Submissions on Australian aviation policy review

The period for public submissions on the planned Australian National Aviation Policy Statement has closed and they are now available NEW on the web (see previous post).

Notable submissions come from Qantas (188 pages), Virgin Blue (46 pages), Emirates (8 pages) and Singapore Airlines (12 pages).

With Australia being in close geographic proximity to New Zealand, some of the points made by Qantas about exchanging traffic rights are particularly interesting:

"1.1.4 Additional policy considerations

...

We recognise that increased competition has contributed to driving efficiencies and strengthening the competitive ability of the Australian aviation industry more broadly.

We note, however, that Australia’s policy contains a delicate balance of competing interests, and relies heavily on market efficiency principles that do not always recognise the harsh realities of international aviation, including the lack of a level playing field, and the complexity of the bilateral system. In particular, we believe that the Government should have regard to the following considerations when implementing policy to achieve further liberalisation.

1.1.4.1 Australia has limited leverage

Australia’s market size and relatively remote ‘end-of-line’ location combine to limit the leverage it can bring to bear in seeking expanded market access rights for our airlines. Indeed, Australia has few “high value cards” left to play when trading rights of access under the bilateral system. It is important that this leverage be conserved and, when deployed, used to maximise commercial opportunities for Australian carriers. This principle should guide any future consideration of access to the trans-Pacific route.

1.1.4.2 Hub carriers have significant natural advantages

Under the bilateral system, hub carriers such as Emirates, Singapore Airlines, Malaysia Airlines and Cathay Pacific can more readily combine third and fourth freedom rights in both directions to exercise sixth freedoms.

By contrast, Australian carriers, being end-of-line operators, often lack the rights needed from third countries to replicate many of the beyond point services operated by hub carriers. For this reason, reciprocal exchanges of rights do not necessarily result in equivalent improved commercial opportunities for Australian carriers.

This characteristic of the bilateral framework underscores the importance of careful sequencing of liberalisation. Qantas has consistently advocated liberalisation in end-of-line markets before hubs, to maximise Australia’s leverage and offset the hub carrier advantage inherent in the bilateral system."

The Avro Vulcan finds a new fan at Farnborough

The 2008 Farnborough International Airshow is just finishing up with its usual displays of spectacular flying. One piece of writing about the Show caused me some amusement - a post by Flight International journalist Kieran Daly on his weblog Unusual Attitude:

"When I wrote on 18 August 2006 that 'I've got my own doubts about how much money can be justified to keep large jets flying' I may have inadvertently given the impression that I had doubts about how much money could be justified to keep large jets flying.

"Having spent a gloriously unproductive ten minutes at Farnborough this afternoon watching an Avro Vulcan fly ... I would like to assure readers that I think the amount of money appropriate for keeping Vulcans flying is, basically, whatever it takes.

I apologise for any confusion that may have been caused."

The ex RAF Avro Vulcan concerned is XH558 restored by the Vulcan to the Sky Trust. Video clips of the aircraft's flying displays are available on YouTube.

For the story of RAF Vulcans in action over the Falkland Islands I thoroughly recommend reading the book "Vulcan 607" by Rowland White.

I confess to mixed feelings about old aircraft being restored to fly. All too often they crash with tragic consequences. I was fortunate enough to attend the Farnborough Air Show in 1986.

The symbols of nationhood

For some time I have been looking for the origin of a sometimes used quote about "flag" carriers. This from Time magazine in an article on 12 October 1970, reporting on Austrian Airlines and Swissair (since replaced by Swiss International after the latter made massive losses) is the earliest that I have found so far:

"Along with a flag and an anthem, the symbols of nationhood all too often include a money-losing national airline. Since 1950, the number of "flag" carriers has proliferated to the point that there are almost as many as there are countries in the U.N."

If anyone finds a similar earlier quote please let me know.

New Zealand Commerce Commission investigating alleged air cargo rate fixing

On 16 July 2008 the New Zealand Commerce Commission issued a media release announcing that it was filing criminal charges against Cathay Pacific Airways, Singapore Airlines Cargo and Aerolineas Argentinas. These airlines are alleged to have not provided information and documents during an investigation into allegations of price-fixing and other anti-competitive conduct in the air cargo industry.

The New Zealand Herald carried a report about this action on 16 July 2008, including comments from Cathay Pacific and Air New Zealand.

On 28 June 2008 the Herald reported on a related very large settlement reached by some international airlines with the US Justice Department described as "the highest total amount of fines ever imposed in a criminal antitrust investigation."

ICAO resources on the economic regulation of international air transport

Buried in the International Civil Aviation Organization (ICAO) web site are some very useful resources for those interested in studying trends in the economic liberalisation of inter-government restrictions on international airlines. These have been prepared by ICAO's Montreal-based Air Transport Bureau.

For example, in an Economic Regulation section of the web site there is the updated 7 March 2008 version of a 13-page paper "Overview of Trends and Developments in International Air Transport".

In a Databases and Studies section there are, for example, the results of a survey of member States on Airline Ownership and Control and databases on Economic Regulation. The latter includes liberalization case studies, a new summary of regulatory actions on major international airline alliances (complete with links), a list of regional/plurilateral agreements and arrangements for liberalization and a list of government-owned and privatized airlines.

Airlines looking for government support in hard times

With the price of jet fuel having doubled in 12 months and a weakening global economy, the international airline industry is "battening down the hatches" by cutting services, laying off skilled staff and grounding older, less fuel-efficient aircraft.

It will not necessarily always be a case of "creative destruction" or "survival of the fittest." Past history would suggest that many "flag" carriers will again look to survive through government intervention. All around the world there are already signs of this happening:

In South America - on 17 July 2008 Reuters reported that the Argentine government is to takeover Aerolineas Argentinas from the Spanish travel group Marsans.

In Asia - on 10 July 2008 The Times reported that it understood Air India is seeking a "rescue finance package" from the Indian government of UK Pounds 270 million.

In Oceania - on 14 July 2008 Pacific Magazine reported on the latest developments with respect to the finances of Air Tahiti Nui. Note the reference to the airline's 16th recapitalisation being approved last year.

In Europe - on 15 July 2008 Reuters reported that the European Commission has received a reply to its concerns about the Euro 300 million loan from the Italian government to Alitalia.

In Africa - on 16 July 2008 SABC News reported that South African Airways says it needs another Rand 5.7 billion in government funding to reduce its debts.

In North America - the US Air Transportation Stabilization Board continues its existence and Chapter 11 bankruptcy protection provides a safeguard for US airlines.

Meanwhile in the Middle East some of the major Gulf airlines simply do not report their losses and their aircraft orders continue unabated. A 15 July 2008 Wall Street Journal article, with some more positive news from the global airline industry, suggests that Etihad Airways will miss its target of breaking even by 2010.

Finally, tongue in cheek, referring to this poster about a government funded air service means that I have all continents covered!

ICAO aviation carbon emissions calculator

The Environmental Unit of the International Civil Aviation Organization's Air Transport Bureau has a couple of noteworthy resources for those interested in aviation and the environment issues.

In April 2008 an ICAO Carbon Emissions Calculator was released. It provides a calculation for the carbon foot print of a passengers based on entering the city of origin and destination, and class of travel. It will be interesting to see what uptake there is of this.

To me what was of more interest was the 14-page methodology paper that was released when the calculator was launched (see previous post).

Another resource available on the ICAO web site is the 260-page ICAO Environmental Report 2007 (this is an 11.31 MB download).

European Parliament votes to include international air transport in emissions trading system

On 8 July 2008 the European Parliament voted 640 to 30 in favour of including international civil aviation within the European Union's Emissions Trading System (EU ETS) confirming the agreement reached between the Parliament and the Council in June (see previous post). A press release from the Parliament outlines what was decided and the text as adopted is now available on the European Parliament's web site.

A press release from the European Commission welcomed the second reading vote. Reactions from IATA, the Association of European Airlines (AEA), the European Low Fares Airline Association (ELFAA) and, more colourfully, from Ryanair were less positive to put it mildly. Of more interest will be the reaction of the United States government, given that it has questioned the legality of aspects of what is proposed.

Australia negotiates new air services arrangements with Kenya and South Africa

A 28 June 2008 statement by the Australian Minister for Infrastructure, Hon Anthony Albanese, has announced that Australia has negotiated its first air services agreement with Kenya and substantially expanded the route and capacity rights in its air services arrangements with South Africa (see recent post).

EU Governments reach provisional deal with European Parliament on "cap and trade" for aviation

A Reuters story dated 27 June 2008 reports that European Union member states have reached a provisional agreement with the European Parliament and Commission on rules to govern emissions trading including aviation not only within the EU but on flights between EU member states and third countries. A press release from the European Parliament dated 27 June 2008 outlines details of the proposed scheme. Agreement was reached just before the end of the Slovenian Presidency (see previous post).

The Bush Administration in the United States, amongst others, has been opposed to the proposed measure.

Hong Kong and the Philippines agree to increased air capacity

Xinhua reported on 26 June 2008 that Hong Kong SAR and the Philippines have agreed to increase capacity on air services.

On the same day there was also a press release NEW from the Philippines Department of Transportation and Communications.

Brazil and the United States agree to air capacity and routes expansion

In a statement dated 26 June 2008 the US Secretary of Transportation, Mary Peters, has announced an expansion of the air services arrangements between Brazil and the United States of America. Allowable airline capacity is increased by just under 50%, five new destinations are made available in Brazil for US airlines and some third-country code sharing is permitted. Some further detail is given in a media note issued on 27 June 2008 by the US State Department.

Brazil is one of an increasingly small number of major markets that the USA has not been able to gain agreement to "open skies" arrangements. Other notable ones are Japan and China.

South Africa making progress implementing 2006 Airlift Strategy

A 23 June 2008 story in Business Day reports on South Africa's good progress in implementing its Airlift Strategy 2006 (see previous post). South Africa is reported to have recently negotiated new air services arrangements with the United Kingdom (a substantial capacity increase), Qatar, the United Arab Emirates, South Korea, Gambia and New Zealand. South Africa is also reported to be in negotiations with Australia, India and the Netherlands.

India and Japan agree to increase air capacity from 2010

On 20 June 2008 the Government of India announced details of new air services arrangements that it has negotiated with Japan to provide for a doubling of airline capacity in 2010.

An extension of the second runway at Narita airport is planned to provide for increased capacity at Tokyo's main international airport from 2010.

Charter flights between the Chinese mainland and Taiwan to increase

On 13 June 2008 Xinhua reported on the signing of an agreement between two NGOs, the mainland's Association for Relations Across the Taiwan Straits (ARATS) and the Taiwan-based Straits Exchange Foundation (SEF), that will see charter flights between the Chinese mainland and Taiwan substantially increased.

The United Arab Emirates concludes six new sets of air services arrangements

The United Arab Emirates has recently concluded new air services arrangements with Lithuania (announced 4 March 2008), Greece (announced 24 March 2008), Eritrea (announced 21 April 2008), Libya (announced 1 May 2008), Luxembourg (announced 24 May 2008) and Syria (announced 20 June 2008)(see previous post).

Canada reaches new air transport agreement with Panama

On 19 June 2008 the Canadian Ministers of Transport and Foreign Affairs announced that Canada had reached a new air transport agreement with Panama.

Forthcoming European Union - New Zealand air services negotiations welcomed

On 19 June 2008 media statements welcoming the forthcoming European Union-New Zealand air services negotiations were released by the New Zealand Minister of Transport, Hon. Annette King, and the Canberra-based European Union Ambassador to New Zealand, Bruno Julien (see previous post).

Transcripts of Air New Zealand's select committee appearances

The report of the Finance and Expenditure Committee of the New Zealand Parliament into the Financial Statements of Air New Zealand Limited for 2006/07 is available on the web as a .pdf file. Air New Zealand appeared before the Committee on 2 April 2008 and the report includes a full transcript of the hearing. I sat in on the public part of the meeting.

The previous appearance by Air New Zealand before the Committee was on 8 December 2004. The related report also includes a full transcript.

The second death of the US airlines

Holman W. Jenkins, Jr. commenting in The Wall Street Journal of 18 June 2008 offers two solutions to the problems facing the US airline industry:

• Repeal the limit on foreign ownership.
  
• Admit ... anti trust laws don't have all the answers.

The world gets bigger

Economist Paul Krugman has a short commentary in the New York Times dated 17 June 2008 noting the likely negative impact of the high price of oil on transport costs and international trade.

European Commission mandated to negotiate air services agreement with New Zealand

The European Council announced that at its meeting on 13 June 2008, chaired by Slovenia, that it granted a mandate to the Commission to negotiate air services agreement with New Zealand and separately Australia:

"In addition, the Council of Ministers conferred a mandate to open negotiations with Australia and New Zealand on the conclusion of comprehensive agreements on air traffic, aiming at closer cooperation between the Community and these two countries. The mandate conferred today includes, for the first time in history, a stronger commitment by this sector to environmental issues; it also enhances cooperation between the EU and the third countries in the area of greenhouse gas emissions."

EU-New Zealand air services negotiations?

On the agenda for the Council meeting of European Union transport ministers in Luxembourg on Friday, 13 June 2008 is whether to grant the European Commission mandates to open negotiations with New Zealand and separately Australia on comprehensive air transport agreements.

Airline capacity changes in the USA

The news of late with respect to the US airline industry has generally been bleak. As the price of jet fuel keeps climbing, airlines are either announcing lay-offs and fleet groundings (for example, American, Continental, Delta and United), or in some cases their financial collapse (for example, Aloha and ATA Airlines).

USA Today has published an interactive graphic showing changes in airline seat capacity since October 2007 projecting forward to October 2008 on a states-by-state and airport-by-airport basis. The newspaper is keeping the graphic updated.

The sources for the data is OAG.

Three key US economic indicators

The Dallas Morning News has published excellent graphics highlighting three key economic indicators for the United States focused on the period from 1960 onwards (.pdf files):

• Trade deficit
• Budget deficit
  
• National debt
  

Kenya and the USA initial "open skies" agreement

On 30 May 2008 the US State Department announced that Kenya and the United States had initialled an "open skies" air transportation agreement, to be phased in over three years.

This will be the 91st such relationship for the United States.

ASEAN moves further towards a single aviation market

As the three-day 25th Association of Southeast Asian Nations (ASEAN) Senior Transport Officials Meeting (STOM) reached its conclusion in Lapulapu City, Cebu, on 29 May 2008 the Philippine Information Agency announced that ASEAN senior transport officials had agreed to recommend signing the ASEAN Multilateral Agreement on the Full Liberalization of Air Freight Services and Air Services.

The senior transport officials among the 10-member ASEAN nations will endorse the signing of the ASEAN multilateral agreement to the ASEAN transport leaders who will be meeting during the 14th ASEAN Transport Ministers (ATM) Meeting in November 2008 in Manila in time for the implementation of the regional integrated air transport services by December 2008.

The reported aim is to have a single aviation market for ASEAN by 2015.

Canada and the Philippines reach new air transport agreement

On 30 May 2008 at an APEC meeting in Peru the Canadian Government announced that it had reached a new air transport agreement with the Philippines.

India and Iran update air services arrangements

On 6 May 2008 the Government of India announced details of new air services arrangements that it had reached with Iran.

South Africa and Gambia sign new air services agreement

The Daily Observer reported on 12 May 2008 that Gambia and South Africa have signed a new air services agreement.

Review of Air Pacific

On 21 May 2008 the interim Fiji government announced that it was appointing a Cabinet Task Force to carry out a review of Air Pacific. The airline is 51% owned by the Fiji government, with Qantas holding a 46% stake.

Like many airlines, Fiji-based Air Pacific will be suffering from the impact of the rocketing price of oil and will be affected by the Boeing B787 delays (the airline has five on order), but the airline also has had other challenges.

On 26 May 2008 the Fiji government responded to criticism from the Association of South Pacific Airlines relating to the review by the Task Force.

The Task Force held its first meeting on 3 June 2008 and will be calling for public submissions.

My in-laws make the news

Auckland's morning daily, The New Zealand Herald, on 20 May 2008 carried an article on new immigrants to New Zealand that featured my wife's sister and her family. You can just see their new puppy in the photo.

We joined them in their house hunting in Auckland at the end of last year. Many real estate agents and vendors at that stage were not yet accepting that the house price boom was over. Added to that the UK pound was dropping in value against the NZ dollar. It was quite a stressful experience but fortunately it all turned out okay just in time for the start of the 2008 school year.

US proposes multilateral agreement on foreign investment in international airlines

In a speech to the European Aviation Club on 13 May 2008 looking to the second stage of air transport negotiations between the United States and the European Union, US Deputy Assistant Secretary of State for Transportation Affairs, John Byerly, raised the idea of "an ancillary multilateral agreement that will be open to accession by other countries that are prepared to enter into reciprocal obligations to lift the barriers to cross-border investment by pledging to forgo recourse to the nationality clause."

The European Commission's chief negotiator, Daniel Calleja, was reported by Reuters to be surprised by the proposal. On 16 May 2008 Reuters also reported on the outcome of the first round of talks held between the EU and US in Slovenia.

The problem with allowing majority foreign investment in an international airline is that under traditional air services agreements (ASAs) another country may refuse to grant operating authorisation if the airline is not "substantially owned and effectively controlled" (SO&EC) by nationals of the country designating it. If an airline is operating a network of international services to a number of countries if the ASA with any one of those countries contains the traditional SO&EC criteria then the airline's network is put at risk.

The United States first moved to relax its approach on this point in the MALIAT (see Article 3).

For New Zealand this issue came up in the context of Singapore Airlines and then Qantas looking to take a stake in Air New Zealand (see the NZ Ministry of Transport report dated 16 July 2001). New Zealand has made great progress in removing the "substantial ownership" criterion from its ASAs but many still have it. Long standing New Zealand Government policy is that is will not designate as a New Zealand international airline any company that is not substantially owned and effectively controlled by New Zealand nationals.

An ICAO template ASA proposes that the criteria could now be "principal place of business and effective regulatory control" (see Fifth Worldwide Air Transport Conference papers from March 2003).

Graphic of inflation components in the USA

On 3 May 2008 the New York Times carried a graphic showing the components of consumer price inflation in the United States in the year to March 2008.

In a story similar to New Zealand, as might be expected oil and dairy price rises feature. What is not catching the headlines are the areas that are seeing price falls.

Contributing to the graphic was Michael Balzer at the University of Konstanz in Germany.

Fiji and Tonga agree to air capacity increase

The Fiji Times, in an article dated 7 May 2008, reports that Fiji and Tonga have agreed to a new Memorandum of Understanding increasing the capacity available to the airlines of each side to 1,000 seats per week. The previous limit had been 350. A report from Fijilive dated 7 May 2008 adds that the new arrangements are to include an exchange of fifth freedom rights.

A report from Fijilive on 9 May 2008 covers the possibility that Air Pacific is looking to start international services to Vava'u.

I have been fortunate enough to visit Vava'u twice. The island group really is a gem with good potential for tourism if reliable air transport links can be maintained. The current small airport, which lies in a shallow basin on the main island, has the most displaced landing thresholds I have ever seen on a runway.

Interactive graphic of UK constituencies

The UK Daily Telegraph has a great interactive graphic mapping all the constituencies in the United Kingdom based on the new electoral boundaries approved by Parliament on 27 June 2007. Each constituency is represented by a hexagon. The graphic interfaces with political opinion poll results and a "swingometer" to show scenarios for the outcome of the next British General Election. Currently the polls point to a wave of blue washing to the north.

UK Election Maps showing constituency boundaries are available from the Ordinance Survey.

Old New Zealand newspapers now available online

I have recently come across Papers Past from the National Library of New Zealand. It gives on-line access to scans of many provincial newspapers in the period up to 1915. Many are searchable.

Back in 1979 while at Otago University I did some historical research using old newspapers. It would have been so much easier, and less hit and miss, with this free resource.

Papers Past should be of great interest to history students and those researching their New Zealand ancestors.

I have already found the name of my great uncle, James Douglas, who in July 1903 as a young child fell through ice and drowned in the river at Waihao Downs (Otago Witness, 22 July 1903), as well as interviews with two of my great great grandfathers, John Douglas (Otago Witness, 22 February 1879) and William Mosley (Otago Witness, 4 May 1878), about their farming in Otago in the pioneering period of settlement.

Do-it-yourself Gapminder graphs

On 15 April 2008 Gapminder announced that Google had released Motion Chart which, when used with Google spreadsheet, enables the production of four-dimensional like bubble graphs - "a dynamic flash based chart to explore several indicators over time" (see previous post).

Australian Aviation Policy review started

On 10 April 2008 the Australian Minister for Infrastructure, Transport, Regional Development and Local Government, the Hon Anthony Albanese, announced that the new Australian Government is developing a National Aviation Policy Statement.

An Issues Paper that was released provides a comprehensive list of the key issues facing aviation in Australia. Many of these issues are common to other countries.

Of note for those interested in Australia's approach to international air services negotiations is the following statement about exchanging fifth freedom rights:

"While access between Australia and our bilateral partners has been able to be increased in many cases, this is not always possible when seeking to fly beyond a second, partner country to other markets. Due to our geographical position, these rights are essential for Australian airlines to fly beyond hubs in Asia and the Middle East to key markets in Europe and North America. In these circumstances, and to enable the establishment of new Australian airlines on the Australia-US route, Australia has not traded access for foreign airlines beyond Australia to the US in recent years. However, the Australian Government may seek to trade such access in the future, if it is judged to be in the national interest to do so."

Also raised is the question about whether Australia should be prepared to exchange seventh freedom rights.

Submissions are due by Friday, 27 June 2008.

EU Transport Ministers grant EC mandate to negotiate ASA with Israel

At their 7 April 2007 Transport, Telecommunications and Energy (TTE) Council meeting held in Luxembourg under the Slovenian Presidency, European Transport Ministers decided to grant the European Commission a mandate to open negotiations with Israel on a comprehensive air transport agreement (see previous post).

The European Commission has also been seeking a mandate to negotiate such agreements with Australia and New Zealand (see previous post).