KAREN WALKER WASHINGTON DC The US Department of Transportation'sChicago conference caused a stirback in December, but will aviation barriers now finally begin to fall? And how feasible is the proposal for a transatlantic common aviation area?

The French have a succinct expression for summing up life's tendency to stay the same despite apparent change. Plus ça change is a comment that the sceptics might well make in the aftermath of the December Chicago convention. The new millennium is barely born and already US and UK open skies negotiators are locked in yet another new stalemate, while 1999's open skies agreement with Argentina looks to be in jeopardy.

No-one believes that breaking down the world's aviation barriers will be easy; many do not even believe it desirable. And to expect a global sea-change as a result of a single conference would be naive. What the US Department of Transportation (DoT) did achieve in December, however, was to put the issue into the open. In this millennium, a free and unrestricted air transport system is a valid topic for discussion.

Something else came out of the conference. In effect, the Europeans turned the discussion on its head by announcing that they were, indeed, ready and willing for action. The challenge comes from two directions; from European Union (EU)Transport Commissioner Loyola de Palacio, and from the Association of European Airlines (AEA). Palacio, already earning a reputation in Brussels as a person of action, says the USA and Europe need to move towards a regional agreement that will in turn lead to a global one. She is pushing to move sooner rather than later and believes that talks between the two sides could begin "as soon as March". Palacio suggests that the EU and USA should meet every six months to prepare for a framework conference by summer 2002.

There is first the small matter of persuading ministers from the EU member states to give the Commission the authority to negotiate on their behalf. The council of EU transport ministers which met in December after Chicago did no more than "take note" of the conference, but many in Brussels believe it is now only a matter of time.

The idea has strong support in Europe, from both industry and in government. Netherlands Minister of Transport Tineke Netelenbos points out that "outdated ownership and control restrictions will hamper growth. The EU and the USA should reach an agreement on a framework to establish a transatlantic agreement as soon as possible. The framework should be used as a stepping stone for a true multilateral system. It will be a regulatory framework that responds to the needs of the airlines and the consumer." Germany's Minister of Transport agrees. "The time is right to move on. The aviation industry has rushed ahead of its ruling authorities. Global alliances show the limits of the bilateral system. It's time to realise free market access. Transatlantic dialogue between the USA and the EU is needed now," he says.

Leo van Wijk, president of KLM, is also outspoken in his support for a new regime: "Bilateralism is dead," he says. "Alliances have stretched the system to its limits. We cannot as airlines develop further efficiencies and we will have to push for what we need. That is not a big bang, but we need a vision. We need to work hand-in-hand with the air traffic control systems and airports. We have been able to develop a single currency in Europe and we are talking about one defence system, but we cannot develop one ATC system and one sky over Europe - it's absurd."

Sir Richard Branson, Virgin Atlantic chairman, also highlights the absurdity of the tangled web of bilaterals. "World wars and iron walls are nothing compared to the heated negotiations prompted by bilateral agreements," he says.

Wider support for globalisation

But these supporters are all familiar faces in the pro-liberalisation campaign. What is more surprising, and what the Chicago conference made clear, is that there is now a wider band of support for globalisation. Yeo Cheow Tong, Singapore's Minister of Communications and Information Technology, highlights a way forward: "Groups of like-minded countries could agree to a common set of principles. Members would then get the benefits of this plurilateralism and this would have a catalytic effect and encourage more countries to join in." Yeo adds that the Asia-Pacific Economic Co-operation (APEC) forum is already looking at this idea and has focused on four areas, including air freight, where this might be possible. "Such a system has to be inclusive so that it can achieve critical mass quickly," says Yeo.

Regional "open skies" agreements have been forged in South America, but some would like the idea taken further. Federico Bloch, president of the TACA group, says: "We fully support the EC position. Such a position would represent a dream world to Central America. There is no question that we are moving toward regional and multilateral agreements. Our alliances will shape up as more than alliances; they will become fully integrated. Like it or not, we need to remove ownership barriers."

This is a point also brought up by New York analyst Candace Browning, who stresses that while Wall Street likes alliances because they lead to cut costs and more efficient distribution of capacity, such benefits would be magnified with mergers and are, therefore, the shareholder's preference.

What is needed, however, and what the AEA's Transatlantic Common Aviation Area (TCAA) policy statement might provide, is a stepping stone. In Washington, the document is not being dismissed, even though it treads in historically sensitive areas, such as cabotage and ownership, that will raise the hackles of US labour groups and national security authorities. Mortimer Downey, US deputy secretary of transportation, has given a cautious nod: "We are willing to work and negotiate; we are ready to talk and explore," he says.

Jeffrey Shane, a lawyer at Washington DC's Wilmer, Cutler & Pickering, and former Assistant Secretary for policy and international affairs at the DoT, is intrigued by the possibilities the AEA document might pose. "My personal conviction is that the fundamental elements of the regime contemplated in the AEA policy statement are almost certainly an inevitability," he says. "Sooner or later, the picture painted in that paper is how the industry will look."

Shane believes that two aspects of the TCAA document are "quite remarkable"; first that it is a serious liberalisation initiative from industry as opposed to government, and second that it has originated not in America, but in Europe. Most important of all, Shane points out, the paper "necessarily contemplates, at long last, a genuine negotiating mandate for the Commission". That is a message which, if followed through by the EC, will grab the attention and require action not only from US Government officials, but policymakers worldwide.

Professor Martin Staniland, director of international affairs at the University of Pittsburgh, also sees the potential power of the AEA document, although he warns that the EU will probably have to settle for a "less ambitious deal", given strong US opposition to yielding restrictions on cabotage and nationality. Think, however, of the ultimate outcome. "If the common aviation area were accompanied by simultaneous removal of cabotage and nationality restrictions on both sides of the Atlantic, the outcome would indeed be a single aviation market stretching from Athens to Seattle," says Staniland. "Such an outcome would truly vindicate the Commission's claims about its power as a single negotiator for the EU and would truly represent the end of the Chicago regime."

Even with concessions, Staniland says the outcome could be far-reaching. "Such a reform would be a substantial blow to the authority of the Chicago system, and might also go some way to undermining the current alliances, or at least their potential for choking competition," he says.

The final word, as the AEA's document is circulated and contemplated globally, goes to Maria Livanos, chairman of the International Board of Commerce, who urges the airline industry to grasp this opportunity: "It is time to move past the anachronistic patchwork of bilaterals as it exists today. Different paths towards liberalisation are not mutually exclusive," she says. "Let's at least focus on building a consensus - the world's business is calling."

Source: Airline Business