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).

EU-US "open skies" comes into effect

The "open skies" Air Transport Agreement between the European Union and the United States comes into effect today, replacing 21 bilateral agreements. This comes just after the opening of the new Terminal 5 at London Heathrow (LHR), the airport that will be the focus of new competition.

Media statements have been issued by the European Commission and US Department of State. Media coverage includes that by USA Today and the BBC. A story in the International Herald Tribune looks towards the next stage in the negotiations.

This is a historic day for international aviation (see previous post on its signing).

Australia adopting the Montreal Convention on air carrier liability

On 20 March 2008 the Civil Aviation Legislation Amendment (1999 Montreal Convention and Other Measures) Bill 2008, that will allow Australia to ratify the Convention for the Unification of Certain Rules for International Carriage by Air (the Montreal Convention 1999) was introduced into the Australian Federal Parliament. The Montreal Convention covers air carrier liability and Australia will be the last OECD country to do so. The Australian Department of Infrastructure has a good page on the subject with links to details of what is happening.

This action is of considerable significance for New Zealand as the trans-Tasman air transport market is our largest. New Zealand ratified the Convention on 18 November 2002. The relevant part of the Civil Aviation Act 1990 came into effect on 4 November 2003. The New Zealand National Interest Analysis of this treaty is available here.

The liability regime is a matter of private international law.

Wellington regional river flows

It has been a very dry summer here in the Wellington region with little rainfall. So much so that we can now only water our gardens with a hand-held hose every second day. For us this has caused some real difficulty as we are trying to get a new lawn established. We now have some brown patches that will need to be reseeded.

This weekend, however, we are enjoying steady rain and river flows in the east of region where we live are rapidly rising.

Korea and Macau open up new air routes

The Macau Daily Times reported on 28 February 2008 that Macau and Korea have agreed to amendments in their air services arrangements that will, among other things, see airlines from Macau permitted to operate to any point in South Korea.

United States negotiates 91st "Open Skies" partnership - with Croatia

The US Secretary of Transportation, Mary Peters, announced on 13 March 2008 that, after two days of negotiations in Zagreb, the United States had reached an "open skies' agreement with Croatia.

Canada and Barbados reach "Open Skies" agreement

On 4 March 2008 Canadian Ministers Cannon and Emerson announced that Canada had reached an "Open Skies-type" air transport agreement with Barbados.

Singapore concludes "Open Skies" agreement with Portugal

On 4 March 2008 the Civil Aviation Authority of Singapore (CAAS) announced that Singapore had concluded an open skies agreement with Portugal following air services negotiations held in Lisbon on 26-27 February 2008. The agreement will become fully effective in 2010.

Singapore now states that it has open skies relationships with more than 25 countries, including 14 in the European Union.

India and China exchange fifth freedom rights

On 20 March 2008 India announced that, following negotiations in New Delhi on 19-20 March 2008, India and China reached an understanding exchanging fifth freedom rights.

The Economic Times reported on 21 March 2008 that this will allow Jet Airways to operate beyond Shanghai to San Francisco.

India and Pakistan negotiate an air routes and capacity expansion

On 15 February 2008 Pakistan's Ministry of Foreign Affairs announced details of new air services arrangements with India. This followed talks in Islamabad. Capacity is increased from 12 to 28 flights per week for each side, Indian carriers may now serve Islamabad and Pakistani carriers Chennai. The new arrangements also move from restricting each side to one airline to allowing each side to designate up to three airlines.

Australia and Malaysia expand available capacity for their airlines

The Australian Minister for Infrastructure, Hon Anthony Albanese, announced on 7 March 2008 that Australia has negotiated a phased increase in seat capacity with Malaysia.

One beneficiary of this should be Air Asia X, which commenced services to the Gold Coast (OOL) on 2 November 2007, and is understood to be planning to serve additional points in Australia.

New Zealand has had a bilateral "open skies" agreement with Malaysia since 1998.

Australia negotiates "open skies" agreement with the United States

The new Australian Minister for Infrastructure, Hon Anthony Albanese, announced on 15 February 2008 that Australia has negotiated an "open skies" agreement with the United States of America. The negotiations, which were held in Washington DC from 12 to 14 February 2008, on the Australian side were led by officials from the recently renamed Department of Infrastructure. The US Department for Transportation released a short statement on 14 February 2008 while the US State Department released a Media Note the same day as the Australians.

A notable feature is the agreement to relax the "Fly America" policy after October 2008. Also included is an exchange of seventh freedom cargo rights. It will be interesting to see to what extent the text of the new agreement differs from the new "model" text the US State Department has had since 10 January 2008.

A major beneficiary of the new agreement is expected to be Virgin Blue subsidiary, V Australia. The Minister is reported by the Sydney Morning Herald as specifically noting that the new Labor Government was not intending to grant fifth freedom access to either Singapore or Canada.

New Zealand first negotiated a bilateral "open skies" agreement with the United States back in 1997.

Singapore concludes "open skies" agreements with Denmark, Norway and Sweden

On 29 January 2008 Singapore announced that it had concluded "open skies" air services agreements with Denmark, Norway and Sweden. The three new agreements include an exchange of seventh freedom cargo rights.

Because of the unusual ownership of Scandinavian Airlines System (SAS Group), these three countries negotiate air services arrangements as a bloc.

This brings the total number of "open skies" relationships Singapore has to 20, 13 of which are with European Union countries.

Hong Kong-Japan air services arrangements reformed

A 1 February 2008 press release from the Hong Kong Government announced the removal of capacity and frequency limits for all air services by the airlines of the two parties between Hong Kong and Japan (except Tokyo).

India and Saudi Arabia sign new air services arrangements

On 24 January 2007 the Government of India announced that it had signed new air services arrangements with Saudi Arabia. The new arrangements include a major capacity increase, new route opportunities and multiple designation, as well as a comprehensive liberalisation of arrangements for freighter services.

The United Arab Emirates concludes new air services arrangements with Mongolia, Myanmar and Turkey

The United Arab Emirates has recently concluded new air services arrangements with Mongolia (announced 13 November 2007), Turkey (announced 27 November 2007) and Myanmar (announced 16 January 2008).

HRH Prince William flies solo

The Times reported on 17 January 2008 that, having transferred to the Royal Air Force (RAF), Flying Officer William Wales has now flown solo in a Grob Tutor at RAF Cranwell. The RAF also has a story on his progress. I hope that this is the beginning of a lifelong interest in aviation for him and wish Prince William every success with the rest of his flight training.

The Tutor is a much more powerful training aeroplane than the two-seat, 115hp Piper Tomahawk ZK-EYG that I flew solo in at Paraparaumu Airport on 18 November 1989. My main recollection was that the aircraft performed significantly better in the takeoff and climb without the then chief flying instructor at the Wellington Aero Club, Sarah McIlroy, who had just been on board.

Safe flying William!

Canada and Mexico create new bilateral air services opportunities

A 14 December 2007 news release from the Government of Canada reports that Canada and Mexico have agreed to create new opportunities for their airlines and to meet again in 2009. The release is short on details.

Back on 27 May 2007 the US Secretary for Transportation announced that she was signing with Canada and Mexico a Ministerial Declaration that including a vision for signing a Trilateral Open Skies agreement within the next 10 years.

Airline delay statistics

A 15 January 2008 article in the Dominion Post reports that Pacific Blue is calling on the New Zealand Government to force airlines to make their on-time performance records public, "despite lengthy delays on its new domestic network." Some governments do collate and publish such data (see previous post).

Much such airline delay performance, including for New Zealand, is already available on the web from FlightStats.

Under "Planning Ahead" click on On-time Performance Ratings. Then in the Flight Rating part use the tabs and type in an airline, flight number or sector that is of interest. Note that all of Air New Zealand's A320 fleet is actually covered separately under the code FOM.

Reactions to EU proposals to include aviation in its emissions trading scheme

A 6 January 2008 report in Aviation Week and Space Technology focuses on the differences between the proposals agreed by the European Parliament and Council ministers, as well as on stakeholder concerns (see previous post).

Reactions to the 20 December 2007 Council decision included those from the Association of European Airlines (AEA) and the European Federation for Transport and Environment (T&E). The announcement and reaction was also covered in articles in the Telegraph on 21 December and 22 December and in Flight International on 7 January 2008.

For some of the background to the design and impact of what is proposed see the July 2005, 245 page report Giving wings to emission trading prepared for the European Commission's DG Environment by the Dutch consultancy CE Delft. The consultancy's web site makes available a number of other reports that are relevant to the debate.

Emirates on aviation and climate change

The Emirates Group 2006-2007 Annual Report has a some strong views on aviation and climate change from the company's Executive Vice Chairman, Maurice Flanagan, that clearly place the airline in the climate-change sceptics camp. I think that they are worthy of quoting in full:

"I was at the World Economic Forum in Davos in January and was aghast at the global warming hysteria sweeping the place, with airlines being demonised for their alleged 1.4 per cent contribution to global emissions. Airlines are at the heart of the travel and tourism nexus, linking engine and airframe manufacturers, hotels, car hire, tour operators, travel agencies, connected businesses, and the communities which they serve. If the Green extremists, and their cohorts in governments and the media have their way, hundreds of thousands of jobs in the travel and tourism industry will be lost in the years ahead, against a very dodgy maybe, unsupported by any conclusive evidence, and with a tide of evidence now sweeping in the opposite direction.

"By the way, about that 1.4 per cent – the methane exuded by cows in Europe alone far exceeds the 1.4 per cent of global aviation emissions. There is now a multi-billion dollar industry invested in the myth that the future of the planet is at serious risk through global warming caused by what people do. The Green extremists are impervious to argument, and tend just to quote Al Gore’s regrettably persuasive but fundamentally misleading An Inconvenient Truth at you. Have a critical look at that film, which concludes with a forecast of a global temperature rise of 2.5°F by the end of the century. Mr Gore’s phony graph, however, has steps on the vertical axis of one hundredths of a degree Fahrenheit, so that the temperature seems to shoot up out of control, instead of creeping along the bottom line as it would if presented honestly. Mr Gore cherry-picks to suit his case, for example, citing less snow on Kilimanjaro, whereas Darjeeling and the mountains of Pakistan are seeing snow for the first time in living memory. Mr Gore cites a few recent years in which the temperature rose, and ignores the years of global cooling after the Second World War, when more carbon emissions were pumped into the atmosphere than at any time before or since. Climate changes unpredictably, minute to minute and millennium to millennium. That’s the essence of climate – it changes. Don’t just believe me about all this. Type ‘Global Cooling’ in your web browser and note, for example, the recent articles in The Times of India, the Canadian National Post, the Daily Telegraph and the Russian climatology scientists predicting global cooling.

"With fuel costs now running at about 30 per cent of a typical airline’s total cost, against about 13 per cent a few short years ago, the airlines and manufacturers of airframes and engines could scarcely do more than they are already doing about it. In the years to 2025, airline passenger traffic is forecast to double, but aircraft movements to increase by only 2.8 per cent, as average aircraft size significantly outpaces traffic growth. Fuel burn per passenger will fall correspondingly and the 1.4 per cent of global emissions allegedly generated by the airlines will undoubtedly fall."

Readers will have their own views on the above. Personally, I believe that there is always a place for healthy scepticism on scientific matters but I was rather taken by the view of Nassim Nicholas Taleb whose popular books, "Fooled by Randomness" and "The Black Swan", I have recently finished reading. In a recent contribution to Edge he says:

"Correspondents keep asking me if it the climate worriers are basing their claims on shoddy science, and whether, owing to nonlinearities, their forecasts are marred with such a possible error that we should ignore them. Now, even if I agreed that it were shoddy science; even if I agreed with the statement that the climate folks were most probably wrong, I would still opt for the most ecologically conservative stance — leave planet earth the way we found it. Consider the consequences of the very remote possibility that they may be right, or, worse, the even more remote possibility that they may be extremely right."

Food for thought.

Some airlines boosted by generous tax treatment

A 22 December 2007 article in the Australian reports on lobbying by TTF Australia (Tourism and Transport Forum) of the new Labor Government for quicker tax depreciation rates for aircraft on climate change grounds. It notes that "Australian airlines are forced to write off the value of their fleet over 10 years while Singapore has a three-year write-off period and Hong Kong can depreciate aircraft in five years."

The issue has been around for many years with Qantas, for example, making a submission that focuses on it to an Australian Government business taxation review a decade ago.

Some airlines receive even more generous tax treatment. Emirates, for example, being based in the oil rich United Arab Emirates reportedly pays no tax.

The issue of state aid to airlines and its competition implications has be of particular concern within the European Union. Does not such tax treatment raise similar concerns?

Helping to ensure that older, less efficient technology aircraft are replaced earlier may have a positive impact on reducing aviation emissions. If, however, those aircraft that are sold earlier than might be expected remain in service with other airlines in other countries the global benefit would have to be questioned. In any case the current price of Jet A1 is a powerful incentive to order new technology aircraft and this is being reflected in the record orders Boeing and Airbus have recently been enjoying.

I suspect that the tax residence of quite a few aircraft leasing companies has been driven by such tax depreciation rate considerations. In 2004 Air New Zealand was reported to be having issues with the Hong Kong tax authorities on related matters.

New Zealand secured open air services arrangements with Switzerland

The Annual Report of the New Zealand Ministry of Transport for the year ended 30 June 2007 tabled in Parliament has on page 34 a brief report on New Zealand's progress in air services negotiations during the year.

During the year New Zealand "Secured open air services arrangements with Switzerland, finalised new arrangements with China and continued efforts to secure more open air services arrangements with other parties, including Canada, the European Union, Turkey, South Africa and the Philippines. Agreement was reached with Japan to permit the operation of B777 aircraft on routes to Japan."

This is the first time that news of the revised arrangements with Switzerland has been made public.

Separate public announcements have already been made on recent new air services arrangements with Canada, China and the Philippines.

Australia-US "open skies" negotiations set to proceed

The Australian reported on 3 January 2008 that the new Australian Labor Government has confirmed that it is looking to negotiate an "open skies" air transportation agreement with the United States. The negotiations are scheduled for 12-14 February 2008. These negotiations will be of particular significance for V Australia (see previous post).

UK negotiates new air services agreements with Antigua, Brunei and Mauritius

The United Kingdom has recently signed new air services agreements with Antigua and Brunei.

The agreement with Antigua was announced by the UK on 14 November 2007, the day it was signed.

The agreement with Brunei was announced by the UK on 23 November 2007, again on the day it was signed. A statement by the Brunei Government gives some further details.

The Mauritius Government announced that on 6-7 November 2007 it also has negotiated new air services arrangements with the United Kingdom.

New Zealand Superannuation Fund investments in civil aviation

Apart from Air New Zealand and an interest in the industry through NZ Post, how many airlines (and other civil aviation businesses for that matter) do New Zealand citizens/taxpayers through the New Zealand Government have shares in?

Have a look at this lengthy 30 June 2007 equity portfolio list from the New Zealand Superannuation Fund. About half the fund's NZ$14bn (and growing) is invested in international equities. On a quick skim read I spotted (all amounts in NZ$m):

Australia
Macquarie Airports $4.93m
Qantas Airways $2.40m
Toll Holdings $0.5m

Austria
Flughafen Wien AG $44.85m

Brazil
Empressa Bras de Aeronautica $1.62m
TAM SA $1.67m

Canada
Ace Aviation Holdings $0.21m
Bombardier $0.72m
CAE $0.28m
Jazz Air $0.009m

Denmark
Kobenhavns Lufthavne $48.79m

France
Air France KLM $10.60m

Germany
Deutsche Lufthansa $7.54m
MTU Aero Engines Holding $1.05m

Hong Kong
Cathay Pacific Air $0.28m

Japan
Airport Facilities $0.04m

Mexico
Grupo Aeroportuario Sur $2.40m

New Zealand
Air New Zealand $15.46m
Auckland International Airport $76.86m
Infratil $35.00m

Singapore
Singapore Airlines $1.03m

South Korea
Korea Airport Service $0.13m

Sweden
SAS AB $1.14m

Switzerland
Unique Zurich Airport $191.74m

United Kingdom
British Airways $1.89m
Easyjet $0.80m
Rolls Royce $2.81m

United States of America
AMR Corporation $0.86m
Atlas Air Worldwide Holdings $0.05m
Boeing $6.05m
Continental Airlines $3.14m
Delta Air Lines $0.73m
General Electric $36.60m
Northwest Airlines Corporation $0.90m
Spirit Aerosystems Holdings $1.39m
United Technologies $4.64m

The notable feature is the size of equity investment in airports.

Oil price over US$100 per barrel

On Wednesday, 2 January 2008 the price of oil briefly hit US$100 before dipping back down. The Financial Times reported that this record price was a result of a small trade.

As well as considering geopolitical factors such as "tension" in the Middle East and other oil producing regions, simple analysis of supply and demand is a good place to start when looking at any market and that for oil is no exception. One of the key factors in recent years is clearly rising demand for oil from China and India as a result of their strong economic growth, a point that the 27 member International Energy Agency has been highlighting.

Another factor to be considered is the impact of the fall in the relative value of the US$ against other major currencies. With respect to the New Zealand dollar (also known as the Kiwi) the National Bank of New Zealand provides a good set of graphs that give a clear picture of recent trends. The New Zealand Ministry of Economic Development's web site has information on both the price of crude oil and refined product in New Zealand dollars.

For a fuller picture when looking at the historic price of oil one must also consider the impact of (and on) inflation and the trend in the proportion of household spending (both direct and indirect) on oil products. In December 2005 the Reserve Bank of New Zealand published an article entitled "Oil prices and the New Zealand economy" by Felix Delbruck.

Regardless of the incentives that will be provided by carbon taxes and emissions trading schemes, the higher price of oil gives consumers, particularly in the transport industry, a strong incentive to look for ways to reduce their consumption.

IATA provides a Jet Fuel Price Monitor NEW that is updated every week.

George MacDonald Fraser obituaries

Obituaries have now appeared in the Telegraph, Times, Independent, Guardian, New York Times, and Globe and Mail (see previous post).

The US presidential primary season kicks off

As a political studies graduate, every four years I take some perverse pleasure in following the peculiar workings of US democracy in action as the US presidential election process works through. It is also fun to watch the polls and see how close they are to the final results.

Today, 3 January 2008, is when the process kicks off in Iowa and this year, with no incumbent running and the polls particularly close in the early races (if not in the country overall), we are in for an interesting time.

There are many web sources for following the US political news but one I have found particularly useful as a starting point is Real Clear Politics from Chicago. It provides links to the latest poll results and articles in the main-stream news media.

Although in New Zealand we are far away from the political action in the US, the final outcome does matter to us, particularly in the attitude a new US Administration and Congress will take on foreign trade issues.

Now on to New Hampshire and beyond.

Otago University research on carbon footprint of visitors to New Zealand

The New Zealand Herald is carrying a 3 January 2008 NZPA report on research by two Otago University physicists, Inga Smith and Craig Rodger, into the carbon footprint of air travel by visitors to New Zealand. The report puts into context the estimated size of the emissions.

I will be interested to see the details of the assumptions used to make their calculations.

Another New Zealand-based academic taking a close interest in these issues is Susanne Becken at Lincoln University.

Over the last year aviation and the environment issues have been taking up an increasing proportion of my work time and this is unlikely to change in the foreseeable future.

Author of the Flashman historical novels dies

The news media is reporting today the sad news that author George MacDonald Fraser has died aged 82. I have all twelve of his well researched and at times very funny novels about the nineteenth century adventures of his fictional hero/coward Sir Harry Flashman. As I write this the 2 January 2008 report from the BBC of the news of his death is its most frequently emailed article. Other new media to report on his life include the Independent and the Times.

I am also sad because no package of papers on Sir Harry's adventures during the US Civil War or the Franco-Prussian War, alluded to in the novels, has been found.

WTO Secretariat study focuses on plurilateral air services agreements

The World Trade Organization (WTO) Secretariat has been continuing its study of air services agreements (treaties) as part of the background for the review held every five years of "developments in the air transport sector" (see previous post). This includes the most comprehensive coverage of plurilateral/regional air services agreements that I have yet seen. The reference number for the latest work that has been made public is S/C/W/270/Add. 2. It can be found in multiple parts for download by searching the WTO web site. The site has a page on Air transport services that provides easy access to the relevant documents.

As well of being of relevance to negotiators, this latest study should also be of considerable interests to academics and students working in the international air transport field.

I was able to help the Secretariat track down the full texts of some of the plurilateral agreements, including the MALIAT and the PIASA.

European Commission includes Air New Zealand in alleged cargo price fixing probe

A 28 December 2007 story by Steve Creedy in the Australian reports that Qantas and Air New Zealand are two of many airlines (others include AC, CX, and SQ) under investigation by competition authorities with respect to global cargo price fixing.

European Parliament and separately Environment Ministers propose rules to include international aviation in EU emissions trading scheme

Both the European Parliament (13 November 2007) and the Council of the European Union Environment Ministers (20 December 2007) have been formally considering a controversial proposal to include aviation under the EU's emissions trading scheme. Each has reached a first reading position and these must now be reconciled. The Aviation and climate change page of the European Commission's DG Environment provides links to the key documents.

New Zealand proposes to include domestic aviation in emissions trading scheme

A proposed new emissions trading scheme announced in late 2007 that is planned for New Zealand would cover domestic aviation along with all other domestic transport modes. The New Zealand Government has set up a web site on New Zealand's climate change solutions that gives details. Special provisions are proposed for major jet fuel purchasers.

How to deal with greenhouse gas emissions from international aviation is the subject of separate, ongoing consideration by ICAO.

Academics look to EC-US air transport liberalisation Stage Two

A 20 November 2007 post on Aviation Law Prof Blog links to an interesting 26-page draft paper produced by an experts working group looking at the forthcoming second stage of the EC-US air services negotiations. This exercise is being conducted under the auspices of the International Aviation Law Institute in Chicago and the International Institute of Air and Space Law at Leiden.

Japan-Thailand air services arrangements liberalised?

A 7 August 2007 release from Japan's Ministry of Foreign Affairs announced that route amendments have been made to the Japan-Thailand air services arrangements.

I have seen an unofficial report with further details but nothing official or in the news media in English.

China and Hong Kong agree to new opportunities for their airlines

The International Herald Tribune in an Associated Press story published on 27 December 2007 details new opportunities created following air services negotiations between China and Hong Kong. Xinhua also ran a story about the new Memorandum of Understanding.

An official press release was issued by the Hong Kong Government's Transport and Housing Bureau.

Malaysia and Singapore negotiate to allow LCCs on Singapore - Kuala Lumpur route

On 21 November 2007 Bernama reported that Malaysia and Singapore were about to negotiate new air services arrangements that would allow their low-cost carriers (LCCs) to start serving the Kuala Lumpur-Singapore air route for the first time.