Anxious to achieve liberalisation, Chile has given Uruguay cabotage rights on the end of international flights in order to secure its first open skies agreement in Latin America.

"Precedent setting" is AvGroup chairman Bob Booth's reaction to the new Chile-Uruguay bilateral. Chile has eight other open skies accords, including one with the USA, but Uruguay is its first in Latin America. It is also Uruguay's first open skies treaty.

Chile's geography has always made open skies a tough sell to its sceptical neighbours. A familiar refrain from rival airlines, who already are concerned about LanChile's regional strength, is that the only fifth freedoms beyond Chile are to Easter Island or Antarctica.

Offering cabotage seems to have made the difference. Chile is four times longer than California with nearly three million annual domestic airline passengers. That is a big enough market to attract other airlines. Pluna, Uruguay's flag carrier, has started talks with Chile's Sky Airlines about becoming its local partner on flights within Chile. Sky moved into domestic scheduled operations in summer 2002, and now wants to begin international flights to Argentina, Bolivia and Peru. It recently added its fifth Boeing 737-200 as it offers an alternative to LanChile.

Any grant by Uruguay of reciprocal cabotage to Chile would be meaningless because the country, which is about the size of Ireland, only has one major city and airport. Montevideo, Uruguay's capital, is attractive to LanChile as a stop-over alternative, with better fifth-freedom rights than Buenos Aires or S‹o Paulo on flights to Europe. Pluna has significant unused traffic rights to the USA and Europe as well as within the region. Pluna could boost these services with LanChile codeshares.

Uruguay also has a Category 2 safety assessment from the USA, meaning LanChile could wet lease jets to Pluna for direct US flights. This all adds up to the Uruguay bilateral representing the first real opening for LanChile on the Atlantic side of South America.

In a related development, Chile's recent signing of the multilateral Asia-Pacific Economic Co-operation (APEC) aviation accord has caused a mild panic in Peru. Under the APEC accord, each member grants all other members open skies. Peru signed in November 2000. Its aviation accord with Chile is already liberal, but not as liberal as open skies. Peru is now reviewing its position and may pull out of the APEC agreement.


Source: Airline Business