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International air transport law. Determinants of Foregn Air Poliey

As indicated before, the general national policy objectives in the field of air transport, whether officially admitted or not, are basically the same in every country, albeit in conflict with each other in the sphere of international relations. The relevant national strategies, however, are greatly diversified depending on many particular factors. It is submitted that there are three factors that of basic importance in determining national foreign air policies.


The policy of a state is first determined by the size of its national  territory, its situation in relation to other countries and to main traffic currents, locational distribution and importance of its international airports - as well as  other geographical factors that may attract airline operations.

a.Territorial size

It can be easily proved that a national territory's size generally the foreign air transport policy of very large countries such as the Soviet Union, Canada, Brazil and the United States, and affects the attitude of smaller countries. A large contry usually has more to offer than a small one in terms of the distances to be flown over its territory in transit or to inland destinations, and the number of international airports. That is why states with extensive territories are usually rather restrictive as far as the exchange of routes and traffic rights are concerned. The same can be said about the attitude of states whose territories are smaller but which are situated on major international air highways and cannot be circumvented without significant inconvenience or cost.
Taking the Soviet Union as an example, the advantage of the size and situation of its territory has always been highly prized by its government in bilateral negotiations. During the period preceding the Second World War, the requests from foreign governments seeking transit opportunities for their air services between Europe and the Far East remained unsuccessful. The Soviet government felt that no other country was able to offer transit advantages comparable to the Siberian route. Soviet writers argued in 1927 that neither "mountains of dollars" nor any other capital inputs (in the case of proposed joint ventures) were likely to compensate the value of transit over the vast territory of the Union [WA Zarzar and WL Lachtin, The Struggle for the Air [in Russian] (Moscow 1927) 275, p. 81], and indeed, no such compensation in the form of reciprocal transit opportunities was considered adequate.
For the same reasons the Soviet Union has not adhered to the Chicago International Air Services Transit Agreement. The transit rights have always been and continue to be negotiated with the Soviet Union bilaterally, and the negotiations have usually been lengthy, difficult and not always successful, even with members of COMECON (as far as the Siberian route was concerned). The Scandinavian countries did not obtain the rights for SAS operations over Siberia until Aeroflot found it desirable to apply for authorization to overtly their territories in order to shorten its routes to Cuba and other North and Central American destinations. Other European countries, as well as Japan and China, did not obtain the rights to use the Siberian route until they accepted rigid operational and commercial (frequency, pooling) conditions laid down by the Soviet government.
Brazil provides another example of a country which, being fully conscious of its advantage due to its large territorial size, has not adhered to the International Air Services Transit Agreement and prefers to use the relevant arguments in bilateral talks. For somewhat different reasons, Canada denounced the Agreement in 1988 which, at least in theory, may cause some problems to airlines operating between Europe and the United States.
The "large territory" standpoint may influence the attitude of states not only in  negotiating transit rights, but also in allowing "deep penetration" of foreign airlines into that territory. This factor explains why the United States has been reluctant for so long to admit European airline operations to the West Coast and Far Eastern airline operations to the East Coast gateways-it was believed that this would give foreign airlines the advantage of carrying traffic that could otherwise be carried by national airlines on their domestic routes (an advantage that cannot be reciprocated by a small country). The same theory has been used by the Soviet Union during the long-drawn-out negotiations over an air services agreement with Japan, with Soviet government favoring the establishment of international services between East Siberian airports and Tokyo, rather than between Moscow and Tokyo. For similar reasons, until recently, tourist traffic from Eastern Europe to Black Sea resorts was mostly handled by international services terminating in Kiev or other Soviet airports situated closer to the border, with passenger transfer onto domestic Aeroflot  services to reach the final destination. In Brazil European airlines are permitted to operate only to West Brazilian gateways, thus leaving traffic to further (inland) destinations to domestic airlines.

b.Other geographical factors

A large county may also derive considerable advantage form having developed an extensive network of international gateways. The United States government, when negotiating its bilateral air agreements, is usually on (and in most cases successful in) establishing the agreed routes' schedule so as to allow the airline(s) of each party to operate between any point or point in its home territory and one point or a limited number of points in the territory of the other party. Thus the "double track" concept is rejected because, it is argued, only the number of points accessible to the airlines of each party in the territory of the other party has to be balanced. That means, however, that the party having more international gateways in its territory(which is always the case with the US) is authorized to use more routes between the two countries than the other party. The Americans have no doubts as to the legitimacyof that reasoning. Frank E loy [FE Loy, "Bilateral air transport agreements: some problems of finding a fair route exchange" in: The Freedom of the Air [see Bibliography 231], pp. 174-189. 157, p. 183] admitted that, in the case of a hypothetical American-Austrian bilateral agreement providing for a  one-to-one (New York against Vienna) exchange, the American carriers could operate from New York, Chicago, Washington, etc to Vienna, while the Austrian carrier could only operate from Vienna and Salzburg to New York, and that, "on the surface", it would weigh in favor of the United States. Yet he suggested that this may (or may not) lean in favor of Austria stemming from the difference in commercial value of the two points that have been exchanged.
Indeed, the significance of international gateways is dependent not only on their number, territorial distribution and situation in relation to the national border (peripheral or inside the country), but also on the volume and characteristics of the traffic served. In this connection, one must recognize the special importance of what are called "hubs"- airports that have been made large centers of on-line connecting  traffic by the airline(s) concerned. The attitude of governments, when negotiating the exchange of traffic rights (routes and points) is sometimes strongly affected by an inequality in value of the hubs in question, for national and foreign carriers, taking into account both international and connecting national traffic. The more important a hub is for national airline(s), the less possibility the airline of another country has to compete and survive on parallel services, unless such an airline is fortunate enough to have a similar hub on the other end of the route, including domestic and/or international "spokes". The relative weight of American hubs or mega-hubs dominated by American carries sometimes makes it extremely difficult to reach an agreement based on traditional methods of balancing traffic rights. The lengthy process of American-Canadian negotiations, as well as the problems raised by a number of European countries, are good examples [JR Chesen, Canadian-American Air Service Negotiations: ending the gridlock (Washington DC 1989). 21].
The geographical location may give a smaller country some of the advantages usually enjoyed by larger states, when its national territory is situated in the pathway of major international air traffic currents, and especially when it can offer good technical or commercial stop-over facilities on long distance routes. This was the case for Ireland in the early 1950s with respect to the United States and European countries seeking rights for transit stops for their North Atlantic routes. Until 1957, the year of its acceptance of the International Air Services Transit Agreement, Ireland was using its geographical location as a helpful bargaining instrument in bilateral negotiations [FE Loy, "Bilateral air transport agreements: some problems of finding a fair route exchange" in: The Freedom of the Air [see Bibliography 231], pp. 174-189. 157,p.178]. Ireland, Portugal, Syria, Pakistan and Sri Lanka were also using this argument to require obligatory stops in their territories on foreign transit air services [B Cheng, The Law of International Air Transport (London 1962). 18, p. 400].
Some countries gain further advantage if they are situated so that their national airlines can normally reach a larger number of foreign destinations by more direct route or by crossing fewer intermediate foreign territories, thus being less dependent on foreign authorizations and saving more on user charges and other costs [JC Cooper, Explorations in Aerospace Law: selected essays edited by IA Vlasic (Montreal 1968). 25,p.26]. This advantage, however, has been mostly reserved for bigger countries-for example those with extensive colonial dependencies-and is rarely available to small and, in particular, land-locked countries.
The benefits associated with a favorable geographical position in comparison with the position of other countries or groups of countries can also materialize in another context. In the hypothetical case of the United States and Austria, Frank Loy [FE Loy, "Bilateral air transport agreements: some problems of finding a fair route exchange" in: The Freedom of the Air [see Bibliography 231], pp. 174-189. 157, p. 183] has rightly stated that, in the absence of a bilateral agreement, the American carriers would still be able to transport a large portion of Vienna-bound passengers to any other European destination near Vienna from whence they would travel onward. The Austrian carrier might never see them at all if it were not able to serve New York directly. This is a further American argument to support the idea that, in most cases like this one, the country that gets access to New York gets the better of the bargain. (Other arguments are related to unequal market value of the points in question.)
Some countries may pretend to have a more central position in the world or in a region than other nations. London is sometimes shown as a central point of the "main hemisphere" and has, in fact, the world's most busy international airport. One, must recognize, however, that most of the world's internal and inter continental traffic is concentrated in the United States, which also explains why the US considers the admission of foreign airlines an extraordinary privilege.

c. "Improving upon geography"

The Air transport policy problems arising from inequalities due to size and location, as well as from unequal gateways' networks or imbalance in the weight of hubs, however, can be solved, and a balance can be achieved by several means. Some of these means have been described under the heading of "improving upon geography" by JR Chesen [JR Chesen, Canadian-American Air Service Negotiations: ending the gridlock (Washington DC 1989). 21] who discussed possible solutions aimed at ensuring equal opportunities to start and maintain viable operations of Canadian air services in competition with American carriers at their (US) stronger hubs. Improvements could include "hubbing in Canada", Canadian "hubbing in the United States" without cabotage (eg through code sharing arrangements), and also the application of other marketing tools "short of cabotage". The cabotage rights were refused to everyone by the United States until recently, in spite of repeated claims from Canada and from European countries.
The most important method chosen recently by Western European countries, not to mention some earlier less complete air transport integration plans for Europe and other geographical regions, is the creation of a regional bloc to counterbalance (as one of its objectives) the geographical advantages enjoyed by the United States. The same idea may find support in Asia. One of the highest Japan Air Lines officials, Yoshiyasu Mayumi, has already suggested that the feasibility of forming a European Community-like organization should be examined Asian countries-at the airlines' level first [MW Lyon, "Pac Rim carries meet the threat of protectionism", Airline Executive, December 1988, pp. 24-26. 159].

d. Summary

Having discussed various geographical factors and aspects of national policies in the field of international air transport, one can conclude that, as a general rule, the larger, better located and better equipped (in terms of international gateways and domestic hubs) is the territory of a country, the stronger is its position in bilateral air negotiation. As a result, the traffic rights (routes, gateways, etc) become more difficult to obtain from that country, however liberal might be its policy regarding other aspects of air transport trade.
In contrast, countries with smaller territories or less favorable geographical locations are usually more inclined to a free and unrestricted  exchange of routes and transit rights. Countries such as Belgium, Denmark, Luxembourg and the Netherlands have built up their important international air transport systems based  on other characteristics  rather than those of a geographical nature.  In order for such a country to utilize and develop an international air transport market and its air transport potential it must offer free access and favorable conditions to foreign airlines. Although unable to oppose territorial arguments propounded by larger countries, they are, however, offering more freedom to competition, and this may be a key to their own success.
To make the analysis of geographical policy-determining factors more complete, one should also take into account certain characteristics that may make some countries, which are least territorially privileged, particularly attractive for international air transport business. Because of a good climate and  natural environmental conditions, historical remains, cultural or other tourist attractions and facilities, a friendly atmosphere, or concentration of economic or scientific activity, some countries receive massive tourist or business traffic. Meanwhile, other countries are generating more national travel abroad. In both cases, provided that appropriate civil aviation facilities are available, the foreign airlines  may have an interest in getting access to these countries irrespective of their  size and  aerogeographical location.


The national policy in the field  of international air transport is also determined by the factors  related to the market or, more precisely, to the characteristics of the potential and actual air traffic flows.
Unlike international trade in  goods, the international air transport  service trade embraces not only export and import of services between the two countries concerned, but also carrying own nationals or goods by national airlines to and from foreign countries (anti-import activity), sometimes crossing the territories of third countries as well-with or without marking stops therein. The service performance cannot be localized in any one single country, and the concurrent interests or jurisdiction of various countries may  be involved. Thus, it would be impossible to assign any international air transport market, or any sector thereof, to any one single state.
Indeed, the following states may be concerned with an air transport transaction or operation:
– the state of nationality of passengers or shippers;
– the state where the carriage is to be contracted and\or paid for;
– the state within the territory of which the carriage has to be performed (cabotage);
– the state within the territory of which the international carriage begins;
– the state within the territory of which the international carriage terminates;
– the third state over  the territory of which the carriage is to be performed with-out stopping or with a technical or commercial stop in that territory-whether or not involving a change of airline or service or aircraft, or a passengers' stop-over;
– the state of nationality of the airline or aircraft  engaged in the carriage.
As far as it is justified by one or more of the above connecting factors, the states concerned may claim some priority  rights to extend their jurisdiction over the air  transport transactions and operations in question, to regulate the market access and exploitation or to reserve an appropriate share for national airlines.
In fact, depending on the characteristics of the air transport market and, in particular, on the proportions of traffic falling under different types of connections with a state as specified above, the national policy, always aimed at optimization of air transport services for the public and maximization (or optimization) of national airlines' share, usually materializes in either one of the following three, marketrelated policy concepts.
a. National market appropriation

Some state tend to consider air traffic as their property, and such a tendency is usually most significant in large traffic-generating countries. Assuming domestic cabotage traffic to be generally excluded from international exchanges, the criteria (connecting factors) chosen to justify the market or traffic appropriation by a state may vary, with the nationality of passengers or shippers, place of contract or  payment, or place where the carriage begins, being the preferred options.
The most common signs of such a market appropriation policy are:
1. the primary entitlement reserved for national airlines to serve their "own" market or their "own" traffic;
2. the restriction on granting access to a country's "own" market or traffic to foreign airlines, the latter being expected to rely primarily on their "own" markets and traffic;
3. encouraging or even compelling citizens to use their national air transport services and discouraging or restricting their use of foreign airline service;
4. extending national regulation and control over air tariffs and conditions of carriage, including charter worthiness condition, with respect to a nation's "own" traffic-whatever airline, national or foreign, might be serving it.
The nationality of passengers or shippers as a criterion for traffic ownership claims is seldom referred to in international agreements-more often such a reference can be found in national regulations governing the exploitation of the "national" market. In the bilateral agreements between the United States and Poland (as supplemented by commercial arrangements applicable in the late 1970 s), the passengers' nationality criterion has also been adopted for specific purposes, namely to ensure a minimum level of PanAmerican revenues from the Polish market, in proportion to the American citizens traffic on LOT-Polish Airline's Warsaw-New York service. That agreement, which is no longer in force, implied that each party considered its part of the market its own property which it could dispose of to the other party. And that was certainly true for Poland at that time, when selling air transport services against national (non-convertible) currency remained totally under government control. The more recent arrangements made by Poland with the Federal Republic of Germany and with the United Kingdom as well, contained capacity provisions reflecting to some extent the proportions of traffic originating in the respective countries, without making express reference to the citizenship of passengers. The transborder traffic origin cannot, however, always be assessed unless the immigration statistics are based on distinction by citizenship.
The concept of traffic ownership can also be attached to the place where the air transport has been contracted or paid for. The Americans [FE Loy, "Bilateral air transport agreements: some problems of finding a fair route exchange" in: The Freedom of the Air [see Bibliography 231], pp. 174-189. 157, p. 183] often suggest that "the place where the paying passenger is and pays his money for the ticket is more important than the place of destination", which is a warning for "countries with little traffic generating potential, but with ambition to fly to the United States", even though "the US view is not simply a self-serving device". While this last is true to a certain extent, the fact remains that the self-serving device is still present.
A different concept of traffic appropriation refers neither to a passenger's or shipper's citizenship nor the place of transaction (payment), but to the place where the air transportation begins. When one refers to the traffic-originating or traffic-generating country, in most cases that means the country where the carriage begins, which may or may not be the country of the passenger's or shipper's nationality or the country where the transport has been contracted or paid for.
In this connection, however, one must observe that there are no generally accepted definitions of what "traffic origin" means (or where the carriage begins) and certain points should be noted.
First, that the most international air passenger traffic is round-trip traffic. When talking about the market characteristic and the relevant market ownership or "primary entitlement" claims for national airlines based on the traffic origin criterion, one is usually referring to the place where the first part of a round or circle trip begins.
Second, a distinction should be made between the place of "on-line" embarkation on a particular air service-which may sometimes be a part of a longer (though)  service or sequence of services of the same airline or of different airlines-and the genuine (first) place that may also be an "off-line" point where such a longer transportation sequence begins. In the same way, one must distinguish between the "on-line" destination and the ultimate "off-line" destination of air transportation.
Third the nation of traffic-originating country and the "ownership" rights claimed by some countries with respect to traffic generated in their territory should not be confused with  the notion of third freedom traffic, which is the  "on-line" traffic that a foreign airline or aircraft is authorized to carry from its home country and disembark in the territory of another state. As JH Spencer said, third freedom traffic constitutes perhaps the one "ineluctable parameter of any route structure negotiation" as "it alone represents throughout any route system the intrinsic traffic generating pressures and potential of each negotiator in that it reflects the full gamut of population, economic, commercial, service-efficiency, tourism and passenger-nationalistic preference pressures and potentials" [JH Spencer "Comment to Chapter 6" in: The Freedom of the Air [see Bibliography 231], pp. 86-88. 226, p. 86]. That, however, can hardly be related to all third freedom traffic in a strict sense, including on-line (eg returning) passenger whose original place of departure was situated in the territory of a state other than the airline's home state. When the regulations governing the foreign air charter operations in the United States and Canada required that a certain proportion be maintained between third and fourth freedom traffic they actually pertained to charter traffic originating, respectively, in the airline's home country and the country authorizing the charters. The returning traffic on the charter flights was then considered as a secondary feature.
In fact, the destination of traffic is non always attributed the same weight and does not provide the country of destination with the same bargaining advantages as the place of origin does. Yes most countries do not recognize any difference in the value of the two, and actually both are accorded the same status in almost all bilateral air transport agreements and in the Chicago Five Freedoms Agreement. The United Kingdom delegation once argued with the United States during the bilateral air negotiations that the "attraction of London is exactly equal and opposite to the repulsion of New York". However, this argument has not met with understating in the American camp [FE Loy, "Bilateral air transport agreements: some problems of finding a fair route exchange" in: The Freedom of the Air [see Bibliography 231], pp. 174-189. 157, p. 183].
It was often suggested that the United States' policy, at least before deregulation, tended to ensure that the national airlines' share of the international air transport market be commensurate with the volume of the US's traveling and shipping population. However, it is difficult to fund any official declaration of this by American officials. They were rather reluctant to make such a declaration, and they rejected similar claims from other governments (eg Japan [HA Wassenbergh, "Reality and value in air and space law" in Annals of Air and Space Law (Vol. III-1978), pp. 323-354. 261, p. 335], as well as-toutes proportions gardees-claims from Poland when Polish traffic prevailed over American traffic on the agreed services). But it must be said that the idea of ownership or primary entitlement, or otherwise privileged position of the traffic generating party, has in fact been reflected in various US policy measures in the past, including the adoption of country-of-origin rules and the tendency to enforce a directional balance or uplift ratio in charter operations. The recognition of the country-of-origin rule has also been endorsed in some US bilateral air transport agreements that have incorporated charter clauses, such as a clause (no longer in force) in the agreement with Poland in 1984. Similarly, some of the United States' bilaterals contain traff clauses that, white limiting the possibility of governmental interference with airline pricing in principle, reserve the ultimate decision on tariffs in controversial cases for the authorities of the traffic-originating country.
The present attitude of the US with regard to the market-related claims, seem to take into account all the relevant factors, including the nationality of passengers and shippers using international routes, the place where the transportation is paid for, and both the place of origin and place of destination of traffic. The Americans continue to avoid officially formulating anything that might be understood as recognition of traffic ownership claims. They also favour the use of such expressions as the "US-Canadian" or "US-Polish" market. But, on the other hand, they do not fail to emphasize, whenever appropriate, the actual weight of their market potential in the broadest sense as defined above. As R De Murias [R De Murias, The Economic Regulation of International Air Transport (Jefferson, N.C. 1988).  33, p. 197] recently stated:
The strength of the United States market for air transportation, although it is not strictly an element of the country's policy, is a constant element that clearly has an effect on the policy. Most other countries desire to have their airlines serve points in the United States because there are heavy traffic flows to and from the United States… This factor provides great bargaining leverage for the United States in dealing with other countries, and has enabled the United States to persuade other countries to accept elements of US policy in bilateral agreements that would otherwise be unacceptable to them. [Reproduced from The Economic Regulation of Air Transport Law by permission of McFarland & Co. Inc., Publishers, Jefferson  NC 28640].
The same author comments on the "pro-competitive" and "open skies" agreements being a result of the US market bargaining agreements and also suggests that, in a number of agreements, the Americans made concessions unlikely to be compensated for by the concessions obtained. Similarly, EJ McAllister, a senior Department of State official, recently stated that the foreign carries in the United States "want access to more of our vast market but we have nothing to ask for in return" [EJ McAllister, International Aviation Club Luncheon Address, Washington DC 20 June 1989. 173]. One might add that the same arguments enabled the United States to persuade some other states not to start their operations to the US at all.
The Bermuda I Agreement signed between the United Kingdom and the United States, as well as many other Bermuda-inspired bilaterals, brought about a distinction between the primary and secondary objectives of international air services. The primary objective of any agreed service operated by a designated airline is to carry traffic originating in, and destined to, its home country, with such traffic to be considered as "national traffic" of the airline concerned. That, however, cannot be construed as a recognition of a "primary entitlement" for serving "national traffic" by the national airline of one country with the exclusion of airlines of other nationalities. Such an interpretation would necessarily lead to a clash of third/fourth freedom entitlement of the airlines designated by the other party, and-in the case of a bilateral allowing for fifth freedom operations-a clash with similar (albeit "secondary") entitlement of third country airlines.
The theory of traffic ownership based on the origin/destination criterion has, however, been made part of the official foreign air policy of some states. Argentina has declared such a policy and reflected it in its bilateral agreements, including its agreement with the United States [E Jimenez de Arechaga, "South American attitudes towards the regulation of  international air transport" in: The Freedom of the Air [see Bibliography 231],  pp. 70-86. 121a].
Moreover, elements of the traffic ownership concept are being included in some states' (eg USSR) claims raised with respect to transit traffic flown across their territory without stops therein. Yet such claims-albeit sometimes supported by traffic property arguments-must be associated with geographical rather that market (traffic)-related factors.
Whatever might be the grounds for market (traffic) ownership or appropriation rights, they cannot be enjoyed by any state or its national airlines without regarding the concurrent claims of other states' airlines. In particular, any claims based on the origin or destination of international air traffic are, by definition, confronted by the same claims from the countries located at the other end of the route. And, irrespective of their justification, no traffic ownership claims can have legal and practical effects unless accepted by the other states concerned, and legitimized in the form of an agreement or other authorization. Therefore the traffic ownership theory cannot be recognized as a valid theory. Nevertheless, a country's traffic originating or attracting potential remains, alongside geographical factors, one of the most valid determinants for national policy and bargaining arguments in any international air transport negotiation.

b.Common market apportionment

Since no state or airline can enjoy any international air transport rights based solely on its national traffic ownership claims without having obtained authorization from at least one foreign state-namely that located at the other end of the route-the idea of traffic appropriation must give way to other, more realistic concepts in the practice of international air transport policy.
The alternative to national (individual) ownership of a defined international air transport market (traffic) can be found in the concept of joint market (traffic) ownership, resting with the countries directly concerned. These may be the countries of first origin and final destination or (taking the "online" criterion) the countries involved in third and fourth freedom traffic moving between their respective territories.
For obvious reasons, the joint traffic ownership, theory is not likely fully to satisfy the party dominating the market in terms of volume of traffic generated in its territory. Instead, that theory is likely to accommodate the "market equals" [FE Loy, "Bilateral air transport agreements: some problems of finding a fair route exchange" in: The Freedom of the Air [see Bibliography 231], pp. 174-189. 157] and, most of all, those countries that are relatively weaker in terms of their "own" (ie self-generated) traffic.
The market (traffic) joint ownership idea is seldom officially declared as an element of a government foreign air policy. However, even the Americans, in spite of being fully conscious of their "own" traffic generating and attracting potential and notwithstanding their general policy opposing any market appropriation, often use such terms as "US-Canadian" or "US-Polish" or "binational" or "transborder" market, or "two halfs" thereof-which seems to imply a concept of joint rather than national "property".
The implications of the joint ownership concept are apparent in most bilateral air transport agreements concluded after the Second World War. In fact, all agreements providing for exploitation by each of the designated airlines of the third and fourth freedom traffic irrespective of its origin and nature reflect the same idea, whether it be  a common policy device or, more probably, merely a result of a compromise. Once the two parties have agreed to consider their bilateral market as joint property to be exploited-as their primary objective (entitlement)-by the designated airlines of the two "co-proprietors", they usually tend to restrict the access of third country airlines' fifth and sixth freedom operations.
The common market concepts may also materialize on a regional scale. Their purpose is not merely to facilitate bilateral third and fourth freedom operations, but also to enable the airlines of the member countries to operate Fifth freedom services between the territories of community member states, thus improving the service to the public and enabling the airlines to enjoy the advantages of an increased scale in operations. The most important reason, however, for creating such regional market systems is clearly the tendency of smaller and medium market countries to improve their position in international air transport negotiations with stronger partners. Thus, the preferential or exclusive regional arrangements within ACAC, AFCAC or LACAC [E Jimenez de Arechaga, "South American attitudes towards the regulation of  international air transport" in: The Freedom of the Air [see Bibliography 231], pp. 70-86. 121a, pp.70ff] have tj be considered not only as mutual propertysharing arrangements, but also-even if a secondary consideration-as joint support defensive systems [J Naveau, International Air Transport in a Changing World (Martinus Nijhoff Publishers Dordrecht 1989). 187, p. 130] The Western European Community internal air  transport market, even though it should not lead to exclusivity, will certainly help participants to enjoy the increased market scale advantages and to use stronger market arguments in their dealings outside the Community.
Eastern European countries have never formally created a common air transport market, although the low-fare passenger traffic between these countries has been freely exchanged between their respective airlines within "plurilateral" pooling arrangements. Exclusion of regional cabotage has never been a part of that system, yet such exclusions have sometimes been provided for in Eastern European bilaterals with those Middle East states that have restricted fifth freedom rights for their regional cabotage sectors (eg in bilaterals signed by Poland with Iraq, Pakistan and Syria). The concept of joint market (traffic) ownership may or may not imply traffic allocation or apportionment between the airlines of the parties concerned according to an agreed formula.
As pointed out by J Naveau [J Naveau, International Air Transport in a Changing World (Martinus Nijhoff Publishers Dordrecht 1989). 187, p. 45], the Bermuda agreement, endorsing the equal opportunity principle was, at the same time, implying a joint market idea with "no curving up the market, no fixed shares, or specific entitlements". The parties "were to share properties rather than allocate markets". Such an agreement was easy to reach between two "aviation equals" but sometimes proves difficult in cases involving two parties of unequal commercial and traffic strength [FE Loy, "Bilateral air transport agreements: some problems of finding a fair route exchange" in: The Freedom of the Air [see Bibliography 231], pp. 174-189. 157, p. 184].
Indeed, once parties agree to consider their market as a joint or common property on either a bilateral or regional basis, the question may arise as to what should be their respective shares in the total market available to the designated airlines. Then again, the  parties with similar but opposed objectives of maximizing their shares in the international air transport market usually take different positions depending -caeteris paribus-on the assessment of their contribution to the common market in terms of traffic potential made available to the agreed operations. The party making a more important contribution may try to obtain a higher share in the capacity to be provided or in traffic carried. The other party will usually oppose such claims and try to negotiate an agreement providing for equal market shares or will attempt to avoid any partition whatsoever.
c.The free market concept

While the market appropriation and market apportionment policies are clearly associated with, respectively, national or common market potential assessment by the parties concerned, the theory of one world air transport market, involving free market access, may be based on a variety of considerations.
First, one can assume that each country that is not able to generate its "own" sufficient traffic and yet has an ambition to have its national airline operating international air services for political, currency earnings or savings, or any other aims, will certainly object to any restrictions affecting its access to the international air transport market based on traffic ownership claims of other potential partners. But the same country might be willing to accept the joint traffic ownership and market (equal) apportionment inasmuch as it would gain more than it would lose in such a common deal.
Second, the liberal policy, rejecting any national traffic ownership or joint ownership concept, and-in consequence-any partition or allocation of the market, may have a background quite independent of the air transport market characteristics. For many countries, the public service considerations such as availability of adequate, flexibe and inexpensive air transport, and the active role that such transport can play in stimulating overall economic development, creating new business and tourism, etc may prevail over the tendency to maximize national airlines' share.
Third, in its broadest expression, the theory of the global air transport market accessible to all nations has to be seen as an emanation of the overall economic concepts involving the free global market and the international division of labour. The merits of that theory are well known. In international civil aviation, it would assist in achieving one of basic ICAO objectives, which is to meet the needs of the peoples of the world for safe, regular, efficient and economical air transport.
There are however, two major obstacles to the free global market access theory. One is that it is not feasible under the existing system of international air law. And the other, obviously, is that it is unacceptable to all those countries that want to have their airlines operating on international routes, but are not confident of their airlines' ability to survive in a free competitive environment.


Besides geographical and market-related factors, the size, quality and, in general, the competitive strength of national airlines is, last but not least, a determining factor in national foreign air policy.
The usual attitude of state that have small or medium size airlines which are not strong enough to stand the competition from foreign, more powerful companies, is to protect their national airlines through various modes of regulation and restriction or traffic apportionment rather than to expose them to risk of possible failure. That general attitude was clearly demonstrated during three consecutive ICAO air transport conferences and in their resolutions, reflecting the position of a large majority of states composed primarily of developing countries which feared excessive competition, and supported-for the same or for merely political reasons-by the COMECON countries. But the same tendency dominates in most bilateral air transport agreements. Indeed, restrictions introduced to protect the weaker party are always reciprocated in similar or other forms of retaliatory restrictions form the other contracting party. One might sometimes question whether the weaker party really achieves its goal from such protectionist exchanges.
For obvious reasons, the foreign air transport policy of a state with strong and competitive airlines must-caeteris paribus again-favour liberal  international air transport trade.
A confidence in the competitive strength of United States' airlines, as rightly stated by R De Murias [R De Murias, The Economic Regulation of International Air Transport (Jefferson, N.C. 1988).  33, p. 198], is a "relatively constant element that does not form a part of the nation's policy, but exercises an influence on it"; it underlies the US advocacy of freedom of the skies and "must have been partial motivation for support of liberal air transport policy throughout the recent years, including the recent trend to deregulation". And EJ McAllister from the State Department declared that the United State will approach the international air policy issue based on the certainty that US aviation is highly competitive and should be extremely successful in the future, if given the opportunity to compete [EJ McAllister, International Aviation Club Luncheon Address, Washington DC 20 June 1989. 173]. However, in spite of having the strongest civil aviation industry in the world, the United State has always been most cautious in exchanging route privileges and, for various reasons, its liberal air transport policy has always been strictly qualified, selective, and subject to conditions, particularly, though not only, during the period preceding deregulation.
As rightly stated by D Goedhuis [D Goedhuis, "The air sovereignty concept and United State influence on its future development", Journal of Air Law and Commerce, Vol 22, 1955, pp. 209-221. 74, p.220], "a state the aviation of which is competitively the strongest in the world cannot expect other states to be liberal if its own attitude towards foreign air services is restrictive". To which one might only add that even the most liberal attitude of the strongest party may not suffice to persuade a weaker party to become fond of free competition.
As far as Western European countries are concerned, their flag carriers have achieved the highest or at least a sufficiently high degree of competitiveness. That is why, along with the general liberalization trends in economic relations within that region, their co-ordinated regional air policies have also been largely relaxed, with a full liberalization anticipated in the near future, notwithstanding some protectionist reservations from a few Community members. One may expect that, in view of further growth in competitive strength, as a community, the Western European countries will also seek more freedom in their international air transport relations with the United States and, perhaps, Far East countries, if not with the rest of the world. An opposite move, involving a hardening of the Western European air policy towards other countries, would be incompatible with increased competitiveness by European airlines, and-for ricochet effects-would be unfortunate for all the parties. Yet it cannot be considered unlikely as a result of "improved geography" and increased common air transport market potential, since it is difficult to predict which policy determinants will prevail.


Compose by:Emin VALIYEV, Senior State Inspector of the Department at work with large taxpayers at the Ministry of Taxes of the Azerbaijan Republic


Bakı-Tbilisi-Ceyhan Azərbaycan və bütün bölgə dövlətləri üçün yeni iqtisadi imkanlar açacaq
Qars-Axalkalaki-Tbilisi dəmir yolu Avropanı Mərkəzi Asiya ilə birbaşa birləşdirəcəkdir
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«Aviasiya haqqında» Azərbaycan Respublikasının Qanunu
The chairman of scientific council


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