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

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

3 Location Of Uganda

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

5 Reform to industry based on Government, Regional and International recommendations, States now more open to liberalization after consensus reached at 4 th 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, Background to liberalization

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

7 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. Background to liberalization…

8 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 in Int. Air Transport Convening of the 5 th ICAO Worldwide is timely. It should further position ICAO as the legitimate agency to steer Civil Aviation to new heights.

9 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? State participation cont..

10 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

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

12 Location - 00 º N - 32 º E Altitude ft AMSL Main runway(17/35) m Entebbe International Airport

13 Aerial View

14 TRAFFIC THROUGH ENTEBBE INT. AIRPORT

15 TRAFFIC THROUGH ENTEBBE INT. AIRPORT Cont…

16 TRAFFIC FORECASTS 2002/2003 TO 2007/2008

17 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. National against Foreign-Owned Airline

18 Ugandas Wildlife Endowments

19 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

20 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 cant 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 Competition and Sustainability…

21 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. Foreign Investment in National Airlines

22 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. Sustained participation for all in Int. Air Transport

23 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. Code of Conduct

24 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. Dispute Resolution

25 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. ICAOs Role

26 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 5 th Worldwide Air Transport Conference is very relevant and timely.

27 Civil Aviation Authority P.O Box 5536 Kampala, Uganda Tel: /9, Fax: Website: To maintain the Highest Standards of Safety and Service in Civil Aviation CAA Uganda, Mission Statement

28 ? ? ? THANK YOU.