Open Skies For Freight?

Jan. 19, 2005
The U.S. and India have negotiated a less restrictive agreement that allows airlines in both countries to select routes and destinations based on demand

The U.S. and India have negotiated a less restrictive agreement that allows airlines in both countries to select routes and destinations based on demand. The agreement, which Department of Transportation officials said provides for open routes, capacity, frequencies, designations and pricing, replaces a 1956 bilateral agreement.

Under the old agreement, the U.S. carriers Delta Air Lines and Northwest Airlines had direct flights between the U.S. and India. American Airlines and United Airlines codeshared on some routes

In a move that many would hope signals a more open attitude, China and Taiwan have agreed to direct flights between the two countries for the first time in 50 years. The scope of the agreement is limited to 48 roundtrip flights during the Lunar New Year holiday from Jan. 29 to Feb. 20. Flights between Beijing, Shanghai and Guangzhou and Taipei and Kaohsiung in Taiwan will transit Hong Kong airspace.

Meanwhile in Europe, Fred Smith, ceo of FedEx, was urging policy makers and business leaders to agree to a full open skies deal between the European Union and the U.S. If they can’t reach an agreement on those terms, at least consider an all-cargo agreement as a step towards liberalization.

The idea that cargo agreements should be separated from the air agreements covering passenger traffic is not new. However, with a large percentage of cargo moving on combination carriers, regulators appear to be unable to find a way to separate the issues. Smith also urged further customs reform to streamline clearance processes and facilitate global commerce and productivity.

Smith also called for airlines to be permitted full ownership of operations on both sides of the Atlantic. This, said Transport Intelligence, is surprising, coming from a company that lobbied hard against DHL’s expansion into the U.S. on the grounds that it broke foreign ownership rules. It could be a prelude to FedEx re-entering the domestic European parcel market. A comment by a senior FedEx executive indicated the carrier would consider domestic service if pressed by customers. A possible further indication of FedEx’s intent might be inferred from discussions with the French government for access to its high-speed rail network to transport packages and freight.

The impact of liberalization of the type called for by Smith and others may play differently for passenger airlines. The embattled U.S. airline industry is expected to post losses of over $2 billion when 2004 figures are tallied. This will be the fifth consecutive year of losses of that magnitude. Though no one is suggesting foreign airlines be granted access to the U.S. domestic market, competition on international routes is clearly a factor in the airlines’ earnings.

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