Passenger Transportation - Tourism: Principles, Practices, Philosophies - page 102

to be finalized in 2011. WestJet Airlines and American Airlines have entered into an interline agreement,
and it is expected that in time it will be expanded to a code-share agreement. West Jet plans three or
four more code share agreements in 2011. Will alliances bene t the consumer through greater choice,
more seamless travel, lower fares, greater convenience, and frequent- yer miles? Or will consolida-
tions and alliances create oligopoly and monopoly, higher fares, and a noncompetitive situation? Only
time and government action will answer these questions. The expectation is that the consolidation
and alliance trend will continue for several years unless regulatory agencies stop it. Authorities in both
the United States and the European Union are analyzing how to deal with major airline alliances and
consolidations. The decisions made will shape the future of airlines around the world.

E GLOBAL INSIGHT E

Open Skies
O n June 24, 2010, representatives of the United States and

providers. Airlines and cargo consolidators may arrange
ground transport of air cargo and are guaranteed access
to customs services.

the European Union (EU) and its 27 member states signed a
''Second Stage'' civil aviation agreement, providing for greater
U.S.-EU cooperation on a wide range of aviation issues. The
accord builds on the historic U.S.-EU ''Open Skies'' agreement
that was signed in April 2007. The pro-consumer, pro-
competitive agreement eliminated restrictions on air services
between the United States and EU member states, allowing
airlines from both sides to select routes and destinations based
on consumer demand for both passenger and cargo services,
without limitations on the number of U.S. or EU carriers that can
fly or the number of flights they can operate. The Centre for Asia
Pacific Aviation (CAPA), based in Sydney, Australia, predicts
aviation liberalization will gain momentum in Asia. In Canada, air
service liberalization is referred to as ''blue skies.'' Canada is
moving ahead with a number of agreements.

User charges are nondiscriminatory and based on costs.

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4. Cooperative marketing arrangements. Airlines may

enter into code-sharing or leasing arrangements with airlines
of either country, or with those of third countries, subject to
usual regulations. An optional provision authorizes code-
sharing between airlines and surface transportation
companies.

5. Provisions for consumer consultation and arbitration.
Model text includes procedures for resolving differences that
arise under the agreement.

6. Liberal charter arrangements. Carriers may choose to

operate under the charter regulations of either country.

Open skies agreements set liberal ground rules for international
aviation markets and minimize government intervention.
Provisions apply to passenger, all-cargo, and combination air
transportation and encompass both scheduled and charter
services. There are eight key provisions:

7. Safety and security. Each government agrees to observe

high standards of aviation safety and security, and to render
assistance to the other in certain circumstances.

8. Optional 7th freedom all-cargo rights. Provides

authority for an airline of one country to operate all-cargo
services between the other country and a third country, via
flights that are not linked to its homeland.

1. Free market competition. No restrictions on international

route rights, number of designated airlines, capacity,
frequencies, or types of aircraft.

Open skies agreements can be either bilateral or multilateral.
The United States has concluded more than 96 bilateral open
skies agreements with countries from every region of the world
and at every level of economic development. A list of these
countries can be found on the U.S. Department of State Web site,
www.state.gov .

2. Pricing determined by market forces. A fare can be

disallowed only if both governments concur—double-
disapproval pricing—and only for certain, specified reasons
intended to ensure competition.

3. Doing business protections. For example:

All carriers of both countries may establish sales offices in
the other country, and convert earnings and remit them in
hard currency promptly and without restrictions.

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DISCUSSION QUESTIONS

1. What are open skies agreements?

2. Are open skies agreements good for the airlines, the

consumer, the country?

Carriers are free to provide their own ground-handling
services—self-handling—or choose among competing

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