Safeguards and Sustainability to the Liberalization of Air Transport ICAO 5th Worldwide Air Transport Conference ICAO Headquarters, Montreal Safeguards and Sustainability to the Liberalization of Air Transport By Ambrose Akandonda Managing Director, Civil Aviation Authority, Uganda 23 March 2003

Presentation map Background, Foreign investment in National Airlines, State participation in Int. Air Transport, Liberalization in Uganda, National against Foreign-owned Airline, Competition & Sustainability of National Airlines, Foreign investment in National Airlines, Sustained participation of all in International Air Transport, Code of Conduct, Dispute Resolution, ICAO’s Role. Conclusion

Location Of Uganda

Uganda Country Profile Land locked Strategically located on the continent Good all-year climate Ambient temperature -(18° - 29°c) Rain Fall -50-2000mm pa Population - 25 million Size- total area - 241,038 sq. km - 197,097 sq. km (Land)

Background to liberalization Reform to industry based on Government, Regional and International recommendations, States now more open to liberalization after consensus reached at 4th Worldwide Air Transport Conference, Process is being implemented at national and regional levels: African Union, SADC, COMESA, EAC etc; Continental level liberalization program based on Yamoussoukro Decision of 1999,

COMESA, SADC, EAC Member States COMESA 20 Countries SADC 14 Countries EAC 3 Countries

Background to liberalization… Liberalization process is progressing well and brought new opportunities and challenges, Non-aviation international agencies e.g. WTO with its GATS, have picked interest in Air Transport Management; Plans are in place to review GATS Annex on Air Transport Services to extend its coverage.

State participation in Int. Air Transport Convening of the 5th ICAO Worldwide is timely. It should further position ICAO as the legitimate agency to steer Civil Aviation to new heights. Vital Questions: How can the desired/expected outcomes of liberalization be assured? Is it necessary to have safeguards or is competition a sufficient safeguard? Can National carriers survive without safeguards in liberalized environment?

State participation cont.. Questions: Can a state allow its national airline(s) to collapse and expect the foreign-owned airlines to provide the services needed? How can sustainability of carriers and assurance of services be achieved in a liberalized environment? Does it matter if a state has no national airline?

Liberalization in Uganda Liberalization of cross-border airline services; Abolition of royalty payments; Adoption of multiple designation; Full liberalization of cargo services; Removal of capacity restrictions; Tax exemptions on foreign airlines; Designation of selected countryside aerodromes as international entry/exit points to promote tourism;

Liberalization in Uganda cont… Implementation of COMESA Legal Notice No.2; Adoption of the Yamoussoukro Declaration of 1999. Abolition of restrictions on foreign ownership in national carriers. Abolition of requirement for substantial ownership

Entebbe International Airport Location - 00 º 02’ 26”.93 N - 32 º 26’ 25”.95 E Altitude - 3782 ft AMSL Main runway(17/35) - 3658 m

Aerial View

TRAFFIC THROUGH ENTEBBE INT. AIRPORT

TRAFFIC THROUGH ENTEBBE INT. AIRPORT Cont…

TRAFFIC FORECASTS 2002/2003 TO 2007/2008

National against Foreign-Owned Airline Presence of National airline means continued state participation in Air Transport; Air Transport bears with it significant economic, social, political and strategic advantages that should not be delegated to foreign carriers; Foreign carriers only provide commercially viable services yet air transport often goes beyond commercial bounds; Sustained participation of states will guarantee availability of services that are in national interest.

Uganda’s Wildlife Endowments

Competition and Sustainability Healthy and fair competition brings about improved service provision to the benefit of the industry and consumers; Competition survival strategies such as cost cutting, code sharing, franchising etc. cannot assure the survival being sought; Regulation prevents competition from causing severe market distortions to the detriment of consumers; Competition without regulation is not a sufficient safeguard for Air Transport sustainability;

Competition and Sustainability… Safeguards must rationally and realistically address disparities relating to level of development, size and location of states including their air carriers to guarantee sustainability; Without tailored safeguards, developing country national carriers simply can’t survive in a liberalization environment. Recent examples on the African continent serve to vindicate this fact Demise of Uganda Airlines Demise of Zambia Airlines Recent sale of Air Tanzania to South African Airways

Foreign Investment in National Airlines Provides much needed yet scarce capital financing; However, foreign ownership has implications on designation and authorization of carrier; under the BASA regime. (Substantial ownership & effective control clauses) Foreign ownership creates opportunities as well as regulatory challenges: Regulatory Challenges: Facilitate progress of liberalization process; Enable airlines take advantage of cross-border capital financing opportunities; Avoid creation of flags of convenience.

Sustained participation for all in Int. Air Transport The ‘Equality of opportunity’ principle should not only be observed but should also be achieved irrespective of extent of liberalization and level of competition. Safeguards-Create a healthy and fair competition Airline alliances should be cautiously regulated to avoid reducing competition;- right of choice by the consumer. Market access should be open, provided the capacity offered by each airline is matched by market potential or size to avoid capacity dumping or predation; Pricing mechanism should remain flexible so that airlines are free to vary their prices within authorized margins.

Code of Conduct An acceptable code of conduct should be developed to provide common understanding of what is acceptable and what is not; This type of code will help minimize disputes.

Dispute Resolution There is need to agree on a dispute resolution mechanism to help settle disputes between contracting states Some form of arbitration will be necessary for disputes that cannot be amicably resolved.

ICAO’s Role Tribute should be paid to ICAO for its role in ensuring the orderly development of International Air Transport. Issues that need to be addressed by ICAO include: Conduct a study on the effects of franchising; Recommend a code of conduct that will govern healthy competition among carriers; Recommend the nature and form of arbitration and procedures to be followed in resolving disputes between members states.

Conclusion Liberalization with Safeguards is beneficial for the development of Global Air Transport industry. The global aviation industry is in transition, with the Challenges and Opportunities of Liberalization requiring our concerted effort; which is why the ICAO 5th Worldwide Air Transport Conference is very relevant and timely.

Civil Aviation Authority P.O Box 5536 Kampala, Uganda Tel: 256- 41-320516/9, 321308 Fax: 256-41-321452 E-mail : aakandonda@caa.co.ug aviation@caa.co.ug Website: www.caa.co.ug CAA Uganda, Mission Statement To maintain the Highest Standards of Safety and Service in Civil Aviation

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