When aviation officials from the US and Japan sit down to negotiate the air services agreement between the two countries at the end of September, it will be the first time that the US negotiates cargo service rights as a stand-alone issue.

More than anything, this is the result of circumstance: it was FedEx that caused the latest imbroglio when, earlier this year, it sought to serve its new Subic Bay, Philippines hub using its beyond rights from Japan. The ensuing events - threatened sanctions, 11th hour agreements, and other things that aviation negotiators secretly enjoy - resulted in FedEx not only getting its desired routes, but also in the current round of negotiations that the company hopes will lead to broad air freight liberalisation between the two countries.

Perhaps of equal importance to FedEx, however, is the potential of realising its long time goal of the US separating cargo and passenger bilateral negotiations with all countries. Though there have been less formal, more conceptual attempts at this - such as US-EU cargo liberalisation talks at the start of 1995 - FedEx believes Japan could be the most significant testing ground yet. 'We certainly hope it is a precedent,' says a FedEx spokesman.

But FedEx should not hold its breath. In the context of aviation bilateral negotiations, cargo has in general become an instrumental bargaining point in concert with passenger service. This is sometimes a liability to freight and express shippers like FedEx, but it can equally be beneficial. An example is the continuing US-UK negotiation in which complete cargo liberalisation is being discussed, says Washington attorney Michael Goldman: 'The US would not be able to negotiate broader cargo rights if it was just dealing with cargo. It will only come from the ability to put it together with [other issues like] Heathrow and the Fly America programme.'

Besides, says DOT deputy assistant secretary Patrick Murphy, the revamped US international aviation policy statement issued last April states that the US will pursue sector-specific agreements 'where appropriate.' The US-Japan discussion is 'consistent with that', he says. 'FedEx made this an almost national issue, and there is a real sense that in the Japanese coming to us we might make real progress in this area,' he adds.

Murphy also acknowledges that it is easier to negotiate with Japan on air freight issues because US carriers do not dominate the US-Japan market as heavily in this area. In the first nine months of last year, US passenger carriers held 62 per cent of the market, while US cargo carriers held a 55 per cent share.

Nonetheless, there is a considerable segment of opinion in Washington aviation circles that cargo and passenger services are so different in character that they should be separated in bilateral talks. The General Accounting Office is, in fact, studying this issue in a report due out next year. Murphy, however, is unswerving. Such a separation will occur 'where appropriate.'


Source: Airline Business