1. Liberalization of air transport services A Regional Perspective
Ahmed Farahat
Director
Sectoral Issues and Policies Division
United Nations- Economic and Social Commission for Western Asia
Ahmed Farahat, SIPD, UN-ESCWA

2. Contents Introduction The regulatory regimes Chicago Convention ICAO
Regional attempts to liberalize air transport
Classification of Air Transport services
Air Transport services and WTO
Current round of negotiations on trade in air transport services
Commitments of some Arab countries in air transport services
Conclusion and recommendations
Ahmed Farahat, SIPD, UN-ESCWA

3. Introduction
Importance of air transport in international trade (tourism/ cargo transport)
Uruguay round showed interest in trade in services and included an Annex on air transport Services
Ahmed Farahat, SIPD, UN-ESCWA

4. 1- Chicago convention (4 April 1947)
The Regulatory Regime
1- Chicago convention (4 April 1947)
Stated that every State has complete and exclusive sovereignty over the airspace above its territory.
Ahmed Farahat, SIPD, UN-ESCWA

5. The Regulatory Regime
Bermuda I: Bilateral agreement between the United States and United Kingdom (1946)
Routes: governments agree on routes on which traffic will be carried
Tariffs: to be established by the airlines through IATA
Capacity: subject to ex post facto review
It was the most influential bilateral development, and became a model for the decades to come.
Its expected liberal effect was diminished by airline pooling agreements and other capacity sharing arrangements.
Ahmed Farahat, SIPD, UN-ESCWA

6. The Regulatory Regime
1987 – US policy of deregulation of international routes.
US policy of open skies.
Ahmed Farahat, SIPD, UN-ESCWA

7. The Regulatory Regime
ICAO “4Th World Wide air transport conference”
The conference was convened to discuss the regulatory change in air transport due to liberalization, commercialization, privatization, regionalization and globalization
In that regard recommendations on the following issues were formulated as guidance to be used by States in their bilateral, regional and multilateral air transport relationships:
Market access
Air carriers ownership and control
Structural impediments
Safeguards
The broader regulator environment
Ahmed Farahat, SIPD, UN-ESCWA

8. The Regulatory Regime
ICAO “4Th World Wide air transport conference”
Developed countries adopted the principal of international air transport liberalization within a competitive environment.
Third world countries, namely African countries, showed reservation in that regard, and pointed out the bad consequences competition will have on developing countries.
The conference adjourned without reaching a consensus on the new regulatory regime.
ICAO secretariat was to prepare a study on preferential measures for developing countries who’s focus was on increasing participation rather than providing protection.
Ahmed Farahat, SIPD, UN-ESCWA

9. The Regulatory Regime 3- Regional attempts to liberalize air transport
Technical terms
Scheduled and non-scheduled passenger service
Freedoms of the air
Ahmed Farahat, SIPD, UN-ESCWA

10. The Regulatory Regime 3- Regional attempts to liberalize air transport
European Union attempts
Member States have a period of 10 years and in three different phases established a regulatory regime aimed at the creation of a single market for intra-Europe air services
EU regulation extended to areas such as licensing, market access, pricing, capacity, and competition, computer reservation systems and airport access.
Ahmed Farahat, SIPD, UN-ESCWA

11. The Regulatory Regime 3- Regional attempts to liberalize air transport
European Union attempts
Of these regulation we mention:
Any EU national company or individual could create an air carrier anywhere within the unified market, and operate wherever market opportunity arose without government permission to do so.
Airlines could decide for themselves according to market opportunities the type of service they were willing to supply
Price setting was left to airlines to decide along with the capacity they wanted to offer in the market.
Ahmed Farahat, SIPD, UN-ESCWA

12. The Regulatory Regime 3- Regional attempts to liberalize air transport
Arab States attempts
A phased progressive liberalization programme among member states of the Arab Civil Aviation Commission was developed in 1998.
1999 :Liberalization of cargo and non scheduled passenger transport
2001: Application of Freedoms 3& 4 with restriction on scheduled traffic capacity.
2003: Application of freedoms 3& 4 without restrictions
2005: Application of Freedom 5
Ahmed Farahat, SIPD, UN-ESCWA

13. The Regulatory Regime 4- Classification of air transport services
Air transport services are classified into two groups:
Aviation services
Scheduled passenger services
Non scheduled passenger services
Cargo services
Landing slots
Ground services
Operational activities (air traffic control, security, maintenance)
Traffic handling (freight, baggage, customs..)
Commercial activities (Duty free, parking, catering..)
Ahmed Farahat, SIPD, UN-ESCWA

14. Air transport services and WTO
Hard rights
Soft rights
Ahmed Farahat, SIPD, UN-ESCWA

15. Air transport services and WTO
GATS Annex on Air Transport Services
Specifically carves out traffic rights and services directly related to the exercise of traffic rights (hard rights) but applies to three minor services (soft rights):
aircraft repair and maintenance,
selling and marketing and
CRS.
Gives preference to bilateral dispute settlement procedures over the WTO mechanism.
Obliges the Council for Trade in Services to periodically review, at least every 5 years:
The developments in the air transport sector,
The operation of the Annex
The possible further application of the GATS in the air transport sector.
Ahmed Farahat, SIPD, UN-ESCWA

16. Air transport services and WTO
Scope of the Annex
Aircraft repair and maintenance services
The services involved are activities undertaken on an aircraft or a part thereof while it is withdrawn from service and does not include so-called line maintenance.
Selling and marketing of Air Transport
These are opportunities foe the air carrier concerned to sell and market freely its air transport services including all aspects of marketing such as market research, advertising and distribution. These activities do not include pricing of air transport services nor the applicable conditions.
Computer reservation system services (CRS):
Services provided by computerized systems that contain information about carriers schedules, availability, fares and fare rules, for which reservations can be made or tickets may be issued.
Ahmed Farahat, SIPD, UN-ESCWA

17. Air transport services and WTO
Analysis of commitments
Aircraft repair and maintenance services
45 States made commitments on aircraft repair and maintenance. (34%) (1998)
Two of the 45 used their own definitions of the scope of the activity, 14 referred to CPC and 8 made explicit reference to the definitions in the annex, and the remainder did not directly refer to it.
As for national treatment, 15 members committed in Mode 1 without limitations. In mode 2, 42 members members offered it with no limitations. Under mode 3, 34 members offered the sector without limitations and eight have done so with limitations.
Two members only have taken the MFN exemptions.
Ahmed Farahat, SIPD, UN-ESCWA

18. Air transport services and WTO
Analysis of commitments
Selling and marketing of Air Transport
34 members have made commitments in this sector
Two of the 34 used their own definitions of the scope of the activity, 3 referred to CPC and 6 made explicit reference to the definitions in the annex, 2 members limited the scope of their commitments by either excluding the selling and marketing for a series of raw and processed agricultural products or to advertising and the creation of regional offices.
Ahmed Farahat, SIPD, UN-ESCWA

19. Air transport services and WTO
Analysis of commitments
Computer reservation system services (CRS)
39 members undertook commitments on CRS
One of the 39 used their own definitions of the scope of the activity, some other states referred to CPC, 8 have included CRS under marketing services, and 8 made explicit reference to the definitions in the annex.
42 MFN exemptions were registered in 1998, they were classified into 4 categories:
Maintenance and repair of aircraft
Selling / marketing
CRS
Other services
Ahmed Farahat, SIPD, UN-ESCWA

20. Arab countries commitments in air transport services Commitments of Sultanate of Oman
Aircraft repair and maintenance services
Selling and marketing of air transport
CRS
foreign capital contribution was limited to 51%
As for the supporting services the Sultanate committed itself to, these are:
Freight transport agency services
Cargo handling
Storage and warehousing services
Other services
Ahmed Farahat, SIPD, UN-ESCWA

21. Arab countries commitments in air transport services Commitments of Morocco
Aircraft repair and maintenance services
Repair and maintenance services of air in general
Selling, marketing , market research, advertising and distribution
CRS or electronic reservation system
Ahmed Farahat, SIPD, UN-ESCWA

22. Arab countries commitments in air transport services Commitments of Jordan
Aircraft repair and maintenance services
Selling and marketing of line transport
CRS
Maintenance and repair
Freight transport agencies services
Loading and unloading
Cargo control services
Ahmed Farahat, SIPD, UN-ESCWA

23. Air transport services and WTO
Further work on the Annex
Clarification of of the services directly related to the exercise of traffic rights, hence work on a the definition and clear understanding of what is included in services not directly related to traffic rights should be done.
Reach an understanding on the treatment of many auxiliary services which can be offered either in conjunction with air transport service or multimodal combinations. (catering, refueling)
Reach a clear understanding on the coverage by the GATS of aviation activities other than air transport (recreational flight, crop spraying, flight survey, aerial photography..)
Therefore if members decide to pursue classification issues further, there are a number of activities which seem to merit study, these include:
Auxiliary services
Supporting services
Catering services
Fueling services
Ahmed Farahat, SIPD, UN-ESCWA

24. Current round of negotiations on trade in air transport services
The Council for Trade in services shall review periodically, and at least every five years, developments in the air transport sector and the operation of this Annex with a view to considering the possible further application of the agreement in this sector
Ahmed Farahat, SIPD, UN-ESCWA

25. ESCWA Meeting
ESCWA organized an EGM on the maritime and air transport services in 1999, and came out with several recommendations for air transport
Ahmed Farahat, SIPD, UN-ESCWA

26. Conclusion and recommendations
Delay negotiations on hard rights so that developing countries and affiliated airlines have time to fix their status before entering the new phase
Further study on the following topics:
All cargo operations
Charter flights in airports found in tourist areas to preserve the interest of scheduled cie
General aviation
Ahmed Farahat, SIPD, UN-ESCWA

27. Conclusion and recommendations
Development of a air transport programmes in Arab States for national air carriers or civil aviation authorities in view of international economic changes and the WTO agreement.
Coordination with ACAC and AACO to implement procedures adopted by these organizations and review transport rights among Arab states to form a unified Arab group .
Stress on the importance of the Arab League in attending official and preliminary meetings at WTO, and the presence of air transport specialist in the Arab States delegations in the negotiation rounds for GATS.
Role of ICAO as a reference for any future development in the regulatory infrastructure in international civil aviation.
Ahmed Farahat, SIPD, UN-ESCWA

28. Conclusion and recommendations
Arab states must make extra efforts in the development and improvement of its air transport industry in order to face the fierce competition in the international market.
Make use of international agreement in that matter to find a place in the international market.
Ahmed Farahat, SIPD, UN-ESCWA