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CHAPTER 6 BILATERAL AND REGUALTORY ISSUES …

CHAPTER 6. BILATERAL AND REGUALTORY ISSUES FACING THE AIR CARGO INDUSTRY. CHAPTER 6- BILATERAL AND regulatory ISSUES FACING THE. AIR CARGO INDUSTRY. TABLE OF CONTENTS. 1. STATUS OF THE INDUSTRY ..3. 2. regulatory CONSTRAINTS FACING THE CARGO SECTOR ..4. BILATERAL Air Service Agreements --- Diane Peterson to provide ..4. Security Constraints ..7. Safety Constraints ..8. 3. SOLUTIONS TO THE CONSTRAINTS ..10. 3. 1 Petitioning the Government to Provide Special regulatory Participating in the BILATERAL Negotiation Process ..10. 4. 1. STATUS OF THE INDUSTRY. Growth in the air cargo industry, both at airports and for airlines, has been stifled since the global economy entered a recession in 2008. However, there are signs that the economy is slowly recovering, particularly concentrated in the Asia-Pacific region, particularly China, while growth in the North American and European regions have been flat. According to the 2012-13 World Air Cargo Forecast, Boeing predicts world air cargo traffic will grow at a rate of annually over the next twenty years.

U.S./European Union Agreement The United States and European Union reached an Open Skies Agreement (Stage 1) in 2007 and concluded negotiations on amending the Agreement

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Transcription of CHAPTER 6 BILATERAL AND REGUALTORY ISSUES …

1 CHAPTER 6. BILATERAL AND REGUALTORY ISSUES FACING THE AIR CARGO INDUSTRY. CHAPTER 6- BILATERAL AND regulatory ISSUES FACING THE. AIR CARGO INDUSTRY. TABLE OF CONTENTS. 1. STATUS OF THE INDUSTRY ..3. 2. regulatory CONSTRAINTS FACING THE CARGO SECTOR ..4. BILATERAL Air Service Agreements --- Diane Peterson to provide ..4. Security Constraints ..7. Safety Constraints ..8. 3. SOLUTIONS TO THE CONSTRAINTS ..10. 3. 1 Petitioning the Government to Provide Special regulatory Participating in the BILATERAL Negotiation Process ..10. 4. 1. STATUS OF THE INDUSTRY. Growth in the air cargo industry, both at airports and for airlines, has been stifled since the global economy entered a recession in 2008. However, there are signs that the economy is slowly recovering, particularly concentrated in the Asia-Pacific region, particularly China, while growth in the North American and European regions have been flat. According to the 2012-13 World Air Cargo Forecast, Boeing predicts world air cargo traffic will grow at a rate of annually over the next twenty years.

2 Heavy growth will continue to be dominated by the Asian countries with domestic China and intra-Asia forecasted to have the greatest growth rates at and respectively. In Asia, China surpassed Japan as the largest Asian trade country. Growing at an average annual rate of since 1991, China's market share rose from to by 2001, and reached by 2011. Japan, the second largest air cargo market in Asia, has a market share. As China's market share rose, Japan's declined, dropping from in 1991, to in 2001, and in 2011. According to the most recent ACI statistics, the five largest cargo airports in North America are, in order: Memphis (MEM), Anchorage (ANC), Louisville (SDF), Miami (MIA) and Los Angeles (LAX). All five were among the fifteen largest cargo airports in the world, with Hong Kong (2nd), Shanghai Pudong (3rd), Seoul Incheon (5th), Dubai (6th), Frankfurt (8th), Tokyo Narita (9th), Paris (10th), Singapore (12th), Beijing (14th) and Taipei (15th) filling out the other top spots.

3 When compared to the previous version of this guide, significant movement was made by Asian airports including, Shanghai, Dubai and Beijing, areas where the greatest cargo growth occurred. Based on 2010 IATA data, FedEx and UPS remain the largest freight cargo carriers, however, significant changes occurred in the remaining top ten carriers, largely driven by increased volumes and growth by Far East carriers. The remaining eight air cargo airlines are Cathay Pacific, Korean Air Lines, Emirates, Lufthansa, Singapore Airlines, China Airlines, EVA Air, and Cargolux. In the United States, the cargo sector remains highly concentrated, with Federal Express and UPS. together accounting for approximately 80 percent of domestic all-cargo capacity. DHL, the subsidiary of Deutsche Post World Net abandoned its attempt to increase its presence in market. UPS and FedEx dominate the presence in many international markets, although a number of other carriers also compete in various niche markets, such as Polar (Atlas Air Worldwide Holdings), Amerijet, and Centurion.

4 Many are especially active in Latin America. Gemini Air Cargo was forced to enter bankruptcy, and subsequently liquidate, in 2008. Additional competition results from the belly capacity offered by combination carriers, and the cargo capacity of foreign flag carriers. While global economic activity over the past four years set back cargo growth plans, airports continue to recognize the importance of cargo and are taking steps to attract greater shares of this business. The intensely busy Southern California airspace provides an excellent example. Even as Los Angeles World Airports continues to invest strongly to maintain Los Angeles International's status as the West Coast's major international cargo gateway, it has approved the development of an international air cargo center at Ontario International on the expectation that the Southern California cargo market will triple in the next 25. years. At the same time, converted March Air Force Base (operating as March GlobalPort) and George Air Force Base (Southern California Logistics Airport), now provide all-cargo alternatives.

5 Other all-cargo airports exist at Columbus, Ohio and Ft. Worth, Texas. Congress recognized the unique position of Alaska when it expanded cargo transfer authority to allow and foreign airlines to interline cargo at Alaska airports. Under previous law, cargo could not be transferred between carriers and their foreign code share partners. The measure protects Anchorage International Airport's status as one of the world's busiest cargo centers and may encourage foreign airlines to relocate elements of their cargo operations to Alaska. 2. regulatory CONSTRAINTS FACING THE CARGO SECTOR. BILATERAL Air Service Agreements --- Diane Peterson to provide International aviation is governed by an array of BILATERAL agreements and some multilateral agreements between and among governments that have evolved under the framework of the Chicago Convention of 1944. Since 1992, the United States has been pursuing an Open Skies policy. The main components of an Open Skies agreement are: Open international routes between the parties including third, fourth, fifth and sixth freedom traffic rights, No limits on number of carriers that are allowed to operate No limits or on the number of flights they can operate, Liberal provisions on pricing and charters, Provisions on commercial opportunities ( intermodal rights) and doing business ISSUES ( user charges and ground handling).

6 The United States also has optional provisions with respect to cargo that it seeks from its negotiating partners: intermodal code sharing and seventh freedom traffic rights for all-cargo scheduled and charter services. (Seventh freedom traffic rights allow an airline to carry traffic between two countries neither of which is its homeland right for Lufthansa to carry cargo between the United States and India without landing in Germany). Of course, the consent of the third country is necessary before the rights can be implemented. (Please see the appendix at the end of this CHAPTER for the definitions of traffic rights discussed in this section). The United States has been successful in concluding Open Skies agreements with many countries in every region of the world. In 2010, the United States achieved the landmark of 100 Open Skies partners. In early 2013, it reached a total of 109 Open Skies partners. Over half of these Agreements include seventh freedom traffic rights for all-cargo services.

7 All Open Skies agreements cover all-cargo services. In a few cases, such as Mongolia and Vietnam, partners have agreed to Open Skies for all- cargo services only. Most of these Open Skies agreements are BILATERAL agreements. However, the United States has two multilateral agreements: 1) United States/European Union Air Transport agreement and 2) Multilateral agreement on Liberalization of International Air Transportation (MALIAT) which was started in 2001 and which primarily involves partners surrounding the Pacific---Brunei, Chile, Cook Islands, Fiji, New Zealand, Samoa, Singapore, Tonga and the United States. The MALIAT also provides an option which allows countries to accede to a Protocol for Open Skies for all-cargo services only. Mongolia opted to agree to the all-cargo Protocol. Some of the air transport agreements reached with major aviation partners since the 2005 issue of the ACI-NA Air Cargo Guide ---European Union, Brazil, China, Colombia, and Japan--- are discussed below.

8 Union agreement The United States and European Union reached an Open Skies agreement (Stage 1) in 2007 and concluded negotiations on amending the agreement in 2010 (Stage 2). The agreement governs aviation relations with the EU and its 27 Member States. Iceland and Norway have acceded to the agreement even though they are not members of the EU. The agreement extended Open Skies to EU member states that did not have such BILATERAL agreements with the United States, such as the United Kingdom. It eliminated the legal restrictions on the number of airlines and which gateways are permitted access to London's Heathrow Airport. The agreement also includes some seventh freedom rights for all-cargo services. The EU. airlines have open seventh freedom rights for all-cargo services between the United States and other countries. airlines are limited to those seventh freedom traffic all-cargo rights, which they already had under BILATERAL agreements with some Member States, such as France and Germany.

9 The agreement is sometimes referred to as Open Skies plus because it contains additional liberalizing elements. For example, the United States agreed to the EU carrier concept which means the United States would accept any EU airline substantially owned and effectively controlled by nationals of any EU Member State or States to operate between any point in the EU (not just that airline's homeland). and the United States. The agreement also allows EU airlines to carry Fly America civilian government scheduled and charter cargo and passenger traffic in international markets that do not include the United States and in international markets for which there is no General Services Administration contract. It provides that airlines can enter into arrangements for aircraft with crew for international air services that do not include the United States. (Previously, airlines were not allowed to wet lease from foreign carriers in any markets). The agreement includes an emphasis on enhanced cooperation between the United States and EU on a variety of ISSUES .

10 The agreement also details how the ICAO balanced approach to aircraft noise management at airports should be implemented. The balanced approach requires a careful evaluation of costs and benefits before restrictions can be placed on aircraft operations. cargo carriers are concerned about EU. airports proposing and implementing noise-based operating restrictions as these undercut the economics of their operations. There are additional rights available to each party, but they are subject in the case of the United States to changing its law on airline ownership and control and in the case of the EU to changing its law on airport noise restrictions. For example, if the United States were to liberalize its law to allow majority ownership and effective control of airlines by EU nationals, then airlines would receive open seventh freedom rights for all-cargo services between the EU and other countries among other things. agreement The United States and Brazil initialed a phased Open Skies agreement during late 2010.


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