ARAB AIR TRANSPORT

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ARAB AIR TRANSPORT LIBERALISATION
AGREEMENT BRIDGING THE GAPS
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Arab Air TransportLiberalisation
AgreementBridging the Gaps

• Arab aviation scene
• Existing world models
• ACAC agreement Strengths and weaknesses
• Gaps and how to bridge them

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Arab Aviation SceneGrowth Development

• Impressive economic growth 5.6
• Extraordinary traffic growth
• Jan-Oct 2005
• Passenger 12.6
• Cargo 14.1
• Fleet expansion (orders 60 b)
• Infrastructure development (30 b)
• Emerging low cost carriers
• Better airline profitability
• Uneven growth/expansion across the region

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Arab Aviation SceneLiberalisation Status

• Wide spectrum of attitudes towards aviation
  regulation
• Liberalisation as growth catalyst e.g UAE,
  Lebanon
• Generally slow pace towards liberalisation
• Only six states with fully or partially
  liberalised agreements
• ACAC agreement a leap forward, but gaps need to
  be filled
• Serious support and political will are needed

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Arab Aviation SceneImplications of ACAC Agreement

• Higher traffic growth rates
• Easier rules on market access and entry
• Increased competition
• Changes in regulatory environment to support
  liberalisation
• Freer movement of persons and goods
• Competition laws to create level playing field
  (airlines operating like any other business)
• Revision of ownership and control clauses
• Multinational/cross border ownership
• Mergers, takeovers?

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Existing World Models European Union

• Fully deregulated internal market
• Any EC carrier can fly from anywhere to anywhere
• Now enlarging scope
• External dimension
• EC Clause (horizontal mandate)
• EU/US deal
• Soon other mandates?
• Development of EASA
• Influence on technical issues
• European licenses

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Existing World Models EU horizontals various
models

• Designation Clauses negotiated by EU Partners
• Traditional National Ownership and Control
• Regional OC safeguard
• non EU State may refuse, revoke, suspend or
  limit the operating authorisation if by
  exploiting traffic rights granted under an
  existing bilateral with a member State, EC
  carrier circumvents limitations imposed under a
  bilateral with another member State
• Principal place of business regulatory
  oversight
• Principal place of business regulatory
  oversight safeguard
• Mixed (e.g. Morocco)

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EU horizontals
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Existing World Models So-called APEC

• Chile, NZ, Brunei, Singapore, USA
• Traffic rights not completely multilateral
• Service must have a point in the country
• designating the airline
• (Except all cargo)
• No cabotage
• National Ownership and Control Principal Place
  of Business

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Existing World Models Latin America Going
around the restrictions

• No multilateral treaty framework in place
• But countries unilaterally negotiating CLAC
  clause with EU
• Chile (soon Argentina, Uruguay, Nicaragua)
• Multi-national airlines emerging
• TACA
• LAN
• COPA

• Minority stakes in foreign carriers
• Doing business under one brand
• Some still use separate codes for difft
  operators

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ACAC Liberalisation Agreement
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ACAC Liberalisation AgreementExcellent
foundation !

• Agreement contains all basic elements of a
  regional block
• Regional Clause (art 5.2.a)
• In line with developments in other regions
• CLAC Clause
• EC Clause
• Traffic Rights
• More than the EC Package 2
• Stops short of Cabotage but still very generous
• External dimension
• in place (Art 32)
• Could lead to creation of one or several pan-Arab
  carriers

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ACAC Liberalisation Agreement Weaknesses

• Problems will not emerge from conflict with
  national laws
• But from gaps in the Agreement
• which can be filled
• regional/multilateral vs bilateral aspects
• Agreement still contains left-overs of
  bilateralism
• Is this balance stable?
• Probably not

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ACAC Liberalisation Agreement Left-overs from
bilateralism

• Tariff filing Why?
• Capacity and frequency are fully deregulated
• Internet increased transparency
• Embryo of competition rules in place
• Safety checks
• With possible multinational carriers emerging,
  need for common standards
• ECAC experience with SAFA common checklists, but
  not common interpretation
• Viz. Blacklist debate in EU
• IOSA?
• Dispute resolution mechanism
• Dry-Leases only? (art 15)
• Ability to transfer crews at short notice

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Competition Law

• National? Bilateral? Multilateral?
• Annex 2 Basic Rules
• Yet basic rules need to be developed
• E.g. Arts 81, 82 of EC Treaty
• Case-Law
• Guidelines
• Regulations
• Recent developments in EC Law
• Large devolution to national competition
  authorities
• BUT EC may pull cases where
• Unity of doctrine is required
• Case affects cross-border trade? Air Transport,
  typically
• E.g. EC / US Draft Open Skies
• Art 19
• Minimize differences re competition law
• cooperation among competition authorities
• Annex 2 Cooperation on Competition Law issues

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Competition Law (2)

• Annex 2
• Too reliant on national laws / authorities
• But not all ACAC countries have them
• And traditions may differ
• Risk of diverging interpretations
• Subsidies ? Problem area
• Loose definition
• No dispute resolution mechanism
• No remedies
• E.g. countervailing measures

Competition Law No Competition Law In transition
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Competition Law (3)

• Dispute Resolution ? Problem area
• Traditional bilateral (consultation, negotiation,
  arbitration)
• Strong enough?
• What about a permanent arbitration panel ?
• Development of common case-law on aviation
• Conflict will not be solely between States
• Airline vs airline
• State vs Airline
• Airlines should have recognized roles in dispute
  resolution mechanism
• Active
• Passive

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ACAC Liberalisation AgreementGaps How to
Bridge Them

• Weak Dispute Resolution Mechanism
• Power based, not rule based
• Weak rules on competition subsidies
• Need developing
• A possible solution Permanent arbitration body
• Interprets the Treaty
• Develops Competition Law aspects of the treaty
  through case law
• Solves general disputes re implementation of the
  Treaty

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THANK YOU