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Benefits of an open skies aviation agreement
U.S. and Thailand
Embassy of the U.S. in Manila
On October 18, 2003, Secretary of State Powell and Foreign Minister Surakiart signed an agreement that provides for Open Skies between Thailand and the United States for cargo only, including full seventh freedom cargo rights (provisions that enable airlines of each country to operate all-cargo services between the other country and third countries via flights not linked to the airline's home country). The agreement allows U.S. and Thai cargo air carriers to make decisions on routes, capacity and pricing without government interference, and fully liberalizes conditions for charters and other aviation activities, and is a significant liberalization over the former agreement that governed U.S.-Thai cargo air transport, which involved limitations on frequencies and routings. The new agreement, signed during the recent APEC meetings in Bangkok, is a strong indication of the strength of the bilateral economic ties between the two countries.
Beyond the benefit to the businesses looking to expand cargo operations in Thailand and the United States, this agreement will directly benefit overall trade as transportation options are increased. Air cargo services are key links in the modern, just-in-time global economy. Air services now account for over 40% by value of global cargo transport. Because of Open Skies policies, carriers have the flexibility to tailor cargo carrier services to current and contemplated market demand, bringing more and better shipping options for businesses around the Pacific Rim. Freed of the restrictions that thwart operational flexibility, one U.S. cargo carrier's services have surged in recent years by 157% in Singapore, 380% in Malaysia, and 59% in Taiwan -- all of which have Open Skies agreements with the United States. The cargo operations of airlines from countries that have Open Skies agreements with the United States are also thriving, creating a win-win situation for airlines, shippers and airports, as well as for the economies of both parties. In terms of international cargo tonnage carried in 1999, the second-largest, third-largest, and fourth-largest carriers are, respectively, from Germany, South Korea, and Singapore, all countries with which the U.S. has Open Skies agreement.
The United States concluded its first Open Skies agreement (with the Netherlands) in 1992 and now has more than 60 such agreements with economies around the world. In the Asia/Pacific region, the United States has Open Skies agreements with Korea, Malaysia, Taiwan, New Zealand, Singapore, Sri Lanka, and Brunei New Zealand, and all-cargo Open Skies agreements with Australia and Thailand.
Open Skies agreements are by no means a U.S. monopoly. Various countries have concluded at least nineteen comprehensive Open Skies bilateral agreements not involving the United States, as well as eleven Open Skies agreements that are limited to all-cargo services. Countries from every region of the world and at every level of economic development have concluded Open Skies agreements.
Recognizing that Open Skies policies allow air carriers to better meet the economic and development needs of the countries they serve, the governments of Brunei, Chile, New Zealand, Singapore and the United States signed the Multilateral Agreement on the Liberalization of International Air Transportation (MALIAT) on May 1, 2001. The Multilateral "Open Skies" Agreement entered into force on December 20, 2001 and is open for participation by all states, not just APEC member economies. Samoa and Tonga have since joined the MALIAT.
Open Skies Benefits
While the United States and Thailand now have all-cargo Open Skies, they do not yet have the benefits of a passenger Open Skies agreement. Experience has shown that Open Skies policies, both cargo and passenger, lead to expanded growth for international aviation service, creating new business for international air carriers. Growth in these available services results in increased travel and trade, productivity, high-quality job opportunities and economic growth. Open Skies does this by reducing government interference in the commercial decisions of air carriers, thereby freeing them to provide market-oriented affordable, convenient and efficient air service for consumers.
Travel and Tourism: Tourism is the worldís largest industry, directly and indirectly driving more than 10% of global employment, economic output and investment. The Tourism Authority of Thailand reports that 10.9 million tourists visited Thailand in 2002. While the SARS crisis hurt the industry in the first part of 2003, travel & tourism demand is expected to grow by 6.9 % per annum, in real terms, between 2003 and 2013. The travel and tourism industry is expected to contribute 5.2 per cent to Gross Domestic Product (GDP) in 2003, rising in nominal terms to 5.9 per cent of total by 2013.
Recognizing the importance of efficient transportation to tourism and the Thai economy, representatives from several economic sectors support passenger Open Skies. Tourism executives have asked the Royal Thai Government to liberalize aviation policies and publicly support passenger Open Skies. Aviation services are critical for the renewed expansion of tourism to Thailand as well as travel to Thailand by Thai nationals living abroad, particularly after the changed aviation security environment since September 11, 2001, travel disruptions due to the SARS outbreak. A passenger Open Skies agreement could accelerate the tourism recovery and support the Tourism Authority of Thailandís master plan (2002-2005) to make Thailand the tourism capital of Asia.
The U.S. Department of Transportation has carefully studied the impact on the trans-Atlantic aviation market of 20 Open Skies agreements that the United States has signed with European countries. Because our Open Skies agreements in Europe are among our oldest, there is more data about their impact. The findings show that Open Skies both expanded the overall market for aviation and produced enormous benefits for millions of passengers in the form of better quality, lower-priced and more competitive services. The average fare in transatlantic markets comparing 1996 and 1999 shows a decrease in Open Skies markets of 20%, compared to only 10% in non-Open Skies markets. During this same period, overall traffic growth in the United States-Europe market increased nearly 30%. Those Open Skies partners whose airlines entered into alliances with U.S. carriers also secured a role for their economies as major trans-Atlantic aviation hubs.
In addition, a study by the Dallas-Fort Worth International Airport concluded that the establishment of non-stop international air service between two cities increases traffic levels between those cities. For example, traffic between Brussels and Dallas-Fort Worth expanded by 44% after non-stop service was introduced.
Air Carrier Alliances: Airline alliances have grown rapidly since the early 1990s and account for more than half of total world airline operating revenue and more than half of world airline revenue passenger kilometers. The growth of international air carrier alliances over the past decade has fundamentally changed the business of international aviation. Air carriers have joined such strategic alliances in order to use codesharing and other cooperative marketing arrangements to generate new traffic and expand business opportunities. Membership in an alliance or similar cooperative arrangement provides an air carrier the ability to expand its business by drawing on the market presence and expertise of a partner air carrier in the partner's home country or region. It also allows carriers to consolidate and exchange traffic at a gateway hub in order to maximize loads.
Cooperation between a U.S. and Thai carrier, for example, could potentially increase traffic for both by linking the network and marketing expertise of a carrier in the United States with a carrier that has a network and marketing expertise in Thailand and Southeast Asia, expanding the global brand of both and improving efficiencies.
Open Skies policies are successful because they have gone hand-in-hand with airline globalization. By allowing air carriers unlimited access to points in the signatory countries and unlimited access to intermediate and beyond points, Open Skies agreements provide maximum operational flexibility for alliance partners. Open Skies agreements also have provisions that facilitate codesharing and other cooperative relationships between carriers. Under a bilateral Open Skies agreement, any Thai carrier could establish codesharing alliances with any U.S. carrier and thereby market service to any point in the United States by flying to the U.S. gateway and using the equipment of their U.S. partner airline to reach the final U.S. destination. Thai carriers would gain options for entering into codesharing alliances with airlines of a third country for service to the United States.
Open Skies agreements give carriers the operating flexibility to improve and expand services efficiently. This is particularly true for network services, both in terms of coordinating schedules in connecting markets, and increasing capacity in gate-to-gate markets needed to accommodate the resulting increase in demand. Open Skies agreements have also afforded the pricing flexibility needed to develop pricing strategies and to market them effectively.
One concern that prospective passenger Open Skies partners may have is that U.S. carriers will dominate traffic between its partnerís homeland and third countries. This has not happened in actual practice. In Europe, for example, U.S. air carriers have taken advantage of Open Skies agreements to create codeshare alliances with European airlines to provide service beyond European gateways on the European partner airline. Thus, Open Skies agreements have actually decreased the number of European destinations that U.S. carriers serve using their own equipment, while services by European carriers to U.S. cities have increased. While the United States has fewer Open Skies agreements in Asia and the Western Pacific, a similar pattern is emerging: U.S. carriers have taken advantage of Open Skies to establish codeshare arrangements with carriers in Korea, Singapore, Taiwan and New Zealand, and not to fly their own aircraft between the Open Skies partnerís homeland and third countries. As a measure of the success of the agreements for our foreign partners, none of the 60+ countries with which we have Open Skies agreements has ever sought to amend or withdraw from an OS agreement.
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