1. Rabat, 21-22 December 2005ACAC Presentation1 A RAB A IR T RANSPORT L IBERALISATION A GREEMENT : B RIDGING T HE G APS

2. Rabat, 21-22 December 2005ACAC Presentation2 Arab Air Transport Liberalisation Agreement: Bridging the Gaps  Arab aviation scene  Existing world models  ACAC agreement: Strengths and weaknesses  Gaps and how to bridge them

3. Rabat, 21-22 December 2005ACAC Presentation3 Arab Aviation Scene Growth & Development  Impressive economic growth5.6%  Extraordinary traffic growth  Jan-Oct 2005  Passenger: 12.6%  Cargo: 14.1%  Fleet expansion (orders $60 b)  Infrastructure development ($30 b)  Emerging low cost carriers  Better airline profitability  Uneven growth/expansion across the region

4. Rabat, 21-22 December 2005ACAC Presentation4 Arab Aviation Scene Liberalisation Status  Wide spectrum of attitudes towards aviation regulation  Liberalisation as growth catalyst: e.g UAE, Lebanon  Generally slow pace towards liberalisation  Only six states with fully or partially liberalised agreements  ACAC agreement: a leap forward, but gaps need to be filled  Serious support and political will are needed

5. Rabat, 21-22 December 2005ACAC Presentation5 Arab Aviation Scene Implications of ACAC Agreement  Higher traffic growth rates  Easier rules on market access and entry  Increased competition  Changes in regulatory environment to support liberalisation  Freer movement of persons and goods  Competition laws to create level playing field (airlines operating like any other business)  Revision of ownership and control clauses  Multinational/cross border ownership  Mergers, takeovers?

6. Rabat, 21-22 December 2005ACAC Presentation6 Existing World Models European Union  Fully deregulated internal market  Any EC carrier can fly from anywhere to anywhere  Now enlarging scope  External dimension  EC Clause (horizontal mandate)  EU/US deal  Soon other mandates?  Development of EASA  Influence on technical issues  European licenses

7. Rabat, 21-22 December 2005ACAC Presentation7 Existing World Models EU “horizontals” – various models  Designation Clauses negotiated by EU Partners  Traditional National Ownership and Control  Regional O&C + safeguard  …[non EU State] may refuse, revoke, suspend or limit the operating authorisation… if by exploiting traffic rights granted under an existing bilateral with a member State, [EC carrier] circumvents limitations imposed under a bilateral with another member State…  Principal place of business + regulatory oversight  Principal place of business + regulatory oversight + safeguard  Mixed (e.g. Morocco)

8. Rabat, 21-22 December 2005ACAC Presentation8 EU “horizontals” EU ‘HORIZONTALS” National O&C Regional+safeguard Regional- in negotiation Princ.pl.of business+reg.ctrl Princ.pl.of business+reg.ctrl +safeguard

9. Rabat, 21-22 December 2005ACAC Presentation9 Existing World Models So-called APEC  Chile, NZ, Brunei, Singapore, USA  Traffic rights not completely multilateral  Service must have a point in the country designating the airline  (Except all cargo)  No cabotage  National Ownership and Control + Principal Place of Business X

10. Rabat, 21-22 December 2005ACAC Presentation10 Existing World Models Latin America: Going around the restrictions  No multilateral treaty framework in place  But countries unilaterally negotiating “CLAC clause” with EU  Chile (soon: Argentina, Uruguay, Nicaragua)  “Multi-national” airlines emerging  TACA  LAN  COPA Minority stakes in foreign carriers Doing business under one brand Some still use separate codes for diff’t operators

11. Rabat, 21-22 December 2005ACAC Presentation11 ACAC Liberalisation Agreement

12. Rabat, 21-22 December 2005ACAC Presentation12 ACAC Liberalisation Agreement Excellent foundation !  Agreement contains all basic elements of a regional block  Regional Clause (art 5.2.a)  In line with developments in other regions  CLAC Clause  EC Clause  “Traffic Rights”  More than the EC Package 2  Stops short of Cabotage but still very generous  External dimension  in place (Art 32)  Could lead to creation of one or several pan-Arab carriers

13. Rabat, 21-22 December 2005ACAC Presentation13 ACAC Liberalisation Agreement Weaknesses  Problems will not emerge from conflict with national laws  But from gaps in the Agreement  …which can be filled…  “regional/multilateral” vs “bilateral” aspects  Agreement still contains left-overs of bilateralism  Is this balance stable?  Probably not

14. Rabat, 21-22 December 2005ACAC Presentation14 ACAC Liberalisation Agreement Left-overs from bilateralism  Tariff filing : Why?  Capacity and frequency are fully deregulated  Internet = increased transparency  Embryo of competition rules in place  Safety checks  With possible multinational carriers emerging, need for common standards  ECAC experience with SAFA: common checklists, but not common interpretation  Viz. “Blacklist” debate in EU  IOSA?  Dispute resolution mechanism  Dry-Leases only? (art 15)  Ability to transfer crews at short notice

15. Rabat, 21-22 December 2005ACAC Presentation15 Competition Law  National? Bilateral? Multilateral?  Annex 2: Basic Rules  Yet basic rules need to be developed  E.g. Arts 81, 82 of EC Treaty  Case-Law  Guidelines  Regulations  Recent developments in EC Law  Large devolution to national competition authorities  BUT: EC may ‘pull’ cases where  Unity of doctrine is required  Case affects cross-border trade  Air Transport, typically  E.g. EC / US Draft Open Skies  Art 19  “Minimize differences re competition law”  “cooperation among competition authorities”  Annex 2: Cooperation on Competition Law issues

16. Rabat, 21-22 December 2005ACAC Presentation16 Competition Law (2)  Annex 2  Too reliant on national laws / authorities  But not all ACAC countries have them  And traditions may differ  Risk of diverging interpretations  Subsidies  Problem area  Loose definition  No dispute resolution mechanism  No remedies  E.g. countervailing measures Competition Law No Competition Law In transition

17. Rabat, 21-22 December 2005ACAC Presentation17 Competition Law (3)  Dispute Resolution  Problem area  Traditional bilateral (consultation, negotiation, arbitration)  Strong enough?  What about a permanent arbitration panel ?  Development of common case-law on aviation  Conflict will not be solely between States  Airline vs airline  State vs Airline  Airlines should have recognized roles in dispute resolution mechanism  Active  Passive

18. Rabat, 21-22 December 2005ACAC Presentation18 ACAC Liberalisation Agreement Gaps & How to Bridge Them  Weak Dispute Resolution Mechanism  Power based, not rule based  Weak rules on competition & subsidies  Need developing  A possible solution: Permanent arbitration body  Interprets the Treaty  Develops Competition Law aspects of the treaty through case law  Solves general disputes re implementation of the Treaty

19. Rabat, 21-22 December 2005ACAC Presentation19 T HANK Y OU