AVIATION BUZZ

UNDERSTANDING THE FREEDOMS OF THE AIR AND BILATERAL AIR SERVICE AGREEMENTS-

?

A CRITICAL DISCUSSION ON WHETHER OR NOT INDIA SHOULD ALLOW FREE MARKET FORCES TO FLOW IN AVIATION

POINT AND COUNTERPOINT

INTRODUCTION:

The Aviation market is a highly dynamic one, like most other world markets. What makes it most exciting is that from being a market that was looked at with disdain and scorn by many Airlines from the 1950s to the 2010s, when they sent their oldest aircraft and aging fleet, and the Indian product did not compare to what many International Airlines offered out of their home bases.

India also remained a fiercely protected market through the 1990s, and 2000s, until the UPA came into power, with Bilateral ASA’s favouring Air India and nominating only one carrier – Air India, in later years expanded to Jet Airways, then Indigo, Kingfisher Spicejet, and Go Air etc.

The UPA came in and made India into a playground of the Middle eastern carriers, and travel exploded from India to the west via gateways in Dubai, Abu Dhabi and later Qatar. In this series of two articles, we explore the point and counterpoint in the Air Services Agreements, and debate whether or not India should open up its borders to a free aviation market.

The most fundamental aspect of aviation that determines the liberalisation of air transport and the rights and freedoms of the states to fly over or land in a state territory or carry passengers and cargo is done through Air Service Agreements (ASAs) to facilitate the privileges granted to the nations in the form of various freedoms of air by various international agreements, including the major Convention on International Civil Aviation at Chicago. It is imperative to understand these freedoms in order to understand the aviation market

FREEDOMS OF AIR:? A BRIEF HISTORY

The Aviation sector developed during 19th Century following increased mobility and trade development. Through trade, the states are globally connected and diplomatic ties develop. The post-war period saw a rise in global co-operation in various sectors, including “Aviation”. A common understanding in the form of mutually shared principles developed. One such set of principles developed specifically for the aviation sector was the ‘freedoms of Air’. It was formulated in the 1947 Convention on International Civil Aviation in Chicago, which also came to be known as ‘Chicago Convention.’ The five freedoms of air are international commercial agreements agreed upon by member states to the convention that grant a country’s airlines a privilege to fly over or land in another country’s air territory.

These freedoms can be traced to Chapter II of the Convention, wherein Article 5 expressly specifies the freedoms granted to commercial aircraft a ‘right to fly’ over the territory of another state, including landing in the territory for refuelling, maintenance, and emergencies that may arise during the flight, also known as non-traffic purposes. The first two freedoms were universal and also the most controversial, as they directly interfered with the sovereignty of a state. The other three principles are concerned with the international air services among the countries. The third and fourth freedoms govern commercial aircraft carrying passengers and cargoes from the country of origin to another country and vice versa.

In practice, these freedoms are restricted by the air services agreements between the countries. The most controversial of all the major five freedoms of air is the fifth freedom, which is to carry passengers and aircraft from the country of origin and discharge them at an intermediate point. This freedom is most convenient for flights of long duration and covering major distances, providing economic relief to the airlines. This freedom is highly criticized by the domestic airlines in the intermediate countries where such flights are disembarked. There are nine major freedoms of air, of which the first five are essential and recognised at international forums, with specific traces found particularly in the Chicago Convention. While formulating the Chicago Convention, negotiations intensified as the representative states could not agree to a standardised procedure on aviation demands, and that is when the economic and operational aspects were given a liberal role to be formulated bilaterally among the states that adhered to the guidelines of the Chicago Convention. Thus, bilateral air services agreements (ASAs), which were already existing, gained prominence.

?

BILATERAL AIR SERVICES AGREEMENTS (ASA):

Bilateral Air Services Agreements (ASAs) are instruments that enforce ‘freedoms of air,’ facilitating air services between two countries that provide the aircraft of other countries, with access to each other’s airspace. The countries, based on their diplomatic relations, market conditions, economic infrastructure, etc., enter into an arrangement with another state to grant certain privileges, such as the right to fly or land for traffic as well as non-traffic purposes, determination of air routes, air service operation, tariffs on air services, dispute settlement provisions, termination clauses, and many other common rights and obligations listed in these agreements.

When a multilateral agreement like the Convention on International Civil Aviation was negotiated, the consensus on granting absolute freedom, especially in the aftermath of World War II was withheld by the states. It took a series of negotiations and amendments in the forms of Protocols to bring into effect a multilateral convention which acts as an advisory body and consulting authority. It is only the bilateral air services agreements negotiated between the states, that determine the operations of aircrafts internationally. However, to keep a hold on each of these bilateral agreements being negotiated between several states and have a regulatory framework to mitigate risks, determine liabilities and uphold sovereignty of the states, ensuring global cooperation, that Air Services Agreements are required to be registered with ICAO for supervisory functions.

In today’s era, where world dynamics are constantly changing, Aviation sector has been developing holistically at the international level. Aviation is considered one of the heftiest yet most profitable markets across the globe and the Chicago convention is signed by almost every country, This signifies that every country is looking forward to growing its aviation markets. Bilateral Air Services Agreements are slowly changing from restrictive and fixed negotiations between the countries based on the uniqueness of arrangements between two states to a liberalised approach open reciprocally to several states in co-operation as the sector targets the market rather than stressing entirely upon diplomacy. This gives enhanced access to the open aviation market. These could be in the form of bilateral and multilateral air services negotiations, which are termed as ‘Open Skies Agreement.’

Open Skies Agreements:

Open Skies Agreements in the context of civil aviation, as evident from the name, are a liberalised version of Air Services Agreements, which are negotiated among several nations aiming at minimal government interference and unlimited market access to the aircraft operators of the countries entering the agreement. Many countries have entered open skies agreements with another country or countries following an agreement of free flow of aircrafts from one country to another. For e.g.: Us and European Union Open Skies’ agreement 2007 or Clause 9 of the National Civil Aviation Policy (NCAP) of India. This agreement may not provide total freedom on aircraft operation; instead, negotiations and assurances from one country to another might ease some restriction imposed through classic air services agreements that are totally dependent upon the negotiations between two states, instead allow some room for the airline operators as well as aircraft access for carriage of passenger and cargo within a state without choking to the restriction posed by Bilateral ASAs negotiated between them. Recently, UAE expressed their interest in entering into an open skies’ agreement in India with a condition to allow unlimited number of aircrafts to and from the country.

SHOULD INDIA ALLOW FREE MARKET FORCES INTO ITS AVIATION INDUSTRY?

At present, India has entered into bilateral air services agreements with 116 countries, expanding its connectivity with various countries across the globe. This also comes as a strategy to outreach its aviation network both domestically through NCAP’s UDAN scheme as well as internationally.

India’s National Civil Aviation Policy, which was introduced in 2016, is an effort to liberalise the sector by allowing open skies arrangements with the countries of SAARC on a reciprocal basis that are beyond the 5000 km radius of New Delhi. It means that any member nation of SAARC can enter into an open skies’ agreement and code sharing in India. The NCAP has significantly mentioned that the agreement is specifically with regards to the unlimited number of flights to and from India, and the negotiating country and other operations are not completely liberalised. This is aligned with the vision of NCAP to make air travel convenient and affordable, with a certain regulatory hold over the liberalisation, and to also avoid cartelization in the aviation sector with respect to designated routes or air fares. For India, the market is slowly growing, and passenger access to air transport services has now slowly increased due to the convenient market hold, price accessibility, and capacity of people to access air transport. Domestic policies have to be effectively implemented first, aviation infrastructural development and airport accessibility need to be developed in India, one step at a time, before allowing the free market for aircraft operators internationally.

India is currently developing at a rapid pace and is witnessing investment, growth, and development in its market across various sectors, including aviation. Currently, India is expanding its air infrastructure by increasing the total fleet of its aircraft, implementing international standards and protocols, and aiming for holistic development in the aviation sector. There is a scope of market liberalisation in the country, and India has already taken significant steps in liberalizing its aviation market through the accession of open skies agreements with the USA and UK, enabling their airlines to operate without restrictions. However, if we see the model of the US and European Union Open Skies Agreement, there is a slight discomfort among the domestic airline operators within the European Union, as the USA in the open skies’ agreement has acquired a significant position through negotiations by allowing their domestic airlines to operate within the European Union regions from one point to another, exercising its seventh freedom of air, but the EU cannot do so and is only allowed to operate international flights from the USA to any other country.? This adversary has been caused by allowing an entirely liberalised approach with almost no governmental interference. Thus, moderate government interference in Indian aviation markets is the need of the hour, to regulate the potential threat that may capture the markets entirely before they are well developed. Market liberalisation boosts the economic potential of the country, but in order to liberalise the market, a country needs to be well-equipped in the sector to acquire strategic positions in negotiations. India is currently in the race to become the top aviation market in the world, and it is necessary to move forward one step at a time.

This article was written by Shraddha Pandey for Avialaz Consultants with inputs and editing by Sanjay Lazar . Shraddha is an advocate and is currently doing her LLM at MNLU Mumbai.

Avialaz Consultants an aviation consultancy, was co-founded by Sanjay Lazar who is an author and Harvard Law Professional with 37 years’ experience in aviation, law, public speaking, and leadership coaching. He is available at @lazar1 on Linked-In & @sjlazars on X (formerly Twitter)

His book ‘On Angels’ Wings — Beyond the Bombing of Air India 182' is a number 1 #Bestseller available on Amazon.in?

?

?

?

?

?

?

?

?

?

?

?

?

?

?

?