India's Comptroller and Auditor General Examines Air India

The Comptroller and Auditor General of India has recently released a Performance Audit of Civil Aviation in India. The audit commenced in September 2009 and the report was tabled in Parliament on 8 September 2011.

For me the most interesting part of the report was Chapter 5 which looks at India's bilateral air services arrangements during a period of fundamental change in India's international air transport policy. Of particular concern to the auditors was the extent of sixth freedom carriage by many of the foreign airlines serving India, notably from small city states. Sixth freedom carriage in this context involves a foreign international airline is carrying traffic between India and a third country via its home country. Seeking to limit such carriage is a traditional approach to air rights exchanges dating back to the 1946 Bermuda 1 arrangements between the UK and the USA (see previous post).

What I had not expected to see was the extent to which European carriers serving India have as high a proportion of sixth freedom carriage as airlines from the Gulf. An 18 September 2011 article in the Business Standard reports on the data.

The auditors also focus in particular on the failure of the Indian Ministry of Civil Aviation to secure Dubai's agreement to a "change of gauge" provision. If this was considered important surely the Indian negotiators would have made it the price for agreeing to capacity increases for Emirates?

A 10 September 2011 report in the Indian Express covers the reaction to the report from the Ministry of Civil Aviation.

It would seem that India has no intention of seeking to wind back existing air services arrangements but one has to wonder what impact this report will have on future negotiations, particularly as there was a change of Civil Aviation Minister in India from Praful Patel to Vyalar Ravi in January 2011.

Air India recently had its application to join the Star alliance suspended (see 31 July 2011 media release) and there is now some doubt about its large order for new Boeing aircraft, including the B787.

In the 1960s Air India was one of the great airlines of the world with its wonderful Maharaja character. However, past failures to agree to replace older airliners has left the airline with a relatively old fleet.

"Aerotropolis - The Way We'll Live Next" by John Kasarda and Greg Lindsay

I had expected that this book would be more of an academic work than what it is - largely one of business journalism - but it is well worth a read nonetheless.

Aerotropolis gives a good picture of the role that civil aviation is now playing in globalisation, and how airports have become central to modern economies and urban development.

Featured in the book are developments around:

• Incheon (ICN) - where a new city, Songdo, is being built
• Los Angeles (LAX) - where the airport had not been supported
• Dulles (IAD) - near Washington DC in a wealthy and growing part of Virginia
• Chicago (ORD) - where there were plans for an additional airport
• Memphis (MEM) and Louisville (SDF) - hubs for FedEx and UPS respectively
• Dallas Fort Worth (DFW) - hub for American Airlines
• Detroit (DTW) - second hub for Delta with links to Asia and looking to build a Detroit Region Aerotropolis
• Denver (DEN) - where a completely new airport was opened
• Amsterdam (AMS) - with its associated flower market
• Dubai (DXB), Abu Dhabi (AUH) and Doha (DOH) - with their competing global ambitions
• Bangkok (BKK) - where a new airport has been built on a swamp
• Hong Kong (HKG), Guangzhou (CAN) and Shenzhen (SZX) - vital to the success of manufacturing in the Pearl River Delta

For me, the book's coverage of developments in China was the most interesting, perhaps because it was the least familiar.

Memorable concepts from the book include:

• "Kasarda's Law of Connectivity: every technology meant to circumvent distances electronically ... will only stoke our desire to transverse [distance] ourselves."
• "Individual companies don't compete. Supply chains compete. Networks and systems compete."
• Marchetti's Constant

One piece of advice that is actually included late in the book. Use Google Earth while reading "Aerotropolis" to get an idea of the lie of the land around the airports being referred to.

Reviews of the book have appeared in:

• Kirkus Reviews 15 December 2010
• Bloomberg Businessweek 24 February 2011
• FT Magazine 25 February 2011
• Wall Street Journal 2 March 2011
• New York Times 4 March 2011
• The Independent 4 March 2011
• The Telegraph 13 March 2011
• The Guardian 19 March 2011
• Barnes and Noble Review 22 March 2011
• The Scotsman 27 March 2011
• The Enlightened Economist 28 April 2011
• London Review of Books 28 April 2011 
• History Books Review 27 May 2011
• Los Angeles Review of Books 30 May 2011

It is clear that civil aviation in general and the future that Kasarda outlines have their sceptics and this book is somewhat provocative.

An earlier 1 July 2006 article, Rise of the Aerotropolis, on the concept by Greg Lindsay appeared in Fast Company.

More new air services arrangements signed by the UAE

The United Arab Emirates has added to its already impressive list of air services agreements (see previous post) by announcing the conclusion of new air services arrangements with (dates are when a statement was posted):

Bangladesh - 14 April 2011
Montenegro - 14 April 2011
Uruguay - 9 May 2011
Colombia - 16 May 2011
Mali - 22 May 2011

The GCCA's statement with respect to Bangladesh rather surprisingly seems to give details of what is supposed to be a Confidential Memorandum of Understanding!

UAE adds to its fast growing list of air services agreements

In addition to that with France (see previous post), in recent months the United Arab Emirates has announced new or enhanced air services agreements with (dates are when a statement was posted):

Ecuador - 27 March 2011
Albania - 16 February 2011
Djibouti - 15 February 2011
Bosnia and Herzegovina - 19 January 2011
Portugal - 19 January 2011
Mauritania - 16 January 2011
Cambodia - 26 December 2010
Botswana - 24 October 2010
Burkina Faso, Guatemala and Vanuatu - 11 October 2010
Panama - 28 November 2010
Slovak Republic - 18 March 2010.

The UAE has also been negotiating with:

Colombia - 19 December 2010
Venezuela - 28 November 2010

This illustrates an interesting dilemma. How many countries and territories does it make sense for a country to establish air services relationships with? ICAO currently has 188 members known as "contracting states". One wonders how many of these members the UAE is aiming to negotiate air services agreements with and how many of these agreement will eventually be used to provide international air services.

If countries are ranked on the basis of the their true origin/destination (TOD) market size (the traditional basis for exchanging restricted traffic rights), the largest markets that New Zealand currently does not have air services agreements with are Israel and then Saudi Arabia. In terms of TOD traffic, some countries with which New Zealand has air services relationships are smaller than this in terms of market size and we continue to receive approaches from countries where the end-to-end market is tiny (less than 1,000 passengers per year). New Zealand now has around 49 air services relationships.

Even if the home market one might gain access to (and through) in an exchange of air services arrangements is small, how, for example, should one take into account the size of a potential partner's airline industry (see previous post) or traffic through its main international airport measured in terms of passenger numbers when considering whether to exchange air rights? According to Airports Council International in its 2010 ranking released on 15 March 2011 Dubai International Airport (DXB) was 13th in the world in terms of passenger movements and 8th in the world for air cargo.

On 3 January 2010 UAE Interact carried a report that quoted Saif Mohammed Al Suwaidi, Director-General of UAE's General Civil Aviation Authority (GCCA) as telling Khaleej Times, "We have already signed open sky agreements with about 45 countries in the Mena region and with some in Europe, North America and Asia. We are willing to sign open sky agreement with any country which is willing to reciprocate."

France agrees to liberalise access for UAE airlines

On 31 January 2011 UAE Interact announced that France and the United Arab Emirates had agreed to an over 60% increases in the frequency of flights permitted between the two countries and the addition of Bordeaux as a destination point in France for airlines from the UAE.

Airlines from the UAE have very large aircraft orders from Airbus.

Further coverage of the UAE v Canada aeropolitical dispute

What is looking like becoming a classic standoff (see previous post) has been receiving further media coverage. The following items are just a sample:

11 October 2010

Winnipeg Free Press

Gulf News from Reuters

12 October 2010

The Montreal Gazette - note the reference to Australia and New Zealand

The Globe and Mail - editorial

13 October 2010

The Globe and Mail

14 October 2010

The Globe and Mail - suggests there were differing views in the Canadian Cabinet

The Vancouver Sun

18 October 2010

The Montreal Gazette

20 October 2010

National Post NEW

21 October 2010

The Vancouver Sun

22 October 2010

National Post NEW - comment from Canadian Transport Minister Chuck Strahl

On 16 October 2010 the Centre for Asia Pacific Aviation published a background article.

The 2001 Canada-United Arab Emirates air transport agreement (ATA) itself is also available online. I found it unusual in that the capacity limits are explicitly included in the Route Schedule at the end of the ATA. The capacity principles are not unusual and are clearly spelled out in Article XI. What I have not seen in any of the coverage are the actual true origin/destination (TOD) passengers numbers between Canada and the United Arab Emirates.

Aeropolitical 'hard ball' directed at Canada by the UAE

Reports in the Globe and Mail (8 October 2010), the Vancouver Sun (9 October 2010) and on Bloomberg (10 October 2010) point to the United Arab Emirates (UAE) venting its frustration at Canada's refusal to grant increased access to Emirates and Etihad (see previous post). This has taken the form of kicking the Canadian military out of the UAE which the Canadians have been using for logistics support for operations in Afghanistan.

I am left wondering whether there is a real risk of Canada giving notice of termination of its air services arrangements with the UAE. Such action would potentially include removing the right for UAE's airlines to overfly Canadian territory on non-stop services between Dubai and San Francisco/Los Angeles, for example, because Canada is no longer a party to the International Air Services Transit Agreement - Canada withdrew in 1988. (New Zealand has only ever terminated an air services relationship once, with Canada in the 1960s.)

Given that the origin of the military operations in Afghanistan was the horrendous 9/11 attacks in the USA using civil aviation, the actions of the UAE are not a good look.

Australian ACCC gives an interim Yes to Etihad-Virgin Blue alliance

On 23 September 2010 the Australian Competition and Consumer Commission (ACCC) announced that it was giving an interim approval to an alliance between Etihad Airways from Abu Dhabi and Virgin Blue from Brisbane. Papers related to the authorisation are available here.

This will see Qantas severing its relationship with Etihad under which, among other routes, Etihad has been code sharing on Qantas operations between Sydney and Auckland (see 11 March 2009 announcement), and Emirates severing its relationship with Virgin Blue group's V Australia under which V Australia has been code sharing on Emirates' operations from Sydney to Auckland and Christchurch (see 16 September 2009 announcement).

The Economist on Aviation in the Gulf

On 3 June 2010 The Economist published a briefing on Aviation in the Gulf "Rulers of the new silk road" and related editorial "Super-duper-connectors from the Gulf", focussing on the rise of network airlines Emirates, Etihad Airways and Qatar Airways, and their hub airports.

These airlines and airports, as well as enjoying the active support of their governments, are just about in the perfect geographic location for serving international air transport needs with ultra-long-haul aircraft. This is illustrated in a range chart centred on Dubai for the Boeing B777 family of aircraft.

On 10 June 2010 Airbus announced that Emirates had ordered a further 32 Airbus A380 aircraft to take its total order to 90 of these giant airliners. Jon Ostrower, in his excellent weblog FlightBlogger, on 10 June 2010 commented: "With RPK - the measurement of actual passenger traffic - set to double in the next 20 years, makes you wonder whether or not Emirates is hoping to carry it all themselves." Jon was joking wasn't he?

Fiji negotiators heading for ICAO meeting in Jamaica

On 17 June 2010 the Fiji Times reported that Fiji is sending an air services negotiation delegation to the third ICAO Air Services Negotiation Conference at Montego Bay, Jamaica from 28 June to 2 July 2010. One of the objectives of the Fiji delegation is to continue negotiations with the United Arab Emirates (previous post).

Fiji to continue air services negotiations with the UAE

On 12 February 2010 the Fiji Times reported that air services negotiations between Fiji and the United Arab Emirates would continue at the third ICAO Air Services Negotiation Conference to be held in Jamaica at the end of June (see previous post).

The UAE Foreign Minister has been making a multi-stop visit to the South West Pacific.

Australia and UAE agree to a seat capacity increase

On 12 February 2010 the Australian Minister for Infrastructure, Transport, Regional Development and Local Government announced that Australia had agreed a seat capacity increase for air services with the United Arab Emirates. Some of this extra capacity is conditional on UAE carriers serving regional airports in Australia.

New PIA route to Dubai blocked?

On 28 November 2009 the Daily Times from Pakistan reported that approval of a proposed new Pakistan International Airlines service from Sialkot in Pakistan to Dubai was being delayed by the Dubai civil aviation authorities.

Germany takes action against Emirates Airline tariffs

On 20 November 2009 Deutsche Welle reported that the German government was taking action against sixth freedom carrier Emirates Airline to stop it undercutting Lufthansa in the Germany-South Africa and Germany-Singapore markets. On 19 November 2009 Reuters report gives further coverage, suggesting that the action was not just directed at Emirates.

A report of reaction in The National dated 26 November 2009 refers to "1970s protectionism".

I was aware of a European law prohibiting fifth freedom price leading by non-EU airlines but had thought that this was limited to flights within the EU. I do not have access to the tariffs article of the Germany-UAE air services agreement which will probably be relevant. I think the current relevant European law is available here but would welcome comments on this.

Enforcing tariff regulation is very hard to do given the thousands of international air tariffs in existence.

UAE negotiates air services agreement with Somalia

On 24 November 2009 Air Transport News carried a release from the United Arab Emirates GCAA that the UAE had negotiated an "open" air services agreement with Somalia. The negotiations were held in Dubai.

Emirates Airline calls on the New Zealand Prime Minister

On 13 November 2009 the NZ Herald reported that Andrew Parker from Emirates Airline had met with the New Zealand Prime Minister, John Key, and senior government officials in Wellington. The Prime Minister also holds the Tourism portfolio.

Note that the 850,000 passenger statistic quoted would seem to have been calculated on a full uplift discharge basis rather than using the true origin destination method. Thus sixth freedom transit passengers travelling between New Zealand and Europe through Dubai would seem to be included in this total.

The Air New Zealand criticism referred to was made by its Chief Executive Rob Fyfe in the speech in Hong Kong in which he did not refer to Emirates by name (see previous post).

Emirates Airline is owned by Dubai holding company Investment Corporation of Dubai.

Fiji negotiates air services arrangements with Turkey

On 5 October 2009 the Fiji Government announced that Fiji has negotiated an air services agreement with Turkey at the recent ICAO Air Services Negotiation Conference (see previous post). The Fiji Daily Post reported on this on 7 October 2009.

Fiji also held negotiations with the United Arab Emirates and informal talks with India, Singapore and Hong Kong.

The release refers to Fiji having a "Look North Policy".

The UAE signs "open skies" agreements with the Dominican Republic and Zambia

The United Arab Emirates (UAE) has announced that it has signed "open skies" agreements with Zambia (2 October 2009) and the Dominican Republic (5 October 2009).

On 29 September 2009 it was reported by AMEinfo.com that, during the second ICAO Air Services Negotiation Conference held in Istanbul held 28 September to 2 October 2009, the UAE was planning to hold bilateral negotiations with "Turkey, Korea, Norway, France, Fiji, Bangladesh, India, Zambia, Ethiopia, Serbia, Bosnia & Herzegovina, and Dominique Republic." The article noted that of a total of 126 air services agreements signed by the UAE 41 were "open sky".

McGill IASL holds Workshop and Conference in Abu Dhabi

The McGill Institute of Air and Space Law (IASL) from Montreal has posted many of the presentations from a Workshop and Conference on Air Transport, Air & Space Law and Regulation that it held in Abu Dhabi on 12-16 April 2009.

From what one can tell from the inevitable .ppt slides, the basics seem to be well covered in the Workshop with, for example, the point being made that the US "open skies" model air services agreement lacks some features such as seventh freedom passenger rights and cabotage so it cannot really be described as totally open.

An interesting presentation from the Conference is that by Alan Khee-Jin Tan from the National University of Singapore on the proposed South East Asian Single Aviation Market.

"Open Sky" from Emirates Airline

I have recently been reading issues of Open Sky, described as "The public affairs journal of Emirates." They are quite thought provoking for those interested in aeropolitics.

As might be expected given its circumstances, Emirates Airline is a strong advocate of market liberalisation.

It is also good to see the airline is now taking a more constructive approach to environment issues than was evident in the past (see previous post).