GT
I downloaded the following while cruising the net on african aviation and it makes all the sense in the world. It had to be edited because of the length.
Prior to de-regulation, the U.S. airline industry (which was entirely private) was the envy of the world. Fares were lower than anywhere else. Service was good. Safety was unmatched.
Now, initially, de-regulation did bring benefits. Cheaper fares and more consumer options appeared but there was a great flaw. The industry was overly competitive.
From 1985 to1987, 28 airlines merged. Competition continued to increase at a suicidal pace. An airline either lived with it or died by it. Even large carriers such as Eastern Airlines, Braniff, Pan American and even TWA disappeared.
Fares have increased considerably despite fuel-efficient aircraft and increased volumes of traffic. These tariff increases occurred even when fuel was cheap.
When the proposed merger of United Airlines and U.S. Air came to light, the news was met with universal hostility, as Americans refused to believe that bigger was better.
Now, add the higher fuel prices to the equation and United, Delta and American, the three largest airlines in the world are in or near bankruptcy. This was not brought about by 9/11 alone. The U.S. aviation industry was in big financial danger far in advance of the terrorist strike.
Unfair competitive practices claims and passenger complaints are on the increase as competition now decreases. In fact, the National Centre for Policy Analysis reports that, “airline re-regulation (in America) is looming”.
The North Atlantic routes, from America to Europe, which are the most densely travelled of all international routes, are still very highly regulated. Why else would the Americans and the Europeans be fighting so hard over them?
Europe
We are all aware that the Europeans were many years behind the Americans in accepting a one-border policy but three points of interest must be noted at this time. They will clearly display the difference between Europe and Africa.
First, Europe is a group of economically mature and highly developed countries with
Massive, air traffic density, second only to the United States.
Secondly, Europe is already a functioning “Union” with its own parliament and currency. It was only a natural progression for Europe to adopt “single skies”.
Thirdly, European aviation has operated in a high-density market nearly since the beginning of commercial aviation itself.
Mr. Avelino Zapanta, CEO of Philippine Airlines, issued a significant statement at the recently held IATA Annual General Meeting in Madrid, Spain. Loosely what he said was, “This appears to be a case of the big fishes eating the little fishes and will usher in an era of neo-colonisation of the developing countries”.
This neo-colonisation will happen in African countries and this time even from within. Ask yourself. Isn’t it already happening?
African Aviation and Implementation of the Yamoussoukro Decision
In Africa and in the time of strict bi-laterals and government airline protection we usually had single airline designation, i.e. one airline from each country operating all the services.
In almost all cases these were government owned.
There were strict restrictions on capacity or frequency allowances per country. This was protectionism at its best and pretty much guaranteed both airlines good load factors and decent yields. It was an airlines market. Even so, corruption and mismanagement did not guarantee profits.
Recently most bi-laterals are being amended to allow multi-designation of airlines. Frequency or capacity allowances per country have been greatly increased or eliminated altogether. Now, competition in the markets is flourishing. Gradual implementation of policies such as this set the framework for the future.
Licensing Councils or their equivalent are charged with the responsibility of determining when additional capacity is needed on routes. If an airline applies to the licensing entity for the right to operate a particular route, there is or should be a hearing in advance to determine the need for the additional capacity and if the licensing authority, in its wisdom, after applying its mind, determines that additional capacity is needed the applicant airline shall be licensed to provide services on that route.
“This is appropriate liberalisation for Africa and the best method for implementing the Yamoussoukro Decision as competition rules prohibiting predatory practises must be strictly enforced”.
If large African airlines and European mega-carriers are permitted to exercise predatory behaviour, thus gaining unfair competitive advantage, the smaller and medium sized African airlines will disappear almost immediately.
The large African carriers may even be next. The European mega-carriers have designs to carve up and divide Africa amongst themselves.
Yamoussoukro Declaration – An improper interpretation (“Free for All”)
I have now convinced myself that the intention of the authors of this document was so that I may be able to count the number of surviving African airlines on the fingers of one hand.
I will point that Article 5.1 of Yamoussoukro very clearly states that “…there shall be no limit on the number of frequencies and capacity offered…”.
Short Term Benefits to Travellers
· Increased choice of airlines
· More flights to their destinations
· Possible decrease in airfares
· Better on-board service
Short Term Benefits to Airports and Handling Companies
· Airports - Increased revenue from landing fees, ATC and other charges
· Handling companies – Increased revenue due to more aircraft being handled
Short Term Benefit to Governments
· Some increase in employment
· Small increase in tax revenue
· Increased tourism
Now can’t we all agree that the Articles of Yamoussoukro are pretty concrete and one can easily see the benefits.
So let’s look at the long-term side of the unregulated coin after all the insane competition and the predatory behaviour has resulted in all of the mergers, franchises, buyouts and bankruptcies; when there are few airlines left.
Long-term Realities for the Traveller
· Severely decreased choice of airlines
· Less seats offered – Probably about the same as before
· Fares will be increased to new and unbelievable highs in order to offset the losses incurred during the period of madness
· On-board service will decline due to decreased competition and to save on expenses against operations
· Public confusion as to which airline will actually operate the flight
“In short, the consumer will be a big loser”.
After airports have spent the money for infrastructure development in order to cope with the temporary flight movement increases and the handling companies have purchased the new equipment necessary to handle the temporary increases in the number of aircraft and the new employees have been hired and the investment made for their training, they also will face the long-term realities.
Long-term Realities for Airports and Handling Companies
· Decreased revenue – Number of flights same as before or less
· Layoffs of unnecessary personnel
· Over abundance of equipment
· Loan payments for equipment and infrastructure
Now what about the long-term effects on the governments whose decision it will be to regulate in a responsible manner or bow to the pressure of irresponsible forces? If governments fail to properly regulate according to fair competition rules there is little doubt that the large fish of other countries will certainly eat the small fish of theirs. We need to consider the employees that will be put out of work and their extended families.
Long-term Realities for Governments
· All ticket sales revenue leaves the country
· Foreign airlines will spend little of their revenues in your countries to support local businesses
· Difficulty in privatisation of national airline with unbridled competition. Who will want to invest in an enterprise with no possibility of success
· In the cases where there were profitable airlines, corporate tax revenues will be lost
· With the loss of jobs that will certainly occur, income tax revenues will be lost
· Export of National Identity is sacrificed
· Continued growth of poverty/ More citizens without work
Yamoussoukro Declaration – Proper interpretation (Fair Competition and Sustainable Growth)
“Yamoussoukro opens African skies. It removes the requirement to systematically increase frequency and capacity restrictions. The limitations are to be removed. It does not however open the markets to unregulated and haphazard competition”.
Competition Rules
Competition rules are more easily defined by identifying “Unfair Competitive Behaviour”.
Just as article 5.1 of Yamoussoukro, mentioned earlier, was used to illustrate the argument for the incorrect interpretation of the declaration, Article 5.2 states:
“Without prejudice to the provisions of paragraph 5.1 above, a State Party concerned may refuse to authorise an increase in capacity if such additional capacity is not in compliance with the provisions of article 7 relating to the rules of fair competition”.
Article 7.1 provides for fair and equal opportunity for designated airlines. Article 7.2 from the draft Yamoussoukro document dated 13-14 November 1999 is as follows. These are the same as are spelled out in ICAO documentation under predatory behaviour. Please note.
7.2 For the purposes of this decision, State Parties agree that the following constitute
unfair competitive behaviour:
a) charging fares and rates on routes at levels which are, in aggregate, insufficient to cover the costs of providing the services to which they relate.
b) the addition of excessive capacity or frequency of services on a given sector;
when the behaviour referred to in paragraphs (a) and (b) above is:
· sustained rather than temporary; or
· have a serious economic effect on, or cause significant economic damage to another carrier; or
· reflect an apparent intent or have the probable effect, of crippling, excluding or driving another airline out of the market.
So, Yamoussoukro is very clear after all but only by proper interpretation. Governments do retain control. All will have the “fair and equal opportunity to participate”. This is
The real understanding of “Level Playing Field”. To summarise this;
“An unbridled, unfair and unregulated airline industry can not exist on the same playing field as competition rules”. They are oil and water and they do not mix.
One of them has to be sacrificed. Are the “free for all” proponents suggesting that we disband the Competition Commissions and throw out the anti-trust laws? Would they have us retire the employees of the regulatory authorities, as they will no longer be necessary?
In the long-term interests of all but a few concerned opportunists, we can not do this.
Conclusion
In concluding this flight I have brought you on, let’s relax a bit as the aircraft taxis into the terminal and we go our separate ways to ponder the benefits and evils that may be lurking.
I have restricted this talk to the most important and immediately pressing matters before us but the subject is vast.
There has not been time to touch on several other matters of importance.
· “Fifth freedom traffic rights” and why, through this means, all mega-carriers can utilise back door methods to cripple even the larger African airlines
· “Dispute mechanism” that must be able to hear and conclude disputes fairly within 30 days
· The “Monitoring body”
We should remind ourselves as to who is driving these initiatives behind an improper interpretation of Yamoussoukro and their self-serving motives, for they are not in the interests of the African Continent.
Dr, Assad Kotaite, President, of the Council of the International Civil Aviation Organisation, in a speech delivered at that recently held IATA Annual General Meeting (AGM) said, “ICAO does believe that liberalisation should be accompanied by safeguards to enable the effective and sustained participation of all States in international air transport, and to ensure fair competition…”.
UNQUOTE