Yielding to persistent pleas from Manila, the US has agreed to delay open skies provisions set to take effect next year under the bilateral. But in return Washington has extracted expanded cargo rights and a phased expansion of passenger services.

Under provisions drafted in 1982 and already postponed three times, next October was to usher in a full open skies accord between the Philip- pines and the US. But struggling Philippine Airlines begged Manila to scrap or at least defer these provisions, claiming it would be overwhelmed. Four desperate rounds of talks over the past year have finally produced a seven year reprieve from open skies, but at a heavy cost to Philippine cargo interests.

Under the new agreement each country may designate two more cargo carriers and Continental Micronesia's temporary all-cargo operating permit becomes permanent. The agreement also grants US cargo carriers greater freedoms: full local intermodal rights, the provision of ground handling for up to six third country carriers, change of gauge, and the beyond right to any Asian country.

The three US passenger airlines already serving the Philippines - Northwest, United, and Continental Micro- nesia - may also substitute cargo flights for existing passenger flights, and add eight more frequencies over the next seven years before open skies takes effect in 2003.

Philippine officials concede it will be tough for PAL and Pacific East Asia Cargo to compete for air freight against this onslaught of US cargo carriers, but that underscores the price smaller countries seem willing to pay to avoid open skies with the US.

Source: Airline Business