Liberalisation of Air Services in the APEC Region 1995-2005 Australia Richard Wood Department of Transport and Regional

1. Liberalisation of Air Services in the APEC Region 1995-2005 Australia Richard Wood Department of Transport and Regional services

2. Background TPT-WG29, Chinese Taipei • At the TPT-WG26 in Vladivostok in September 2005 it was decided to develop a project to assess progress of liberalisation of air services in the APEC region over the past decade; • Purpose – identifying the extent to which the Bogor Goals have been met in developed and developing countries; • The project report was intended to inform the Ministerial Meeting in Adelaide on 28-30 March 2007; • The project report was implemented by an independent consultant and does not necessarily reflect Australia’s views.

3. Project Objectives TPT-WG29, Chinese Taipei • CAPA Consulting was retained by the Australian Department of Transport and Regional Services (DOTARS), on behalf of the APEC Secretariat, to undertake the following study: • Identify existing barriers to liberalisation, and specific areas where there is scope for further development; • Determine progress with the liberalisation of air services in the APEC region between 1995 and 2005; • Indicate where efforts should be focused in future to achieve the targeted reforms agreed under the Eight Options for More Competitive Air Services with Fair and Equitable Opportunity.

4. Methodology TPT-WG29, Chinese Taipei Methodology • CAPA’s model utilised a combination of indicators for air services between APEC economies relating to: • Changes to Structures of Bilateral Air Service Agreements (based on Eight Options); • Performance of APEC economies & hub airports (GDP, overseas visitors, designated airlines, capacity, flight frequency); • Statistics, where possible, are aggregated and assessed at three yearly intervals (the base year 1995, 2000 and 2005); • The results are qualified and analysed to determine the rate and nature of progress achieved, and identify deficiencies.

5. Data Model TPT-WG29, Chinese Taipei Data Model

6. Limiting Factors TPT-WG29, Chinese Taipei • Development of meaningful comparisons of progress on liberalisation post 1995 constrained by: • Non-availability of historic information on bilateral air service agreements between APEC economies for 1995; • Significant variation in the quantity and quality of survey returns from APEC countries; • Limited data was accessible on the available capacity of the countries at the different time intervals; • The model was adapted to reflect these difficulties; • As a result, CAPA relied to a greater extent on performance indicators for its findings.

7. Key Findings TPT-WG29, Chinese Taipei Conclusions • There has been a considerable increase in: • The number of bilateral agreements between APEC economies; • The spread of city pairs operated within the region; • Numbers of international airlines serving APEC-related routes; • Seat capacity and frequencies between hub airports; • Capacity growth between APEC economies was more moderate.

8. Key Findings TPT-WG29, Chinese Taipei Key Findings Impediments to further liberalisation: • Government policy issues • Governments’ reluctance to relax ownership and control; • Effects of competition policy – the enactment of competition or antitrust legislation in several economies makes it difficult for carriers to merge/consolidate operations; • Continuing protection for government owned carriers; • While carriers are undergoing restructuring, governments less likely endorse market liberalisation.

9. Key Findings TPT-WG29, Chinese Taipei Key Findings Impediments to further liberalisation: • Key industry issues • Growing pressure on airports’ infrastructure and capacity (i.e. slots); • Skills shortages – pilots, maintenance engineers, cabin crew; • Rise in jet fuel prices.

10. Conclusions TPT-WG29, Chinese Taipei Conclusions • Much of the growth achieved can be linked to relaxation of restrictions on designation, freight, charters, code sharing and enhanced market access; • Enhanced market access achieved through increased 3rd/4th freedom capacity and new routes.

11. Conclusions TPT-WG29, Chinese Taipei Conclusions • 5th freedom capacity remain restricted and 7th freedom remains virtually non-existent (other than for cargo-only flights); • Little progress in moving to more liberal ownership and control provisions; • Growth has taken place with highly uneven degrees of liberalisation across individual economies. The APEC economies are moving toward more liberal provisions within their ASAs with each other but with different speeds and priorities.

12. Development of Future Strategy TPT-WG29, Chinese Taipei Development of future strategy Report Suggests: • Establish a dual approach to the Eight Options programme by differentiating targets between developed and developing countries; • Designate the achievement of reforms to ownership regulations as a hight priority and consider the introduction of an interim target of removing effective control provisions from bilateral agreements.

13. Development of Future Strategy TPT-WG29, Chinese Taipei Development of future strategy Report Suggests: • Encourage more aggressive adoption of open 5th freedom rights, as a means of conferring greater economic/tourism benefits and building competition; • Accelerate the removal of restrictions on cargo-only services to enhance the flow of trade across the region; • Continue incremental development of other aspects of the Eight Options with the objective of achieving greater progress with liberalisation of market access, tariffs, charters and business activities.