UK looks to increase number of UK – China flights through renewed bilateral agreement

Taiwan and United Kingdom has finalized a revised bilateral deal on 06OCT10.

The revised deal is to be in effect from 27MAR11, covering:

Passenger
London Service Increase from 10 to 14 weekly
Manchester NEW Destination in the UK, up to 7 weekly

Cargo
London Service Remains up to 3 weekly
Manchester Increase from 3 to 10 weekly

In the deal, Taiwanese carrier is allowed to operate 5th freedom traffic rights beyond Manchester for both passenger and cargo service.

http://airlineroute.net/2010/10/08/twuk-bilateral/

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The insane world of bilateral international aviation regulation

It was recently announced that after talks between the British and Hong Kong governments, Richard Branson’s Virgin Atlantic Airways had won its long desired rights to fly from London to Sydney, Australia. In return for this, Hong Kong’s Cathay Pacific Airways were given the right to fly from London Heathrow to New York and other cities in the United States. Various observations were made about how an additional competitor on each route would increase competition and give passengers lower fares and more options.

While this is true as far as it goes, this is a pretty bizarre paragraph if you think about it. Why does the British government have to negotiate with the Hong Kong government before a private company can fly to Australia? In what parallel universe is the quid pro quo you must offer to get your airline permission to fly to Australia the permission for another airline from a third country to fly to New York?

And if additional competitors are good on routes, why were these airlines not allowed to fly on them already? And why did Singapore Airlines, Delta Airlines, and Continental amongst others object strenuously to the deal?

To answer these questions, we have to look at just how international aviation is regulated. This is bizarrely anachronistic. This most global of industries is regulated by a web of bilateral treaties between nations that dramatically limits competition. And to find this out, we have to look back into the dim depths of the past, to 1944. In the late days of the Second World War, it was widely recognised that international air travel was going to be a much bigger deal after the war than it had been before, and the instincts that created the new framework were, to put it mildly, protectionist.

The basic principal of the Chicago convention was that treaties allowing airlines to fly between countries would be bilateral in nature, negotiated between governments, and that airlines would generally only to allowed to fly either from or to their home country.

That is, flights between countries A and B would only be provided by airlines from countries A and B. In most instances each of these countries would have a single state owned airline licensed to operate on international routes. These two airlines could operate the route in peace, without there being any pesky competition. (Under the auspices of the IATA, they were generally required to charge the same fares as each other, too). Even countries that had private airlines (for instance the United States) generally gave favoured regulatory treatment to certain designated “international” carriers (in the case of the US, mostly Pan Am and TWA). So airline seats were expensive and regulated.

However, things were a little different for extremely long haul routes. You see, aircraft could (and can) only fly so far. Every now and then they have to stop to refuel. And if they are stopping to refuel anyway, why can’t they pick up and put down passengers at the airports where they stop? If an airline based in country A is flying to country C but has to stop on the way in country B, then there are almost always treaties between A and B and also between A and C that apply. If such an airline flies from A to C via B, then it is almost always allowed to put down passengers who got on at A at country B, and on the return leg it can carry passengers from B to A. And it can carry passengers all the way from A to C and on the way back it can carry passengers from C to A. What it cannot do is pick up passengers in B and carry then to C to replace the passengers from A who got off at B. Therefore, in such circumstances an airline tends to have full planes on the leg from A to B, but half empty planes on the leg from B to C. It is not allowed to sell tickets to fill these empty seats.

Such an airline is at a serious commercial disadvantage to airlines that are actually based in country B. Airlines based in B will likely have treaties with A and C. They are allowed to fly passengers in both directions between A and B, and they are also allowed to fly passengers in both directions between B and C. Because flying passengers from A to C is just a combination of these two journeys, both of which are permitted, it can also carry passengers from A to C. Therefore, an airline based in country B can fill its planes with all three types of passenger, and is at a commercial advantage compared to the first airline.

Unsurprisingly, airlines in country A have never been very keen on this kind of arrangement. Therefore, they have always looked for stopover countries willing to grant them so called “fifth freedom” rights. (Also sometimes called “beyond” rights. Freedoms one to four, and the unofficial freedoms six to eight are listed here, although fifth freedom is by far the one the most discussed). Fifth freedom rights are the right to pick up passengers in one foreign destination and carry them on to another foreign destination. Given that it is surely in the interests of a country to have as many connecting flights to the rest of the world as possible, one would hope that lots of countries would offer such rights. On the other hand, those who have studied how governments actually work would be less likely to conclude this. Unsurprisingly, local airlines hate having foreign airlines that actually compete with them, and nationalised (and private but protected) airlines tend to have the ear of the government to a greater extent than do genuinely competitive market based airlines. So there is usually more reluctance to grant fifth freedom rights than there should be.

Just to repeat the key definition: A fifth freedom right allows an airline to carry passengers between two countries, neither of which are the home country of the airline.

…………. and it continues, at length ……..

http://www.samizdata.net/2003/12/the-insane-world-of-bilateral/