator of revenue with respect to an all-cargo aircraft ora freighter.

Although airlines sell air cargo transportation directlyto customers, a substantial proportion of their cargo salesactivity involves intermediaries, such as:

• cargo agents, who act as retailers, selling air cargotransportation to shippers on behalf of airlines ona commission basis; and

• freight consolidators/forwarders, who act for ship-pers as forwarding agents (though some may alsooperate their own aircraft) and often consolidateshipments from more than one shipper into largerunits which are tendered to airlines, benefiting fromreduced freight rates for bulk shipments.

In many countries, commercial enterprises that are freightconsolidators/forwarders are also cargo agents, although insome States this is prohibited by law.

In terms of economic regulation of international air trans-port, air cargo transportation is generally treated as a com-ponent of government regulation with respect to marketaccess, tariffs, capacity and non-scheduled operations, etc.These elements are examined in separate chapters of themanual.

Most governments traditionally regard air cargo as partof passenger air services, because most national airlinescarry cargo in combination with their scheduled passengerservices, with relatively few having all-cargo operations(e.g. in 2000, some 716 airlines provided internationalscheduled passenger services and about 91 operated inter-national scheduled all-cargo services). Thus, in the bilateral

exchange of market access rights (discussed in Chapter 4.1),States typically grant the right for their designated airlinesto transport passengers, cargo and mail on the agreedscheduled international air services. The right to operate all-cargo air services is generally considered as implicit in suchgrant, but some bilateral agreements are more specific,referring to “passengers, cargo and mail, separately or inany combination”.

Some bilateral air transport agreements assign specialroutes for all-cargo services. Recognizing the distinct natureof air cargo, some agreements provide for special route flex-ibility for all-cargo services, for example, by allowing theuse of different intermediate points than those authorizedfor passenger or combination services, while permittingsuch services to be operated by the designated airlines onany combination service routes.

Government regulation on air carrier capacity (coveredin Chapter 4.3) also extends to all-cargo operations, buttends to be less restrictive than that applied to passenger airservices because cargo is generally of less concern tonational airlines in terms of revenue generation and marketshare. Air transport regulators also deal with cargo rates aspart of the government regulation of airline tariffs (seeChapter 4.2).

A great number of non-scheduled international airtransport activities are all-cargo charter operations, such asthose operated by or for freight forwarders/consolidators,couriers and express/small package services. These charterflights are regulated by States as part of the non-scheduledair transport services (see Chapter 4.6).

One major problem all-cargo operators experience isthe lack of flexibility in market access rights under bilateralagreements in which air cargo is treated as part of passen-ger services. In such agreements, the limitations usuallyimposed on passenger services in respect of routes, trafficrights, frequency, etc., may also apply to all-cargo services.Since there are minimal synergies between passenger andcargo operations (e.g. different customers, different depar-ture/arrival time requirements, directional imbalance oftraffic movement), such regulatory restrictions often makeit difficult for air carriers to sustain an economically viableall-cargo service.

Other regulatory problems all-cargo operators mayencounter include:

• airport curfews which often limit the flexibility inflight scheduling, particularly for courier andexpress services which tend to wait until late in the

REGULATION OF AIR CARGO

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day to receive their shipments and operate overnightfor next day delivery; and

• in some cases, limitation on airport slots that can beused by cargo flights, especially at congested air-ports where all-cargo operations are often givenlower priority than passenger services.

As the air cargo market’s size and importance grow,more States are adopting more flexible regulatoryapproaches that facilitate its development. ICAO has alsodeveloped guidance, in the form of model clauses for airtransport agreements, for optional use by States in liber-alizing air cargo services, which can be found inDoc 9587.

4.6-1

Chapter 4.6

NON-SCHEDULEDAIR SERVICES

A non-scheduled air service is a commercial air transportservice performed as other than a scheduled air service. Acharter flight is a non-scheduled operation using achartered aircraft. Though the terms non-scheduled andcharter (i.e. a contractual arrangement between an aircarrier and an entity hiring or leasing its aircraft) havecome to be used interchangeably, it should be noted that notall commercial non-scheduled operations are charter flights.

Non-scheduled air services emerged as an importantcategory of air carriage first in Europe, spreading later toNorth America and other regions. They experienced rapiddevelopment in the 1960s and 1970s, fostered by thegrowing demand for low-cost air travel. Though often con-sidered by States as supplementary to scheduled services,non-scheduled services have been instrumental in someregions (notably in Europe) in the development of inter-national mass tourism, which has assumed considerableeconomic and social importance for many countries,developed and developing.

Unlike scheduled international air services which areregulated primarily on the basis of bilateral agreementsbetween States, non-scheduled international air services aregenerally authorized on the basis of national regulation.Although aviation regulators sometimes also regulate com-mercial non-transport operations (such as aerial crop dust-ing and surveying) as well as operations such as overflightand landing by private, corporate, military and State air-craft, whether for transport or not, these are outside thescope of this chapter and this manual.

The first section of this chapter describes some charac-teristics of non-scheduled air services which set them apartfrom scheduled services. The next section identifies thenumerous kinds of international non-scheduled air services.The last section discusses how governments regulate inter-national non-scheduled air services.

Non-scheduled air services may be performed by all typesof air carriers and may be distinguished from scheduledservices by the following characteristics. They are usuallyoperated:

• pursuant to a charter contract on a point-to-pointand often plane-load basis (but several charterersmay share the capacity of an aircraft);

• either on an ad hoc basis or on a regular butseasonal basis;

• not subject to the public service obligations thatmay be imposed upon scheduled air carriers such asthe requirement to operate flights according to apublished timetable regardless of load factor;

• with the financial risk for underutilized payloadbeing assumed by the charterer rather than theaircraft operator;

• generally without the air carrier maintaining directcontrol over retail prices (the aircraft capacity isusually sold wholesale by the carrier to tour oper-ators, freight forwarders or other entities); and

• subject to seeking permission, or giving prior noti-fication, for each flight or series of flights, to/fromthe country of origin or destination or both.

Over the years, international non-scheduled air serviceshave developed to meet changing air transport market

CHARACTERISTICS OFNON-SCHEDULED AIR SERVICES

KINDS OF INTERNATIONALNON-SCHEDULED AIR SERVICES


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demands and the various regulatory environments. Indeedtheir evolution could be described as a demand inspiredgrowth from a small base with fairly simple regulation intoa sizeable field of air transport with more complex regu-lation. Their growth encouraged the development of liber-alized scheduled air services, which in turn diminished boththe non-scheduled market size and the complexity of itsregulation. Thus many of the distinct types defined belowhave ceased to be used but the descriptions have beenretained for historical purposes. The current and historicaltypes fall into four categories.

The first category is passenger charter flights. Thosethat are open to the general public include:

• the advance booking charter (ABC) or non-affinitygroup charter, a charter whereby all or part of thepassenger capacity of an aircraft is chartered by acharter/travel organizer who resells seats to thegeneral public, subject to rules that are or werelikely to include various requirements such asadvance payment, pre-listing, minimum stay, can-cellation penalties, stopover restrictions and otherconditions;

• the inclusive tour charter (ITC), a charter wherebyall or part of an aircraft is chartered for thecarriage of passengers who have purchased aninclusive tour from a tour operator (i.e. a travelorganizer who resells seats in conjunction withaccommodation and/or other ground arrangementsfor a comprehensive price); and

• the public charter, a generic charter type wherecapacity is sold to members of the general publicthrough recognized intermediaries, often withoutregulatory requirements such as round trip, advancebooking, etc.

Passenger charters that are or were open solely to eligiblesegments of the public or that are for the charterer’s ownuse rather than resale include four types most oftenrendered obsolete by liberalization, namely:

• the affinity group charter, one chartered for theexclusive use of a group (or groups) consisting ofmembers of an association or club having principalaims and objectives other than travel and sufficientaffinity prior to the application for charter trans-portation to distinguish it and set it apart from thegeneral public;

• the common purpose charter, one chartered by anorganizer for resale to persons who share a com-mon purpose in travel (such as attending a particu-lar event) but are not necessarily members of anyassociation or club;

• the special event charter, a charter for the carriageof people attending a special event of a religious,sporting, cultural, social, professional or othernature;

• the student charter, a charter bought entirely forthe carriage of students at a recognized establish-ment of higher education, usually subject to certainage limitations; and

• the most basic and timeless type, the single entitycharter or own-use charter, one chartered by oneentity (e.g. an individual, corporation, government)solely for its own use for the carriage of passengersand/or freight, with the cost borne solely by thatentity and not shared directly or indirectly by others.

The second category is cargo charter flights, includingthose that are chartered for resale purposes by freight for-warders, consolidators, shipper’s associations, express/smallpackage/courier services and similar charterers, and thosefor the charterer’s own use rather than resale.

The third category is combinations or variants of theabove, including:

• the mixed passenger/cargo charter, one used by thesame charterer to carry both passengers and cargo(e.g. people attending a trade fair and exhibits); and

• the split charter, a charter involving more than onecharterer where the capacity of the chartered air-craft is shared or split.

Also, two practices created other variants, namely that ofcomingling, i.e. carrying on the same flight more than onekind of passenger charter traffic, such as advance bookingand inclusive tour; and intermingling, i.e. carrying on thesame flight traffic originating its travel in the origincountry of the round trip flight and traffic starting its travelin the destination country, both outmoded concepts whereregulation has been liberalized.

The fourth category of international non-scheduled airservices is non-scheduled non-charter flights for the carriageof individually ticketed or individually waybilled traffic

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(sometimes referred to as on-demand air taxi service). Theseare flights not operated according to a published schedulebut sold to individual members of the public (usually freightshippers). They fly authorized routes but only make stops aten-route points where there is traffic to be set down orpicked up.

International non-scheduled air services are generallynot considered to include certain scheduled services thatmay be confused with non-scheduled operations, such as:

• inaugural flights;

• positioning flights;

• extra sections of scheduled services;

• scheduled flights using wet-leased or dry-leasedaircraft; and

• “part charters” on scheduled service flights. Notethat a part charter is in effect a marketing methodwhich allows part of a scheduled service flight(seats or space) to be sold in the manner of acharter service under a carrier-charterer contract.

The Convention on International Civil Aviation (ChicagoConvention) distinguishes between the rights to be accordedby Contracting States to international non-scheduled flights(Article 5) and to scheduled international air services(Article 6). It refers to non-scheduled flights as the flights ofall aircraft “not engaged in scheduled international airservices”. The first paragraph of Article 5 requires that eachContracting State grant the rights of transit and non-trafficstops to all international non-scheduled flights by aircraft ofother Contracting States “without the necessity of obtainingprior permission”. The second paragraph of this Article statesthat commercial non-scheduled flights shall also “have theprivilege of taking on or discharging passengers, cargo ormail, subject to the right of any State where such embark-ation or discharge takes place to impose such regulations,conditions or limitations as it may consider desirable”. As apractical consequence of Article 5, the regulation of inter-national non-scheduled services has generally been governedby rules laid down by individual States, with only a fewbilateral and multilateral agreements existing to create jointregulation.

For the guidance of States in their interpretation orapplication of Articles 5 and 6 of the Chicago Convention,the Council of ICAO has developed a definition for the term“scheduled international air service” which is accompaniedby “Notes on the Application of the Definition and anAnalysis of the Rights Conferred by Article 5 of the Con-vention” (see Doc 9587). The Council recognized, whendeveloping the definition, that the right of ContractingStates to impose regulations, conditions and limitations onthe taking on or discharging of passengers, cargo or mail bycommercial non-scheduled air transport is unqualified. Ithas expressed the opinion, however, that it should be under-stood that the right would not be exercised in such a manneras to render the operation of this important form of airtransport impossible or non-effective.

Under a unilateral framework where international non-scheduled/charter operations continue to be regulated,States of origin and destination regulate independently ofeach other such services between their territories. In thissituation the charterer and carrier must follow the rules ofboth States for the operation to be charterworthy, i.e beinga valid charter under the relevant regulation. These rulesgenerally appear in national laws, government regulations,policy statements dealing with air transport and authorizingthe regulation of such operations, or in the licence/permitauthorizing the non-scheduled flight or flights. In somecases, ad hoc decisions are made by regulatory authorities.

National policies with respect to international non-scheduled commercial operations have taken a variety offorms, ranging from severe limitation to complete freedom.Most State policies lie between these approaches. In devel-oping policies and regulations concerning non-scheduledair services, individual States usually take into account therole of such services in the satisfaction of the demand ofthe public for low-price air transport; their place in theoverall air transport system; and their contribution inmeeting some general national priorities and interests (e.g.promotion of tourism, expansion of airport utilization, jobcreation and community development).

A carrier must be licensed by its home State to engagein international non-scheduled air transport. Some Statesrequire evidence of this from foreign carriers. Air transportauthorities may authorize international non-scheduled oper-ations by a national or foreign carrier by issuing a licenceor permit (i.e. general authorization or permission given ona relatively long-term, continuing basis, for example, for ayear or a season), or an ad hoc authorization for a flight orflights.

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4.6-4

States may also adopt procedures to a) require advanceapproval of charter programmes or individual flights; or b)not require pre-flight approvals; and c) require pre-flightnotification and/or post-flight reporting. Some States maycontinue to use the procedure of advance placement of car-riers on a list of those eligible to perform charter flights.

Various States use combinations of the above and takeinto consideration reciprocity, the origin of the traffic, theregion involved, the nationality of the carrier (national ver-sus foreign), the type of carrier or size of aircraft, the kindof charter or other determinants. It is general practice forStates to require the filing of a flight plan or some form ofprior notification (usually 24 hours in advance) for air trafficcontrol, customs, immigration and public health purposes(note that Annex 9 to the Convention on International CivilAviation also contains provisions requiring ContractingStates to minimize such procedures to facilitate non-scheduled operations).

Some States have concluded bilateral non-scheduled airservices agreements or bilateral air transport agreementscovering both scheduled and charter services to allowoperation of non-scheduled services under mutually agreedterms. These agreements normally include provisionsregarding charterworthiness rules (for example, acceptanceof country of origin rules or harmonization of rules), pointswhich may be served, fair and equal opportunity, pricing,traffic freedoms covered, designation and licensing of car-riers; provisions similar to those found in other agreementscovering technical subjects, such as customs exemption andconsultation and arbitration.

Only a few multilateral agreements have been con-cluded on non-scheduled air services, all on a regional basis(such as the 1956 Multilateral Agreement on CommercialRights of Non-scheduled Air Services in Europe betweenECAC States, and the 1971 Multilateral Agreement onCommercial Rights of Non-scheduled Air Services Amongthe Association of South-East Asian Nations (ASEAN)).These agreements generally provided for a more liberalizedregime in authorizing non-scheduled operations betweenthe signatory States, for example, by permitting freeadmission of certain types of non-scheduled flights (e.g.humanitarian, emergency charters, single entity charters orcharter flights serving routes not being directly served byscheduled services), subject only to prior notification.

A basic problem experienced by many States in respectof regulating international non-scheduled services is how tostrike a balance between the commercial interests of the

scheduled services operators and those of the charter oper-ators in the same markets, while taking into account theoverall economic interests of the country concerned. Statesthat maintain significant regulation generally impose vari-ous restrictions or controls to ensure that non-scheduled airservices do not impair the profitability and efficiency oftheir scheduled air services and/or to satisfy a need forsome balance in the charter benefits received by carriers ofeach involved State. The controls which such States mayuse on commercial non-scheduled operations include:

• marketing restrictions through charter definitionsand rules (for example, by not permitting certaintypes of charters);

• geographical and route restrictions (for example, byallowing the operation of certain types of chartersonly to defined areas or only on specified routes);

• capacity control (involving, for example, a specificnumerical limit or one related to a specific percen-tage of scheduled flights); and

• price control.

Another problem encountered by various States inregulating international non-scheduled services stems fromthe absence of an agreed clear definition of a non-scheduledservice (it is defined only as other than a scheduled airservice). This is especially true in situations when thedistinction between the two types of air services hasbecome blurred. For example, as charter services becamemore readily open to use by members of the public theycame to be called “schedulized charters” or “programmedcharters”, i.e. charter flights open to the public that are soregular or frequent that they constitute a recognizablesystematic series.

Most scheduled carriers now offer reduced fares andconditions which were once more common to charterservices. As the air transport industry has evolved and asmore States have adopted a liberal policy towards inter-national air transport regulation, the usefulness of makingsuch distinctions for charters has been questioned. In thecase of the European Union, the “third package” of airtransport liberalization has effectively eliminated theregulatory distinction between the two (by allowing non-scheduled/charter carriers to operate scheduled flights andsell flights directly to the public), although the distinctiontends to be retained by the industry in terms of how non-scheduled services are marketed and operated.

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Chapter 4.7

AIRLINE COMMERCIALACTIVITIES

This chapter discusses the commercial and related aspectsof international air transport (sometimes referred to as“doing business” matters). Although not given as muchimportance by regulators as the principal regulatoryelements of market access, capacity and tariffs, they are ofregulatory interest because of their potential for increasingor decreasing market access and the effectiveness and/orprofitability of air carriers.

The first three sections of this chapter present subjectsthat have been regulated since the beginning of inter-national air services, namely, currency conversion andremittance of earnings, employment of non-nationalpersonnel and the sale and marketing of international airtransport.

The fourth section of this chapter presents the ever-evolving environment of airline product distribution andelectronic commerce including computer reservation sys-tems and the Internet. The fifth section discusses regulationof the growing activity of aircraft leasing.

The sale and marketing of international air transportservices, airline product distribution (including computerreservation systems), and aircraft leasing are regulated tovarious extents largely by air transport authorities. Incontrast, two other activities (currency conversion andremittance of earnings, and employment of non-nationalpersonnel) are regulated primarily by non-aviation auth-orities using exchange controls and immigration laws,respectively, along with regulations of general applicability.Internet activities (such as online sales via the Internet) arevirtually unregulated at the time of this writing but maybecome topics of future governmental regulation.

The extensive worldwide network of travel agents and theability to provide international air transport on an interlinebasis combine to permit air carriers to sell tickets in manycountries in the world, including those which they do notserve directly. Thus, air carriers accumulate revenues inmany currencies, some of which are subject to exchangecontrols. Currency conversion and remittance, changinglocal currency remaining after local expenses have beensubtracted from local revenues into a convertible currencywhich can be transferred by the air carrier to its head officeor elsewhere, have been long-standing problems in caseswhere States, for a variety of reasons, have imposedexchange controls which do not permit, which restrict, orwhich result in extensive delays in currency conversion andremittance.

In a number of instances, air carriers have, often underthe auspices of the International Air Transport Association(IATA), made collective efforts to secure the conversion andremittance of their blocked earnings in certain countries.There have also been a few instances of joint representationsby the governments concerned for the same purpose.

Formal regulatory efforts to ensure currency conversionand remittance have, however, tended to fall in the bilateralarea. A small minority of the bilateral air services agree-ments registered with ICAO contain provisions accordingdesignated airlines the right to convert and remit any excessof local receipts over local disbursements. In this regard,ICAO developed a model bilateral clause for currencyconversion for use by States in their bilateral air servicesagreements. (The text of the model clause can be found inDoc 9587.)

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In almost all cases where conversion and remittance oflocal currency are dealt with bilaterally, there is some typeof limitation, such as subjecting the process to an agreedformula or special payment regime, limiting the transfer tothe air carrier’s head office, or specifying the convertiblecurrency. In some cases the provisions require that the con-version be prompt or at a particular rate of exchange (e.g.the rate of exchange in effect on the date of conversion, therate for current transactions, or the official rate) and thatremittance be without tax or other limitation.

A more general condition (whether stated or not) whichcan in some instances unduly lengthen the conversion andremittance process is that the conversion and remittance bein accordance with the procedures established in the State’sexchange control regime. In many cases, this will result inthe civil aviation authorities having to convince officials ofanother government department and/or a private entity,such as a bank, of the importance of complying with thebilateral commitment to convert and remit.

International air carriers, by the nature of their business,employ personnel of different nationalities. With respect tosome activities, they prefer to employ non-national per-sonnel, persons who do not have the nationality of the Statein which they are to work (and who usually have thenationality of that State in which the air carrier has its head-quarters). Consequently, such personnel require authoriz-ation from that State to reside and work therein. Dependingon the laws and regulations of the State concerningresidence and employment and how they are applied, thesepersonnel may be able to qualify for admittance forresidence and employment with the air carrier. Where thisis not the case, however, States have sought other means toensure that their air carriers could employ non-nationalpersonnel in some categories of activities.

A small minority of the bilateral air services agreementsregistered with ICAO contain provisions allowing a foreignair carrier to bring in and maintain in a State certain typesof non-national employees. Almost all of these provisionscontain some type of restriction, such as:

• a reciprocal numerical limit;

• a requirement that a certain percentage of theforeign air carrier’s local employees be nationals;

• a requirement that employees be located at airports/cities served directly by the air carrier; and

• a requirement that their entry and stay be governedby national law or mutual agreement between aircarriers.

The principal difficulty in this area lies in the require-ment (explicit or implicit) that the admittance for residenceand work of the non-national employee of the air carrier besubject to national law and regulations. In some cases,national law and regulations either make no provision fornon-national employees of air carriers or impose require-ments that the non-national employee cannot meet. Conse-quently, a few of the bilateral provisions on employment ofnon-national personnel are stated in fairly broad, unrestrictedterms; for example, work permits will not be required.

Another aspect of the situation concerning non-nationalpersonnel is that, as in the case of conversion and remit-tance, civil aviation authorities find themselves in theposition of having to convince officials of another govern-ment department (in this case, immigration authorities) ofthe importance of complying with a bilateral commitmentto allow the entry and residence of certain non-nationalpersonnel employed by foreign air carriers. In this regard,ICAO also developed a bilateral model clause on non-national personnel and access to local services for use byStates, which can be found in Doc 9587.

The ability to sell and market international air transport is animportant element of an air carrier’s operations. Althoughthere are provisions on the sale of air transport services inover one-third of the bilateral air services agreementsregistered with ICAO, marketing, the promotion of sales bysuch means as advertising and incentives, can be subject toseveral different regimes, depending on the activity.

Almost all of the provisions in bilateral air servicesagreements concerning the sale of international air transportinclude the right of a foreign air carrier to maintain salesoffices and to sell its products directly or through agents.Some of these provisions specify the right to sell in certaincurrencies and require that users be free to purchase the airservices of the carriers concerned.

EMPLOYMENT OFNON-NATIONAL PERSONNEL

SALE AND MARKETING OFINTERNATIONAL AIR TRANSPORT

Part 4 — Regulatory ContentChapter 4.7 — Airline Commercial Activities 4.7

4.7-3

Among the restrictions found in sales provisions are arequirement for airline agreement on all commercial mattersand a requirement allowing sales offices only online, i.e atairports/cities directly served by the foreign air carrier(though in some other cases, a foreign designated airlinemay be allowed to set up sales offices off-line, i.e. at citiesnot within the system of scheduled services of that airline).ICAO developed a bilateral model clause on the sale andmarketing of air service products which is provided inDoc 9587.

Although the term “marketing of international air trans-port” is not found in bilateral air services agreements, someStates consider that the term “freely sell its services” or thatthe right to a fair and equal opportunity to compete with aircarriers of the other party necessarily includes marketingactivities. The term does appear in the Annex on Air Trans-port Services of the General Agreement on Trade inServices (GATS — see Chapter 3.3). In the Annex, themarketing of air transport services includes “all aspects ofmarketing such as market research, advertising and distri-bution”. The Annex states, however, that the activities ofselling and marketing do not include “the pricing of airtransport nor the applicable conditions”.

Depending on the type of marketing activity involved,States have relied on one or more of the following types ofregulation:

• for incentives (such as frequent flyer programmes),some States use the applicable tariff regime,including such incentives in the definition of tariff;

• for advertising, some States use national lawsdesigned to ensure fair trading and consumerprotection; and

• in general, most States use the bilateral provisionaccording air carriers a fair and equal opportunityto compete or to operate air services covered by theagreement.

Airline product distribution generally refers to the waysand means by which air transport services are marketedand sold, such as the traditional sales outlets of airlines andtravel agents, and the more modern means of computerreservation systems and the Internet.

Airline product distribution had traditionally its princi-pal locus in airlines’ own sales outlets and travel agents,but has gained a very effective and valuable tool with theadvent of computer reservation systems (CRSs), whichprovide information on air carrier schedules, space avail-ability and tariffs, and through which reservations on airtransport services can be made.

Computer reservation systems provide travel agents, onwhom airlines rely heavily in conducting their sales, withup-to-date information not only on airlines’ flight sched-ules, fares and seat availability but also on a range of othertravel and leisure services. CRSs also facilitate their workin making reservations and issuing tickets. In large markets,many air carriers regard participation in one or more com-puter reservation systems as essential.

Soon after their introduction, however, CRSs attractedconsiderable regulatory attention because of their increasinginfluence on the sale and distribution of international airtransport services. A number of States were concerned thatas a powerful marketing tool, CRSs could have the potentialto be abused to unfairly favour certain air carriers or airservices because most CRSs were then owned by majorairlines. During the introduction and early development ofCRSs, regulatory activity centred around four general areas:

• display of information (the sequence in whichflights are displayed, how different types of flights(online, codeshared) should be treated);

• participation of air carriers (including conditions,charges, inclusion of schedules of non-participatingair carriers and participation by dominant air carriersin certain markets);

• data questions (releasing information on individualbookings, safeguarding the privacy of personal data,releasing aggregated data); and

• the inclusion (or exclusion) of non-scheduled flights.

Regulation of CRSs has occurred at both national andinternational levels. At the national level, several States(such as the United States and Canada) have developeddetailed CRS regulations. At the regional level, there alsoexist a few codes of conduct on CRSs, including the onesadopted by the European Community (EC), the EuropeanCivil Aviation Conference (ECAC) and the Arab CivilAviation Commission (ACAC).

At a general, worldwide level, ICAO has developed aCode of Conduct for the Regulation and Operation of

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Computer Reservation Systems for States to follow (adoptedby the Council in 1991 and revised in 1996), and two alter-native model clauses on CRSs for optional use by States intheir air services agreements (contained in Doc 9587). Asnoted in Chapter 3.3, the GATS also includes, in its AirTransport Annex, computer reservation systems as one ofthe three air transport services to be liberalized under themultilateral trade rules.

Specific aspects of CRS regulation tend to reflect differ-ent approaches based on whether such regulation should begeneral or more detailed. For example, the ICAO Coderequires a neutral display or displays of air carrier sched-ules, space availability and tariffs. To achieve this, theregional European codes prescribe detailed requirements forflight displays, differentiating among non-stop flights, otherdirect flights and connecting services; while the nationalregulations of the United States do not prescribe detailedrequirements but require the same flight display criteria tobe used for all participating air carriers.

For bilateral regulation, States have generally relied onthe provision in their bilateral agreements that accords theirair carriers a “fair and equal opportunity to compete/oper-ate” and on reciprocity to deal with CRS issues involvinginternational air transport. Some recent bilateral agreementshave also included specific provisions on CRSs designed toprotect air transport users and to ensure non-discriminationand fair competition amongst CRS service providers andparticipants.

Since the mid-1990s, the world’s CRS industry hasconsolidated into four major global CRS vendors —Amadeus, Galileo, Sabre, and Worldspan. With the expan-sion of their presence and scope of business, these globalvendors have increasingly seen themselves as global distri-bution systems (GDSs), i.e. providers of comprehensivetravel information and reservation capability not only onairlines but also on hotels, car rentals, rails and leisuretours.

Another significant development is the change in theownership structure of the CRSs. There has been a steadyoverall decline in airline ownership of all the major CRSs,and by the end of 2003, three of the four global CRS ven-dors (except Amadeus) had become totally non-airlineowned.

At the same time, along with the advancement oftechnology and the general growth of electronic commerce(e-commence), i.e. commercial activity conducted throughelectronic means, there has been a rapid increase in onlinesales of airline products via the Internet.

There are broadly two types of e-commerce activity inairline product distribution:

a) business-to-consumer (B2C), which allows a busi-ness entity to sell products or provide services toend-user consumers via the Internet (e.g. withaccess to airline flight schedules, seat availabilityand fares, as well as to permit bookings and otheractivities). There exist several different types ofB2C websites. They are: 1) traditional travel agents’websites which constitute a simple extension toretail outlets and business processes; 2) online travelagents who do not have conventional retail outlets;3) airlines’ own websites; and 4) websites jointlyowned by groups of airlines which offer widerproduct choices than the ones offered by a singleairline’s website; and

b) business-to-business (B2B), which allows theexchange of products, services, and informationbetween business entities (e.g. airlines, travel agents,CRS vendors and suppliers of air transport) directlyvia the Internet. One example is an e-marketplacefor airframes, engines and avionics components,maintenance services, and fuel, etc. Such B2B web-sites connect buyer airlines with suppliers throughthe Internet with the objective of creating costsavings by integrating and streamlining the supplychains. Another example is a CRS business. CRSsserve as a booking engine behind most B2C web-sites and as an online travel booking system formajor corporations and airlines.

Major CRS vendors are also further expanding theirB2B activity to the area of business-to-business-to-consumer (B2B2C), in which a business entity sells aservice or product to end-user consumers by using othercompanies as intermediaries. For example, CRS vendorsprovide participating travel agents with a customized web-booking facility so that CRS vendors can reach consumersindirectly via their travel agents.

These changes have created new challenges for regu-lators. Although a number of the original regulatoryconcerns with CRSs have diminished as ownership hasmoved away from air carriers, some other concerns haveemerged from the rapid development of e-commerce,especially the Internet. Since no websites are completelyindependent of CRSs, regulatory attention has tended tofocus mostly on the consumer and competition aspects ofthe Internet, similar to those for CRSs before the codes orregulations were introduced.


4.7-5

With respect to the consumer aspects, the issue is howto ensure that Internet-based systems provide consumerswith comprehensive and non-deceptive information. Whilethe traditional CRSs are required to provide a comprehen-sive source of neutral information on air services, this is notnecessarily the case with websites on the Internet, thoughsuch websites can provide consumers with additionalchoices of travel options with a greater variety of new prod-ucts such as Internet-only fares and auction fares. One otherconsumer concern is the use and disclosure of personalinformation on the Internet. To protect consumers fromincomplete and misleading information and improve con-sumer confidence, several States have addressed the issueunder the umbrella of airline passenger rights; other Stateshave applied general consumer protection laws/rules to theInternet transactions.

The primary issue regarding competition is whethercertain practices associated with the use of the Internet arelikely to undermine competition and consumer benefits,despite a competitive impetus carried to the marketplace bythe Internet. On the one hand, the use of the Internet mayprovide greater opportunities for more vigorous compe-tition and for new businesses, which could result in newproducts and services and more dynamic technologicalinnovation. On the other hand, some areas of the Internetbusiness may give rise to anti-competitive behaviour, wheremarket incumbents seek to sustain or enhance their marketpower at least for a certain period. For example, B2B andB2C websites jointly owned by horizontal competitorsholding dominant positions in the relevant markets mayhave the potential to use these sites to collaborate andcoordinate their prices and services indirectly by signalling,or directly, thereby stifling competition. Also the owner air-lines may discriminate against competing airlines, travelagents and service providers by refusing access to theirInternet-based systems on fair and reasonable terms. In thisregard, some States are examining the issue under theexisting CRS rules/regulations, competition laws andconsumer protection laws.

Regulatory response to product distribution is not easyfor regulators because of the ever-changing marketplace andbusiness practices. In addition, multiple parallel distributionchannels currently coexist, and the pace and extent ofacceptance of the new Internet-based systems vary amongstStates, making it difficult to find appropriate regulatory for-mulas, or keep regulations current. Because of the changesin the CRS industry, some States (e.g. Australia, the UnitedStates), after a long review process, have decided to ceasetheir regulation of CRSs.

Another important development is electronic ticketing(e-ticketing), i.e. a method for documenting and distributingairline tickets without producing paper coupons. In an era ofincreased competition, electronic ticketing offers consider-able cost savings for airlines and travel agents and providesconvenience for consumers. Although the use of electronictickets has in the early stage been applied mostly to single-carrier online itineraries, interline electronic ticketing(e-interlining), which permits the use of electronic tickets onmore than one airline, has gained increased popularity asmore airlines introduced the practice or expanded the capa-bility for additional routes. This practice may, however, havesome potential regulatory implications, for example in theliability and security aspects of international air transport.

The practice of aircraft leasing, i.e. the rental, rather thanpurchase, of aircraft by an air carrier from another air car-rier or a non-airline entity, has been growing steadily in thelast two decades. The use of leased aircraft plays a signifi-cant role for airlines in the provision of international airservices, reflecting in particular the economics and flexi-bility of leasing over purchasing (such as reducing initialcost burden or debt level, gaining tax benefits, and meetingseasonal demands for additional capacity). In a liberalizedregulatory environment, leasing of aircraft facilitates theentry of new carriers into the market.

There are various types of aircraft leases. They can becharacterized by their purpose. A financial or capital leaseis used by air carriers to avoid the otherwise substantialcapital outlays/debt required in purchasing aircraft directlyfrom the manufacturer, or to reduce taxation or other costs.For example, an air carrier may sell all or part of its fleetto a bank or other financial institution and then lease theaircraft back. Financial leases are long-term arrangementswhich give the outward appearance of ownership, e.g. theaircraft bears the air carrier’s name/logo and is usuallyregistered in the air carrier’s State.

In contrast, an operating lease is designed to meet anair carrier’s immediate need for additional aircraft, oftenon a seasonal or short-term basis. An air carrier withexcess or under-utilized aircraft can lease them to other aircarriers.

For regulatory purposes, there are two basic types ofaircraft leases, namely, a dry lease where the aircraft is

AIRCRAFT LEASING


4.7-6

leased without crew; and a wet lease where the aircraft isleased with crew. A wet lease with partial crew (such ascockpit crew or cabin crew) is sometimes referred to as adamp lease.

In this connection, the term lessor means the party fromwhich the aircraft is leased; the term lessee means the partyto which the aircraft is leased. For example, if air carrier Aleases an aircraft to air carrier B, air carrier A is the lessorair carrier and air carrier B is the lessee air carrier.

The increasing use of leased aircraft in international airtransport can, however, raise potential safety and economicissues in a situation where the leased aircraft is registered ina State other than that of the operator using it in inter-national commercial services. Current policies and practicesof States concerning the use of leased aircraft are mainlydesigned with a view to ensuring compliance with safetystandards and that the economic rights accorded in bilateralor regional agreements are not used by third parties notentitled to them.

With regard to the safety aspects of aircraft leasing,several definitions contained in Annex 6 to the ChicagoConvention are of particular interest. These are: State ofRegistry, the State on whose registry the aircraft is entered;State of the Operator, the State in which the operator’s prin-cipal place of business is located or, if there is no such placeof business, the operator’s permanent residence; operator, aperson, organization or enterprise engaged in or offering toengage in an aircraft operation; and air operator certificate(AOC), a certificate authorizing an operator to carry outspecified commercial air transport operations.

The fundamental safety question is which State, theState of the aircraft’s registry, or the State of the aircraft’soperator, is responsible for compliance with the applicablesafety standards of the Chicago Convention and itsAnnexes, and which operator is responsible for compliancewith the safety standards in applicable national laws andregulations. In some situations the safety responsibilities ofthe State and the operator are clear. Potential safety prob-lems arise where a leased aircraft is registered in a Stateother than that of the operator using it for international airservices.

States have addressed safety concerns arising fromaircraft leasing using the established procedures in theChicago Convention and its Annexes and, more recently,through Article 83 bis of the Convention. The Conventionassigns the task of ensuring compliance with applicablesafety standards primarily to the State of Registry of the

aircraft but also, for certain aspects, to the State of theOperator. Article 83 bis of the Convention, which enteredinto force on 20 June 1997 (see Doc 9587), sets out ameans of transferring all or part of the duties and functionspertaining to Articles 12, 30, 31 and 32(a) of the Conven-tion from the State of the Registry (the lessor air carrier) tothe State of the Operator (the lessee air carrier).

Additionally, regulatory concerns about safety areincreasingly being dealt with in bilateral air transport agree-ments, in regulations or resolutions of regional bodies (e.g.the European Union, the European Civil Aviation Confer-ence) and in various ICAO meetings and studies. ICAO hasalso developed guidance on aircraft leasing, includingmodel clauses on aircraft leasing for optional use by Statesin bilateral or regional contexts (see Doc 9587), and on theimplementation of Article 83 bis (see Cir 295).

National regulations can have an impact on the use ofleased aircraft in international air transport. For example,for safety reasons, the United States does not approve thewet lease to its national air carriers of aircraft registered inanother State. However, given the widespread use of leasedaircraft in international air transport, States appear toapproach the approval/disapproval of leased aircraft pri-marily on the basis of their use by foreign air carriers andmore often on a case-by-case basis than on the basis ofbroad, general policies.

Since aircraft leasing can be arranged in many ways,which can result in varied and complex safety situations,there is a need for coordinated and cooperative action bythe different States concerned to ensure that safety respon-sibilities are clearly understood and met. In this regard, nosingle predetermined formula will fit all situations from theperspective of safety.

In the economic regulation of aircraft leasing, Stateseither approve or do not regulate leases where the lessor isnot an air carrier or controlled by an air carrier. In otherwords, financial and long-term operating leases where thelessor is a leasing company, bank or other entity are gener-ally permitted in international air transport.

From a bilateral perspective, economic concernsregarding aircraft leasing tend to focus on any potential, ina bilateral air transport market, that an airline of a thirdcountry could, via a leasing situation, exercise or benefitfrom traffic rights to which it is not entitled. States gener-ally permit aircraft leases between airlines of the two par-ties, while restricting or not allowing leases, particularlywet leases, from airlines of third countries. However, the


4.7-7

increase in the number of liberalized bilateral agreements,such as “open skies agreements”, which grant unrestrictedtraffic rights would decrease the number of situations inwhich a third country airline does not have the underlyingroute rights. In other words, a State will have more oppor-tunities to use leased aircraft when the countries involvedall have liberalized air services agreements.

From an economic perspective, dry leases do not appearto raise the level of regulatory concern that wet leasesgenerate. To the extent that dry leases, which involve non-airline parties as lessors, are specifically mentioned in bilat-eral air services agreements, it is to state that such leases donot require approval but only notification to the bilateralpartner. However, some bilaterals do not make any distinc-tion between wet or dry leases and apply the same criteriato both types.

At the regional level, only the ECAC recommendationon leasing touches this area in a general fashion, statingthat the use of wet-leased aircraft should not be used as ameans of circumventing applicable laws, regulations orinternational agreements.

The use of leased aircraft to meet sudden, unforeseenneeds for short periods of time, such as the mechanical fail-ure of an aircraft awaiting boarding/loading, are dealt withat the national level, generally either through waiver orsome form or prior approval. Given the extremely shortnotice in such situations, which makes prior approvalimpractical in most cases, one possible solution (assuggested by the ECAC recommendation on leasing) is toestablish, based on submissions by airlines, a list of aircarriers approved by national aeronautical authorities fromwhich an air carrier may lease an aircraft at short notice, fora short period, to meet an unforeseen need.

To assist States in formulating clear, effective and trans-parent policies on aircraft leasing in international air trans-port, ICAO has developed the following checklist of factorsto be considered in reaching decisions to approve ordisapprove the use of leased aircraft:

a) In every leasing situation, determine:

1) which States are responsible for which aspectsof safety oversight;

2) which operator is responsible for complyingwith the safety standards established by theChicago Convention and its Annexes;

3) what measures are necessary for the safeoperation of the leased aircraft (e.g. crew famil-iarization/licence validation, etc.);

4) if an agreement under Article 83 bis would beeffective and appropriate. If so, decide:

i) which States will be involved;

ii) which safety functions will be transferred;and

iii) which aircraft will be included.

b) Establish the types of leases that can be approved orneed not be regulated, such as:

1) financial and operating leases of non-airlineentities;

2) leases of aircraft owned by air carriers ofparties to the relevant bilateral agreement; and

3) wet leases in short-term, unforeseen situations,using a list of potential lessor airlines asapproved sources.

c) Establish criteria for the approval of wet leases ofaircraft from airlines of third countries, such as:

1) possession of traffic rights involved;

2) reciprocity; and

3) no benefit related to the traffic carried or use ofthe route.

4.8-1

Chapter 4.8

AIRLINE COOPERATIVEACTIVITIES

As the operating environment of the airline industrybecomes increasingly competitive, international air carriersare adopting various strategies in order to adapt to thechanges, including innovative cooperative arrangements.This chapter discusses three of the most notable andgrowing airline cooperative practices which have attractedregulatory attention in recent times, namely, airlinealliances, codesharing and franchising. Because of theirpotential implications for market access, competition andconsumer interests, they are not only dealt with by airtransport regulatory authorities, but may also or alterna-tively be regulated, in some instances, by governmententities with responsibility for competition or consumerprotection.

Airline alliances, i.e. voluntary unions of airlines heldtogether by various commercial cooperative arrangementsare a relatively recent and rapidly evolving global phenom-enon in the airline industry.

An alliance agreement may contain a variety ofelements such as codesharing, blocked space, cooperationin marketing, pricing, inventory control and frequent flyerprogrammes, coordination in scheduling, sharing of officesand airport facilities, joint ventures and franchising.

Airline alliances, especially transnational ones, are aconsequence of air carrier response to, inter alia, perceivedregulatory constraints (for example, bilateral restrictions onmarket access, ownership and control), a need to reducetheir costs through economies of scope and scale, and amore globalized and increasingly competitive environment.They are perceived by many airlines as an effective tool tomaximize revenue and traffic feed.

Modern alliances differ from traditional airline cooper-ation (such as pooling) in that the latter usually involves aninter-airline agreement on tariffs and/or sharing of capacity,cost and revenue, which usually covers duopoly routes andprovides little incentive for competition or efficiency;whereas modern alliances are normally built around possiblesynergies and complementary route structures and services.

Alliances may be domestic, regional, intercontinental orglobal and can be of any size, for any particular purpose orobjective, or for any length of time. While numerous agree-ments concern cooperation on a limited scale (for example,codesharing on certain routes), the number of wide-rangingstrategic alliances has been on the rise in recent years. Mostnotable was the emergence of several competing mega-alliances, i.e. alliance groupings of geographically spreadlarge and medium airlines with extensive combined globalnetworks. Three typical examples of such global alliancegroupings are:

• Star Alliance, founded in 1997 by Air Canada,Lufthansa, Scandinavian Airlines System (SAS),Thai Airways International and United Airlines.(By the end of 2003, it had fifteen member airlines.Website: www.star-alliance.com);

• Oneworld, founded in 1998 by American Airlines,British Airways, Cathay Pacific and Qantas. (Bythe end of 2003, it had eight member airlines.Website: www.oneworldalliance.com); and

• SkyTeam, founded in 2000 by AeroMexico, AirFrance, Delta Air Lines and Korean Air. (By theend of 2003, it had six member airlines. Website:www.skyteam.com).

The partnership of each alliance group, however, can beunstable. An example is the alliance group dubbed “Wings”led by KLM and Northwest Airlines which formed one of

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the earliest strategic alliances in 1989. This alliance hassince seen many partnership changes in its members, thelatest being that its founding member, KLM, entered into amerger agreement in October 2003 with Air France, afounding member of SkyTeam.

While most alliance arrangements centred aroundpassenger-related services, some alliances have been formedwith a focus on air cargo business. Intermodal alliances withrailways have also grown in Europe and North America.Furthermore, cross-alliance partnerships, usually bilateral,have also entered the already complex scene.

The impact of global alliances on the airline industry issignificant. The marketing power of global alliances,together with their competitive consequences, includingtheir dominance at some hubs, has small and medium-sizedairlines concerned about their survival which has promptedthese airlines to either develop a particular segment of amarket or to compete as low-cost point-to-point airlines.Some small airlines also moved to form regional allianceswith neighbouring like-minded carriers (for example, CaribSky Alliance), and to enter into franchise agreements withmajor airlines (see discussion under airline franchising).

Alliances have also attracted considerable attention fromregulatory authorities because of their potential impact onmarket access, competition and consumer interests. Someproposed major alliances have been examined closely byrelevant national and regional regulatory bodies; and, insome cases, certain regulatory measures were introduced toameliorate the anti-competitive aspects of the arrangements(e.g. requiring the surrender of a certain number of slots tofacilitate other airlines’ entry into the market). Regulatorytreatment of airline alliances varies amongst States and ismostly on an ad hoc rather than systematic basis, often dic-tated by general aero-political considerations of the Statesconcerned.

Closely related to the subject of alliances is the practice ofcodesharing, which developed earlier than the growth ofalliances and has been a major element of most alliances.

The practice of codesharing, by which one carrierpermits a second carrier to use its airline designator code ona flight, or by which two carriers share the same airlinecode on a flight, can take different forms. It may, for

example, involve a major carrier sharing its code with asmaller feeder carrier; it may also be an arrangementbetween two or in some instances three or more inter-national carriers for an international flight operated incooperation, or for a connecting service that uses the samecode.

Like other forms of airline cooperative ventures, code-sharing has been adopted by many international carriers toadapt to the increasingly competitive environment. Fromthe carriers’ perspective, the main reasons for codesharingare the following:

• to achieve a better display position in computerreservation systems in cases where the flight istreated as an online service with a higher priority inlisting than an interline service;

• in the context of an increasingly competitiveenvironment, to form some kind of cooperativelinks with other carriers to maintain, protect andimprove their positions in the market;

• to achieve better presence on routes they do not fly,by means of an inexpensive marketing tool;

• to enable two carriers to operate a viable joint ser-vice where traffic volumes do not justify individualoperations by the two carriers;

• to obtain feeder traffic;

• to remain competitive or in some cases to enhancecompetitive position by drawing traffic within theorbit of codesharing partners; and

• to obtain increased market access to points hithertorestricted by capacity provisions in bilateral air ser-vices agreements.

In practice, the effects on airlines differ depending ontheir specific situation. In some cases, airlines that areparties to a broader alliance can clearly benefit fromcodesharing when the practice brings in additional trafficand extra revenue. In other cases, within the context of atransnational alliance, the codesharing arrangement maybenefit only other carriers and other countries if theservices are exclusively operated by the other party, withpossible consequences for the first party in terms ofemployment and revenue.

For airports and passengers alike, codesharing per sewill not automatically be beneficial in every situation;

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although when circumstances are favourable, it can be ofvalue to airport operators and the travelling public (e.g.where it results in more frequent flights to/from the airport,and more choices for passengers).

Airline codesharing may have advantages for develop-ing countries in so far as it can offer the possibility ofserving very thin routes at minimal cost and using hereto-fore unused rights. It can thus be an instrument to facilitatethe participation of airlines of developing countries in inter-national air transport. However, the practice has yet to takehold. This may change as the potential benefits of this formof cooperation come to be viewed as a means of adaptingto the changing competitive environment and of enablingairlines of developing countries to participate moreeconomically and effectively in international air transport.

As with alliances, codesharing has given rise to a num-ber of regulatory concerns since it is perceived as a meansof indirectly increasing market access. It is now the generalpractice that international codesharing is dealt with in thebilateral negotiating process and that underlying trafficrights are required in order for any codeshared services tobe approved. In some cases, specific provisions in bilateralagreements may also be required for codeshared services,especially when a third country is involved. Other than itslink to underlying traffic rights, codesharing is not sub-jected to systematic regulatory treatment, but rather ad hoctreatment dictated by general aero-political, economic orcompetition considerations.

Codesharing affects competition in two ways, eitherenhancing it through the provision of additional or betterservices or reducing it through a concentration of forcesplaying in the market. Therefore, the potential pro- or anti-competitive aspects of a proposed codesharing operationneed to be weighed carefully on a case-by-case basis.

Codesharing may give rise to uncertainties concerningcarrier liability. Two important legal issues are posed bycodesharing: which air carrier is liable under the Warsawregime and which air carrier is responsible to the passengerin user-/consumer-related matters? In the case of the formerit would appear that codesharing, when it involves a con-nection, need not necessarily be equated to successivecarriage, such as is the usual case with interlining, but thatultimate legal responsibility could nonetheless be deter-mined by the contract of carriage between the passengerand the contracting carrier, depending on the interest of thepassenger or its claimants. Where the codeshared servicedoes not involve successive carriage, then other legal con-siderations concerning the right of liability redress may

arise. With respect to responsibility regarding user-relatedissues, the usual airline industry rules and practices apply,i.e. responsibility rests with the operating carrier. In anyevent, before providing services, codesharing partnersshould agree on liability issues and give notice to the publicso that these become part of the terms and conditions ofcarriage.

The consequences of codesharing for the consumerraises the question of whether it is a deceptive practice or,alternatively, whether it is beneficial to the consumer. Theoverall concern is that information on actual or potentialtravel given to the travelling public must be accurate andcomplete and not confusing or in any way misleading. Inthis regard, ICAO recommends that information provided toconsumers should include flights, operators, intermediatestops and changes of aircraft, airlines and airports. Althoughairlines have the main responsibility for taking action,others in the information chain such as travel agents, com-puter reservation systems and airports should also beinvolved. It is further recommended that, as a minimum,passengers be provided with the necessary information inthe following ways:

• orally and, if possible, in writing at the time ofbooking;

• in written form, on the ticket itself and/or (if notpossible), on the itinerary document accompanyingthe ticket, or on any document replacing the ticket,such as a written confirmation, including infor-mation on whom to contact in case of problems anda clear indication of which airline is responsible incase of damage or accident; and

• orally again, by the airline ground staff at all stagesof the journey.

Codesharing can have implications for some otheraspects of air transport regulation. For example, the practicehas some governments concerned about the safety standardsof foreign airlines with which their national airlines havecodesharing arrangements. Another concern relates to thesecurity implications of the potential transfer of a securitythreat, which may exist against one airline and be spread toits partner or partners in a codesharing arrangement, and anysubsequent additional security measures imposed by theappropriate authorities. It is therefore essential that clearlines of accountability and responsibility be established forthe parties involved in a codesharing arrangement sincetechnical and operational regulations may vary considerablyfrom one airline partner to another.


4.8-4

More detailed information and analysis of codesharingcan be found in Circular 269 — Implications of AirlineCodesharing.

Airline franchising is a commercial arrangement thatinvolves a franchiser carrier granting a franchise or right touse various of its corporate identity elements (such as itsflight designator code, livery and marketing symbols) to afranchisee carrier to market or deliver the latter’s air serviceproducts, typically subject to standards and controlsintended to maintain the quality desired by the franchiser.

Under a franchising arrangement, the franchisee(usually a small airline) typically pays a fee and royalties touse the brand of the franchiser (usually a major air carrier)and other services associated with that brand (e.g. uniformsand other marketing symbols, computer reservation systemsand frequent flyer programmes, sales and marketing,customer service procedures, etc.), with the intent that pass-engers will feel as though they are flying with the majorairline. Although the franchisee assumes the public face ofthe franchiser, it usually maintains its independence inrunning its operations and carrying out its revenue manage-ment and, in some cases, may continue to use its own namefor its services.

The practice of airline franchising began in the UnitedStates in the early 1980s. It usually involves a major carrierwith smaller regional airlines, with the latter acting asfeeders and operating under the former’s brand (e.g. AirWisconsin Airlines, Atlantic Coast Airlines as UnitedExpress; Comair, SkyWest Airlines as Delta Connection;and Mesa Airlines, Air Midwest as US Airways Express,etc.). In Europe, franchising was first experimented with inthe United Kingdom, led by British Airways and, morerecently, has been used by several other major Europeancarriers such as Air France, Lufthansa and Iberia, and hasnow been extended by these airlines to Africa and theMiddle East (e.g. British Airways franchise agreementsinclude three African carriers: Comair of South Africa,Regional Air of Kenya and Zambian Air Services ofZambia).

It should be noted, however, that there is a distinctionbetween the kind of franchise operation that has existed inthe United States for many years and the more recent fran-chising arrangements developed by the European carriers.

For example, there is often a financial connection betweenthe United States franchiser carrier and its feeder airlines(typically with the major carrier having equity investmentin the latter). This is not the case in Europe. Also, in theUnited States there is normally a close operational connec-tion between the partner airlines, with the major carrierhaving a greater measure of control and influence over thefeeder airlines, and the arrangement often involving closercoordination in terms of marketing, equipment inter-changes, ground handling and so on. In Europe, theseelements do not exist to the same extent, and traffic feed isnot the primary objective of the arrangement as it is in theUnited States. Therefore, in terms of the method of fran-chising, the European arrangements adhere more to thefranchising concept described above.

While franchising is currently not widely practised(except in North America and Europe), it is becomingincreasingly common as air transport liberalization continuesto spread.

The major advantage of franchising is that it allowspartner carriers to marry their respective strengths, i.e. asmall airline can combine its low-cost operations with amajor airline’s strong brand and powerful distribution sys-tem while the major carrier can extend its brand to routeswithout actually operating air services on such routes.

From a franchiser’s respective, benefits may include:

• more brand exposure, and traffic feed from thefranchisee carrier;

• increased income from fees and royalties;

• extension of its network, with minimum financialrisk, to thinner regional routes that it could notserve profitably or to markets where it was absent;and

• better utilization of slots at congested airports formore lucrative routes (when it transfers thinnerroutes to its franchisees).

As for the franchisee carrier, benefits may include:

• more brand recognition, and traffic feed from themajor carrier;

• access to the major carrier’s product distributionsystems and frequent flyer programme (FFP);

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• access to skills and training; and

• enhancement of services and reputation.

However, there can also be certain risks associated withfranchising. For example, the franchiser may risk damage toits brand image if things go wrong with the franchisee’s ser-vice (such as an accident, poor quality service). Where thefranchiser airline depends on its franchisee to serve certainmarkets, it may risk a hole in its network if the franchiseeterminates the partnership. As for the franchisee carrier,such an arrangement may lead to potential loss of identityand increased cost or pressure to maintain standards set bythe franchiser.

Since franchising, by way of branding/marketing, essen-tially allows an airline to assume the public face of another,it may raise many issues similar to those of codesharingwhich also involves more than one airline. For example, interms of technical and operational aspects, there can bequestions regarding attribution of rights and responsibilitiesof the parties concerning the services operated under suchan arrangement (e.g. Whose call sign should be used for airtraffic purposes? Under whose route, traffic and operationalrights should the services be operated? Whose slots shouldbe used for the services? Who should be responsible forfiling schedules, tariffs?).

From an economic regulatory perspective, issues canarise in three main areas: a) market access rights; b) effectson competition; and c) need for consumer protection.

Franchising is unlikely to create major regulatory prob-lems when it involves only carriers of the same country(such as those in the United States) or of the same commonmarket (e.g. the European Union) because the servicesinvolved are mostly domestic and are subject to the sameregulatory regime (especially in a fully liberalized environ-ment). However, when franchising involves internationalservices, particularly carriers of different countries, it hasbeen known to cause certain regulatory problems or evendisputes.

In the area of market access rights, for example, a prob-lem may arise when the franchisee airline operates a serviceon routes where it has its own underlying route/trafficrights, but it flies its aircraft and holds out its service usingthe franchiser’s brand (which does not have the underlyingroute/traffic rights on those same routes). Some States (e.g.South Africa) are more flexible in allowing their local car-riers to operate services using a foreign franchiser’s nameon both domestic and international routes. Some otherStates may, however, require that both the franchiser andthe franchisee possess the necessary rights under relevantbilateral agreements. Questions may also arise regardingdesignation. Can a franchisee use the designation of fran-chiser? If yes, how can a foreign franchisee meet the fran-chiser country’s designation criteria on ownership andcontrol? Or, can the franchisee operate under its owndesignation but hold out its services using the franchiser’sbrand?

With regard to the effects on competition, althoughmany of the routes operated by franchisees tend to be toosmall to support multi-carrier competition, it might still bequestioned, under certain circumstances, if relevant compe-tition law requirements are being met because of the natureof such arrangement, which involves a high degree of coop-eration between two independent airlines, especially whena major franchiser carrier coordinates schedules and pricingwith its franchisee partner airlines on routes covering majormarkets.

In the area of consumer protection, since franchising,like codesharing, involves an operator using the brandand/or code of another airline, it may have similar deceptiveeffects on passengers (e.g. passengers may find themselvesbooked with one carrier but flying with another). Therefore,there is a regulatory need to address the disclosure issue. Inthis regard, many of the regulatory measures for code-sharing may also be applied to franchising. Regulatory con-cerns about clear lines of responsibility between the partnersfor safety, security, liability, and economical issues (e.g.denied boarding compensation, mishandled baggage, etc.)should also be properly addressed.

4.9-1

Chapter 4.9

AIR PASSENGERS

The enormous growth of international air travel, coupledwith multiple innovations in services and tariffs, particu-larly in liberalized markets, has created several new areasof concern to air transport regulators. One of these areasrelates to consumer interests which has received increasingattention and covers many issues including “air passengerrights” and the contractual relationship between air carriersand their users.

The first section of this chapter discusses the positivedevelopment in recognized passenger rights and relatedissues. The next two sections present topics that representsomewhat negative or troublesome developments from thestandpoints of both passengers and air carriers, namely,unruly or disruptive passengers and improperly documentedpassengers.

Although there is no formal, internationally agreed defi-nition, the term passenger rights has been used to generallyrefer to the entitlements of passengers to protection from orcompensation for certain actions by airlines and/or airportsthat are adverse to their interests, which are specified ingovernment regulations or in the airline’s contract ofcarriage and/or other published commitments. Some suchrights have been protected for many years. One example isthe Warsaw Convention (see also Chapter 3.2) which gov-erns the liability of air carriers in the case of accidents, lossof baggage, and delays.

Along with the continuing liberalization of internation-al air transport regulation, the protection and improvementof passenger rights has achieved greater importance, partic-ularly, but not exclusively, in major markets. For airlines ofdeveloping States operating to and from major markets, thetreatment of this matter has longer term consequences fortheir competitive viability.

Despite the emphasis liberalization places on openingup markets to meet user needs, the focus by airlines on costpressures and competitive market forces has sometimes hadan adverse impact on consumer interests. The quality ofservice offered by airlines has not always met consumers’expectations. Infrastructure limitations at some airports(such as airspace congestion, and passenger handlingcapacity) have also compounded the situation. These haveoften led to passenger dissatisfaction with the serviceconduct of airlines and/or airports such as inadequate hand-ling in the case of flight delays and cancellations, andinsufficient information for users.

In response to a perceived decline in customer services,a significant number of States, in recent years, have adoptedregulatory measures that address some of the issues such asdenied boarding compensation, bans on smoking, on-timeperformance statistics and access for disabled passengers.Some governments have also required airlines, inter alia, toensure that all tariffs are made available to the public, todisclose information on cancellation policies and to avoidmisleading advertisements.

At the industry level, many airlines have also taken theinitiative by making voluntary commitments (i.e. non-legally binding self-regulation) to clarify or improve theirpolicies or practices with regard to certain customer services(such as fare offers, ticket refunds, denied boarding, flightdelays and cancellations, baggage handling, response tocomplaints, and special passenger needs), often in responseto public pressure and to avoid regulatory measures.

On a worldwide basis, the International Air TransportAssociation (IATA) has developed conditions of contract(Resolution 724), which lay down the contractual con-ditions applicable to the international flights of its memberairlines as a binding resolution. IATA has also developedconditions of carriage (Recommended Practice 1724),aimed at the harmonization of the general conditions underwhich passengers travel on inter-carrier journeys. UnlikeResolution 724, this Recommended Practice, which focuses

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4.9-2

on “best practice”, does not bind member airlines, nor doesit apply to domestic flights or to services operated by non-member carriers. In addition, IATA produced a GlobalCustomer Services Framework in June 2000 as guidancefor its member airlines in developing their own voluntarycommitments.

From a regulatory policy perspective, the improvementof the quality of passenger service may be achieved bydifferent approaches including competitive response, regu-latory measures and/or voluntary commitments. But eachapproach may raise certain issues and concerns.

States that consider air transport primarily a commercialactivity governed by market forces tend to rely on compe-tition and, at least initially, voluntary air carrier measuressupplemented as necessary with regulatory measures.

Advocates of this approach believe that competition inthe marketplace is the best way to meet consumers’ expec-tations, especially in the areas relating to “value for money”,such as seat configuration, in-flight services, meals ande-commerce services. On the basis of their own commercialjudgement of the market demands, airlines provide variouscombinations of service quality and prices. Consumers ben-efit from the availability of different product options, and ifa carrier does not meet their expectations, they can switch tocompeting airlines. Consumers’ comparison shoppingshould, in general, enhance service competition so that themarketplace itself generates better performance.

Nevertheless, there exist some instances where compe-tition does not necessarily guarantee a minimum level ofservice that customers can expect, either directly orindirectly, and below which no carriers should fall. This isparticularly true when consumers cannot make an informedchoice of airlines in planning their travel arrangements dueto the lack of information available to them. Certainelements (for example, the treatment of disabled andspecial-needs passengers) might not even be a matter ofcompetition between airlines. Also consumers’ negotiatingposition is relatively weak because they have to acceptcontractual conditions and business practices decided byairlines and fully pay for the service before actually takingthe flight.

Recognizing the limits of competitive response, someStates have introduced certain regulatory measures tostrengthen passenger rights, create contractual certainty andmake more information clearly and readily available toconsumers on a wide range of subjects. These range fromairline business practices (such as codesharing, availabilityof fares, and ticket refunds), contracts (such as conditions

of carriage, denied boarding, liability provisions, misplacedbaggage, and special passenger needs) to operational per-formance disclosure (such as on-time performance andcomplaints).

However, a major complication with government inter-vention generally in consumer interest matters is thatregulatory measures which tightly define the quality ofservice may remove a key competitive element, therebylimiting the scope of the service areas where competitionmight be the best means of improvement. Regulations oftenimpose additional costs on airlines, thereby affectingairlines’ competitiveness, pricing and product differen-tiation. Furthermore, regulations, once introduced, may bedifficult to withdraw or amend promptly according to achange of situation, and the attempt to regulate one elementcan result in a proliferation of regulations involving otherelements. Authorities may also incur administrative costsfor regulation.

To avoid the potential problems associated with theregulatory approach, States may choose to rely initially onvoluntary commitments by airlines (and service providers ifapplicable), which are regarded as complementary to theregulatory approach. The airline industry also favours thevoluntary commitment approach by outlining service targetsor “best practices” that individual airlines agree to buildupon according to the type of services they offer. If volun-tary commitments are prevailing and attainable, and themonitoring system is well established, then regulatorymeasures on subjects covered by the commitments wouldgenerally be unnecessary.

In practice, different levels of interest in and responseto consumer issues have resulted in the emergence ofregimes in various States or regions with similar aims andobjectives on passenger rights but with differing regulatory,self-regulatory and contractual requirements. A potentialconsequence of this patchwork of emerging regimes forinternational air transport is that carriers with broader net-works, especially ones involving major markets, could facenumerous and sometimes conflicting regulatory and con-tractual requirements, creating confusion for airlines andconsumers alike.

A fragmented system of consumer interest regulatoryregimes may also make it costlier for airlines to apply con-sistent internal training and to maintain adequate communi-cation, and may affect common or compatible industrysystems and standards as well as the multilateral interlinesystem. Therefore, uniformity of standard terms forconditions of contract/carriage, together with international

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liability regimes and required ticket notices, would greatlyassist in the smooth functioning of interline carriage.

Another consequence, if the regulatory approach isincreasingly applied vis-à-vis voluntary commitments, isthat there is a potential risk of extraterritorial application ofnational (or regional) laws by a State (or a group of States).Although existing regulatory measures are applied inter-nationally on the country-of-origin basis, a State may wishto apply them irrespective of the origin or destination of theflights operated by its national carriers, or to further extendthe scope of application to foreign carriers that pursue theircommercial activities in its territory, especially where it con-siders that foreign carriers could avoid its jurisdiction. Anexample of such a case would be a State applying its deniedboarding regulation to all flights to and from its territory,including those operated by carriers of third countries.

It is also possible that a State may wish to regulate acontract of carriage irrespective of where the contract wasconcluded because e-commerce makes it difficult for aState (and the courts) to determine the exact place where acontract was concluded. However, since the application ofnational laws with such broad scope would imposeobligations on foreign carriers or affect contracts estab-lished in the territories of third countries, it would createpotential legal uncertainty and raise objections by someStates concerned.

ICAO has done considerable work in this field, inclu-ding the development of guidance material in such areas asconditions of carriage, fare guarantee, baggage, tariffdisclosure, denied boarding and codesharing. The ICAOCode of Conduct for the Regulation and Operation of Com-puter Reservation Systems also covers the consumer pro-tection aspects in the context of CRSs. This guidance canbe found in Policy and Guidance Material on the EconomicRegulation of International Air Transport (Doc 9587).

Guidance material for air transport users has also beenprepared to assist States in publishing or encouraging thepublication of booklets intended to inform air passengersand shippers of their rights and obligations (see Appendix 5to this manual). Furthermore, Annex 9 to the ChicagoConvention sets out standards and recommended practicesfor passenger facilitation designed to allow air transportusers to proceed through airports with minimal delay anddifficulty.

The issues identified above were also addressed bythe fifth ICAO Worldwide Air Transport Conference(ATConf/5), held in March 2003, which drew the followingconclusions in respect of possible action by States:

a) As a premise in addressing consumer interest issues,States need to carefully examine what elements ofconsumer interest in service quality have adequatelybeen dealt with by the current commercial practicesof airlines (and service providers if applicable) andwhat elements need to be handled by the regulatoryand/or voluntary commitment approaches.

In this regard, the following indicative list, togetherwith airlines’ conditions of contract/carriage (seesummary in the box following this section), couldserve as a checklist of many of the consumer interestsubjects a State may wish to monitor:

1) the availability of lower fares including fares onwebsites;

2) reservation, ticketing and refund rules;

3) advertisements;

4) airline’s commercial and operational conditions;

5) check-in procedures;

6) handling of and compensation for flight delays,cancellation and denied boarding;

7) baggage handling and liability;

8) operational performance disclosure such as on-time performance and complaints; and

9) assistance for disabled and special-needspassengers (i.e. people with reduced mobility).

b) States need to strike the right balance between vol-untary commitments and regulatory measures,whenever government intervention is considerednecessary to improve service quality. States shouldrely generally and initially on voluntary commit-ments by airlines (and service providers), and whenvoluntary commitments are not sufficient, Statesshould consider regulatory measures.

c) In implementing new regulatory measures, Statesshould minimize the unnecessary differences in thecontent and application of regulations. Efforts tominimize differences would prevent potential legaluncertainty that could arise from the extra-territorialapplication of national laws, without diminishing thescope for competition or hampering the operatingstandards and procedures for interlining.


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AIRLINE’S CONDITIONS OF CONTRACT/CARRIAGE

As described in Chapter 4.3 — Air Carrier Tariffs, “conditions of carriage” means the terms and conditions established by an aircarrier in respect of its carriage, which are referred to as “conditions of contract” when shown on the passenger ticket or air waybill.The various benefits and limitations set out in the conditions of carriage/contract, along with the price for the services being provided,constitute a “contract for carriage” between the air carrier and the user.

In order to harmonize the conditions under which passengers travel on inter-carrier journeys, the International Air TransportAssociation (IATA) has developed Resolution 724 on Passenger Ticket — Notices and Conditions of Contract which are binding onits member airlines for application to international flights. The Notices cover limitations of liability, overbooking, information ontaxes and user fees, and some national requirements. IATA has also developed Recommended Practice 1724 on General Conditionsof Carriage (Passenger and Baggage) which is for optional use by its members. This Recommended Practice (2000 version) consistsof the following elements:

1. What Particular Expressions Mean in These Conditions

2. Applicabilitygeneral; charter operations; codeshares; overriding law; conditions prevail over regulations

3. Ticketsgeneral provisions; period of validity; coupon sequence and use; name and address of carrier

4. Fares, Taxes, Fees and Chargesfares; taxes, fees and charges; currency

5. Reservationsreservation requirements; ticketing time limits; personal data; seating; reconfirmation of reservations; cancellation of onward reservations

6. Check-in and Boarding

7. Refusal and Limitation of Carriageright to refuse carriage; special assistance

8. Baggagefree baggage allowance; excess baggage; items unacceptable as baggage; right to refuse carriage;right of search; checked baggage; unchecked baggage; collection and delivery of checked baggage;animals

9. Schedules, Delays, Cancellation of Flightsschedules; cancellation, re-routing, delays, etc.

10. Refundsinvoluntary refunds; voluntary refunds; refund on lost ticket; right to refuse refund; currency;by whom ticket refundable

11. Conduct Aboard Aircraftgeneral; electronic devices

12. Arrangements for Additional Services

13. Administrative Formalitiesgeneral; travel documents; refusal of entry; passenger responsible for fines, detention costs, etc.;customs inspection; security inspection

14. Successive Carriers

15. Liability for Damage

16. Time Limitation on Claims and Actionsnotice of claims; limitation of actions

17. Other Conditions

18. Interpretation


4.9-5

The term unruly or disruptive passengers refers to passen-gers who fail to respect the rules of conduct on boardaircraft or to follow the instructions of crew members andthereby disturb the good order and discipline on boardaircraft.

In recent years, there has been an increase in thereported incidents involving such passengers. The incidentsinvolved various types of offences and reprehensible acts,including assault on crew members or passengers; fightsamong intoxicated passengers; child molestation, sexualharassment and assault; illegal consumption of drugs onboard; refusal to stop smoking or consuming alcohol; ran-sacking and sometimes vandalizing of airline seats andcabin interior; unauthorized use of electronic devices;destruction of safety equipment on board; and otherdisorderly or riotous conduct. These incidents are notrestricted to a particular airline, country, customer, class ofservice, or length or type of flight. Such acts and offencescan sometimes directly threaten the safety of the aircraft.There were cases where the aircraft commander had tomake an unscheduled stopover to disembark the unrulypassenger(s) for safety reasons. These incidents havecaused growing international concern.

The increase of these incidents also presents new chal-lenges for both governments and air carriers, particularlywhen such acts occur on board international flights.Authorities and airlines are often faced with legal and regu-latory issues in handling unruly passengers due to theexistence of certain gaps in their relevant national laws andexisting international aviation security conventions.

One major issue concerns what constitutes an offencethat is subject to prosecution. The movement of aircraftacross national borders means that they will be subject tothe laws and regulations of different jurisdictions. Due tothe diversity of laws and regulations, an act or omissionwhich is regarded as an offence in one jurisdiction may notbe so regarded in another jurisdiction.

When suspected offenders are to be prosecuted in aState where a foreign aircraft has landed, the question mayarise whether their acts or omissions constitute offences notonly in the State of landing but also in the State of Registryof the aircraft and in the State where the acts or omissions

occurred. Therefore, it is necessary to establish a uniformlist of offences that would be regarded as a commondenominator for all States involved. Such a list will beinstrumental in incorporating the relevant offences intoStates’ respective national laws or regulations allowingprosecution and application of sanctions.

Another major issue concerns jurisdiction. There aremany cases in which unruly passengers have to be releasedwithout being submitted to judicial proceedings due to thelack of jurisdiction of the State where the aircraft lands.Under most domestic laws, States other than the State ofRegistry of the aircraft normally do not have jurisdictionover offences committed on board the aircraft outside theirrespective territory, except for certain offences covered byinternational treaties or international customary law, suchas hijacking, sabotage and hostage taking.

Under international law, while international conven-tions relating to aviation security have proven to be aneffective tool in combating hijacking, sabotage and similarforms of unlawful interference against civil aircraft, theseconventions are not specifically designed to deal with other,less serious types of offences committed by unruly passen-gers. For example, under the Convention on Offences andCertain Other Acts Committed on Board Aircraft(Doc 8364), signed at Tokyo on 14 September 1963,offenders cannot be held in restraint beyond the first stop-over; by the time the aircraft has returned to the State ofRegistry, the offenders, as well as the witnesses, will belong gone. Many offenders have taken advantage of thissituation to avoid prosecution.

To address these issues, ICAO has done considerablework, focusing on three major areas, namely, a list ofspecific offences for inclusion in national law, the extensionof jurisdiction over such offences, and the appropriatemechanisms for addressing these offences. Drawing onStates’ experience, it has developed some guidance forStates which mainly addresses the legal aspects of unrulypassengers.

To address the issue of what constitutes an offence, alist of offences has been drawn up by ICAO in order to pro-vide a common denominator for offences as a basis fornational prosecution.

With respect to the jurisdiction issue, some States have,in their respective domestic legislation, extended their juris-diction to cover offences committed on board foreign air-craft that next land in their respective territories. Based on

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4.9-6

this emerging practice, ICAO prepared a model juris-dictional clause extending national jurisdiction over suchoffences for possible use by States in their relevant nationallaw to fill the jurisdictional gap referred to above.

The list of offences and the jurisdictional clause whichare part of a proposed model legislation developed byICAO can be found in Circular 288 — Guidance Materialon the Legal Aspects of Unruly/Disruptive Passengers.

Among the legal and regulatory measures that Statescould take to address the problem of unruly passengers arethe adoption of national laws, bilateral arrangements, andthe interpretation and application of existing internationalconventions. In addition, other practical or preventivemeasures could also be taken or considered on the part ofairlines and other involved parties. For example, airlinescould develop or update policies and programmes specifi-cally designed to address the problem of unruly passengers.Some key areas to be covered in this regard include:

• Passenger management and operating procedures.This involves the process of dealing with airlinepassengers and may include measures and pro-cedures to prevent or deal with incidents, such asdenied boarding procedures, passenger informationpolicies, smoking and alcohol policies, and conflict-resolution training for cabin crew and passenger-handling staff.

• Improvement of the air travel environment andexperience. This involves identifying factors whichmay cause passenger stress and aggression, such asoverbooking, delayed flights and lack of informationfor passengers.

• Increased passenger awareness. Passengers shouldbe made aware that unruly acts on board aircraft areagainst the law and may result in convictions orbeing denied boarding in the future. The policy mayneed to be specified in the terms and conditions ofcarriage. Campaign material such as posters andairline ticket inserts may be utilized for this purposeas well.

In this respect, efforts have been made both within andoutside ICAO to develop guidelines and other material con-taining preventive measures concerning unruly passengers,in particular, the ICAO aviation security training packagematerial (ASTP 123/Airline), as well as relevant airlineprogrammes and other relevant documentation.

Another negative development associated with air passen-gers is the problem of improperly documented passengerswho attempt to migrate from one State to another underfalse pretences contrary to the national laws of either State.Since the mid-1980s, such attempted migration, whether forpolitical, economic or social reasons, has become a world-wide phenomenon, placing extensive economic burdensboth on governments and air carriers.

In recent years the problem has been compounded bythe involvement of criminal elements in the organization ofsuch illegal movements and the adoption by would-bemigrants of various methods of evading or prolonging theimmigration process in their chosen destination State. Suchmethods include the use of fraudulent travel documents (orthe fraudulent use of valid documents by imposters), thedestruction of travel documents during the flight or voyage,and mala fide applications for asylum upon arrival at theintended destination.

The use of improper travel documentation as a tactic forgaining access to air transportation to a desired destinationadversely affects the general security of States, regardless ofwhether their territories may be a source of, a transit pointfor, or a recipient of this type of traffic.

Traditionally States have relied upon legislative pro-visions making transport operators responsible for ensuringthat their passengers are adequately documented for travel,and imposing fines or penalties as deterrents to the interna-tional carriage of inadmissible persons. Many internationalairlines, in cooperation with States, have been obliged toimplement intensive programmes to detect fraudulent doc-uments and to identify and intercept passengers who aretravelling with the intent to migrate without proper docu-mentation.

However, the increasing volume of illegal traffic andthe sophistication of methods employed have called formore effective measures and concerted efforts at the inter-national level to counter travel document fraud and addressissues related to inadmissible persons, i.e. persons refusedadmission to a State by its authorities.

In this connection, the principal concern of the civil avi-ation community is the use of improper travel documents

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4.9-7

contrary to Article 13 (Entry and clearance regulations) ofthe Chicago Convention rather than the traveller’s status as“admissible” or “inadmissible”, which is an immigrationissue.

Another problem that has caused some concern is thelack of cooperation and communication between Statessending and receiving inadmissible persons. For example,there have been cases where passengers were shuttled backand forth between States because of disagreements abouttheir “inadmissible” or “deportee” status. Aircraft weredetained on the ground for days, and even weeks, becauseof disputes between administrations on their respectiveresponsibilities with regard to inadmissible persons.

These border control problems consume an inordinateamount of the civil aviation community’s service resources,including control authorities at airports. Reactive measuresare often time-consuming which degrade the clearance ser-vice for the general travelling public. Moreover, inadmis-sible persons being repatriated against their will have beenknown to pose problems for the security of the flight.

ICAO is leading the international efforts to addressthese problems and issues. It has developed relevant Stan-dards and Recommended Practices (SARPs) in Annex 9(Facilitation) to the Chicago Convention, and accompany-ing guidance material. The SARPs of Chapter 3 of theAnnex set out general procedures to be followed by Statesand airlines when dealing with inadmissible passengers.The objective of the SARPs and guidance material is to:encourage better cooperation and communication betweenindustry and government, and among States affected; helpStates enhance their border controls through, inter alia,preventive measures (including, for example, better use ofmodern technology such as machine readable travel docu-ments) and improved immigration procedures; and clearlydefine the responsibility of the State and the operatorinvolved in the handling, including repatriation, of inadmis-sible persons. Annex 9 also requires States to remove fromcirculation fraudulent, falsified and counterfeit documents.

Details of the SARPs and guidance material can befound in Annex 9 and Parts 1, 2 and 3 of Doc 9303 —Machine Readable Travel Documents.

4.10-1

Chapter 4.10

AIRPORT-RELATED MATTERS

This chapter presents three airport-related matters that haveattracted increasing regulatory interest in recent times.Discussed in the first section is ground handling at inter-national airports, which has historically been subject toregulation at the national, bilateral and even multilaterallevels. The second section examines the topic of allocationof flight arrival and departure slots at international airports,an issue faced by an increasing number of States wheredemand outstrips supply as a result of the substantialgrowth in air transport. The third section discusses airportprivatization.

Although there is no formal, official definition, groundhandling is generally understood to broadly include servicesnecessary for an aircraft’s arrival at, and departure from, anairport but to exclude those provided by air traffic control.The Airport Economics Manual (Doc 9562) separates theground-handling function into terminal handling (passengercheck-in, baggage and freight handling) and ramp handling(aircraft handling, cleaning and servicing). Ground handlinggenerally excludes maintenance and repair of aircraft,although in some instances so-called line maintenance maybe considered as a part of ground-handling services.

Services related to ground handling may be provided atan airport by one or more airlines, by one or more con-cessionaires, by the airport itself, or by a combination ofany of these means.

States usually regulate ground handling as an airportactivity, either as operators of airports (directly or viaautonomous agencies) or by relying on national laws andregulations concerning such matters as non-discriminatorytreatment. This regulatory activity will take into accountprovisions on ground handling contained in bilateral air

services agreements and, where applicable, measures ofregional multilateral regulatory authorities, such as theEuropean Commission.

ICAO guidance on ground handling includes, forexample, Recommended Practice 6.6 in Annex 9 (Facili-tation) to the Convention on International Civil Aviation.That provision recommends that air carriers, in agreementwith and subject to reasonable limitations which may beimposed by the airport authorities, be offered severalchoices with respect to ground-handling arrangements,including providing their own services. In cases where air-ports provide such services or derive concession revenuesfrom their provision, appropriate guidance is contained inICAO’s Policy on Charges for Airports and Air NavigationServices (Doc 9082) with supplementary guidance beingprovided in the Airport Economics Manual (Doc 9562).

In terms of bilateral regulation, a small minority of thebilateral air services agreements registered with ICAOcontain provisions concerning ground handling. Theseprovisions tend to fall into two general categories. The firstand larger category is composed of provisions which stipu-late that ground-handling services are to be providedreciprocally by the respective designated airlines of the twoStates or by a national agency approved by the State inwhich the ground-handling services are provided. Theprovisions in the second category recognize the right of adesignated airline to perform its own ground-handlingoperations or to use other airlines or service providers butthis right is often subject to conditions established by theState in which the ground-handling services are performed.

Along with the trend of liberalization in internationalair transport, many States, in recent years, have introducedliberal ground-handling provisions in their bilateral air ser-vices agreements, and ground handling is now frequentlyoutsourced to specialized companies. Unlike air carriers,ground-handling companies are not constrained by nationalownership restrictions, and they have been undergoing aprocess of globalization and consolidation. This has given

GROUND HANDLING


4.10-2

rise to some concern that the outsourcing of ground hand-ling will have an adverse impact on safety, on the premisethat private companies without previous experience of asafety culture are becoming involved. To address this con-cern, ICAO conducted, in 2001, a study on the safetyaspects of ground handling, which led to a review of, andamendments to, the existing Standards and RecommendedPractices (SARPs) in Annex 6 to the Chicago Convention,and other ICAO guidance material. These amendmentswere designed to ensure that States give adequate consider-ation to the safety aspects of ground-handling arrangementsin the certification and surveillance of aircraft and airportoperators and ground-handling companies. In addition,ICAO also developed an amendment to the existing ICAOmodel clause on ground handling to take account of therequirement for compliance with applicable safety andsecurity provisions (see Doc 9587).

An airport slot is a specific designated day and time (usuallywithin a 15- or 30-minute period) for an aircraft to arriveat or depart from an airport.

Slots are important to air carriers not only foroperational reasons (e.g. for aircraft, crew, and gate usescheduling) but also for commercial reasons (e.g. matchingdeparture and arrival times to time periods believed to bepreferred by most travellers provides a more attractive ser-vice). The availability of slots at an airport can be limiteddue to various physical constraints such as the capacitylimitations of the runway(s), terminal(s), boarding gatesand air traffic control facilities. Therefore, in situationswhere an airport becomes congested and the demand forslots exceeds available supply, some type of rationing orslot allocation mechanism, i.e. a formula for the allocationof slots among their users, will be required.

The allocation of slots is typically carried out amongthe airlines serving the same airport and involves consul-tation with the airport authorities. Since a slot change atone airport may have major implications for a flight interms of securing corresponding slots at other airports, it isoften necessary to have wider coordination.

The mechanism most often used by airlines for sched-ule coordination and slot allocation has been the IATA Air-line Schedule Coordination Conferences, which are heldtwice yearly, about four months prior to each schedulingseason (one runs from April to October, the other from

November to March). Participation is open to any airline(IATA member or non-IATA member). An importantelement in this system is so-called “historical precedence”or “grandfather rights”, i.e. rights to retain what was heldbefore, in this case slots used in the previous equivalentseason. Schedule changes and/or adjustments includingthose required by new flights or services are accommodatedmainly through voluntary adjustments or exchanges of slotsbetween the airlines concerned. The worldwide member-ship of the Conference gives it a unique ability to accom-modate the necessary adjustments in flight schedules at allaffected airports, as long as sufficient slots are available.However, a system based on “grandfather rights” can, inthe view of some observers, result in new entrant airlinesand new services not being accommodated at particularlycongested airports.

States generally endorse the use of the IATA mech-anism in schedule coordination and slot allocation. How-ever, in some States where the problem of insufficientairport capacity is more serious, regulatory authorities havefound it necessary to introduce certain additional measuresto limit or ration access to congested airports. In somecases, airlines not presently serving the congested airportare not allowed to begin service, and certain types of oper-ations (such as non-scheduled flights or all-cargo services)are either not permitted or severely limited. In some cases,international services with rights granted under a bilateralair services agreement are given priority for slots overdomestic flights. Limitations at some congested airports aresometimes mitigated where slots are available at other air-ports serving the same city. In some severe cases,government-to-government negotiation and/or agreement isrequired for resolution of specific slot allocation problems.In some States, internationally agreed slot allocation rulesare applied (e.g. the European Union member States followthe EU common rules for the allocation of slots at Com-munity airports, which essentially use the IATA mechanismwithin certain constraints; for example, new entrant airlinesare given priority in the allocation of 50 per cent of theslots that become available).

Over the last two decades, the increase in commercialair services has continued to outstrip available capacity atmore and more airports, chiefly in Europe but in otherregions as well. States, airports and airlines have sought todeal with this problem through measures that focus oneither increasing the capacity (supply-side approach) ormanaging the lack thereof (demand-side approach).

Among the supply-side actions which can overcome orreduce a shortage of airport slots are: a) building new

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airports or expanding existing ones; b) improving air trafficcontrol capabilities through new technology and procedures;and c) increasing efforts and resources in passenger andcargo facilitation.

Among the regulatory policies and practices Stateshave used aimed at the demand-side of the problem are:

• setting annual limits on the number of aircraftmovements or passengers;

• negotiating new or expanded traffic rights onlywhen these can be accommodated at the airport(s)concerned;

• negotiating access to slots bilaterally in advance;

• applying a policy of reciprocity;

• developing and encouraging the use of alternateairports;

• recognizing the link between noise rules anddemand; and

• employing peak period pricing in landing chargesto help spread the demand for slots to periods whenthe airport’s capacity is not fully utilized.

Some States, where airport capacity constraints havebeen particularly severe, have used one or more measuresfrom both the supply-side and demand-side approaches.

Clearly, increasing airport capacity through new orexpanded airports, runways and terminals has the greatestimpact on resolving a scarcity of slots. However, these typesof improvements usually take years to put in place and, insome cases, the additional capacity is quickly used up bytraffic growth. Moreover, it is also equally clear that forsome airports environmental and physical constraints makesubstantial expansion of the existing facilities impractical orprohibitively expensive. Nevertheless, even at these airportsincremental capacity increases are possible.

Improvements in facilitation and air traffic controlservices can be employed to use the existing airport infra-structure more efficiently. These can provide importantincremental increases in the number of aircraft, passengersand cargo which can use a capacity-constrained airport, andthese merit continuous evaluation by airlines, airports, andcustoms and immigration authorities. Improvements in airtraffic control involving coordination with many States can

take time and patience but will ultimately provide benefitsin terms of increased use of both en-route and airportcapacity.

With regard to regulatory measures on slot allocation,since the situation at each congested airport tends to be par-ticular to that facility, States have dealt with the situation ina number of different ways. One approach is to allow aircarriers to preserve the so-called “grandfather rights” butprovide slots for new entrants and new services by, forexample, reserving a fixed proportion of new capacity forthem. Another approach is a “use or lose” rule, whichrequires that an air carrier use its assigned slots at a speci-fied level (e.g. 80 per cent of the annual or seasonal total)or lose them. A third approach is to allow air carriers toexchange slots on a one-for-one basis to use the availableslots more effectively.

Other potential devices include buying and selling ofslots, auctioning, and some combination or variation of theabove methods. Although some such practices exist (e.g.the United States permits the purchase, sale and lease ofcertain domestic slots at some airports subject to the Fed-eral Aviation Administration’s High Density Rule), whetherthey can be applied to international air services remains tobe addressed. For example, there has been concern over thecommercial trading of slots because of possible effects oncompetition, and unresolved legal issues.

There has been a continuing debate as to the “owner-ship” of airport slots, primarily in terms of claims by airlineswhich have historically used them for long periods of time.However, some formal regulatory regimes either explicitlyor implicitly exclude this concept, for example, stating thatairlines do not acquire property rights to the slots assignedto them and that the slots must be returned to the aeronaut-ical authority under certain circumstances. The implicitapproach ties the continued use of the slot to its use at aspecified level (the “use or lose” rule) and allows theexchange of slots on a one-for-one basis.

Some issues related to capacity-constrained airportswill involve broader regulatory policy questions, such asthe enhancement of competition, the avoidance of excess-ive concentration and abuse of dominant positions, as wellas the compatibility of broad market access with capacity-constrained airports. Although the broad granting of trafficrights bilaterally and regionally with multiple airline desig-nation creates additional potential demand for airport slots,it also provides some relief in the form of flexibility to usealternate airports and cities which can accommodate newand increased air services.


4.10-4

A number of States will nevertheless have the task, inthe long term as well as the short term, of balancing con-flicting objectives in terms of which international air ser-vices will be able to use their capacity-constrained airports.In fashioning responses to this problem, States will have totake into account the legal framework provided by theChicago Convention (e.g. Article 15 which establishes anational treatment principle in the context of the use ofairports and other air navigation facilities), air servicesagreements, regional and national slot allocation rules andexisting voluntary mechanisms for managing insufficientairport capacity. However, the response will have to fit thesituation of the individual airport(s) concerned and willtherefore vary depending on the nature of the constraint andthe means taken to overcome it.

Additional information on this subject can be found inCircular 283 entitled Regulatory Implications of theAllocation of Flight Departure and Arrival Slots atInternational Airports.

Until the late 1970s, the great majority of internationalairports were owned and managed by governments. Manychanges have since occurred in ownership and managementstructure of airports, generally in the direction of reducingdirect government involvement. Private sector involvementin this area began in the 1980s, gaining momentum in the1990s, especially in Asia, Europe and Latin America, butslowing down in recent years.

The changes have generally been thought of as“privatization”. However, these changes can take variousforms and, while they generally reflect a move away fromgovernment ownership and management, they do notnecessarily (and indeed rarely) denote outright privatizationper se, particularly as regards ownership.

In the context of airports, privatization connotes eitherfull ownership or majority ownership of facilities and ser-vices by the private sector, while private participation orprivate involvement refers to situations in which the privatesector plays a role in the ownership or management, orboth, of the airport (e.g. in the form of a management con-tract, a lease or minority equity) but the majority ownershipremains with the government.

Corporatization refers to the undertaking of creating alegal entity (a corporation or company) outside the govern-

ment to manage and operate the airport, either through aspecific statute or under an existing general statute such ascompany law. Normally, the ownership of the corporationremains with the government. However, private sectorparticipation in a corporatized body is possible.

Commercialization refers to a management approachwhich applies business principles or places specialemphasis on the development of commercial activities.Commercialization should not be equated to private partici-pation or privatization because the former connotes anapproach to management while the latter refers to change inthe ownership or control of management.

Autonomy refers to the powers of the managers ofairports to utilize revenues generated and take independentmanagerial decisions on issues falling within the charter ofthe organization. An autonomous airport authority is anindependent entity established to operate and manage oneor more airports and empowered to use the revenues it gen-erates to cover its costs. An autonomous airport authoritycan be a unit within the government, a corporate authorityor a company wholly owned by the government.

Privatization and private participation in the provisionof airport services has been part of the general process ofglobalization and liberalization of the economies of theworld and the movement toward privatization of commer-cially oriented industries and services managed by States orState-owned entities. A number of other factors, such asfinancial problems faced by States in airport development,the need to reduce budgetary deficits and the emergence ofa global airport management industry, have motivated Statesto move towards privatization and private participation.

Faced with increasing difficulty in the financing ofairports, many governments have come to realize thatwhere traffic volumes are relatively high, it may be possi-ble to pass the burden of financing airport developmentprogrammes to the private sector. Moreover, private partici-pation and privatization in the provision of airport serviceshas been seen as a source of revenue to cover or reducebudgetary deficits. Profit-making airports can provide aregular source of tax revenue. Financial bids for privateparticipation and privatization of airports have furtherencouraged States to move in this direction.

The current approach of governments is to move awayfrom the ownership and management of non-core publicutilities, and airports, at least the major ones, are consideredas commercial entities rather than public utilities. Larger air-ports are turning into cities in themselves with marketplaces

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and meeting points for people and business. There is theperception that privatization leads to improvement in themanagement of airports.

From the commercial perspective of the business andfinancial communities, an airport can be a sound invest-ment. Airports are essentially monopolies. Growth in trafficis generally continuous and faster than the growth of thegross domestic product over the intermediate and longerterms. The credit ratings of airports are generally very high,and they have strong cash flows. Although airports are sub-ject to government regulations, commercial activities at air-ports, which produce significant revenues, are generally lessregulated or not regulated at all. Consequently, there hasbeen a gradual emergence of a global airport managementindustry.

In most States, private participation and privatization inthe provision of airport services has taken place in stages.For example, in the United Kingdom, major airports wereinitially transferred to a government corporation. Severalyears later they were transferred to a government-ownedcompany. Soon thereafter, the shares of this company weresold to the private sector. In some European countries, theairports were first transferred to separate companies ownedby the State, and the divestiture of shares was gradual.Evidence suggests that States have generally benefited froma gradual change in ownership and management structure.

Private participation in the provision of airport serviceshas basically taken three forms: management contract, lease(which is sometimes called concession), and transfer ofminority ownership. Apart from airports originally ownedby private entities, fully privatized airports or airports withmajority private ownership are few.

Because airports are monopolies upon which users arehighly dependent, in almost all States in which privatizationor private participation has taken place, regulatory auth-orities exist or have been established in some form toensure that monopoly power is not abused, especially in thecase of aeronautical charges.

For States considering privatization of their airports, itis important to bear in mind that the Chicago Conventionplaces on each Contracting State the responsibility for the

provision of airports and air navigation services in its terri-tory in accordance with the Standards and RecommendedPractices. Articles 11 and 15 of the Convention provide fornon-discrimination between Contracting States. Article 15deals with basic charging principles. While the Conventiondoes not prevent States from delegating functions to privateentities, the responsibility for ensuring that all the pro-visions of the Convention are fully complied with rests withthe State. In addition to the Convention, there are otherinternational agreements, such as bilateral or regional airservices agreements, which may impose obligations on aState party to such agreements with respect to some aspectsof the provision of airports or air navigation services.

A change in the ownership and management structurein the provision of airport services may not necessarilysolve all the problems that an airport or a group of airportsmay be facing. The change may be harmful in the long runif poorly planned. The objectives of any change should beclearly defined.

The primary objective of airports and air navigationservices is to provide safe, secure, efficient and economicalservices to users. There are several ownership and manage-ment options that may be considered to achieve this end.There is no best option for global application. A Stateshould choose an option best suited to it. Selection of anoption should be done after careful consideration and plan-ning. Regardless of the organizational form or legal status,the State remains ultimately responsible for safety andsecurity.

In this connection, ICAO has developed guidancematerial which provides information and analyses of theoptions available for States when considering a change inownership and management in the provision of airports andair navigation services, together with the possible implica-tions of these options, and discusses major issues to beexamined. This guidance is contained in Circular 284 —Privatization in the Provision of Airports and Air Navi-gation Services. Other related guidance in this field includeICAO’s Policies on Charges for Airports and Air Naviga-tion Services (Doc 9082), the Airport Economics Manual(Doc 9562) which also covers economic regulation ofairports, and the Manual on Air Navigation ServicesEconomics (Doc 9161).

Part 5

GENERAL TERMINOLOGY

5.0-1

Chapter 5.0

INTRODUCTION TOGENERAL TERMINOLOGY

The first four parts of the manual have presented anddefined many terms, each in its particular context withinthe regulatory content, process and structure of the national,bilateral and multilateral regulation of international airtransport. Part 5 presents general terminology which iscommon or supplemental to all parts of the manual.

Unlike the usual alphabetical listing of terms in aglossary, the terms in this part of the manual are presentedunder four distinct generic groupings: Chapter 5.1 — AirCarriers; Chapter 5.2 — Aircraft; Chapter 5.3 — AirServices; and Chapter 5.4 — Airports. Most of the termsdefined or identified are routinely used in connection withthe economic regulation of air transport. Some terms arefrequently used in other contexts but as they fall under thegeneric groupings, they have also been included in thispart for comprehensiveness and for additional usefulinformation.

The terminology in these four chapters is drawn from avariety of sources and is not intended to be exhaustive(ICAO’s numerous publications, primarily manuals in otherdisciplines, are sources where specific aviation terminologycan be found). Some terms have definitions that are widelyaccepted, such as those developed by ICAO or those foundin the Convention on International Civil Aviation. Most ofthe definitions or descriptions herein, however, have no for-mal status. Some have, nevertheless, been developed andapplied by States in particular contexts, such as in bilateralregulation. Some terms have different meanings whenapplied in different contexts, while others are in commonusage and appear frequently in the media. A few of thedefinitions are relative, evolving in meaning as technologyadvances and as applicable regulatory regimes change. Ingeneral, as air transport evolves, so does its terminology andthe use of it. All of these considerations have been takeninto account in the development of this part of the manual.

5.1-1

Chapter 5.1

AIR CARRIERS

An air carrier is an enterprise that engages in provision oftransportation services by aircraft for remuneration or hire.

Air carriers can be identified by the type of operationsthey offer:

• a scheduled air carrier or airline is one that engagesmainly in scheduled services (though it may alsooperate some non-scheduled flights). (See Part 1 ofDoc 9587 and Chapter 5.3 of this manual for the def-inition of scheduled and non-scheduled services);

• a non-scheduled air carrier is one whose primaryactivity is non-scheduled operations;

• a charter carrier is a non-scheduled air carrier thatoperates only charter flights.

An international carrier is one that provides air trans-port services on routes involving more than one State andthat may also operate domestic air services.

A scheduled international carrier is a carrier auth-orized to operate scheduled international air services, whilea non-scheduled international carrier is one authorized tooperate international non-scheduled flights.

A domestic carrier is one that primarily provides airtransport services wholly within the territory of its homeState.

Under national regulation of air transport, a licensedcarrier (in some cases, referred to as a certificated carrier)is an air carrier that holds a formal authorization from aconstituted authority to operate air transport services. Insome States a licence is issued to a national carrier and apermit is given to a foreign applicant, while in some others,a licence is granted for scheduled services and a permit forcharter flights.

A national carrier is an expression used to refer to anair carrier, established in accordance with the national lawof a State, which is usually the only or the principal air car-rier of that State in the provision of air transport servicesincluding international air services, and which is regardedas a national instrument in air transport.

A flag carrier is a term often used interchangeably with“national carrier” but more from an international perspec-tive because the aircraft of such carrier usually bears thenational flag of the State in the provision of international airservices. Note, however, that Article 20 (Display of marks)of the Chicago Convention only requires that aircraftengaged in international air navigation bear its appropriatenationality and registration marks (States generally use let-ters and numerical numbers for this purpose). Therefore,there is no legal requirement under international law that theaircraft of a national carrier engaged in the operation ofinternational air services must bear the national flag.

A designated carrier refers to an air carrier designedby a State under the relevant air services agreement for theoperation of air services authorized under the said agree-ment. A designated carrier, in most cases, is the national orflag carrier of the designating State, but in some cases mayalso be an air carrier of another State when this is per-mitted under the relevant air services arrangement (e.g. inthe case of a “community of interest” provision. SeeChapter 4.4).

Carriers may be categorized by the type of traffic theytransport. Thus:

• a passenger air carrier is primarily involved in thetransportation of passengers by aircraft (althoughsuch aircraft may also carry freight);

• a cargo air carrier will primarily be involved in thetransportation of freight and mail by aircraft.


5.1-2

Air carriers are often characterized by the role they playin national or international markets or by the scale of theiroperations:

Generally, a major air carrier provides scheduled airservices on domestic trunk routes and/or on internationalroutes, usually having a relatively large scale of operationcovering an extensive route network;

• a regional carrier provides short-haul scheduledpassenger and freight services, operating mostlyturboprop and/or small jet aircraft and connectingsmall and medium-sized communities with majorcities and hubs;

• a feeder carrier operates short-haul services con-necting small and regional points to a hub airport,generally using small to medium-capacity aircraft;

• a commuter carrier operates feeder and/or regionalservices, more often of the point-to-point type,usually with aircraft seating no more than 30 pass-engers; this capacity limit, however, has been con-tinually growing over the years and may now referto aircraft with up to 50 seats;

• a mega-carrier is an expression used to refer to avery large carrier in terms of its scale of operationand/or route network. Such size may have beenattained through its own growth, acquisitions of, orequity investment in, other carrier(s), or certainforms of alliance.

Some definitions concerning air carriers are based onmarketing/economic considerations:

• a niche carrier is an air carrier specializing onparticular routes or in a particular segment of themarket;

• a start-up carrier is a newly established air carrier;

• a new entrant carrier means a carrier, newly estab-lished or not, that attempts to enter a marketalready served by other carriers;

Others are based on the characteristics of their businessmodels:

• a full-service carrier is an air carrier, typically atraditional national or major carrier that operateson a relatively extensive route network (thus also

referred to as a network carrier) and provides a fullrange of services including different seating classes,in-flight entertainment, meals and beverages, on-board store, and ground facilities such as waitinglounges for premium class passengers or frequentflyer programme members;

• a no-frills carrier refers to an air carrier that,unlike a full-service carrier, focuses on providinglow-cost air transport service to customers withsimple or limited in-flight services;

• a low-cost carrier generally refers to an air carrierthat has a relatively low-cost structure in compari-son with other comparable carriers and offers lowfares or rates. Such a carrier may be independent,the division or subsidiary of a major carrier or, insome instances, the ex-charter arm of an airlinegroup.

Air carriers can also be identified by their trade mem-

bership, for example, an IATA carrier, i.e. a carrier that isa member of the International Air Transport Association;conversely, a non-IATA carrier is one that is not an IATAmember.

Carriers are also qualified according to their ownershipand control:

• a state-owned carrier is a carrier whose total ormajority share of capital is held by the State(government agency, parastatal holding, etc.);

• a private carrier is a company whose total ormajority share of capital is held by privateinterests;

• a joint venture carrier is an air carrier that isjointly owned by two or more major investing par-ties, which may be entities of the same or differentcountries;

• a community carrier is a term that refers to an aircarrier whose substantial ownership is vested witha member State of the European Community, nowknown as the European Union.

In terms of airline liability, the term common carrierrefers to a carrier that is prepared to provide transport ofpassengers and cargo for anyone who wishes to engage itsservices and is prepared to pay its charges.

Part 5 — General TerminologyChapter 5.1 — Air Carriers 5.1

5.1-3

Associated with air carriers are some terms commonlyused in measuring airline capacity and performance and indetermining their ranking in terms of traffic carried:

• Available seat-kilometres (ASKs) or seat-kilometresavailable, which are equal to the sum of theproducts obtained by multiplying the number ofpassenger seats available for sale on each flightstage by the stage distance (a seat kilometre isavailable when a seat is flown one kilometre).

• Available tonne-kilometres (ATKs) or tonne-kilometres available, which are equal to the sum ofthe products obtained by multiplying the number oftonnes available for the carriage of revenue load(passengers, freight and mail) on each flight stageby the stage distance (one ATK is a metric tonne ofavailable payload space flown one kilometre).

• Passenger tonne-kilometres performed, which areobtained by applying a standard weight per passen-ger to the passenger-kilometre performed. (See alsorevenue tonne-kilometre below.)

• Revenue passenger-kilometres (RPKs), i.e. the sumof the products obtained by multiplying the numberof revenue passengers carried on each flight stageby the stage distance. The resultant figure is equalto the number of kilometres travelled by all revenuepassengers.

• A revenue tonne-kilometre (RTK) is generatedwhen a metric tonne of revenue load is carried onekilometre. Where such load includes passengerload, the number of passengers is converted intoweight load, usually by multiplying this number by90 kilograms (to include baggage). The total tonne-kilometres performed (TKPs) equals the sum of theproducts obtained by multiplying the number ofpassengers, freight and mail loads carried on eachflight stage by the stage (one TKP is a metric tonneof revenue load carried one kilometre).

• Revenue passenger, a term which, for ICAOstatistical purposes (cf. Doc 9703), refers to apassenger for whose transportation an air carrierreceives commercial remuneration. Such pass-engers include, for example, those travelling:a) under publicly available promotional offers(e.g. “two-for-one”) or loyalty programmes (e.g.redemption of frequent flyer points); b) as com-pensation for denied boarding; c) on corporatediscounts; d) on preferential fares (government,seamen, military, youth, student, etc.), but exclude:a) persons travelling free; b) persons travelling ata fare or discount available only to employees ofair carriers or their agents or only for travel on thebusiness of the carriers; c) infants who do notoccupy a seat.

25/10/05Corr. No. 2

5.2-1

Chapter 5.2

AIRCRAFT

Aircraft, when used as a generic term, means any heavier-than-air flying machine. An aeroplane (or a fixed-wing air-craft) is a power-driven heavier-than-air aircraft, derivingits lift in flight chiefly from aerodynamic reactions on sur-faces which remain fixed. A helicopter (or a rotary-wingaircraft) is a heavier-than-air aircraft supported in flightchiefly by the reactions of the air on one or more power-driven rotors on substantially vertical axes (cf. Doc 9569).A STOL aircraft (i.e. short take-off and landing aircraft) isan aircraft designed for taking off and landing on short run-ways. In practice, the term aircraft commonly implies“aeroplane” or “airplane” and is often used interchangeably.

The nationality of aircraft is the State of its Registry(see Article 17 of the Convention on International CivilAviation).

Transport aircraft are aircraft that are designed for thepurpose of transporting persons and/or cargo. Commercialtransport aircraft are transport aircraft that are used forremuneration or hire.

State aircraft include any aircraft used for military,customs, police or other law enforcement services of a State(see Article 3 of the Convention on International CivilAviation).

Private aircraft are any non-State aircraft used for non-commercial purposes.

In the context of economic regulation, aircraft are oftencategorized according to the type of traffic they aredesigned to carry:

• a passenger aircraft is an aircraft primarilydesigned and configured for the transport of per-sons and their accompanying baggage;

• an all-cargo aircraft or freighter is an aircraft con-figured for the carriage of freight only (althoughpersons who accompany certain kinds of cargo,such as livestock or oil rig machinery, may also becarried);

• a combination aircraft (often referred to as combiaircraft in the airline industry) is a transport air-craft capable of carrying both passengers and cargoon the main deck, often in varied configurations.

Aircraft can be characterized by their size:

• a wide-body aircraft is a large transport aircraftwith internal cabin width sufficient for normalpassenger seating to be divided into three axialgroups by two aisles (in practice this means not lessthan 4.72 metres (15.6 feet));

• a narrow-body aircraft is an aircraft having onlyone aisle in the cabin with passenger seating dividedinto two axial groups.

Although mostly used in marketing, these two terms arealso used by some States in connection with capacityregulation.

• A jumbo jet is a popular term applied to a largewide-body aircraft such as the Boeing 747.

The term “large aircraft” can have various definitionsserving specific purposes (e.g. for pricing airport landingcharges or capacity regulation). A large aircraft, for ICAOstatistical purposes, is an aircraft of 9 tonnes (approximately20 000 lbs) maximum certificated take-off weight (MTOW)and over; and in the context of technical regulation, anaircraft having a MTOW of over 5 700 kg (approximately12 550 lbs).

Some other aircraft terms by size include:

• a small or light aircraft, i.e. an aircraft with anMTOW less than 5 700 kg (approximately 12 550 lbs);

• an ultra-light aircraft, i.e. an aircraft having anMTOW not exceeding 454 kg (1 000 lbs) and notusually used for public transport purposes.


5.2-2

For analytical purposes (such as in fleet planning andforecasting), aircraft can be categorized according to theirseating capacity:

• a high-capacity aircraft is one usually in theapproximate capacity range of 350 to 500 seats;

• an ultra-high-capacity transport aircraft (UHCT)or a very large commercial transport aircraft(VLCT) is a type of aircraft currently under con-sideration by some aircraft manufacturers that isexpected to have over 600 seats.

A widespread method used by air carriers to obtainequipment or increase their fleet capacity is through leasing:

• a leased aircraft is an aircraft used under acontractual leasing arrangement;

• a wet-leased aircraft includes a crew;

• a dry-leased aircraft does not include a crew;

• a damp-leased aircraft is a term used in some casesto refer to a wet-leased aircraft that includes acockpit crew but not cabin attendants.

In this connection, the term lessor means the party fromwhich the aircraft is leased and the term lessee is the partyto which the aircraft is leased.

Aircraft are also classified by other criteria, for example,by the type of engine they use:

• a piston-engine aircraft, now rarely used in com-mercial air transport, is one powered by pistonengine(s);

• a turboprop aircraft is an aircraft driven by turbo-propeller engine(s);

• a turbojet aircraft or simply jet aircraft is an air-craft powered by turbojet engines;

• a turbofan aircraft is an aircraft having turbofanengines.

Aircraft are sometimes referred to in terms of thenumber of their engines:

• a twin jet is a jet aircraft with two engines; and

• a tri-jet is one having three engines.

Many twin-engine commercial transport aircraft have nowbeen authorized for long-range operations known asETOPS (i.e. extended range twin-engine operations).

Aircraft may be distinguished by the speeds at whichthey can fly:

• a subsonic aircraft means an aircraft incapable ofsustaining level flight at speeds exceeding a Machnumber of 1 (i.e. the speed of sound);

• a supersonic aircraft is one capable of flying atspeeds exceeding the speed of sound;

• a hypersonic aircraft is one able to fly at speedsexceeding a Mach number of 5;

• the term high-speed civil transport aircraft(HSCT) is generally used to refer to various futuresupersonic commercial transport aircraft understudy.

Aircraft can also be defined by the distances they canfly:

• a short-range aircraft is an aircraft having a non-stop flying range usually not exceeding 2 224 kilo-metres (1 200 nautical miles) with a full payload atnormal cruising conditions;

• a medium-range aircraft is one usually capable offlying between 2 224 to 5 556 kilometres (1 200 to3 000 nautical miles) with a full payload at normalcruising conditions; and

• a long-range aircraft is an aircraft capable ofexceeding 5 556 kilometres (3 000 nautical miles)with a full payload at normal cruising conditions.

Commuter aircraft and regional aircraft are transportaircraft used for the operation of commuter or regional airservices, usually having a relatively small seating capacity(ranging from 10 to 70 seats) or payload. A regional jet isa jet-powered commuter aircraft or regional aircraft.

In the context of aircraft noise regulation:

• a Chapter 2 aircraft is one that complies with thenoise certification Standards set out in Chapter 2 ofAnnex 16 to the Convention on International CivilAviation; and

Part 5 — General TerminologyChapter 5.2 — Aircraft 5.2

5.2-3

• a Chapter 3 aircraft is one that complies with thenoise certification Standards set out in Chapter 3 ofAnnex 16 to the Convention on International CivilAviation (which are more stringent than those inChapter 2).

Note that the terms Stage 2 aircraft and Stage 3 aircraft areterms applied in the United States that have meaningsessentially the same as those of “Chapter 2 aircraft” and“Chapter 3 aircraft”, respectively.

5.3-1

Chapter 5.3

AIR SERVICES

Air service, in its broadest sense, includes any service per-formed by aircraft for public transportation, whether on ascheduled or non-scheduled basis. For regulatory purposes,however, the term always has a specific meaning (definedin Article 96(a) of the Convention on International CivilAviation and used in most bilateral air transport agreementsbetween States) and refers to any scheduled air service per-formed by aircraft for the public transport of passengers,mail or cargo.

A commercial air service means an air service per-formed by aircraft for the public transport of passengers,mail or cargo for remuneration or hire.

Air services can be classified by the geographical areasthey serve, for example:

• a domestic air service, i.e. an air service operatedwholly within the territory of a State;

• an international air service, i.e. an air service thatpasses through the airspace over the territory ofmore than one State;

• a regional air service, i.e. either an air serviceoffered on routes serving smaller cities within aregion or between regions of a State; or an air ser-vice offered on secondary routes serving smallercities in a regional area involving the territories ofmore than one State;

• a cross-border service, i.e. an international short-haul air service operating across the borders of twocontiguous States.

In economic regulation, air services are often categor-ized according to the type of traffic carried by the air carrier:

• a passenger air service is an air service performedprimarily for the transport of passengers;

• a cargo air service is an air service provided for thepublic transport of freight and mail;

• a combination service refers to one that carriesboth passengers and cargo on board the sameaircraft.

Air services can also be distinguished by theiroperational features:

• a scheduled air service is typically an air serviceopen to use by the general public and operatedaccording to a published timetable or with such aregular frequency that it constitutes an easilyrecognizable systematic series of flights;

• conversely, any air service that is performed otherthan as a scheduled air service is regarded as a non-scheduled operation, including but not limited tocharter operations. Note that “non-scheduled” is apublic law term, while “charter” is a private lawterm pertaining to the contract between an air car-rier and a charterer (although these two terms havecome to be used interchangeably).

In international air transport regulation, air serviceshave been regulated under different regimes depending onwhether they are performed on a scheduled or non-scheduled basis (see also Chapter 4.6). As defined by theCouncil of ICAO (see Doc 9587, Part 1, Section B), ascheduled international air service is a series of flightsthat possesses all of the following characteristics:

• it passes through the airspace over the territory ofmore than one State;

• it is performed by aircraft for the transport of pass-engers, mail or cargo for remuneration, in such amanner that each flight is open to use by membersof the public; and


5.3-2

• it is operated so as to serve traffic between thesame two or more points, either according to apublished timetable or with flights so regular orfrequent that they constitute a recognizablesystematic series.

Any international flight performed other than as ascheduled international air service is a non-scheduledinternational flight.

A trunk service is an air service operated on routeslinking major cities, usually with a large volume of traffic.

The term air taxi service can have two meanings:

• a type of on-demand air service usually performedby small capacity aircraft on short notice in a verysimilar way to an automobile taxi service; or

• in some cases, a service operated on a scheduledbasis with stops made only at points where passen-gers and cargo are to be picked up or discharged.

A shuttle air service is a high-frequency, no reservationpassenger air service operated at regular intervals, typi-cally on a city-pair route with high traffic density. In somecases, boarding is a continuous process and an aircraft maydepart before scheduled time, if full.

A feeder service is an air service offered on regionalroutes that feeds traffic to major domestic or internationalservices.

For marketing purposes, an air service is often termedas:

• a non-stop service, an air service provided betweentwo points with no intermediate stops (not even atechnical stop); or

• a direct air service (also referred to as through ser-vice), an air service provided between two points bya single aircraft with intermediate stops but withoutchange in flight number.

5.4-1

Chapter 5.4

AIRPORTS

An airport (or aerodrome, a term that is almost synony-mous, though used more in a generic sense) is a definedarea on land or water that is used for the arrival, departureand surface movement of aircraft (cf. Doc 9569).

Airports can be differentiated by the type of aircraftthey serve:

• a heliport is an aerodrome or a defined area on astructure used for the landing, take-off or surfacemovement of helicopters;

• a stolport is an airport specifically designed forSTOL aircraft separate from conventional airportfacilities.

Airports can also be characterized by type of activity:

• a commercial airport is an airport used by thegeneral public that includes facilities for processingpassengers, handling cargo and servicing commer-cial aircraft;

• a private airport serves primarily small privatelyowned aircraft, flying clubs, etc.

An international airport is a designated airport of entryand departure for international air services, where formali-ties such as customs, immigration, public health, animal andplant quarantine and similar procedures are carried out(see Annex 9 to the Convention on International CivilAviation). A gateway airport is an international airport thatis the first point of arrival or last point of departure in aState for international air services.

A domestic airport is an airport used for domestic airservices only.

A regional airport generally refers to an airport of amedium or small city that is mainly served by short-haulregional services.

A congested airport is one whose capacity for handlingtraffic (air or ground) is inadequate to accommodatedemand. To cope with congestion problems, one State hasdesignated certain airports as reliever airports, i.e. airportsthat divert traffic from major commercial airports; andsupplemental airports, i.e. airports that attract generalaviation away from busy airports, thus relieving congestionin particular markets.

Several terms are often used in connection withcongested airports:

• airport capacity is the number of passengers andamount of cargo which an airport can accommo-date in a given period of time; it is a combinationof runway capacity and terminal capacity.

• runway capacity is the number of aircraft move-ments which aeronautical authorities determine cansafely be operated, usually stated as the total num-ber of landings and take-offs per hour, taking intoaccount such factors as the physical characteristicsof the runways and the surrounding area, altitude,the types of aircraft involved (larger aircraft maymandate greater separation) and air traffic control(approach and aerodrome control) capabilities.

• terminal capacity is the number of passengers andtonnes of cargo per hour which can be processed ina terminal building (sometimes referred to aspassenger throughput or cargo throughput). Thetype of passenger or passenger mix can influencethe rate of passenger throughput. International pass-engers who must clear customs and immigrationrequire more time and space than domestic passen-gers who are not subject to these procedures.Domestic and international cargo presents a similarsituation.

An alternate airport is an airport to which an aircraftmay proceed when it becomes either impossible or


5.4-2

inadvisable, for technical reasons, to proceed to or to landat the airport of intended landing (cf. Doc 9569).

A hub airport or hub, when used in a general context,means any airport having numerous inbound and outboundflights and a high percentage of connecting traffic; while inthe context of scheduling and marketing from a hub-operating air carrier’s perspective, it denotes an airportwhere many of its inbound and outbound schedules arecoordinated with the aim of producing the most convenientconnections and/or transshipment for passengers, freightand/or mail. The same airport may serve as a hub for morethan one air carrier although this is exceptional.

A major hub is one with a large volume of connectingtraffic, usually a centrally located airport served by morethan one airline with long-haul connections.

A regional hub is a hub that serves a region of a Stateor a region comprising more than one State.

An interline hub is a hub at which connections ortransferring of traffic are chiefly made between flights ofdifferent carriers.

An online hub is a hub at which connections or trans-ferring of traffic are mostly made between different flightsof the same airline.

Associated closely with the online hub is the hub-and-spoke system (also known as hubbing), i.e. an operationalsystem in which flights from numerous points (the spokes)arrive at and then depart from a common point (the hub)within a short time frame so that traffic arriving from any

given point can connect to flights departing to numerousother points. The “power” of such a system lies in itsunique ability to combine traffic from numerous city-pairmarkets on the same aircraft, thus permitting a service to aspoke point that would not otherwise be viable or could notsupport the same volume and frequency of service. Thehubbing system works by moving waves or banks of flightsfrom different origins through the hub within a period oftime sufficient for traffic to interconnect.

A mini-hub is a secondary hub set up by a carrier.

A mega-hub or a super-hub is a very large hub.

A second country hub is a hub set up by an air carrierin a foreign country, typically to allow it to interconnecttraffic between numerous points in its home country andnumerous third countries.

While most hubs are passenger hubs, other types ofhubs, in terms of traffic handled, also exist including:

• a cargo hub, i.e. an airport where facilities areprovided for easy and fast connections and trans-shipment of air cargo traffic;

• a postal hub or mail hub, i.e. one which serves asa transit centre for postal or mail shipments;

• an intermodal hub or multi-modal hub, i.e. a hubthat enables convenient connections or transship-ment of traffic from one mode of transport toanother, for example, surface to air on a sea-airrouting.

APPENDICES

A1-1

Appendix 1

FORMATS FOR TARIFF FILINGS

In March 1985, the Council approved RecommendationFRP/8-2 of the Fares and Rates Panel which called for thedevelopment of guidelines for the format for tariff filingssubmitted by airlines to governments. The Secretariat, inconsultation with members of the Fares and Rates Panel,produced the formats and guidance material for passengerfares which are contained in Parts I and II of this appendix.They are for optional use by States and for adaptation toparticular situations.

In 1986, the Fares and Rates Panel, in RecommendationFRP/9-2, addressed the question of filing tariffs by elec-tronic means. As approved by the Council in March 1987,this called for compatibility amongst tariff filing systems indifferent States and with airline industry databases,including those in computer reservation systems, alongwith provision of continued manual filing of tariffs by air-lines where required. In 1992, the ICAO Secretariat soughtinformation from States concerning their current tarifffiling procedures and the requirements of those States wish-ing to use an electronic tariff filing procedure to assist indeveloping some common worldwide basic requirementsaimed at ensuring the compatibility envisaged in Recom-mendation FRP/9-2. In addition to national administrations,

some regional intergovernmental aviation organizations,such as the European Civil Aviation Conference (ECAC)and the Latin American Civil Aviation Commission(LACAC), have studied methods and implications ofelectronic tariff filing.

One example of the minimum elements of an electronictariff filing system, which was developed by ECAC inconsultation with companies designing such systems, isincluded in Part III of this appendix.

The following checklists of filing requirements for inter-national scheduled passenger fares contain more infor-mation items than individual States may require. In order toease their administrative burden and that of airlines, Statesmay wish to select and apply from the checklists only filingrequirements which relate to those aspects of fares whichthey actively regulate and which they consider to befundamental for evaluation purposes.

Section 1 — Information required for all types of filings

Part I — Filing requirements

Requirement Commentary for the information of States

Filing reference number To be assigned by the authority upon receipt.

Relevant previous reference number(s) In case of revision or update of previous filing, this should beentered by the airline. States may also require airlines to providereference numbers for related tariff filings and/or relevant previousgovernment notices of action.

Date/time of filing To be entered by the authority upon receipt.

Appendix 1 Manual on the Regulation of International Air Transport

A1-2

Section 2 — Filing of general tariff rules

Name of submitting airline(s) Depending on national legislation and subject to proof of authority,some States may accept filings by a designated agency of theairline(s).

Nature of filing

Airline to specify:

• whether the filing relates to general tariff rules, particular fare level and associated conditions, currency adjustment, or add-on;

Filing of general tariff rules is dealt with in Section 2. For othertypes of filing, see Section 3.

• whether the proposal is for new or for revised tariffs;

In the case of revisions, States may wish to limit the filing require-ment to identification by the airline of changes only.

• whether the filing flows from IATA or other multilateral airline agreement, bilateral airline agreement, or is a single carrier filing;

In order to evaluate the robustness of an IATA or similar agree-ment, States may wish to require the airline(s) to specify the geo-graphical scope of application of the agreement, i.e. whether it is a“full” or “limited” agreement, and whether it includes “escape”and/or “short-notice” amendment provisions.

• whether approval is requested under regular statutory provisions or under exemption provisions for “short-notice” or “matching” filings.

In the case of “matching filings”, States may wish to limit the filingrequirement to identification by the airline of the tariff to bematched.

Date of introduction proposed The date proposed by the airline on or after which travel should beat the fares, conditions or rules in the tariff filing.


Text of relevant IATA resolutions or other multilaterally agreed airline tariff rules and/or text of individual airline general tariff rules

The types of resolutions or rules specified are basic to theestablishment of tariffs and have an impact on existing andproposed fares. Other general rules or conditions govern suchmatters as children’s, infants’ and agents’ discounts; reservationand payment conditions; ticket validity; as well as cancellation, re-routing and refunds. All such resolutions and rules would generallyapply to all fares unless they are specifically overridden by theconditions attached to particular fares (see Section 3).

Airline to provide:

• conditions of carriage (not applicable for fares to and from Canada/United States);


Formats for Tariff Filings Appendix 1

A1-3

Section 3 — Filing of particular fare levels and associated conditions(including filing of currency adjustments and “add-ons”)

• conditions of service (e.g. seat pitch and seats abreast for each class of service);

• baggage allowances and charges;

• fare construction rules;

• currency conversion rules;

• agents’ commission rules;

• other general tariff rules or conditions (airline to specify).

Period of proposed effectiveness Dates proposed by the airline. Basic IATA rules such as those gov-erning fare construction and currency conversion may technicallycease to exist in the absence of an IATA agreement on particularfares. States may wish to require the airline to designate whetherthe rules on file would, nonetheless, remain effective in thesecircumstances or whether the airline would file replacement rules.

Availability of promotional benefits States may wish to require airlines to notify them of all incentivesoffered to passengers in conjunction with international fares, suchas “frequent flyer” programmes or discounts on hotel accommo-dations. Where such incentives are attached to a particular fare andStates require them to be filed, they would form part of the faresubmission (under Section 3).


Fare type (e.g. “normal economy”, “advance purchase excursion” — airline to identify)

Where the filing is made pursuant to a bilateral or multilateralintergovernmental agreement which incorporates a “fare band”arrangement, States may wish to require the airline to designate the“fare band” with which the proposed fare is intended to conformand to declare whether it does so. (Such a declaration could reduceor eliminate the need for most additional information.)

Fare code to be used (e.g. YLE45 — airline to identify)

States may wish to encourage clarity and consistency.

Class of service (e.g. first, intermediate or economy)

This would include notification by the airline of the provision offacilities such as sleeper seats; in such cases, any applicablesurcharge should be reflected in a separately specified fare level.



A1-4

Trip type (e.g. one-way, round trip, circle trip, open jaw — airline to specify)

—

Date of sale proposed (where different from the proposed date of introduction)

Where States permit airlines to offer or sell proposed fares inadvance of the date of introduction while the fares are still “subjectto government approval”, States may wish to require airlines tospecify arrangements for the provision of advice to purchasersabout the potential consequences of the unapproved status of thefares, for example, possible non-applicability, possible surcharge,and rights to refund.

Date of expiry proposed Some air services agreements specify that a tariff remains in forceuntil replaced. However, the provisions of many agreements makespecification by the airline of a proposed expiry date necessary inorder to define the period of prolongation of existing tariffs in caseswhere replacement tariffs are disputed.

Geographical area, routes or specific city-pairs of application

See comments under “fare levels” below. Where applicable, specificroutings or directions of travel should also be indicated.

Fare levels Unlike fare conditions, which may be common to a number of city-pairs, fare levels generally differ according to city-pair and musttherefore be specified separately by the airline. See the chart at theend of this section entitled “Presentation of proposed fare levels”for possible forms of presentation.

Currency adjustments Revisions should be reflected as changes in local currency farelevels and filed as above. Depending on national legislation and/orapplicable air services agreements, States may also require notifi-cation of the changes in the currency adjustment factor and/or“IATA” exchange rate concerned.

Add-ons Add-ons (also known as proportional fares) are used in conjunctionwith specified fares to establish through fares to and from manyadditional points, and as such, they create many more fares whichmay fall under the jurisdiction of States in the same way as thespecified fares themselves. Add-ons may be filed by the airlines atthe same time as the relevant fares or separately for intendedapplication to already approved fares and to subsequent fare filings.

Airline to specify:

• points between which the add-ons apply (that is, origin, destination and construction points);

• routings for which the add-ons are applicable;

• fare types to which the add-ons apply;

• any restrictions on combinability;

• currency in which the add-ons are expressed;

• proposed levels.



A1-5

Rules and conditions specific to the fare concerned

Airline to specify:

• period of application, e.g. all year or within defined periods (seasonal, time of day or week);

The checklist includes the most common rules and conditions.States may find it helpful to prescribe or agree with airlines astandard presentation framework for the rules and conditions theyrequire airlines to file, with standard numbering for each rule orcondition. (In this regard, IATA Resolution 100, “StandardCondition Resolution for Special Fares”, lists 30 rules/conditionsapplicable to all such fares unless the resolution concerning aparticular fare specifies otherwise.) Airlines should specify detailsagainst any such rule or condition that applies to the fare inquestion.• specific reservations, payment and ticketing

conditions (e.g. those for advance payment, “instant” purchase or standby fares);

• minimum stay;

• maximum stay;

• stopover conditions (number/places/charges);

• routing conditions (including online and/or interline transfer restrictions);

• restrictions on the number of seats available for sale at the fare concerned (other than constraints of class of service or aircraft capacity);

• restrictions on combination with other fares;

• restrictions on advertising or sales;

• eligibility restrictions (e.g. in connection with preferential fares restricted to persons having specified attributes in terms of age, occupation, religion, etc.);

• documentary requirements (proof of age, residence, occupation, etc.);

• promotional benefits (including availability of discount hotel accommodation, “frequent flyer” arrangements, etc. (see also Section 2));

• other applicable rules or conditions (airline to identify).

Additional rules and conditions specific to group fares

States may wish to require airlines to specify details against anyrule or condition that applies to the fare in question.



A1-6

Airline to specify, where applicable:

• minimum group size;

• group requirements (e.g. affinity, incentive group) and method of formation;

• requirements for travel together (outbound and return);

• permissible changes from initial composition of group;

• other applicable rules or conditions (airline to specify).

Additional rules and conditions specific to inclusive tour fares

Airline to specify, where applicable:

• inclusive tour requirements (ground package, tour organizer, etc.);

States may wish to require airlines to specify details against anyrule or condition that applies to the fare in question.

• minimum tour price;

• permissible changes from initial itinerary and facilities;

• applicable tour conductor’s discount;

• other applicable rules or conditions (airline to specify).

Applicability of general tariff rules and conditions

Airline to specify any exceptions in case of:

• conditions of carriage;

For ease of administration, States may wish to require that airlinespresent these in the form of specified exceptions, in the case of theparticular fares concerned, to the general tariff rules dealt with inSection 2. The most common items against which exceptions arise,usually involving additional restrictions on users, are listed.

• conditions of service;

• baggage allowances and charges;

• fare construction (including indirect routing options);



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• currency conversion;

• agents’ commission;

• children’s and infants’ discounts;

• circumstances under which waiver of minimum stay may be granted;

• circumstances under which ticket validity may be extended;

• reservation, payment and ticketing procedures;

• voluntary re-routing conditions;

• involuntary re-routing conditions;

• cancellation and refund conditions;

• passenger expenses en route;

• inaugural flights;

• agents’ discounts;

tour conductors’ discounts;

other general rules or conditions (airline to specify).



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Presentation of proposedfare levels

Basic requirements

The form below is designed for the provision by airlines ofbasic data regarding proposed fare levels and applies onlyto fares for travel originating in or destined for the countryof filing. Where fare data are required for travel betweenthird countries (for example, in relation to traffic carried bya national airline under Fifth Freedom traffic rights), theform could be readily adapted by using only the datacolumns under “For travel originating outside country offiling”.

For comparative purposes, States generally find itexpedient to require data by fare type for each city-pair asshown, but an alternative approach is to list data by city-pairwithin each fare type. Fare types should be listed by the air-line along with trip type and any seasonal indicator andindicator of service or routing conditions. For example:

First class (one-way, sleeper seat)First class (one-way)Intermediate (business) class (one-way)Normal economy (one-way, unrestricted)Normal economy (one-way, online)

Economy excursion (round trip)Apex (round trip) — Introductory

— High season— Low season

Possible additional requirements

Where fares are evaluated on a regular basis or wheredetailed examination of a particular submission is to becarried out, States may require additional informationwhich could vary according to circumstances. Each of themore commonly sought data elements identified belowcould be obtained through the addition of data columns andappropriate sub-headings to the above form of presentation:

a) fares for travel originating outside the country offiling converted to equivalent levels in currency ofsale of the country of filing at prevailing bankers’exchange rates, which should be specified;

b) all fares in terms of one or more convertible cur-rencies using, for example, IATA conversion rates;

c) historic (previous year) data; and

d) percentage change between proposed and currentfare levels (and historic levels, if appropriate).

CITY-PAIRS ANDFARE TYPES

FOR TRAVEL ORIGINATING INCOUNTRY OF FILING

(Point A to Point B)

FOR TRAVEL ORIGINATING OUTSIDE COUNTRY OF

FILING(Point B to Point A)

Current level Proposed level Current level Proposed level

(in currency of sale incountry of filing)

(in currency of sale incountry of origin of travel)

City-pair (A-B): ........................................... Currency: ......................................

Fare types:

.................................................................

.................................................................

.................................................................

....................

....................

....................

....................

....................

....................

....................

....................

....................

....................

....................

....................

(continue for each city-pair andfare type as required)


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The following enumeration of possible justification require-ments for proposed international scheduled passenger farescontains more information items than individual States arelikely to require. In establishing their own justificationrequirements, States may wish to take into account that datamay not be obtainable from airlines of other States, thatcertain information may be commercially sensitive andairlines may not wish it to become publicly available, andthat the provision of data may be a particular burden onsmall airlines.

Detailed justification would normally be required onlyin special circumstances such as in connection with aradical change in a fare level or structure, the introductionof a fare for a new route, an airline appeal against agovernment disapproval of a fare, or the settlement of adispute. Justification requirements may also differ betweenfilings of fares flowing from multilateral airline agreementsand those of fares agreed bilaterally or submitted byindividual airlines.

Section 1. General information

Justification of a proposed fare would normally include anexplanation of the rationale behind any new fare or anychanged level or condition of a particular fare. In the caseof a general change in fares, the rationale should be directlyrelated to developments in the operating environment suchas the introduction of new aircraft types, economic trends(including, in particular, trends in consumer prices in eachcountry concerned), changes in currency exchange rates, orincreases in specified costs such as the price of aircraft fuel,and should include the reasons for any major variation fromthe changes being sought in other areas.

Where relevant, comments should be provided on thecompetitive effects of the tariffs proposed or applied byother carriers with (scheduled or non-scheduled) operationson the same, overlapping and/or neighbouring routes. Theimpact of the proposed tariffs on user interests and anyother anticipated effects would also be identified. Whereappropriate, the filing airline should indicate whether therehad been any consultation with user groups or associationsof agents and the outcome of such discussions. Wherechanges to general tariff rules are proposed, any actual orpotential impact on particular fares and/or on the farestructure should be explained.

Section 2. Specific data

For a fully effective evaluation, data on fare levels may needto be expanded beyond basic requirements as indicated inSection 3 of the tariff filing format dealing with the Presen-tation of Proposed Fare Levels (Part I above). Other funda-mental information requirements, apart from the tariff filingand the general explanations referred to in Section 1 above,are the current and anticipated revenues, costs, traffic andcapacity. Detailed data by individual city-pair or routewould normally be required only in special circumstances asindicated above. More general data aggregated by group ofroutes would be useful on an annual basis and/or in conjunc-tion with proposals for general changes in fares; such datashould be readily available, particularly from airlines thatsubmit data for ICAO’s annual studies of regionaldifferences in fares and costs or for IATA’s Cost Committee.

Both the detailed and the more general data require-ments are included in the possible form of presentationprovided in the table on the following page. Together withthe related explanatory notes, this table is designed to giveStates general guidance on data requirements and presen-tation. Specific requirements will vary from State to Stateand according to particular circumstances.

Part II — Justificationrequirements


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Presentation of justification data for proposed fares

A. COMPARATIVE TIME PERIOD

Actual historic(year 1)

Estimated current(year 2)

Anticipated (year 3)

Without fare changes

With fare changes

B. CURRENCY OF SUBMISSION: ......................1

Exchange rate against other major currencies:

Currency: ....................................1

(data continued as required foradditional currencies)

.................. 2 .................. 2 ............................. 2

C. DATA BY INDIVIDUAL CITY-PAIR FOREACH ROUTE

Route: ......................................

City-pair: ..................................a) number of revenue passengers: .................. .................. .................. ..................

– estimated percentage of revenue passengers that originates in country of filing:

.................. .................. .................. ..................

– estimated percentage of revenue passengers that is prorate traffic: .................. .................. .................. ..................

b) revenue from passengers: .................. .................. .................. ..................

– estimated percentage of passengers that originates in country of filing: .................. .................. .................. ..................

c) revenue from excess baggage: .................. .................. .................. ..................

(data continued in above format as requiredfor each city-pair)

D. SUMMARY BY ROUTE

Route: .......................................

Passenger-kilometres performed: .................. .................. .................. ..................

Seat-kilometres available: .................. .................. .................. ..................

Passenger load factor (%): .................. .................. .................. ..................

Revenue from passengers and excess baggage: .................. .................. .................. ..................

(data continued in above format as requiredfor each route)


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Commentary for the information of Stateson the above justification data

Comparative time periods: For the evaluation of mosttypes of tariff filing, States may require from airlines twoor more chronological sets of data covering (i) a basereference period or periods; and (ii) a comparable period orperiods after the intended effective date of the tariff pro-posal. The annual period shown here is the most expedientas it smooths out seasonal fluctuations. However, wheretariff changes are proposed with greater than annualfrequency or where the tariffs are for seasonal application,it would be valuable to have the revenue and traffic databroken down amongst the periods for which the fares con-cerned were or would be applicable. Since a “current”year’s data would almost always, in part at least, includeestimated elements, it could be useful, as shown here, toestablish a base through the provision by airlines of“actual” data for the previous year. It would also be usefulto request “anticipated” data both with and without the pro-posed tariffs implemented. For new fare types, it may bevaluable to consider “anticipated” data for a period beyondthe first year of planned effectiveness in order to assess theconsequences in a fully matured situation.

Currency of submission: All revenue and cost datawould normally be provided by the airline in the currencyof sale in the country of filing (consistent with the currencyused for the tariff filing in Part I for travel originating in thecountry of filing) or the national currency of the country offiling as required. Where the rate of exchange against majorcurrencies, such as the United States dollar, has a signifi-cant impact on traffic, revenues or costs, and is not steady,historic and assumed future exchange rates should beprovided, and revenue and cost data may need to be brokendown (to the extent possible) by the currency of the sub-mission and other major currencies concerned.

Data by individual city-pair for each route: Thesedata could be required for a single tariff proposal which islikely to have a significant effect on the traffic or operatingeconomics between a city-pair. As with the tariff filingitself (Part I), the data would generally apply to those city-pairs involving travel to and from the territory of thecountry of filing, but some States may require data foradditional city-pairs. Where at least one origin and destina-tion are common to more than one route, States may find itconvenient to request airlines to amalgamate the data forthe routes concerned.

E. SUMMARY BY GROUP OF ROUTES

Group of routes: ...............................

Passenger-kilometres performed:3 .................. .................. .................. ..................

Seat-kilometres available:3 .................. .................. .................. ..................

Passenger load factor (%): .................. .................. .................. ..................

Revenue from passengers and excess baggage:3 .................. .................. .................. ..................

Other revenues (freight, mail and pertinent incidental revenue): .................. .................. .................. ..................

Operating costs (broken down by cost item if required): .................. .................. .................. ..................

Return on investment (%): .................. .................. .................. ..................

1. For insertion of name or ISO code of currency.2. For insertion of exchange rate per unit of currency of submission.3. Compiled directly from D above.

A. COMPARATIVE TIME PERIOD

Actual historic(year 1)

Estimated current(year 2)

Anticipated (year 3)

Without fare changes

With fare changes


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Traffic data are presented here in terms of numbers ofon-flight origin and destination passengers between eachcity-pair; particularly when broken down by origin asshown, this enables evaluation of the impact of the tariffproposal on the national aviation infrastructure (forexample, airport capacity) and on the national economy (forexample, tourist flows). The concomitant revenue dataenable direct measurement of the impact of the proposal onrevenue yield for comparison both chronologically andagainst revenue yield for other city-pairs. The differencebetween fare levels and revenue levels is determined bycommission payments, discounts (such as those forchildren), and the impact of prorating. The latter, in partic-ular, varies significantly from route to route and has a directeffect on the level of fares to be offered; hence, it can beuseful to measure its impact, which may be done throughthe provision of an estimate of the percentage of proratetraffic as shown.

A further breakdown into revenue and traffic by faretype may be necessary, including estimates of the antici-pated diversion of traffic between fare types as well as ofthe overall impact on traffic. Some States require a break-down on a regular basis but in most other cases such datawould only be required where major changes to the farestructure are being proposed. Freight revenue and trafficdata may also need to be taken into account, particularlywhere combination passenger/freight (“combi”) aircraft areconcerned.

Summary by route: These data could be required fora tariff proposal which is likely to have a significant effecton the operations or economics of a route as a whole; thedata should cover all city-pairs on the route concerned.

Traffic data are presented here in terms of passenger-kilometres. Together with capacity data in terms of seat-kilometres, they enable calculation of the passenger loadfactor and the impact of the tariff proposal on the oper-ations of the route. Together with the revenue data, theygive some insight into the economics of the route. Freightrevenue and traffic data may also need to be taken intoaccount, particularly where combination passenger/freightaircraft are concerned.

Summary by group of routes: These data wouldnormally be required only on an annual basis and/or inconjunction with proposals for general changes in fares.Substantive insight into the economics of a route is gainedhere by the addition of non-passenger related revenues and

of operating costs. Such data are normally provided only atthe aggregate route group level, primarily because operatingcosts cannot be segregated with any great degree ofprecision because of the generic or joint nature of many costelements (for example, general administrative costs or com-bined passenger/freight (“combi”) aircraft flight costs).However, provided the cost allocation methods and criteriaare identified and consistently employed, valid comparisonsover time may be made.

Where proposals for general changes in fares are madeto reflect changes in costs, and particularly where they aredesigned to respond to specific cost changes such asincreases in fuel prices, operating cost data would need tobe broken down by cost item. Some States may wish todesignate (or agree with the airline on) a specific format forthe systematic identification of cost items.

Short-term anomalies affecting costs should be elimi-nated. For example, the major change between short-runand long-run costs might be high start-up costs for theintroduction of new aircraft which would be the mainequipment used on the route for a substantial period. Returnon investment would be calculated in accordance withnational practice and would normally cover such items asreturn to shareholders and contribution towards the cost ofre-equipment.

As a minimum, a tariff filing should contain:

a) A filing identification. An identification, such as theIATA filing advice number, unique to a particularfiling and generated when filing takes place throughan automated filing system. Once the identificationhas been issued, it cannot be changed.

b) A date and time stamp. Generated by the automatedtariff filing system and indicating the date and timeof completion of a tariff filing and its entry into thefiling systems’ database. Once the stamp has beenissued, it cannot be changed.

c) A carrier code.

Part III — Minimum elements ofan electronic tariff filing

(as specified by ECAC guidelines)


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d) A justification element. Provided by the filingcarrier(s) to justify the introduction, deletion oramendment of a filing.

e) A point of contact element. Containing the nameand telephone number of the person dealing withthe filing at the carrier(s) concerned.

f) A geographical identification. Showing the point oforigin and the point of destination, or a widergeographical area, as applicable.

g) A fare class code. An alphanumeric code used bythe carrier(s) to reflect a carrier-specific tariff.

h) At least one of the following:

1) a fare and/or add-on element (to add, change ordelete a fare and/or add-on). Where the filingcontains either a fare or add-on element (orboth), it should also include:

— a currency code (showing the applicablecurrency code);

— a one-way/round trip indicator (to identifywhether the fare or add-on is one-way orround trip);

— where a change in fare or add-on amount isinvolved, the existing fare or add-on shouldalso be given, together with the percentagechange;

2) a rule element (to add, change or delete a rule);

3) a routing element (to add, change or delete arouting for a specific fare);

4) a footnote element (to add, change or delete afootnote)

together with the proposed correspondingdate(s) of effectiveness and expiry date(s), ifany.

For a filing of general conditions, such as commission,baggage rules and fare construction rules, the requirementsin points f) and g) need not apply.

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Appendix 2

IATA CURRENCY CONVERSION SYSTEM

Since airlines and air transport intermediaries (e.g. travelagents, freight forwarders) often have to make conversionsfrom one currency into another when calculating inter-national passenger fares and cargo rates, IATA hasdeveloped rules and procedures for making currencyconversions. The IATA currency conversion systemenables fares or rates to be quoted in one single currencyfor multi-sector trips/shipment involving one or more air-lines, or for trips originating in another country.

IATA introduced the system in 1984, which enables allcargo rates and charges to be expressed in local sellingcurrencies. When it is necessary to combine or comparecargo rates expressed in different currencies for rateconstruction purposes, such rates are converted into acommon unit, United States dollars, by using the exchangerates published by the IATA Clearing House; the necessarycalculations are performed in dollars.

Under this system which was introduced in July 1989, allIATA passenger fares are established and quoted in thecurrency of the country where passengers commence theirtravel, except in some countries and territories withrelatively weak currencies where fares are established inU.S. dollars instead. A traveller may pay the fare in localcurrency or in some other acceptable currency based onconversion at the bank exchange rate. For ticket sales madeoutside the country where travel actually commences(i.e.“foreign” sales), the fare in that country’s currency isconverted into the currency of the country of sale at thebank exchange rate on the day the ticket is issued

(see example 1). Where a trip involves a combination ofdifferent currency fares, each fare is converted into the cur-rency of the country of commencement of travel by usingthe IATA Clearing House rates of exchange against the U.S.dollar (see example 2). These rates, reflecting recentlyprevailing bank exchange rates, are issued quarterly byIATA and normally remain unchanged for three months.However, if a currency weakens or strengthens against theU.S. dollar by more than 10 per cent during the three-month period, a new exchange rate is issued for thatcurrency.

The following two simple examples illustrate how theIATA system works.

Example 1 — Foreign sale

A passenger in Montreal buys a New York to Londonticket:

Local fare (in Canadian dollars) = New York-London localfare (in U.S. dollars converted into Canadian dollars at thebank exchange rate on the day the ticket is issued).

Example 2 — A combination of different currency fares

A passenger in Montreal buys a Montreal-London-Tokyo-Sydney (A-B-C-D) ticket (in the absence of a through-fare):

Local fare (in Canadian dollars) = A to B local fare (inCanadian dollars) + B to C local fare (in U.K. poundssterling converted into Canadian dollars using the IATAexchange rate) + C to D local fare (in Japanese yenconverted into Canadian dollars using the IATA exchangerate).

Currency conversion systemfor cargo rates and charges

Currency conversion systemfor passenger fares

Examples of currency conversionfor passenger fares


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Certain rules governing the application of the currency con-version system for passenger fares are of regulatory interestto governments, for example:

• a requirement that if a directional difference infares exists whereby an outbound one-way fare ishigher than the corresponding inbound one-wayfare, a passenger must be charged the higher of thetwo fares whenever a one-way ticket is sold orissued outside the country of commencement oftravel;

• a requirement that fares will only be valid whentravel originates in the country of origin shown onthe ticket; and

• a requirement that if a fare for a passenger’s routingis less than a comparable fare between any twoticketed points on the routing (a “higher intermedi-ate fare”), the level of the passenger’s fare must beraised to that of the higher intermediate fare.

Largely designed to protect airline revenues and minimizeabuse of the system (e.g. from countries with weakcurrencies and depressed fare levels), these rules could haveimplications for governments in respect of enforcement orcompetition policies. In the latter case, for example, theymay be considered as placing restrictions on consumerchoices (e.g. in the European Union, competition lawrequires that consumers must be free to purchase goods andservices wheresoever they wish and to enjoy locally prevail-ing prices and terms of sale). To meet such concerns, someprovisions were made by IATA to exclude the application ofthe above rules in certain States.

Regulatory implications

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Appendix 3

PRORATING

Many international journeys by passengers and shipmentsof cargo involve transportation on more than one air carrierat a single through-fare or rate. This creates a need for amethod of “prorating” revenues, i.e. allocating totalrevenues earned for the carriage of passengers or freightbetween origin and destination among two or more aircarriers which provide the transportation for differentsegments of a journey.

To facilitate such interline journeys and to reduce theadministrative burden of revenue-sharing procedures onairlines, two Multilateral Proration Agreements have beendeveloped by the airline industry, one for passengers andone for cargo, which together provide revenue allocationrules for interline fares and rates worldwide. The ProrateAgency’s terms of reference are specified in the ProrateAgency Agreement, and its administrative expenses fundeddirectly by airlines signatory thereto. The agreements areopen to all airlines operating scheduled services.

The prorate agreements, as voluntary private commer-cial agreements which do not set or modify tariffs but applyagreed rules on sharing revenue derived from approvedtariffs, are not filed with governments for approval.

The agreements allocate revenues in basically twoways: by using solely prorate factors based on distance andcosts (referred to as straight rate proration) or by using thefactors in conjunction with provisos or requirements filedby individual airlines. These provisos or requirements

specify a share for the filing airline (a percentage or a statedamount) to be deducted from the amount to be proratedbefore the application of the prorate factor.

A minimum prorate rule is used in conjunction withprovisos and requirements to ensure that an airline perform-ing a segment will receive a certain minimum amountequivalent to about 30 per cent of the applicable fare for thesegment it operates.

For cargo, prorate factors are determined by distance,weighted by costs provided by aircraft manufacturers. Forpassengers, a more elaborate formula is used based ondistance, weighted by a three-year worldwide average totalcost factor plus an area factor developed from a three-yearaverage of direct operating costs (such as fuel, landing andairport charges, and en-route facility charges) for17 regions. Cost data collected by ICAO are used indeveloping the passenger prorate factors.

The prorate agreements also contain a number ofassociated rules on how the prorate factors are to beapplied, for example, in the case of stopovers, discounts forinfants, voluntary and involuntary re-routings, and roundtrips.

In cases where an airline is not a member of the prorateagreements, bilateral arrangements between concernedairlines are made for the division of revenues derived frominterline transportation.

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Appendix 4

GUIDANCE MATERIAL FORUSERS OF AIR TRANSPORT

This guidance material was issued by decision of the Coun-cil to assist States in publishing or encouraging the publi-cation of booklets intended to inform air transport users oftheir rights and obligations. The material was developed inthe mid-1980s having regard to the increasing complexityof tariff rules and conditions and the need expressed byStates to ensure that the public is fully informed of the rulesand conditions when purchasing air transport services.Although both the air transport industry and its regulationhave undergone significant changes in the last two decades,this material can still serve as a useful checklist for States,where applicable, because the issue of consumer interestscontinues to be relevant and, in fact, has attracted increasingregulatory attention in recent years (see Chapter 4.9).

The guidance material consists essentially of twoinventories of possible contents of information booklets,one designed for air passengers (Part I) and the other for airshippers (Part II), the latter aimed particularly at shipperswith small or infrequent shipments. The inventories includematters that may be of interest or importance for selectionand development according to local circumstances and con-ditions, and tariff-related aspects are enlarged upon in anannotated descriptive text. The inventories have been com-piled from ICAO conclusions and recommendations, airlinerules and regulations, and several existing informationbooklets published in various countries.

In 1992 the Latin American Civil Aviation Commission,a regional inter-governmental aviation organization, produced

for the guidance of its members a “Charter of Rights for theAir Transport User” which included many of the items in theinventories developed by ICAO.

In considering whether information booklets should bedeveloped in their own countries, States will wish to takeinto account the various means by which such bookletsmight be developed and disseminated, bearing in mind theneed to ensure an appropriate balance of public interest andto ensure that any guidance material is brief, readilycomprehensible and widely available.

In some countries, such documents have been developedand published as a public service by the government trans-portation or consumer protection agency concerned, whilein other cases independent consumer action groups havebeen responsible for the documents, funded by governmentsubsidy and/or public donations. All of these publicationsare made available on request, free of charge, to the generalpublic. Government publications generally make it clear thatthey are for information only, are not binding, and do notoverride airlines’ approved tariff rules or conditions ofcarriage.

In some other cases, documents have been developed byindividual airlines or freight forwarders and made availablefree of charge on their own aircraft and/or in their salesoutlets. Further means of development and distribution arethrough user groups, such as business associations or associ-ations of shippers, and through commercial publishers.


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Part I — Possible contents of publications for guidance of air passenger

Background Introductory description of the fare-setting process, including the role of air-lines, IATA and other airline associations, governments and, as appropriate,organizations representing user interests.

Scheduled versus charter Introductory description of differences between scheduled and non-scheduledoperations, including a description of different charter types and of inclusivetour arrangements, and the fact that for charter flights the contract is with thecharterer rather than with the air carrier.

Role of intermediaries Description of the functions of travel agents and travel organizers/touroperators/charter organizers, any licensing and escrow/bonding requirements,implications of accreditation by IATA and other programmes, etc.

Prices and conditions a) Advice that on most routes two or more classes of travel and a wide rangeof fares are available, with descriptions indicating the advantages ofnormal fares (for example, unlimited stopovers/transfers, indirect routingallowances, no charge for cancellation/change of flight, etc.) and of“restricted” normal economy fares in some markets which retain most ofthe characteristics historically associated with normal economy fares buthave restrictions, for example, on the availability of stopovers or, in somecases, on the ability to interline as well as the price advantages andrestrictive conditions attached to special fares (for example, circletrip/round trip requirements, seasonal application, stopover/transfer limita-tions, minimum and maximum stay periods, advance reservation andpayment provisions, cancellation charges and forfeits, group requirements,ground purchase or other additional purchase requirements, etc.).Description of varying availability of discounts for infants, children,students/youth, etc., and of preferential fares.

b) Advice to check, in advance of purchase, which conditions apply.

c) Where charges or forfeits apply for change in ticket validity or for ticketchange/cancellation, advice to check whether exceptions are granted (forexample, in cases of illness or death) and whether insurance againstunforeseen changes in plan is available through the airline and/or directlyfrom the insurance company (and, if so, what it covers).

d) Advice that in many areas certain taxes and/or charges (for example,airport service charges) are not included in the price of the ticket; in suchcases, they may be added at the time of purchase and/or collected at theairport prior to departure.

Currency of payment Advice that, except in countries where it is specifically excluded, paymentmay be made in a range of currencies. Where this is not the case, advice as towhat restrictions and procedures with respect to currency apply to thepurchase and refund of tickets.

Tickets a) Advice that the air ticket is the passenger’s evidence of his or her contractwith the air carrier or charterer (see also “Conditions of carriage” below).

Guidance Material for Users of Air Transport Appendix 4

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b) Advice regarding implications of purchase of irregularly issued tickets.

c) Brief explanation of the main elements of notation on the ticket (forexample, boxes showing passenger’s name, airports, airlines, flightnumbers, codeshared flights and their significance for the traveller, classof travel, departure dates and times, status, validity, etc.).

d) Advice that a file reference number should be obtained and noted whenmaking a reservation or reconfirmation.

e) Advice that most airlines have established deadlines by which tickets mustbe paid for in full (and in some cases collected) failing which thereservations concerned are subject to cancellation.

Tickets issued at fares subject to government approval

Advice that in many countries fares may be advertised and tickets sold at fareswhich have yet to receive government approval; that such advertisements andtickets should be clearly annotated that the fares are “subject to governmentapproval”; and that purchasers of such tickets should ensure that they areaware of the potential consequences of the unapproved status of the fares (forexample, possible non-applicability, possible surcharge, rights to refund).

Tickets issued prior to announcement of fare increases

Advice that as a general rule tickets paid for may be subject to surchargewhere a fare increase is subsequently approved, but that exceptions to this ruleexist in a number of countries.

Lost tickets/refunds Advice concerning rights to refunds and procedures to be followed to obtainrefunds. Description of differences between “voluntary” and “involuntary”refunds and refunds for lost or stolen tickets, service charges, periods withinwhich applications must be made, and expectation of delays in processing.

Check-in Advice concerning airline check-in requirements and consequences of failureto observe them, such as cancellation of the reservations for that and anysubsequent flights on the itinerary.

Free baggage allowances andexcess baggage charges

a) Advice on the existence of different methods of establishing free baggageallowances and excess baggage charges under the so-called piece andweight systems, on airline variations under both systems, and on thepossibility that different allowances may apply on different sectors of aninterline journey or on the return journey.

b) Advice to ascertain in advance from the airline or its agent the detailedallowances which apply throughout the intended journey, both for carry-on baggage and for checked baggage.

c) Advice that an airline at its discretion may accept excess baggage atcharges related to the system being applied and according to itsregulations.

d) Advice that passengers travelling together may pool their free baggageallowances.


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e) Advice that personal effects may be shipped as cargo, generally at lowercost than for shipment as excess baggage, but under more onerouscircumstances.

f) Advice on the existence of limited liability by the airline for lost ordamaged baggage, levels of which may be ascertained from the carrier orits agent. Advice on liability exclusions regarding checked baggage (forexample, for certain perishable and valuable items), on the availableoption of declaring a higher value for baggage on payment of an additionalcharge and/or, where available, taking out insurance.

Right to refuse carriage Advice that under certain circumstances airlines may refuse carriage, inrelation to the conduct, age, or mental or physical state of the passenger.

No-shows, overbooking, andcompensation for denied boarding

a) Advice which includes a description of a “no-show” and how to avoidbeing a “no-show”.

b) Advice that to compensate for no-shows most airlines often overbookflights, that as a result passengers with confirmed reservations areoccasionally denied boarding because of non-availability of seats, and thatin certain countries and for certain airlines compensation for such deniedboarding is available. Advice that passengers may wish to ascertain,before accepting compensation, their rights at law where major financialor other losses are incurred as a consequence of denied boarding.

Delay/cancellation a) Advice that when (due to circumstances beyond their control) airlinescancel or delay a flight or cause a passenger to miss a connection, mostairlines accept the obligation to refund or provide alternative flightarrangements at no further cost to the passenger, but do not generallyaccept any further liability for any damages incurred as a result (forexample, lost vacation or work time). Advice that where major financialor other losses are incurred as a consequence of delay, passengers maywish to ascertain their rights at law.

b) Advice that in case of delay to passengers, most airlines customarilyprovide certain amenities, such as the free provision or reimbursement ofthe cost of communications, meals, refreshments, transit taxes and, usuallyin circumstances of prolonged delay during the night hours (at pointswhich are not origin, destination or stopover points), hotel accommodationand ground transportation.

c) Advice that in the case of delayed baggage, airlines may, in certaincircumstances, provide or reimburse passengers for the purchase ofpersonal necessities.

Reconfirmation Advice that many airlines require reconfirmation of an onward reservationwherever a journey is broken for more than 72 hours, and that failure tocomply may result in cancellation of the reservation in question, together withthose for any subsequent flights in the journey.


A4-5

Complaints and redress Advice as to complaint procedures and avenues for action, includinginformation on differing time periods within which formal claims must bemade.

Conditions of carriage a) Advice that passengers (and air carriers or charterers) are bound by con-ditions appearing on the ticket, by tariff conditions, by carrier or chartererregulations and, outside Canada and the United States, by conditions ofcarriage, all of which should be readily available from the carriers orcharterers for reference.

b) Advice that all these conditions may vary for different segments of ajourney, if provided by more than one airline.

Liability Brief summary of limits of liability as provided for by international treaty(supplemented in some instances by other arrangements) and available forreference in summary on the ticket coupon and in detail in air carrierconditions of carriage (air carrier tariffs in Canada and the United States).

Glossary Description of commonly used air carrier terms and abbreviations.

Checklist of non-tariff matters Advice regarding:

• Travel documentation — passports (including information on machinereadable passports, where applicable), visas, medical certificates, drivinglicences, diplomatic/consular representation in foreign countries, etc.

• Health-vaccination requirements, medical treatment, health risks andprotection.

• Insurance.• Foreign currency and currency restrictions, traveller’s cheques, use of

credit cards.• General customs requirements and duty-free purchase allowances, dual-

channel clearance system.• Facilities, conditions and procedures for carriage of unaccompanied

minors, pregnant women, the obese, and sick and/or handicapped persons.• Carriage of pets.• Hotel reservations and car hire.• In-flight services (meals, including availability of special meals, drinks,

entertainment, etc.).• Seat reservation and selection, smoking regulations.• How to pack and label, what to pack in carry-on baggage, what to wear.• Carriage of dangerous goods.• Control of illicit traffic in narcotic drugs.• Facilities available at airports.• Key to flight displays and standard signs at airports.• Check-in and boarding procedures, including security arrangements.• Safety on board.• Procedures to be followed in the event baggage is lost.• Effects of alcohol.• Jet lag.


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Part II — Possible contents of publications for guidance of air shippers

Background Introductory description of the rate-setting process, including the role of air-lines, IATA and other airline associations, freight forwarders/consolidators,governments and, as appropriate, organizations representing user interests.

Scheduled versus charter Introductory description of differences between scheduled and non-scheduledoperations, including a description of different charter types and the fact that forcharter flights the contract is with the charterer rather than with the air carrier.

Small package/courier services Description of availability of such services and how they differ from moregeneral air freight services.

Role of intermediaries Description of the functions of cargo agents, freight forwarders/consolidators,any licensing and escrow/bonding requirements, implications of accreditationby IATA and other programmes, etc.

Rates, charges and conditions a) Advice that on most routes a range of rates is available with discounts forlarge volumes, for many types of commodities, and for use of containers orpallets.

b) Advice that rates are determined by factors including minimum charges,weight, density, packaging and the degree to which the item is considereddifficult to handle (in relation, for example, to outsized objects, livestock ordangerous goods).

c) Advice that basic rates usually cover air transportation (airport to airport)only and any other services such as collection, delivery, ground handling,customs clearance and storage are generally subject to additional charges,except in the case of small package/courier services where door-to-doorservice is provided.

d) Advice that gifts sent as cargo are usually liable to clearance or handlingcharges at destination whether there is any duty payable or not.

Reservations a) Advice that advance arrangements are generally required for certain types ofshipments (for example, outsized objects, livestock, valuable or dangerousgoods) and that many airlines also accept reservations for other shipments.

b) Advice that where space is reserved in advance, a file reference numbershould be obtained and noted.

Charges prepaid and charges collect Advice that total rates and charges may be paid in advance in the country ofshipment (or in a third country) or, in many countries and on payment of a ser-vice charge, on delivery of the shipment in the country of destination.

Currency of payment Advice that, except in countries where it is specifically excluded, payment maybe made in a range of currencies, converted at the prevailing bankers’ rate ofexchange to the local selling currency.

Air waybill a) Advice that the air waybill is the shipper’s evidence of his or her contractwith the air carrier, forwarder or charterer (see also “Conditions of carriage”below).


A4-7

b) Brief explanation of the main elements of notation on the air waybill (forexample, boxes showing the shipper’s, consignee’s and forwarder’s namesand addresses, airports, airlines, flight numbers, rate class, consignmentdata, etc.).

Delay Advice that, while airlines are obliged “to complete the carriage with reasonabledispatch”, they bear no explicit responsibility for delay except, in the case of afew routes and airlines, for certain “priority” services offered with or withoutadditional charge. Advice that where major financial or other losses are incurredas a consequence of delay, shippers may wish to ascertain their rights at law.

Refunds Advice concerning rights to refunds and procedures to be followed to obtainrefunds, service charges, periods within which applications must be made, andexpectation of delays in processing.

Complaints and redress Advice as to complaint procedures and avenues for action, notably in respect oflost, delayed or damaged cargo (including concealed damage discovered afterdelivery), incorporating information on differing time periods within whichformal claims must be made.

Conditions of carriage a) Advice that shippers (and air carriers, forwarders or charterers) are boundby conditions appearing on the air waybill, by tariff conditions, by aircarrier and charterer regulations and, outside Canada and the United States,by conditions of carriage, all of which should be readily available from thecarriers, forwarders or charterers for reference.

b) Advice that all these conditions may vary for different segments of thecarriage, if provided by more than one airline.

Liability a) Brief summary of limits of liability as provided for by international treaty(supplemented in some instances by other arrangements) and available forreference in summary on the air waybill and in detail in air carrier conditionsof carriage (air carrier tariffs in Canada and the United States).

b) Summary of liability arrangements for forwarders/consolidators.

c) Advice on liability exclusions, on the option of declaring a higher value forcargo on payment of an additional charge and/or taking out insurance,which may be available through the carrier.

Glossary Description of commonly used air carrier terms and abbreviations.

Checklist of non-tariff matters Advice regarding:

• Documentation — shipper’s letter of instructions, commercial invoices,certificates of origin, consular invoices, letters of credit, etc.

• Carriage of dangerous goods.• Restrictions on acceptance for carriage.• Control of illicit traffic in narcotic drugs.• Choice of routing and implications of transit.• Import restrictions and duties.• Automated customs clearance procedures, including legal implications.• Insurance.

25/10/05Corr. No. 2


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• Packaging.• Carriers and forwarders’ credit policies.• Consequences of failure to collect shipment.• Benefits of shipping by air, the total distribution cost concept.

25/10/05Corr. No. 2

Index-1

INDEX

A

A posteriori . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-2A priori . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-2Ab initio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-2Acceptance or approval . . . . . . . . . . . . . . . . . . . . . . . . 3.1-4Accession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1-4Accreditation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1-2Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-2Ad referendum agreement . . . . . . . . . . . . . . . . . . . . . . 2.1-5Addendum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1-2Additional Protocol No. 1 . . . . . . . . . . . . . . . . . . . . . . 3.2-4Additional Protocol No. 2 . . . . . . . . . . . . . . . . . . . . . . 3.2-4Additional Protocol No. 3 . . . . . . . . . . . . . . . . . . . . . . 3.2-4Add-on fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-3Adopted agenda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1-2Advance booking charter (ABC) . . . . . . . . . . . . . . . . . 4.6-2Advance purchase excursion fare (APEX fare). . . . . . 4.3-4Aerodrome . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-1Aeronautical authorities . . . . . . . . . . . . . . . . . . . . . . . . 1.2-1Aeronautical Commission of the Peace Conference . . 3.0-2Aeroplane . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-1AFCAC Bureau . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6-1AFCAC Plenary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6-1Affinity group charter. . . . . . . . . . . . . . . . . . . . . . . . . . 4.6-2African Air Tariff Conference . . . . . . . . . . . . . . . . . . . 3.6-1African Airlines Association (AFRAA). . . . . . . . . . . . 3.9-1African, Caribbean and Pacific Group of States

(ACP Group). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-6African Civil Aviation Commission (AFCAC) . . . . . . 3.6-1Agenda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1-2Agreed fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-3Agreed joint press release . . . . . . . . . . . . . . . . . . . . . . 2.1-5Agreed minute. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-5Agreed press release . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-5Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-2Agreement ad referendum . . . . . . . . . . . . . . . . . . . . . . 2.1-5Agreement among Directors General of Civil Aviation

of the Kingdom of Cambodia, the Lao People’sDemocratic Republic, the Union of Myanmar, andthe Socialist Republic of Viet Nam on theEstablishment of Subregional Air TransportCooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-6

Agreement on airline crew visas . . . . . . . . . . . . . . . . . 2.2-4

Agreement on the avoidance of double taxationrelating to air transport services. . . . . . . . . . . . . . . . 2.2-4

Agreements on certificates of airworthiness . . . . . . . . 2.2-5Agreements on communications . . . . . . . . . . . . . . . . . 2.2-5Agreements on duties on fuel . . . . . . . . . . . . . . . . . . . 2.2-5Agreements on meteorology . . . . . . . . . . . . . . . . . . . . 2.2-5Agreements on search and rescue . . . . . . . . . . . . . . . . 2.2-5Aide-mémoire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-5Air cargo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5-1Air carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-1Air carrier capacity. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2-1Air Charter Carriers Association (ACCA) . . . . . . . . . 3.9-1Air operator certificate (AOC). . . . . . . . . . . . . . . . . . . 4.7-6Air service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3-1Air Services Agreement . . . . . . . . . . . . . . . . . . . . . . . . 2.2-1Air taxi service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3-2Air transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (iv)Air Transport Agreement . . . . . . . . . . . . . . . . . . . . . . . 2.2-1Air Transport Association of America (ATA) . . . . . . . 3.9-1Air transport authorities . . . . . . . . . . . . . . . . . . . . . . . . 1.2-1Air Transport Bureau . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4-3Air Transport Committee . . . . . . . . . . . . . . . . . . . . . . . 3.4-2Air transport conference. . . . . . . . . . . . . . . . . . . . . . . . 3.4-2Air transport market . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-1Air transport market access . . . . . . . . . . . . . . . . . . . . . 4.1-1Air transport market penetration . . . . . . . . . . . . . . . . . 4.1-1Air Transport Regulation Panel . . . . . . . . . . . . . . . . . . 3.4-2Air waybill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-2Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-1Aircraft interchange . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-8Aircraft leasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7-5Aircraft repair and maintenance services . . . . . . . . . . 3.3-4Airline alliances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.8-1Airline product distribution . . . . . . . . . . . . . . . . . . . . . 4.7-3Airport. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-1Airport capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-1Airport Economics Manual (Doc 9562) . . . . . . . . . . . 3.4-4Airport Economics Panel . . . . . . . . . . . . . . . . . . . . . . . 3.4-2Airport Operators Council International (AOCI) . . . . 3.9-2Airport slot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10-2Airport slots article. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-3Airports Association Council International (AACI) . . 3.9-2Airports Council International (ACI). . . . . . . . . . . . . . 3.9-2Airworthiness article. . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-3

Index Manual on the Regulation of International Air Transport

Index-2

All-cargo aircraft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-1All-cargo service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5-1Alternate airport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-1Amendment article . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-4Amendment clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-4Amendment to a treaty . . . . . . . . . . . . . . . . . . . . . . . . . 3.1-4Andean Committee of Aeronautical

Authorities (CAAA) . . . . . . . . . . . . . . . . . . . . . . . . . 3.6-2Andean Community . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-4Annex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-4Application of laws article . . . . . . . . . . . . . . . . . . . . . . 2.2-3Approved tariff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-8Arab Air Carriers Organization (AACO) . . . . . . . . . . 3.9-1Arab Civil Aviation Commission (ACAC) . . . . . . . . . 3.6-2Arab Civil Aviation Council . . . . . . . . . . . . . . . . . . . . 3.6-2Arab Common Market (ACM). . . . . . . . . . . . . . . . . . . 3.7-6Arab Maghreb Union (AMU) . . . . . . . . . . . . . . . . . . . 3.7-1Arbitral tribunal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-7Arbitrary fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-3Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-7Area 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8-2Area 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8-2Area 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8-2Area Conferences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8-2Areeda-Turner rule . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-11Arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-2Article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-2Article 3 bis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-4Article 83 bis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-3Asean Free Trade Area (AFTA). . . . . . . . . . . . . . . . . . 3.7-2Asia-Pacific Economic Cooperation (APEC) . . . . . . . 3.7-2Asociación Internacional de Transporte Aéreo

Latinamericano (AITAL) . . . . . . . . . . . . . . . . . . . . . 3.9-1Assembly. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4-1Association Internationale de Transporteurs

Aériens (ATAF). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9-1Association of Asia Pacific Airlines (AAPA) . . . . . . . 3.9-1Association of European Airlines (AEA) . . . . . . . . . . 3.9-2Association of South East Asian Nations

(ASEAN). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-2Association of South Pacific Airlines (ASPA) . . . . . . 3.9-2Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1-4Authorized capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2-2Autonomous airport authority . . . . . . . . . . . . . . . . . . 4.10-4Autonomy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10-4Available seat-kilometres (ASKs) . . . . . . . . . . . . . . . . 5.1-3Available tonne-kilometres (ATKs) . . . . . . . . . . . . . . . 5.1-3Average load factor. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2-1Average variable cost . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-11Aviation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (iv)Aviation security agreement . . . . . . . . . . . . . . . . . . . . . 2.2-5Aviation security article . . . . . . . . . . . . . . . . . . . . . . . . 2.2-3

B

Back end . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-5Banjul Accord. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-6Banjul Accord for an Accelerated Implementation

of the Yamoussoukro Declaration . . . . . . . . . . . . . . 3.2-6Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-2Basic fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-7Basic market access right. . . . . . . . . . . . . . . . . . . . . . . 4.1-1Behind point . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-4Bermuda Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-1Bermuda I Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-1Bermuda I type Agreement . . . . . . . . . . . . . . . . . . . . . 2.2-1Bermuda I type method . . . . . . . . . . . . . . . . . . . . . . . . 4.2-2Bermuda II Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 2.2-1Bermuda-type Agreement. . . . . . . . . . . . . . . . . . . . . . . 2.2-1Beyond point. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-3Bilateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-1Bilateral clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-2Bilateral interlining. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-9Bilateral negotiation . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4-1Bilateral regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.0-1Bilateral/multilateral fare . . . . . . . . . . . . . . . . . . . . . . . 4.3-3Billing and Settlement Plan (BSP) . . . . . . . . . . . . . . . 3.8-4Bis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-2Blind sector. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-12Blind sector traffic . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-12Blocked space . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-7Booking classes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2-5Break point . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-5Break-even load factor . . . . . . . . . . . . . . . . . . . . . . . . . 4.2-2Bucharest Convention of 1936. . . . . . . . . . . . . . . . . . . 3.0-2Bucket shops. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-5Buenos Aires Convention of 1935. . . . . . . . . . . . . . . . 3.0-2Bundled fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-3Bus (BUS). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-8Business-to-business (B2B) . . . . . . . . . . . . . . . . . . . . . 4.7-4Business-to-consumer (B2C) . . . . . . . . . . . . . . . . . . . . 4.7-4Business-to-business-to-consumer (B2B2C) . . . . . . . . 4.7-4

C

Cabotage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-10Cabotage privilege . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-10Cabotage right. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-10Cabotage traffic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-10Capacity allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2-2Capacity article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-3Capacity regulation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2-1Capital lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7-5Cargo Accounting Settlement System (CASS) . . . . . . 3.8-4

Manual on the Regulation of International Air Transport Index

Index-3

Cargo agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5-2Cargo air carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-1Cargo air service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3-1Cargo flexibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-4Cargo hub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-2Cargo throughput . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-1Caribbean Community and Common Market

(CARICOM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-5CARICOM Multilateral Air Services Agreement

(MASA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-6Carrier fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-3Cartagena Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-4Central African Customs and Economic Union

(CACEU) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-1Central African Economic Union (CAEU) . . . . . . . . . 3.7-1Central American Air Transport Commission

(COCATRAE). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6-2Central American Common Market (CACM) . . . . . . . 3.7-5Central American Integration System . . . . . . . . . . . . . 3.7-5Central European Initiative (CEI) . . . . . . . . . . . . . . . . 3.7-3Certificated carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-1Chairpersons’ meeting . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-4Change of gauge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-5Chapter 2 aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-2Chapter 3 aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-3Charter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-2Charter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6-1Charter Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-1Charter carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-1Charter fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-5Charter flight. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6-1Charter of the United Nations . . . . . . . . . . . . . . . . . . . 3.5-1Charter rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-5Charter/travel organizer . . . . . . . . . . . . . . . . . . . . . . . . 4.6-2Charterworthy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6-3Chicago Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-1Chicago Conference . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.0-2Chicago Convention . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-3Chicago-type Agreement . . . . . . . . . . . . . . . . . . . . . . . 2.2-1Circle flight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-12City-pair market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-1Civil aviation authorities . . . . . . . . . . . . . . . . . . . . . . . 1.2-1Class rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-5Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-2Clearing House . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8-4CLMV Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-6Club interlining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-9Club of Paris . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-6Co-branding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5-1Codesharing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-7Combi aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-1Combination aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-1

Combination service . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3-1COMESA Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-6Comingling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6-2Comity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1-3Commercial air service. . . . . . . . . . . . . . . . . . . . . . . . . 5.3-1Commercial airport. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-1Commercial operations article . . . . . . . . . . . . . . . . . . . 2.2-3Commercial opportunities article . . . . . . . . . . . . . . . . . 2.2-3Commercial presence . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3-5Commercial transport aircraft . . . . . . . . . . . . . . . . . . . 5.2-1Commercialization . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10-4Commission override . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-5Commission Regulations . . . . . . . . . . . . . . . . . . . . . . . 3.7-4Commissions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-2Committee of the Regions (COR) . . . . . . . . . . . . . . . . 3.7-4Common carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-2Common Foreign and Security Policy (CFSP) . . . . . . 3.7-3Common Market for Eastern and Southern Africa . . . 3.7-2Common purpose charter . . . . . . . . . . . . . . . . . . . . . . . 4.6-2Commonrating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-7Commonwealth Independent States (CIS). . . . . . . . . . 3.6-2Community carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-2Commuter aircraft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-2Commuter carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-2Composite Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8-2Computer reservation system (CRS) services . . . . . . . 3.3-4Computer reservation systems article . . . . . . . . . . . . . 2.2-3Computer reservation systems (CRSs) . . . . . . . . . . . . 4.7-3Conditions of carriage . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-2Conditions of contract . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-2Configuration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2-5Congested airport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-1Connecting traffic . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-11Consecutive cabotage . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-10Consignee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-2Consignor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-2Consolidator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-4Constructed fares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-3Consultation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-1Consultation article. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-3Consultation (negotiation) working paper . . . . . . . . . . 2.1-5Consultation round . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-4Consumers International. . . . . . . . . . . . . . . . . . . . . . . . 3.9-2Consumption abroad. . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3-5Container rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-5Containers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5-1Contract for carriage. . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-2Contracting parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-2Convention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-2Convention on International Civil Aviation . . . . . . . . 3.2-3Convention on the Marking of Plastic

Explosives for the Purpose of Detection . . . . . . . . . 3.2-5


Index-4

Conversion factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2-2Conversion formula . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2-2Cooperation Council for the Arab States of

the Gulf (GCC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-5Corporatization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10-4Corrigendum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1-2Co-terminal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-4Co-terminal point . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-4Council . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4-2Council Directives . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-4Council of Arab Ministers of Transport . . . . . . . . . . . 3.7-6Council of Europe (CE) . . . . . . . . . . . . . . . . . . . . . . . . 3.7-3Council of the Entente (CE). . . . . . . . . . . . . . . . . . . . . 3.7-1Council of the European Union . . . . . . . . . . . . . . . . . . 3.7-4Council on Aviation and Airspace Use (CAAU) . . . . 3.6-2Council Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-4Country of designation . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-6Country of origin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-6Country-pair market . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-1Coupon or flight sector origin and destination . . . . . 4.1-10Courier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5-1Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-2Credentials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1-2Cross-border . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3-4Cross-border service . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3-1Currency conversion and remittance . . . . . . . . . . . . . . 4.7-1Customs duties and taxes article . . . . . . . . . . . . . . . . . 2.2-3

D

Damp lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7-6Damp-leased aircraft. . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-2De facto. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-3De jure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-3De minimus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-3Decision 297 of the Commission on the

Cartagena Accord . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-6Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-2Definition of a scheduled international air service . . . 3.4-4Definitions article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-2Delegation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-3Denunciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-8Denunciation article . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-4Denunciation of a treaty . . . . . . . . . . . . . . . . . . . . . . . . 3.1-4Depository. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1-4Designated carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-1Designation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-2Designation and authorization article. . . . . . . . . . . . . . 2.2-2DG IV (Competition) . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-4DG VII (Transport). . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-4DG XI (Environment, Consumer Protection

and Nuclear Safety) . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-4

Digest of Bilateral Air Transport Agreements(Doc 9511) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4-4

Diplomatic conference . . . . . . . . . . . . . . . . . . . . . . . . . 3.1-3Diplomatic note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-5Direct air service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3-2Direct transit traffic . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-11Directorates-General (DG) . . . . . . . . . . . . . . . . . . . . . . 3.7-4Discount ticket . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-5Discounted fare. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-5Dispute resolution consultation . . . . . . . . . . . . . . . . . . 2.1-2Divisional session . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4-2Doing business rights . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-3Domestic air service . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3-1Domestic airport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-1Domestic carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-1Domestic tariff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-2Domestic traffic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-2Double approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-6Double disapproval. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-6Double track route . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-4Double tracking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-4Drafting group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-4Dry lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7-5Dry-leased aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-2Dual designation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-5Dual disapproval. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-6

E

East Asian Economic Caucus (EAEC) . . . . . . . . . . . . 3.7-2ECAC Coordinating Committee . . . . . . . . . . . . . . . . . 3.6-1ECAC Meetings of Directors General of Civil

Aviation (DGCA) . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6-1ECAC Plenary Conference. . . . . . . . . . . . . . . . . . . . . . 3.6-1ECAC policy statements . . . . . . . . . . . . . . . . . . . . . . . 3.6-2ECAC resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6-2Economic and Monetary Union (EMU) . . . . . . . . . . . 3.7-4Economic and Social Commission for Asia

and the Pacific (ESCAP) . . . . . . . . . . . . . . . . . . . . . 3.7-2Economic and Social Commission for Western

Asia (ESCWA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-6Economic and Social Committee (ECS) . . . . . . . . . . . 3.7-4Economic Commission. . . . . . . . . . . . . . . . . . . . . . . . . 3.4-1Economic Commission for Africa (ECA) . . . . . . . . . . 3.7-1Economic Commission for Europe (ECE) . . . . . . . . . 3.7-3Economic Commission for Latin America

and the Caribbean (ECLAC) . . . . . . . . . . . . . . . . . . 3.7-5Economic Community of Central African

States (ECCAS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-1Economic Community of the Great Lakes

Countries (CEPGL) . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-1


Index-5

Economic Community of West AfricanStates (ECOWAS). . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-2

Economic Cooperation Organization (ECO) . . . . . . . . 3.7-6Effective date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-8Effective regulatory control . . . . . . . . . . . . . . . . . . . . . 4.4-5Effective tariff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-8Eighth Freedom of the Air . . . . . . . . . . . . . . . . . . . . . 4.1-10Eighth Freedom Right . . . . . . . . . . . . . . . . . . . . . . . . 4.1-10Electronic commerce (e-commerce). . . . . . . . . . . . . . . 4.7-4Electronic Data Interchange for Administration,

Commerce and Transport (EDIFACT). . . . . . . . . . . 3.8-4Electronic tariff filing system. . . . . . . . . . . . . . . . . . . . 4.3-8Electronic ticketing (e-ticketing) . . . . . . . . . . . . . . . . . 4.7-5Enplaning traffic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-11Entry into force article . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-4Established tariff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-8ETOPS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-2European Airlines Research Bureau (EARB) . . . . . . . 3.9-2European Atomic Energy Community (EAEC or

EURATOM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-3European Central Bank. . . . . . . . . . . . . . . . . . . . . . . . . 3.7-4European Civil Aviation Conference (ECAC). . . . . . . 3.6-1European Coal and Steel Community (ECSC) . . . . . . 3.7-3European Commission . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-4European Communities . . . . . . . . . . . . . . . . . . . . . . . . 3.7-3European Community (EC) . . . . . . . . . . . . . . . . . . . . . 3.7-3European Court of Auditors (ECA) . . . . . . . . . . . . . . . 3.7-4European Court of Justice (ECJ) . . . . . . . . . . . . . . . . . 3.7-4European Economic Area (EEA) . . . . . . . . . . . . . . . . . 3.7-3European Economic Community (EEC) . . . . . . . . . . . 3.7-3European Free Trade Association (EFTA). . . . . . . . . . 3.7-4European Parliament (EP) . . . . . . . . . . . . . . . . . . . . . . 3.7-4European Regions Airlines Association (ERA). . . . . . 3.9-2European Union (EU). . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-3Evaluating tariffs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-7Ex parte. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-3Ex post facto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-3Exchange of letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-4Excursion fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-4Expanding bilateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4-1Expert group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-4Expiry dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-8Express/small package business . . . . . . . . . . . . . . . . . . 4.5-1Extension consultation . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-2Extra section flight . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-6

F

Fair and equal opportunity article . . . . . . . . . . . . . . . . 2.2-2Fair competition article. . . . . . . . . . . . . . . . . . . . . . . . . 2.2-3 “Fan” change of gauge . . . . . . . . . . . . . . . . . . . . . . . . 4.1-6Fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-2

Fare agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-3Fare-band system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-7Federation of Air Transport User Representatives

in Europe (FATURE) . . . . . . . . . . . . . . . . . . . . . . . . 3.9-2Federation of Air Transport User Representatives

in the European Community . . . . . . . . . . . . . . . . . . 3.9-2Feeder carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-2Feeder service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3-2Ferry flight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-6Fifth Freedom of the Air . . . . . . . . . . . . . . . . . . . . . . . 4.1-8Fifth Freedom Right . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-8Final act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1-3Financial lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7-5First Freedom of the Air . . . . . . . . . . . . . . . . . . . . . . . 4.1-5First Freedom Right . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-5First person note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-5Five Freedoms Agreement . . . . . . . . . . . . . . . . . . . . . . 3.2-4Fixed-wing aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-1Flag carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-1Flags of convenience . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4-4Flexible pricing zones . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-6Flight sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-12Flight stage(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-12Flimsy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1-2Foreign investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-2Formal consultation . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-1Formal note. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-5Fortaleza Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-6Fourth Freedom of the Air . . . . . . . . . . . . . . . . . . . . . . 4.1-8Fourth Freedom Right . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-8Framework Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-6Franchise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-7Franchisee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-7Franchiser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-7Franchising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-7Free pricing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-6Free riders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3-5Free-determination method. . . . . . . . . . . . . . . . . . . . . . 4.2-2Freight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5-1Freight consolidators/forwarders . . . . . . . . . . . . . . . . . 4.5-2Freight-all-kinds rate . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-5Freighter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-1Frequent flyer programmes . . . . . . . . . . . . . . . . . . . . . 4.3-2Full Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-7Full-service carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-2

G

Gateway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-4Gateway airport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-1Gateway point. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-4GATS Annex on Air Transport Services . . . . . . . . . . . 3.3-4


Index-6

GATS core liberalization principles . . . . . . . . . . . . . . . 3.3-5GATS general obligation . . . . . . . . . . . . . . . . . . . . . . . 3.3-5Gazette . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2-3General Agreement on Tariffs and Trade (GATT) . . . 3.5-2General Agreement on Trade in Services (GATS) . . . 3.3-4General cargo rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-5General rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-2Geneva Convention. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-5Global distribution systems (GDSs). . . . . . . . . . . . . . . 4.7-4Global market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-1Good offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-8Governing body . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-2Government order fare . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-3Grand cabotage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-10Grandfather rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10-2Grant of rights article . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-2Gross fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-4Ground handling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10-1Group inclusive tour fare (GIT fare) . . . . . . . . . . . . . . 4.3-4Group of Eight (G-8) . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-6Group of Negotiations on Services (GNS) . . . . . . . . . 3.3-4Group of Seven (G-7). . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-6Group of Seventy Seven (G-77) . . . . . . . . . . . . . . . . . 3.7-6Guadalajara Convention . . . . . . . . . . . . . . . . . . . . . . . . 3.2-4Guatemala City Protocol . . . . . . . . . . . . . . . . . . . . . . . 3.2-4Gulf Cooperation Council . . . . . . . . . . . . . . . . . . . . . . 3.7-5

H

Hard rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-3Havana Convention. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.0-2Helicopter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-1Heliport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-1High-capacity aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-2High-speed civil transport aircraft (HSCT) . . . . . . . . . 5.2-2Historical precedence . . . . . . . . . . . . . . . . . . . . . . . . . 4.10-2Hovercraft (HOV). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-8Hub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-2Hub airport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-2Hub-and-spoke system . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-2Hubbing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-2Hypersonic aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-2

I

IATA Annual General Meeting (AGM). . . . . . . . . . . . 3.8-1IATA Board of Governors (BG) . . . . . . . . . . . . . . . . . 3.8-1IATA Cargo Agency Conference (CAConf) . . . . . . . . 3.8-2IATA Cargo Services Conference (CSC). . . . . . . . . . . 3.8-2IATA Cargo Tariff Coordinating Conferences

(CTCs). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8-2IATA carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-2

IATA currency conversion system . . . . . . . . . . . . . . . . A2-1IATA fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-3IATA Industry Affairs Committee (IAC). . . . . . . . . . . 3.8-1IATA interlining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-9IATA Passenger Agency Conference (PAConf) . . . . . 3.8-2IATA Passenger Services Conference (PSC). . . . . . . . 3.8-2IATA Passenger Tariff Coordinating Conferences

(PTCs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8-2IATA Procedures Conference. . . . . . . . . . . . . . . . . . . . 3.8-2IATA Schedules Conference . . . . . . . . . . . . . . . . . . . . 3.8-4IATA Secretariat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8-1IATA Special Committees . . . . . . . . . . . . . . . . . . . . . . 3.8-1IATA standard premium service fares

(SPS fares) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-10IATA Standing Committees . . . . . . . . . . . . . . . . . . . . . 3.8-1IATA Tariff Coordinating Conference (TC) . . . . . . . . 3.8-2IATA tariff coordination process . . . . . . . . . . . . . . . . . 3.8-2IATA Traffic Conference . . . . . . . . . . . . . . . . . . . . . . . 3.8-1IATA/SITA baggage tracing (BAGTRAC) system . . . 3.8-4Ibero-American Convention Relating to

Air Navigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.0-2ICAO circular . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4-5ICAO digest of statistics . . . . . . . . . . . . . . . . . . . . . . . 3.4-5ICAO document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4-4ICAO Journal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4-4ICAO regional workshops . . . . . . . . . . . . . . . . . . . . . . 3.4-5ICAO Regional Workshops on Air Transport

Regulatory Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4-5ICAO Regulatory Policy Seminar . . . . . . . . . . . . . . . . 3.4-5ICAO Secretariat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4-1ICAO State Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4-5ICAO’s Policies on Charges for Airports and

Air Navigation Services (Doc 9082) . . . . . . . . . . . . 3.4-4ICAO’s Policies on Taxation in the Field of

International Air Transport (Doc 8632) . . . . . . . . . 3.4-4Improperly documented passengers . . . . . . . . . . . . . . . 4.9-6Inadmissible persons. . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9-6Inclusive tour charter (ITC) . . . . . . . . . . . . . . . . . . . . . 4.6-2Increasing participation of developing countries. . . . . 3.3-5Indian Ocean Commission (IOC) . . . . . . . . . . . . . . . . 3.7-2Individual inclusive tour fare (IIT fare) . . . . . . . . . . . 4.3-4Informal consultation . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-1Information paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1-2Innovation consultation . . . . . . . . . . . . . . . . . . . . . . . . 2.1-2Instant purchase fare. . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-4Institut du Droit International (IDI). . . . . . . . . . . . . . . 3.9-3Institut du Transport Aérien (ITA). . . . . . . . . . . . . . . . 3.9-3Instruments of ratification, acceptance

or approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1-4Inter alia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-3Inter se agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1-4Interchange flight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-8


Index-7

Intergovernmental Agreement on CivilAviation and Airspace Use. . . . . . . . . . . . . . . . . . . . 3.6-2

Intergovernmental organization . . . . . . . . . . . . . . . . . . 3.2-1Interim Agreement on International Civil Aviation . . 3.0-2Interim Commission of the International Trade

Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5-2Interline connecting traffic . . . . . . . . . . . . . . . . . . . . . 4.1-12Interline electronic ticketing (e-interlining) . . . . . . . . . 4.7-5Interline fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-3Interline hub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-2Interline stopover traffic . . . . . . . . . . . . . . . . . . . . . . . 4.1-10Interlining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-3Intermediate point . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-3Intermingling. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6-2Intermodal hub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-2Intermodal rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-5Intermodal right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-8Intermodal transport . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5-1International Agreement on the Procedure for the

Establishment of Tariffs for Intra-EuropeanScheduled Air Services. . . . . . . . . . . . . . . . . . . . . . . 3.2-6

International Agreement on the Procedure for theEstablishment of Tariffs for Scheduled Air Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-5

International Agreement on the Sharing of Capacityon Intra-European Scheduled Air Services . . . . . . . 3.2-6

International Air Carrier Association (IACA) . . . . . . . 3.9-2International air service . . . . . . . . . . . . . . . . . . . . . . . . 5.3-1International Air Services Transit Agreement . . . . . . . 3.2-4International Air Transport Agreement . . . . . . . . . . . . 3.2-4International Air Transport Association (IATA) . . . . . 3.8-1International airport . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-1International Bank for Reconstruction and

Development (IBRD) . . . . . . . . . . . . . . . . . . . . . . . . 3.5.2International Business Aviation Council (IBAC) . . . . 3.9-2International Business Travel Association (IBTA) . . . 3.9-3International carrier. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-1International Chamber of Commerce (ICC) . . . . . . . . 3.9-3International Civil Airports Association (ICAA) . . . . 3.9-2International Civil Aviation Organization (ICAO) . . . 3.4-1International Commission on Air Navigation

(ICAN) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.0-2International Conference of Air Navigation . . . . . . . . 3.0-2International Council of Aircraft Owner and

Pilot Associations (IAOPA) . . . . . . . . . . . . . . . . . . . 3.9-2International Court of Justice (ICJ) . . . . . . . . . . . . . . . 3.5-1International Federation of Air Line Pilots’

Associations (IFALPA). . . . . . . . . . . . . . . . . . . . . . . 3.9-2International Federation of Forwarding

Organizations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9-3International Federation of Freight Forwarders

Associations (FIATA) . . . . . . . . . . . . . . . . . . . . . . . . 3.9-3

International Federation of Ship, Dock andRiver Workers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9-3

International Federation of Tour Operators(IFTO) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9-3

International Foundation of Airline Passengers’Association (IFAPA). . . . . . . . . . . . . . . . . . . . . . . . . 3.9-3

International Labour Organization (ILO) . . . . . . . . . . 3.5-2International Law Association (ILA). . . . . . . . . . . . . . 3.9-3International organization. . . . . . . . . . . . . . . . . . . . . . . 3.2-1International Organization for Standardization

(ISO) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5-2International Organization of Consumers Unions

(IOCU) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9-2International tariff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-2International Telecommunication Union (ITU) . . . . . . 3.5-2International Trade Organization (ITO). . . . . . . . . . . . 3.5-2International Transport Workers’ Federation (ITF). . . 3.9-3International Union of American Republics . . . . . . . . 3.7-6Internet fare. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-5Interstate Aviation Committee (IAC). . . . . . . . . . . . . . 3.6-2Intervention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1-3Inventory control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2-5Inward investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-2Issuing carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-9

J

Jet aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-2Joint Aviation Authorities (JAA) . . . . . . . . . . . . . . . . . 3.6-2Joint bilateral negotiation . . . . . . . . . . . . . . . . . . . . . . . 2.4-1Joint fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-3Joint service flight . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-1Joint venture carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-2Journal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2-3Jumbo jet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-1Just in time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5-1Justice and Home Affairs (JHA) . . . . . . . . . . . . . . . . . 3.7-3

K

Kona Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-6

L

LACAC Assembly . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6-2LACAC Executive Committee. . . . . . . . . . . . . . . . . . . 3.6-2LACAC Group of Experts on Air Transport

Policies (GEPTA) . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6-2LACAC Group of Experts on Costs and

Tariffs (GECOT). . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6-2Large aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-1


Index-8

Latin American Civil Aviation Commission (LACAC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6-2

Latin American Economic System (SELA). . . . . . . . . 3.7-5Latin American Integration Association (LAIA). . . . . 3.7-5Launch (LCH). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-8League of Arab States . . . . . . . . . . . . . . . . . . . . . . . . . 3.6-2League of Arab States (LAS). . . . . . . . . . . . . . . . . . . . 3.7-6Leased aircraft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-2Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7-6Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-2Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7-6Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-2Liberalized air agreements . . . . . . . . . . . . . . . . . . . . . . 2.2-2Licence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1-1Licensed carrier. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-1Light aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-1Limousine (LMO). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-8Load factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2-1Local fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-3Local traffic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-?Lomé Convention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-6Long-range aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-2Long-run marginal cost . . . . . . . . . . . . . . . . . . . . . . . 4.3-11Low-cost carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-2Lowest combination principle . . . . . . . . . . . . . . . . . . . 4.3-3

M

Maastricht Treaty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-3Madrid Convention . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.0-2Mail hub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-2Major air carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-2Major hub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-2Mala fide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-3Mandatory stop requirement. . . . . . . . . . . . . . . . . . . . . 4.1-6Manual on Air Traffic Forecasting (Doc 8991) . . . . . 3.4-4Manual on Air Navigation Services Economics

(Doc 9161) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4-4Manual on the ICAO Statistics Programme

(Doc 9060) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4-4Market access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3-5Market fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-2Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7-2Matching tariffs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-7Maximum permitted mileage (MPM) . . . . . . . . . . . . . 4.3-3Maximum tariff system . . . . . . . . . . . . . . . . . . . . . . . . 4.3-8Mean load factor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2-1Mediation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-8Medium-range aircraft . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-2Mega-alliances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.8-1Mega-carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-2Mega-hub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-2

Memorandum of consultation . . . . . . . . . . . . . . . . . . . 2.1-5Memorandum of Understanding (MOU) . . . . . . . . . . . 2.2-1Mercosur Treaty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-5Mileage fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-3Mileage principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-3Mini-hub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-2Minutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1-3Mixed passenger/cargo charter. . . . . . . . . . . . . . . . . . . 4.6-2Model bilateral air transport agreement. . . . . . . . . . . . 2.1-3Modes of supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3-4Modification consultation. . . . . . . . . . . . . . . . . . . . . . . 2.1-2Modification to a treaty . . . . . . . . . . . . . . . . . . . . . . . . 3.1-4Montevideo Treaty . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-5Montreal Agreement of 1966. . . . . . . . . . . . . . . . . . . . 3.2-4Montreal Convention . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-5Montreal Convention of 1999 . . . . . . . . . . . . . . . . . . . 3.2-5Montreal Protocol No. 4 . . . . . . . . . . . . . . . . . . . . . . . 3.2-4Most-favoured nation (MFN) treatment . . . . . . . . . . . 3.3-5Multilateral agreement article . . . . . . . . . . . . . . . . . . . 2.2-4Multilateral Agreement Concerning the Operation

of Air Services within the Caribbean Community(CARICOM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-6

Multilateral Agreement on Commercial Rightsof Non-scheduled Air Services among theAssociation of South-East Asian Nations

(ASEAN) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-5Multilateral Agreement on Commercial Rights

of Non-scheduled Air Services in Europe. . . . . . . . 3.2-5Multilateral Agreement on the Liberalization of

International Air Transportation. . . . . . . . . . . . . . . . 3.2-6Multilateral Air Services Agreement for

Liberalization among States of the PacificIslands Forum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-6

Multilateral Interline Traffic Agreement (MITA) . . . . 3.8-4Multilateral Prorate Agreement (MPA) . . . . . . . . . . . . 4.3-9Multilateral regulation . . . . . . . . . . . . . . . . . . . . . . . . . 3.0-1Multi-modal hub. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-2Multiple class seating . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2-5Multiple controlled designation . . . . . . . . . . . . . . . . . . 4.1-5Multiple unlimited designation . . . . . . . . . . . . . . . . . . 4.1-5Mutatis mutandis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-3

N

Narrow-body aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-1National carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-1National regulation of air transport . . . . . . . . . . . . . . . 1.0-1National treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3-5Nationality of aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-1Negotiated fares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-4Negotiating position . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-3Negotiating round . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-4


Index-9

Negotiating team. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-3Negotiating venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-3Negotiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-1Net fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-4Net/net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-5Network carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-2New entrant carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-2Niche carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-2Ninth Freedom of the Air. . . . . . . . . . . . . . . . . . . . . . 4.1-10Ninth Freedom Right . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-11No-frills carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-2Non-affinity group charter . . . . . . . . . . . . . . . . . . . . . . 4.6-2Non-governmental organization (NGO). . . . . . . . . . . . 3.2-1Non-IATA carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-2Non-IATA fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-3Non-IATA interlining . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-9Non-national personnel. . . . . . . . . . . . . . . . . . . . . . . . . 4.7-2Non-paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-5Non-promotional-type special fare. . . . . . . . . . . . . . . . 4.3-3Non-scheduled air service . . . . . . . . . . . . . . . . . . . . . . 4.6-1Non-scheduled Air Services Agreement . . . . . . . . . . . 2.2-1Non-scheduled carrier. . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-1Non-scheduled international carrier . . . . . . . . . . . . . . . 5.1-1Non-scheduled international flight . . . . . . . . . . . . . . . . 5.3-2Non-stop service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3-2Nordic Council (NC) . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-4Normal fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-3North America Free Trade Agreement (NAFTA) . . . . 3.7-5Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-5Note verbale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-5

O

Offers and requests . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3-6Off-line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7-3Off-tariff fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-2Oneworld. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.8-1Online . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7-3Online connecting traffic . . . . . . . . . . . . . . . . . . . . . . 4.1-12Online fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-3Online hub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-2Online stopover traffic . . . . . . . . . . . . . . . . . . . . . . . . 4.1-12Open area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8-3Open Skies Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-2Operating lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7-5Operational right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-6Operator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7-6Optional stop right . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-?Order of business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1-2Organisation for Economic Cooperation and

Development (OECD) . . . . . . . . . . . . . . . . . . . . . . . 3.5-3

Organization of African Unity (OAU) . . . . . . . . . . . . 3.7-2Organization of American States (OAS) . . . . . . . . . . . 3.7-6Organization of Central American States (OCAS) . . . 3.7-5Organization of Eastern Caribbean States (OECS) . . . 3.7-5Orient Airlines Association (OAA) . . . . . . . . . . . . . . . 3.9-1Orient Airlines Research Bureau . . . . . . . . . . . . . . . . . 3.9-1Originating traffic . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-11Overbooking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2-5Overflight right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-5Own-use charter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6-2

P

Pacific Asia Travel Association (PATA) . . . . . . . . . . . 3.9-3Pacific Community . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-3Package . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8-3Pacta sunt servanda . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1-4Pallets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5-1Pan-American Convention on Commercial Aviation . 3.0-2Pan-American Union . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-6Panel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4-2Panel on Air Navigation Services Economics. . . . . . . 3.4-2Paris Club . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-6Paris Convention. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.0-2Paris Convention for the Regulation of Aerial

Navigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.0-2Parliamentary Assembly of the Council of Europe . . 3.7-3Part charter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6-3Partial blind sector . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-10Participation measures . . . . . . . . . . . . . . . . . . . . . . . . . 2.3-8Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-2Passenger air carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-1Passenger air service . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3-1Passenger aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-1Passenger load factor . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2-1Passenger rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9-1Passenger throughput . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-1Passenger ticket . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-2Passenger tonne-kilometres performed . . . . . . . . . . . . 5.1-3Peak load pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-4Per se . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-3Permanent Secretariat of the General Treaty

on Central American Economic Integration(SIECA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-5

Permit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1-1Petit cabotage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-10PEX fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-4Piston-engine aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-2Plenary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-4Plurilateral agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 2.4-1Point . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-2Point-to-point normal fare . . . . . . . . . . . . . . . . . . . . . . 4.3-3


Index-10

Policy and Guidance Material on the EconomicRegulation of International Air Transport (Doc 9587) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4-4

Pooling arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2-6Position paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-3Positioning flight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-6Postal hub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-2Preamble . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-2Preambular clauses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-2Precedence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-7Preclearance agreement . . . . . . . . . . . . . . . . . . . . . . . . 2.2-4Predatory tariff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-7Predetermination method . . . . . . . . . . . . . . . . . . . . . . . 4.2-2Preferential measures . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3-8Preferential Trade Area for Eastern and Southern

African States (PTA). . . . . . . . . . . . . . . . . . . . . . . . . 3.7-2Presence of a natural person . . . . . . . . . . . . . . . . . . . . 3.3-5Price leadership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-7Prima facie . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-3Principal place of business . . . . . . . . . . . . . . . . . . . . . . 4.4-5Principals’ meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-4Private aircraft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-1Private airport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-1Private carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-2Private fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-2Private involvement . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10-4Private participation . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10-4Privatization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10-4Process of bilateral regulation . . . . . . . . . . . . . . . . . . . 2.1-1Process of multilateral regulation. . . . . . . . . . . . . . . . . 3.1-1Process of national regulation . . . . . . . . . . . . . . . . . . . 1.1-1Programmed charters . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6-4Progressive liberalization . . . . . . . . . . . . . . . . . . . . . . . 4.1-2Promotional-type special fare. . . . . . . . . . . . . . . . . . . . 4.3-4Proportional fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-3Proportionate action . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-8Proposed tariff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-8 “Prorating” revenues . . . . . . . . . . . . . . . . . . . . . . . . . . A3-1Protocol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-4Protocol Supplementary to the Montreal

Convention of 1971 . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-5Protocol to the Multilateral Agreement on

the Liberalization of International AirTransportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-6

Provisional agenda . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1-2Provisional International Civil Aviation

Organization (PICAO) . . . . . . . . . . . . . . . . . . . . . . . 3.0-2Provisional order of business . . . . . . . . . . . . . . . . . . . . 3.1-2Public charter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6-2Public excursion fare . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-4Public fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-2Published fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-2

Q

Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1-2

R

Rapporteur . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1-2Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-2Ratification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-7Reciprocity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1-3Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-2Redistribution consultation. . . . . . . . . . . . . . . . . . . . . . 2.1-2Reference levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-7Regional air service . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3-1Regional aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-2Regional airport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-1Regional carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-2Regional hub. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-2Regional jet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-2Region-to-region market. . . . . . . . . . . . . . . . . . . . . . . . 4.1-1Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2-3Registration article . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-4Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (iii)Regulatory content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (iii)Regulatory Implications of the Allocation of

Flight Departure and Arrival Slots atInternational Airports (Cir 283) . . . . . . . . . . . . . . . 3.4-4

Regulatory process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (iii)Regulatory structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . (iii)Reliever airports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-1Reservation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1-4Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-2Resolution documents (Res. Docs.) . . . . . . . . . . . . . . . 3.8-3Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8-3Resolving clause(s). . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-2Restricted normal fare . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-3Revenue management. . . . . . . . . . . . . . . . . . . . . . . . . . 4.2-5Revenue passenger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-3Revenue passenger-kilometres (RPKs) . . . . . . . . . . . . 5.1-3Revenue tonne-kilometre (RTK) . . . . . . . . . . . . . . . . . 5.1-3Revocation of operating authorization article . . . . . . . 2.2-3Right of establishment . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-2Right of optional omission of stops. . . . . . . . . . . . . . . 4.1-6Right of overflight . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-5Right of technical stop . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-5Right to operate extra section flights. . . . . . . . . . . . . . 4.1-6Rome Convention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-5Rome Treaties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-3Rotary-wing aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-1Round . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-4Round of consultations. . . . . . . . . . . . . . . . . . . . . . . . . 2.1-4


Index-11

Round of negotiations. . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-4Route annex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-4Route right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-2Route schedule(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-4Route terminal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-4Routing fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-3Rover point . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-3Rule-of-reason approach. . . . . . . . . . . . . . . . . . . . . . . 4.3-11Runway capacity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-1

S

Safety article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-3Safety net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-2Scheduled air carrier. . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-1Scheduled air service . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3-1Scheduled airline. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-1Scheduled international air service . . . . . . . . . . . . . . . 5.3-1Scheduled international carrier. . . . . . . . . . . . . . . . . . . 5.1-1Scheduling season. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10-2Schedulized charters . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6-4Seasonalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-4Seat factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2-1Seat-kilometres available . . . . . . . . . . . . . . . . . . . . . . . 5.1-3Second country hub . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-2Second Freedom of the Air . . . . . . . . . . . . . . . . . . . . . 4.1-5Second Freedom Right . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-5Second section flight . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-6Second-country change of gauge . . . . . . . . . . . . . . . . . 4.1-6Secretariat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-1Secretariat study group . . . . . . . . . . . . . . . . . . . . . . . . . 3.4-3Selling and marketing of air transport services. . . . . . 3.3-4Selling date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.8Selling fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-5Sell-up tariff structure. . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-4Settlement of disputes article . . . . . . . . . . . . . . . . . . . . 2.2-4Seventh Freedom of the Air. . . . . . . . . . . . . . . . . . . . 4.1-10Short-notice filing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-8Short-range aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-2Short-run marginal cost . . . . . . . . . . . . . . . . . . . . . . . 4.3-11Shuttle air service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3-2Signature provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-4Single class seating. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2-5Single designation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-5Single disapproval regime . . . . . . . . . . . . . . . . . . . . . . 4.3-7Single entity charter . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6-2Single European Market . . . . . . . . . . . . . . . . . . . . . . . . 3.7-4Single track route . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-5Single tracking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-5Single-factor fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-3Sixth Freedom of the Air . . . . . . . . . . . . . . . . . . . . . . 4.1-10

Sixth Freedom Right . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-10Sky Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.8-1Slot allocation mechanism . . . . . . . . . . . . . . . . . . . . . 4.10-2Slots . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8-4Small aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-1Société Internationale de Télécommunications

Aéronautiques (SITA). . . . . . . . . . . . . . . . . . . . . . . . 3.9-3Soft rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-3South Asian Association for Regional

Cooperation (SAARC) . . . . . . . . . . . . . . . . . . . . . . . 3.7-3South Pacific Bureau for Economic Cooperation

(SPEC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-3South Pacific Commission (SPC) . . . . . . . . . . . . . . . . 3.7-3South Pacific Forum. . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-3Southern Africa Transport and Communications

Commission (SATCC) . . . . . . . . . . . . . . . . . . . . . . . 3.7-2Southern African Development Community

(SADC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-2Southern African Development Coordination

Conference (SADCC). . . . . . . . . . . . . . . . . . . . . . . . 3.7-2Southern Cone Common Market (MERCOSUR) . . . . 3.7-5Sovereign body . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-1Special Drawing Rights (SDR) . . . . . . . . . . . . . . . . . . 3.2-4Special event charter . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6-2Special excursion fare . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-4Special fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-3Special Prorate Agreement (SPA) . . . . . . . . . . . . . . . . 4.3-9Specific commodity rate. . . . . . . . . . . . . . . . . . . . . . . . 4.3-5Specific principles under the GATS . . . . . . . . . . . . . . 3.3-5Specific rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-2Specified fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-3Split charter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6-2Stage 2 aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-3Stage 3 aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-3“Stand alone” cabotage . . . . . . . . . . . . . . . . . . . . . . . . 4.1-?Standard commissions . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-2Standby lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2-6STAR Alliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.8-1Starting net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-4Start-up carrier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-2State aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-1State of Registry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7-6State of the Operator . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7-6State-owned carrier. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1-2Statistics article. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-3Status fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-3Status quo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-3Status quo ante . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-3Statutory-notice filing. . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-8Stockholm Convention . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-4STOL aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-1Stolport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-1


Index-12

Stopover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-11Stopover traffic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-11Structure of bilateral regulation . . . . . . . . . . . . . . . . . . 2.2-1Structure of multilateral regulation . . . . . . . . . . . . . . . 3.2-1Structure of national regulation . . . . . . . . . . . . . . . . . . 1.2-1Student charter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6-2Study Group on Computer Reservation Systems

(CRS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4-3Sub-Area Conferences . . . . . . . . . . . . . . . . . . . . . . . . . 3.8-2Subsonic aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-2Succession to a bilateral agreement . . . . . . . . . . . . . . . 2.1-7Sum of sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-7Suo moto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-3Super-hub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-2Supersonic aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-2Supplemental airports . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-1Supra-State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.0-1Surface conveyances. . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-8Suspension of operating authorization article . . . . . . . 2.2-3

T

Tariff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-1Tariff article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-3Tariff condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-2Tariff consultation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-9Tariff coordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-9Tariff enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-5Tariff filing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-1Tariff malpractice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-5Tariff rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-2Taxation article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-3TC member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8-2Technical stop right . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-5Template air services agreements (TSAs) . . . . . . . . . . 2.2-2Terminal capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-1Terminal point. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-4Termination article . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-4Terms of reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-2The Hague Convention. . . . . . . . . . . . . . . . . . . . . . . . . 3.2-5The Hague Protocol . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-4Third Freedom of the Air. . . . . . . . . . . . . . . . . . . . . . . 4.1-8Third Freedom Right . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-8Third person note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-5Third-country change of gauge . . . . . . . . . . . . . . . . . . 4.1-6Through fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-3Through service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3-2Ticket or waybill origin and destination . . . . . . . . . . 4.1-10Ticketed point mileage (TPM) . . . . . . . . . . . . . . . . . . . 4.3-3Tokyo Convention. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-5Tonne-kilometres available. . . . . . . . . . . . . . . . . . . . . . 5.1-3

Tonne-kilometres performed (TKPs) . . . . . . . . . . . . . . 5.1-3Tour operator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6-2Traffic right. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-8Traffic rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-8Train (TRN) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-8Transborder tariff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-2Transit traffic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-12Transparency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3-5Transport aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-1Trans-regional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-1Treaty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-2Treaty of Chaguaramas . . . . . . . . . . . . . . . . . . . . . . . . 3.7-5Treaty of Izmir . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7-6Treaty on European Union . . . . . . . . . . . . . . . . . . . . . . 3.7-3Tri-jet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-2Truck/road feeder service (RFS) . . . . . . . . . . . . . . . . . 4.1-8True origin and destination . . . . . . . . . . . . . . . . . . . . 4.1-10Trunk service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3-2Turbofan aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-2Turbojet aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-2Turboprop aircraft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-2Twin jet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-2Two Freedoms Agreement . . . . . . . . . . . . . . . . . . . . . . 3.2-4

U

ULD (unit load device) discount rate . . . . . . . . . . . . . 4.3-5ULDs (unit load devices) . . . . . . . . . . . . . . . . . . . . . . . 4.5-1Ultra-high-capacity transport aircraft (UHCT) . . . . . . 5.2-2Ultra-light aircraft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-1UN Economic and Social Council (ECOSOC) . . . . . . 3.5-1UN General Assembly . . . . . . . . . . . . . . . . . . . . . . . . . 3.5-1UN regional commissions . . . . . . . . . . . . . . . . . . . . . . 3.5-1UN Secretariat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5-1UN Security Council . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5-1Unbundled fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-3United Nations (UN) . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5-1United Nations Conference on Trade and

Development (UNCTAD). . . . . . . . . . . . . . . . . . . . . 3.5-2United Nations Framework Convention on Climate

Change Secretariat (UNFCCC Secretariat) . . . . . . . 3.5.3United Nations Transport and Communications

Decades . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5-1United Nations Treaty Series (UNTS). . . . . . . . . . . . . 3.5-1Universal Federation of Travel Agents’

Associations (UFTAA) . . . . . . . . . . . . . . . . . . . . . . . 3.9-3Universal Postal Union (UPU). . . . . . . . . . . . . . . . . . . 3.5-2Unpublished fare. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-2Unruly or disruptive passengers. . . . . . . . . . . . . . . . . . 4.9-5Uruguay Round. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5-2User charges article . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2-3


Index-13

V

Very large commercial transport aircraft (VLCT) . . . . 5.2-2Vienna Convention on the Law of Treaties. . . . . . . . . 3.2-2Visit another country tariff . . . . . . . . . . . . . . . . . . . . . . 4.3-2Voluntary commitments . . . . . . . . . . . . . . . . . . . . . . . . 4.9-1

W

Warsaw Convention . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-4Warsaw System. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-4Waves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4-2Web fare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-5West African Economic Community (CEAO) . . . . . . 3.7-2Wet lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7-6Wet-leased aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-2White Paper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2-3Wide-body aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2-1Withdrawal from a treaty . . . . . . . . . . . . . . . . . . . . . . . 3.1-4Wholesaler . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-4

Working group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1-4Working paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1-2World Bank Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5-2World Tourism Organization (WTO-OMT). . . . . . . . . 3.5-2World Trade Organization (WTO-OMC). . . . . . . . . . . 3.5-2World Travel and Tourism Council (WTTC) . . . . . . . 3.9-3

Y

“Y” change of gauge . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1-6Yamoussoukro Declaration on a New African

Air Transport Policy . . . . . . . . . . . . . . . . . . . . . . . . . 3.2-6Yield management . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2-5

Z

Zemun Agreement of 1937 . . . . . . . . . . . . . . . . . . . . . 3.0-2Zone fare systems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-7Zones of flexibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3-7Zones of reasonableness. . . . . . . . . . . . . . . . . . . . . . . . 4.3-7

— END —