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ŞƏHADƏTNAMƏ: 0104-P72-40981

INTERNATIONAL AIR TRANSPORT LAW


National Prioriteties and Specific
Air Transport Economic Goals

The article describes the role of international air transport as an integral part of international trade and mentions its role in the development of large-scale business in the society.
It is mentioned that the national governments in their proqrams of economical development should be given siqnificant consideration to this sphere.


1. CENERAL NATIONAL PRIORITIES

Since air transport has grown into a big business and international air transport has become a significant part of international trade, national governments, recognizing the importance of this branch of national activity, have incorporated it into their economic policy, which often involves distinct air transport related instruments and goals. One must remember that not long ago, it was a rather common belief that general geopolitical, military, administrative and psychological (prestige, propaganda) considerations had been and for some time were likely to remain predominant factors in the development of air transportation. As Oliver J Lissitzyn wrote, ⌠means such as [the] aeroplane may mean the difference between expansion and extermination. No state with a will to survive is likely to ignore these considerations■ [O.J. Lissitzyn. International Air Transport and National Policy, (reprint New York 1983)] . The economic aspects were aslo taken into account, but primarily for the instrumental role of air transport serving these general national interests rather than for any independent business purposes.

2. SPECIFIC ECONOMIC GOALS OF AIR TRANSPORT ACTIVITIES

Along with the development of air transport, in an increasing number of countries the national aviation policies became more and more inspired by independent economic considerations. Yet the situation was and continues to be diversified in different countries, and the purposes served by national air carriers vary accordingly. As rightly stated by Amer A Sharif [A.A. Sharif. Commercial Aviation in the Arab World (Beirut, 1975).] they may range along the following spectrum:
(a) A small carrier in an underdeveloped country may be a lifeline of all activity and as such is a public utility that forms part of the infrastructure. Profits here are not a goal, nor are they expected. Serviceability to society and to other economic sectors is the criterion.
(b) A carrier may undertake a purely commercial operation, with a profit and loss statement carefully balanced like any other commercial enterprise, welding into the various other activities of the country concerned┘
(c) A third carrier may be basically a foreign currency earner, without being required to look much into losses incurred in local currency.
(d) A fourth carrier may be a combination of the previous two, operating mainly as an ⌠export industry■. The carrier here is a business enterprise that must earn a profit to exist, and does so by the carriage of non-nationals and foreign cargo.
(e) Finally, there is the flag-waver, pure and simple. [But-according o the author-] this animal is, happily, almost extinct.
The above classification needs only a few comments. Referring to the first case (a), one might observe that the public utility criterion is sometimes applied to the airlines of developed countries as well, when these airlines are serving national or foreign tourist or business traffic, or facilitating the exchange of goods. In the case of purely commercial operations (b), the carrier may equally serve the purposes defined for previous cases. In connection with foreign currency earning (c), it has to be noted that in some countries the national airline may also be expected to help save foreign currency as an ⌠anti-import industry■, serving national tourist or business travel abroad, or carrying exported or imported goods, and in that way reducing import of foreign airline services. The same may apply to case (d), being a combination of the previous two. Besides-as Sharif admits-no carrier conforms to any one single class, and in most cases there is a combination of varios characteristics with certain aspects sometimes dominating.
Air transport purposes in a country are also often subject to evolution. Taking Poland as an example, in the period immediately succeeding the Second World War, air services were being operated simply to ensure domestic inter-regional links even before the surface transport networks were rebuilt. They mainly served official passengers and mail delivery, irrespective of the financial results of these operations. The same was true of the earliest international air operations connecting Poland with neighbouring and some western countries until the late 1950 s. During the 1960 s and 1970 s, Polish tourist traffic became the predominant business for scheduled and nonscheduled services of the Polish airline; foreign tourist traffic was growing at a slower rate and was chiefly served by foreign airlines. Thus, saving foreign currency for the country (anti-import activity), rather than earning foreign currency from foreign customers, was the main economic purpose of national airline operations. Along with the development of its operations, the financial results became a significant criterion. In fact, the Polish airline was gradually released from national planning strictures, while the government stopped subsidization of its international air services in the late 1960s, and by the mid -1970s did the same for domestic operations. In the mid-1980s the Polish Air Traffic and airport Administration reached the financial point of breaking even. And finally, following the improvement of the financial condition of the two enterprises and the recent decisions concerning the puchase of western wide-bodied aircraft and the modernization of Warsaw International Airport, Poland▓s air transport industry has become more and more export-oriented, subject always to the profitability criteria (ie without government aid).

Basic Air Transport Policy Goals

In trying to derive some general (common) goals of national air transport policy from the variety of different specified objectives, excluding those external to civil aviation or those of short-term or minor importance, it is possible to summarize them as follows:

1.PUBLIC SERVICE OPTIMIZATION

This general goal can be defined briefly as the provision of adequate air transport service at a reasonable (lowest possible) cost (price) to meet the requirements of society, other sectors of the national economy and the travelling public, subject to a general economic rationality test. This pertains to all air transport services, both international and domestic, and can be checked by means of the following specific criteria:
(a) accessibility of the air transport system, involing an adequate network of civil airports, air routes and commercial air services;
(b) provision of adequate air transport capacity for scheduled and, when requierd, non-scheduled operations;
(c) apporopriate standards of services relating not only to the safety of operations (subject to a system of technical regulations, which are beyond the scope of this study) but also to their regularity and comfort;
(d) apporopriate protection of consumers involving such issues as liability for damages, solvency of the air carrier, air transport insurance and fair information;
(e) reasonable traffs and conditions of their application.
All the above criteria are inter-related and contribute to an overall evaluation of air transport services. The proper (optimum) balance between the relevant, sometimes conflicting, requirements can be achieved in theory through the play of market forces. However, in a more developed country, this issue becomes the primary objective of the national, air transport policy and, where necessary, government intervention; albeit simply to entorce a free and fair market play, as is the case in the United States and Western Europe.

2. OPTIMIZATION OF THE NATIONAL SHARE IN INTERNATIONAL BUSINESS

While the first goal pertains to the whole air transport system (both domestic and international) the national policy with respect to international air transport is also governed by another general goal, which is additional and concurrent to the first one, and which can be defined as maximizing or optimizing a nation▓s share in international air transport market operations and earnings. In other words, the same goal can be understood as tantamount to protecting and improving the national balance of payments in international air service trade.
As the importance of international air transport business increases, the second air transport policy goal becomes more and more valid. Indeed, no country can remain indifferent to the overall balance of its exports and imports. It is true that some governments are reluctant to recognize this goal internationally. During the second ICAO Air Transport Conference in 1980, when a list of generally agreed objectives for international air transport capacity regulation was being prepared, the issues of balancing international payments and traffic sharing were excluded from the ⌠common objectives■ and included in the ⌠variable objectives■ section [ICAO, ⌠Report: Second Air Transport Conference■, Montreal, 12-28 February 1980, Doc 9297.] This, however, cannot be seen as denying the validity of these the ⌠variables■ for national air transport polices. It only means that some governments were not prepared to admit their adoption of these variables as a basis for the formulation by ICAO of the model capacity clauses.
Bearing in mind the fact that the expansion of national airline operations on international routes not only increases the value of export of their own services, but also helps to reduce national expenses for the importation of foreign airline services, and thus has a doubly beneficial effect on the national balance of payments, the interest of the state in facilitating and protecting that expansion appears obvious. Consequently, admitting foreign airline operations into a country, which involves competition with the national airline, reducing export possibilities and usually increasing importation of foreign services, may appear detrimental to a country's national interests. These considerations explain the general tendency of governments to support and protect national airline activities to enable them to obtain the maximum share of the market. And that usually implies, on the one hand seeking minimal restrictions for them in foreign countries and, on the other hand, enforcing more restrictions on foreign airlines. Admitting foreign air carriers appears as a malum necessarium which has to be tolerated in order to ensure acquisition of appropriate rights and opportunities for a country▓s national airline under the reciprocity rule. However, the objective of maximizing a national airline▓s share in the international air transport business cannot remain absolute. This is not for any altruistic reasons, but merely because the rigid enforcement of the relevant policies might prove unreasonable and counter-productive. The admittance of foreign airlines can be useful not only to obtain reciprocal privileges, but also to improve the air services system available to the public (goal 1) which, in turn, may bring indirect benefits to the admitting country, such as an increase in tourism, commercial business, airport revenues, etc. Foreign airlines may also temporarily fill the gaps in the national airline▓s capacity √ which is why Poland accepted a KLM/LOT blocked space arrangement for North Atlantic traffic in the 1960s, and in 1971 authorized PanAm unilateral operations pending LOT▓s introduction of long-range planes. Allowing foreign airlines to operate in a country may sometimes produce more positive effects on its balance of payments than would refusing or restricting foreign operations.
Moreover, the improvement or protection of the balance of payments cannot be sought at any price, disregarding the relevant costs in the local currency. Even in a country facing the most serious balance of payments constraints, as is the case of Poland since the 1980s, the national airline▓s claim for a priority right to serve business charter traffic on behalf of polish foreign trade and maritime enterprises, with the exclusion of foreign competitors, has been rejected by the national civil aviation authorities. Accordingly, with respect to traffic that connot be handled fairly by scheduled services, these authorities, subject to reciprocal treatment of the Polish airline in the foreign country in question, grant charter permits to a foreign airline whenever the offer of the latter is cheaper and more attractive to the Polish consumer than the polish airline▓s offer.
In addition to the volume of traffic and airline sales, the level of air transport fares and rates, as well as other charges or prices incidental to international airline operations, is yet another issue of international air transport trade and policy that affects the balance of mutual advantages and has a direct influence on the airline net revenues. The levels of these fares, rates, charges and costs in different countries may sometimes be completely difserent Directional differences between passenger fares are sometimes as great as a cost-ratio of 1:2. Agency commissions range from about 10 per cent in Europe to 20 or even 30 per cent in the United States. The relationship between the net revenue yields applicable to export and import of air transport services (terms of trade) affects the balance of mutual advantages in the same way as the relationship between traffic acquired by the airlines from each other▓s county. And, when considering the issue of market shares, one cannot disregard the actual terms of trade.
In drawing a conclusion, one could define the second general goal of national policy in the field of international air transport as optimizing (rather than maximizing) the share of national airline (or airlines) in the international air transport market. This general goal usually implies the following subordinate, specific objectives:
(a) promoting expansion of national airline activities, involving both export of air services and anti-import services to national customers on international routes, to the extent justifiable by the national economy, balance of payments and general economic rationality criteria;
(b) keeping the operations of foreign airlines under control within the framework of mutual arrangements, wherever applicable, to ensure that these operations conform to national interests and do not unduly affect the interests of the national airline or airlines;
(c) taking care, where apporopriate and possible, of the terms of air services trade where they influence the net advantages derived by the parties and the balance of payments of the country.

3.COMMON NATIONAL POLICY ISSUES

Since air transport cannot be isolated from overall economic relations, nor can international air transport trade be detatched from the system of international exchange of goods and services as a whole, the national air transport policies must also be harmonized with the overall economic and foreign trade policy of the contry. Moreover, the state▓s policy with respect to civil aviation is sometimes greatly influenced by non-economic considerations (defence, legislative, prestige, etc). Similarly, international air transport negotiations and arrangements are sometimes affected by factors completely outside any international economic exchange rationale, as were the aeronautical clauses in the peace treaties signed after the First and Second World Wars. All these economic and non-economic considerations remain beyond the scope of this study. They cannot, howere, be disregarded as components of the whole environment affecting air transport policy and business, which impose constraints thereon or determine the bargaining strength of the parties concerned.
What has to be considered here is the relationship between the two independent general air transport policy goals, namely those concerning the optimization of public services (goal 1) and the national share in international air transport trade (goal 2). Although, in principle, no optimum can be reached unless one single objective (criterion) has been adopted, a set of conditions might be possible that would integrade the best publice service requirements with the best foreign air transport trade performance. Such an ideal case, however, is not likely to occur very often. Inmost cases, the two goals are in conflict with each other and cannot be brought into harmony without compromising one or both of them. Expore directed policy and assistance accorded by the government to international operations of national airlines may deter them from serving domestic routes even though the public demand might be higher there.
By contrast, the world▓s largest airline, Soviet Aeroflot, has for decades been primarily aimed at serving domestic traffic, and the national aircraft industy was commanded accordingly, while the vocation of Soviet international services was mostly limited to handling official and business traffic rather than increasing their own share and seeking more revenue from the international travel market. The airlines serving international routes to and from the United States, and the US governmental authorities, have recently been blamed for favouring concentration of international traffic in a small number of the largest and most profitable gateways, disregarding public demand from other American cities. The Canadion policy aimed at protecting the position of its national airlines and their share in the trans-border air traffic was also criticized because of lack of attention to public demand for more direct routes. The policy of South American countries of restricting the access of new foreign airlines to their continent, is certainly helping them to protect or improve their national airlines▓ share in intercontinental traffic, but at the same time it brings about a freeze in the development of potential new routes and traffic markets, limited competition, and relatively high fares to the disadvantage of the public. Similar inconsistencies between the public service objectives and protection of the national share in international air transport business can be observed both in the lagest traffic originating countries such as Australia and Japan, and in a number of developing countries.
Indeed, the harmonizing of national air transport policy and combining the two concurrent goals into one optimum is an extremely difficult task. It is clear that no policy-making body can be expected to determine exactly what would be the best compromise, unless assisted by the invisible hand of the market. Yet in the real world, no country, whatever its devotion to the market economy might be, is likely to leave these forces working without government control. And there are no prospects for any changes with regard to this as long as any national policy concerning international air transport is challenged by that of other nations.
Another problem experienced by any national policy in the field of air transport is the ability to ensure maximum consistency between its objectives and the corporate goals of the air transport enterprises.
The full scheme of air transport consists of there principal entities:
1.The air transport industry;
2.Users of air transport services; and
3.The state (which is supposed to represent the interest of the first two entities, as well as other national interest).
While the state▓s duty is to create and to enforce the general policy, air transport industry itself is playing a more complex role. It is the main receiver of the state▓s policy directives and impulses, which it must then translate into its own goals and marketing decisions, immediately evaluate the results on the market (where the users become supreme judges), and take short-and long-term action accordingly, including-where necessary-the action towards revision of the state▓s policy. Its sound condition and managerial skills are of decisive importance.
In fact, it is quite possible for an effective airline, which reasonably satisfies the public▓s needs, to function without being directed by a state▓s policy decisions and regulations, but any such decisions and regulations will remain ineffectual where addressed to an inefficient airline. Thus it is suggested that the sound condition of national airlines and airport enterprises as well, should be considered the basic prerequisite of any successful national air transport policy; so much so that national air transport policy objectives and competent government policy-making bodies must be concerned with it. Even in the United States √the country of independent, privately-owned airlines-the Department of Transportation has a statutory responsibility to ensure that all airlines have both the technical and financial ability to provide safe and dependable services.

4.CONFLICTING NATIONAL POLICIES IN INTERNATIONAL CONTEST

While national (internal) policy issues are common to all, the foreign air policy objectives of different countries aimed at optimizing and, for a still stronger reason, maximizing their respective shares in the international air transport services trade (goal 2) are, by definition, opposed to, and in conflict with each other. Thus, in their international relations, the more successful one party is in achieving these objectives, the more unhappy will usually be the other party or parties. As the position of one party constitutes contraints on the operation of international services of the airlines of the other parties, the result may sometimes be equivalent to having no international air transport services at all between the countries concerned. Indeed, under the existing rules of international air law, each state which is not satisfied that the operation of international air services over or in its territory will meet its interests and policy objectives can, by simple reference to these legal rules, prevent such operation or make its authorization subject to terms that cannot be accepted by the other party.
However, for all these conflicting interests and objectives, as well as legal barriers arising therefrom, international air services are being established between thousands of city-pairs. Although no party can usually achieve all that is desired, the parties concerned may find it possible to agree that each will give up a part of its claims. Such compromises may sometimes be nothing more than a test of bargaining strength and skill of the parties using all their leverage, even if not necessarily related to air transport itself. Otherwise, the resultant agreement may really be an air policy deal with an underlying economic rationale of its own. In such a deal-unless a common objectives such as a joint venture has been set up-the parties come to an agreement at a point that is usually somewhere between their respective goals.

Source: MAREK ZYLICZ. INTERNATIONAL AIR TRANSPORT LAW. Martinus Nijhoff Publishers. DORDECHT /BOSTON/ LONDON. 1992.

Compose by: F.ALIYEVA. Student of the BAKU State University




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F.Əliyeva, BakЩ DЖvlət
Universitetinin hЭquq
fakЭltəsinin tələbəsi


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МЕЖДУНАРОДНОЕ ВОЗДУШНОЕ ТРАНСПОРТНОЕ ПРАВО

Экономическое значение, национальные приоритеты и специфика воздушного транспорта



Ф.Алиева, студентка юридического
факультета Бакинского
Государственного Университета


В статье особо отмечено о роли международного воздушного транспорта в развитии в обществе большого бизнеса, как составной и не отемлимой части международного торговля.
Отмечается, что национальные правительства в своих программах экономического развития должны уделять этой области значительное место.

MÜNDƏRİCAT

 
The chairman of scientific council


PAŞAYEV A.M.

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