9626 3RD 2018

Doc 9626
Manual on the Regulation of

International Air Transport
Third Edition, 2018
Approved by and published under the authority of the Secretary General
INTERNATIONAL CIVIL AVIATION ORGANIZATION

Doc 9626
Manual on the Regulation of
International Air Transport
Third Edition, 2018
Approved by and published under the authority of the Secretary General

Published in separate English, Arabic, Chinese, French, Russian
and Spanish editions by the
999 Robert-Bourassa Boulevard, Montréal, Quebec, Canada H3C 5H7
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Third edition, 2018
Doc 9626, Manual on the Regulation of International Air Transport

Order Number: 9626
ISBN 978-92-9258-541-9
© ICAO 2018
All rights reserved. No part of this publication may be reproduced, stored in a

retrieval system or transmitted in any form or by any means, without prior
permission in writing from the International Civil Aviation Organization.
AMENDMENTS
Amendments are announced in the supplements to the Products and

Services Catalogue; the Catalogue and its supplements are available
on the ICAO website at www.icao.int. The space below is provided to
keep a record of such amendments.
RECORD OF AMENDMENTS AND CORRIGENDA
AMENDMENTS CORRIGENDA
No. Date Entered by No. Date Entered by
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FOREWORD
The main purpose of this Manual on the Regulation of International Air Transport is to meet an ever-increasing need for
a comprehensive and objective source of information about the many facets of this dynamic activity. This need was
foreseen by the ICAO Assembly which, by Resolution A24-11, directed the preparation and publication of this manual.
The need for and expected usefulness of this manual is not confined to any particular State or category of State,
whether small or large, whether least developed, developing, or having developed economies. Rather, it was prepared
to meet the needs of all ICAO Member States.
The air transport authorities of these States may well become the most frequent users of this manual. Yet many others
in these States may also find it very useful. International air transport evokes considerable interest of many people:
those associated with airlines; airports and communities seeking new air services; users of air transport; air carrier
labour; aircraft manufacturers; certain international organizations; people involved with aviation financing, tourism
development and trade; people in academia and the communications media; and, at times, members of the general
public as well. This manual is intended to also meet the needs of and be useful to these broader constituencies within
ICAO Member States and, in so doing, to increase its value to air transport authorities who interact with such
constituencies.
BASIC COMPOSITION OF THE MANUAL
As international air transport developed and became more complex especially since the early 1990s, so too has its
regulation. Also, much new terminology evolved, often without widely accepted definitions (or with conflicting ones) and
sometimes with more than one term applied to the same subject. Thus the approach taken in the preparation of this
manual has been to provide clear and adequate explanations and guidance in a well ordered context. Each relatively
short chapter is, in effect, a narrative composed largely of a series of definitions and explanations in a logical order of
presentation derived from the topic itself.
Regulation is the giving of authoritative direction to bring about and maintain a desired degree of order. All regulation
involves regulatory process, various patterns of activity by people interacting to establish and maintain some desired
result for the subject or entities being regulated. Similarly, all regulation involves regulatory structure, i.e. the
organizations or other entities involved and the legal framework (such as licences, regulations and agreements). Finally,
all regulation involves regulatory content, the particular subjects being regulated (such as market access, pricing and
capacity).
The process and structure of international air transport regulation have three distinct venues — national, bilateral and
multilateral; therefore, each venue has been assigned a separate part in this manual, i.e. Parts I, II, and III, respectively.
Regulatory content topics, which States deal with in all three venues, are in Part IV. General terminology, i.e. that which
is common or supplemental to all parts of this manual, forms Part V. Appendices contain certain reference materials.
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FUNCTIONS AND SCOPE OF THE MANUAL
This manual is designed to be user friendly and to serve two distinct functions. First, it can be used as an encyclopedia.
Each broad regulatory topic has its own chapter or section of a chapter in the manual, written to compress essential
facts into one or a few pages. The Table of Contents assists the reader to determine the location of material on broader
topics (e.g. the bilateral regulatory process, traffic rights, etc., each of which may involve many related definitions and
explanations). Second, this manual as a whole can be useful as a textbook for academic or other educational and
training purposes.
The scope of the manual is limited to the economic aspects of international air transport regulation as distinguished from
the technical aspects thereof such as those involving navigation, safety and security. Nevertheless, these other areas of
regulation are not totally separable from economic regulation and can affect such matters as airline licensing, airport
access and the structure of agreed routes. Although air transport regulators sometimes also regulate commercial non-
transport operations, such as aerial crop dusting and surveying, as well as non-commercial flying, such as overflight and
landing by private, military and State aircraft, both topics are outside the scope of this manual. The term “aviation” is
often used incorrectly in lieu of the term “air transport”. While air transport is more specific, referring to those aspects
related to the carriage by air (usually commercial air transport), aviation is generic and includes far more topics such as
military, state and private flying, aircraft manufacturing, air navigation, non-commercial transport and specialty air
services.
WHAT IS NEW IN THE THIRD EDITION
Along with the trend of globalization and liberalization, international air transport has also undergone significant changes
in the last two decades. This third edition has been updated and expanded to take account of the developments in
international air transport and its regulation since 2004 when the second edition was first published.
This edition includes several new topics (e.g. fair competition, consumer protection, and funding of aviation system
upgrade and regulatory oversight), which are drawing increasing regulatory attention. A number of new air transport
terms and definitions have been added, including some that were non-existent when the first and second editions were
published (e.g. connectivity, aviation system upgrade, etc.). Additionally, many websites and e-mail addresses (primarily
of air transport-related international organizations and entities) have been updated or added enabling users of the
manual to access a wealth of information and vastly expand their knowledge base.
The updating of established topics, as well as the addition of new information, adds significantly to the manual’s value as
a user-friendly tool for those who are interested in knowing more about international air transport.
This manual both complements and supplements ICAO Doc 9587 — Policy and Guidance Material on the Economic
Regulation of International Air Transport, which is a compendium of all the formal policies and guidance adopted by
ICAO in this field (such as Assembly resolutions, Council decisions, and conclusions and recommendations of air
transport conferences).
______________________
TABLE OF CONTENTS
Page
PART I — National regulation ......................................................................................................................... I-(i)
Chapter 1. Introduction to national regulation ........................................................................................... I-1-1
Chapter 2. Process of national regulation .................................................................................................. I-2-1
2.1 Introduction..................................................................................................................................... I-2-1

2.2 The legislative component .............................................................................................................. I-2-1
2.3 The licensing component................................................................................................................ I-2-2
2.4 The ad hoc authorization component ............................................................................................. I-2-3
2.5 Comity and reciprocity .................................................................................................................... I-2-3
Chapter 3. Structure of national regulation ................................................................................................ I-3-1
3.1 Introduction..................................................................................................................................... I-3-1

3.2 The organizational component ....................................................................................................... I-3-1
3.3 The legal component ...................................................................................................................... I-3-3
Chapter 4. Key issues of national regulatory process and structure ...................................................... I-4-1
4.1 The relationship between air transport regulators and interested parties ....................................... I-4-1
4.2 The optimum location of the international air transport regulatory function .................................... I-4-3
4.3 Good regulatory practices .............................................................................................................. I-4-5
PART II — Bilateral regulation ........................................................................................................................ II-(i)
Chapter 1. Introduction to bilateral regulation ........................................................................................... II-1-1
1.1 General........................................................................................................................................... II-1-1

1.2 Evolution of the bilateral regulation of international air services ..................................................... II-1-1
Chapter 2. Process of bilateral regulation .................................................................................................. II-2-1
2.1 Introduction..................................................................................................................................... II-2-1

2.2 Initiation of and preparation for a formal bilateral consultation ....................................................... II-2-2
2.3 Consultations and negotiations: types of meetings and documents ............................................... II-2-5
2.4 Consultations and negotiations: strategic and tactical considerations ............................................ II-2-7
2.5 Conclusion, implementation, management, dispute resolution, amendment and
(exceptionally) termination of an agreement................................................................................... II-2-8
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Page
Chapter 3. Structure of bilateral regulation ................................................................................................ II-3-1
3.1 Introduction..................................................................................................................................... II-3-1

3.2 Basic document types .................................................................................................................... II-3-1
3.3 Typical provisions of bilateral air transport (services) agreements ................................................. II-3-2
3.4 Types of bilateral agreements on subjects closely related to air transport ..................................... II-3-5
Chapter 4. Key issues of bilateral regulatory process and structure ...................................................... II-4-1
4.1 Introduction..................................................................................................................................... II-4-1

4.2 Balancing benefits in a liberalizing environment ............................................................................. II-4-1
4.3 Shortcomings of bilateral regulatory structure ................................................................................ II-4-3
4.4 Bilateral relations involving groups of States .................................................................................. II-4-5
4.5 Application of competition laws to air transport .............................................................................. II-4-6
4.6 Effects of State aids and subsidies ................................................................................................. II-4-7
Chapter 5. Types of international air services negotiations ..................................................................... II-5-1
PART III — Multilateral regulation .................................................................................................................. III-(i)
Chapter 1. Introduction to multilateral regulation ..................................................................................... III-1-1
1.1 General........................................................................................................................................... III-1-1

1.2 A brief history of the multilateral regulation of international air transport ........................................ III-1-2
Chapter 2. Process of multilateral regulation ............................................................................................ III-2-1
2.1 Introduction..................................................................................................................................... III-2-1

2.2 Formal multilateral meetings .......................................................................................................... III-2-2
2.3 Process within formal international organizations ........................................................................... III-2-4
2.4 The multilateral treaty process ....................................................................................................... III-2-4
Chapter 3. Structure of multilateral regulation .......................................................................................... III-3-1

3.2 Basic elements of the organizational component ........................................................................... III-3-1
3.3 Basic terminology of the legal component ...................................................................................... III-3-2
3.4 The Chicago Conference documents ............................................................................................. III-3-4
3.5 The Warsaw System and the Montreal Convention of 1999........................................................... III-3-5
3.6 Other air law instruments................................................................................................................ III-3-6
3.7 Regional multilateral agreements ................................................................................................... III-3-8
Table of Contents (ix)
Page
Chapter 4. Key issues of multilateral regulatory process and structure ................................................. III-4-1

4.2 Why the multilateral approach? ...................................................................................................... III-4-1
4.3 Possible processes in the quest for a new multilateralism.............................................................. III-4-3
4.4 The likely generic structural elements of a new multilateral air transport agreement ..................... III-4-4
4.5 The general agreement on Trade in Services (GATS) and its air transport Annex......................... III-4-5
Chapter 5. International Civil Aviation Organization (ICAO) ..................................................................... III-5-1

5.2 Policy development bodies ............................................................................................................. III-5-1
5.3 Air Transport Bureau ...................................................................................................................... III-5-3
5.4 ICAO policy, guidance and information .......................................................................................... III-5-4
Chapter 6. Worldwide intergovernmental organizations .......................................................................... III-6-1
6.1 Organs of the United Nations ......................................................................................................... III-6-1

6.2 Specialized agencies of the United Nations ................................................................................... III-6-2
6.3 Other worldwide intergovernmental organizations .......................................................................... III-6-2
Chapter 7. Regional intergovernmental civil aviation organizations ....................................................... III-7-1
7.1 Africa .............................................................................................................................................. III-7-1

7.2 Europe ............................................................................................................................................ III-7-2
7.3 Latin America and the Caribbean ................................................................................................... III-7-2
7.4 Middle East..................................................................................................................................... III-7-3
Chapter 8. Regional and trans-regional intergovernmental organizations and trade areas .................. III-8-1

8.2 Regional intergovernmental organizations ..................................................................................... III-8-1
8.3 Formal trans-regional groups ......................................................................................................... III-8-8
8.4 Informal trans-regional groups........................................................................................................ III-8-9
Chapter 9. Major air transport industry organizations .............................................................................. III-9-1
9.1 International Air Transport Association (IATA) ............................................................................... III-9-1

9.2 Airports Council International (ACI) ................................................................................................ III-9-2
9.3 Civil Air Navigation Services Organization (CANSO) ..................................................................... III-9-4
Chapter 10. Non-governmental organizations ........................................................................................... III-10-1

10.2 Air carrier organizations.................................................................................................................. III-10-1
10.3 Other aviation organizations ........................................................................................................... III-10-3
10.4 Other organizations interested in air transport................................................................................ III-10-3
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PART IV — Regulatory content ...................................................................................................................... IV-(i)
Chapter 1. Introduction to regulatory content ........................................................................................... IV-1-1
Chapter 2. Basic market access .................................................................................................................. IV-2-1
2.1 Introduction..................................................................................................................................... IV-2-1

2.2 Route rights .................................................................................................................................... IV-2-3
2.3 Operational rights ........................................................................................................................... IV-2-6
2.4 Traffic rights.................................................................................................................................... IV-2-10
2.5 Market access as affected by the so-called “Sixth Freedom” ......................................................... IV-2-15
Chapter 3. Air carrier capacity..................................................................................................................... IV-3-1
3.1 Introduction..................................................................................................................................... IV-3-1

3.2 Capacity regulation by governments .............................................................................................. IV-3-1
3.3 Capacity as viewed by air carriers .................................................................................................. IV-3-4
Chapter 4. Air carrier tariffs ......................................................................................................................... IV-4-1
4.1 Introduction..................................................................................................................................... IV-4-1

4.2 Why States regulate tariffs ............................................................................................................. IV-4-1
4.3 Definition of tariff ............................................................................................................................ IV-4-2
4.4 Types and characteristics of tariffs ................................................................................................. IV-4-3
4.5 Methods for regulating tariffs .......................................................................................................... IV-4-6
4.6 Key tariff issues .............................................................................................................................. IV-4-10
Chapter 5. Air carrier ownership ................................................................................................................. IV-5-1
5.1 Introduction..................................................................................................................................... IV-5-1

5.2 The discretionary criteria ................................................................................................................ IV-5-1
5.3 Use of the criteria ........................................................................................................................... IV-5-2
5.4 Some exceptions ............................................................................................................................ IV-5-2
5.5 Foreign investment in air carriers ................................................................................................... IV-5-3
5.6 Key issues ...................................................................................................................................... IV-5-4
Chapter 6. Air cargo ..................................................................................................................................... IV-6-1
6.1 Introduction..................................................................................................................................... IV-6-1

6.2 Distinct features of air cargo ........................................................................................................... IV-6-1
6.3 Regulation of air cargo ................................................................................................................... IV-6-2
Chapter 7. Non-scheduled air services ...................................................................................................... IV-7-1
7.1 Introduction..................................................................................................................................... IV-7-1

7.2 Characteristics of non-scheduled air services ................................................................................ IV-7-1
7.3 Kinds of international non-scheduled air services .......................................................................... IV-7-2
7.4 Regulation of non-scheduled air services ....................................................................................... IV-7-4
Table of Contents (xi)
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Chapter 8. Airline commercial activities ..................................................................................................... IV-8-1
8.1 Introduction..................................................................................................................................... IV-8-1

8.2 Currency conversion and remittance of earnings ........................................................................... IV-8-1
8.3 Employment of non-national personnel .......................................................................................... IV-8-2
8.4 Sale and marketing of international air transport ............................................................................ IV-8-3
8.5 Airline product distribution and electronic commerce ..................................................................... IV-8-4
8.6 Aircraft leasing ................................................................................................................................ IV-8-6
Chapter 9. Airline cooperative activities .................................................................................................... IV-9-1
9.1 Airline alliances .............................................................................................................................. IV-9-1

9.2 Airline codesharing ......................................................................................................................... IV-9-2
9.3 Airline franchising ........................................................................................................................... IV-9-4
Chapter 10. Air passengers ......................................................................................................................... IV-10-1
10.1 Introduction..................................................................................................................................... IV-10-1

10.2 Passenger rights ............................................................................................................................ IV-10-1
10.3 Unruly or disruptive passengers ..................................................................................................... IV-10-4
10.4 Improperly documented passengers .............................................................................................. IV-10-6
Chapter 11. Airport-related matters ............................................................................................................ IV-11-1
11.1 Ground handling ............................................................................................................................. IV-11-1

11.2 Slot allocation ................................................................................................................................. IV-11-2
11.3 Night curfew or night flight restrictions ............................................................................................ IV-11-4
11.4 Privatization of airports ................................................................................................................... IV-11-5
PART V — General terminology ..................................................................................................................... V-(i)
Chapter 1. Introduction to general terminology......................................................................................... V-1-1
Chapter 2. Air carriers .................................................................................................................................. V-2-1
Chapter 3. Aircraft ........................................................................................................................................ V-3-1
Chapter 4. Air services ................................................................................................................................. V-4-1
Chapter 5. Airports ....................................................................................................................................... V-5-1

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APPENDICES ................................................................................................................................................... App-(i)
Appendix A. Formats for tariff filings ......................................................................................................... App A-1
Appendix B. IATA currency conversion system ........................................................................................ App B-1
Appendix C. Prorating .................................................................................................................................. App C-1
______________________
Part I
NATIONAL REGULATION
I-(i)
Chapter 1
INTRODUCTION TO NATIONAL REGULATION
1.1 National regulation of air transport is regulation undertaken by a State within its territory in its exercise of
sovereignty over that territory and the airspace above it. Thus national regulation extends to both domestic and
international air services and to both national and foreign air carriers. The national regulation of international air services
must take into account the State’s international obligations pursuant to bilateral and multilateral agreements and
arrangements and should give due regard to the actions and concerns of other States.
1.2 The particular aims of national regulation in the field of international air transport vary from State to State
and are influenced by national economic policies, territorial size and location, the degree of national development,
domestic and international politics, etc. Those aims are, however, likely to include all or several of the following:
a) to provide for the transport requirements of foreign commerce;
b) to promote particular service sectors (such as tourism);
c) to provide employment;
d) to earn foreign exchange;
e) to meet the needs of the postal system;
f) to create the conditions for a viable, healthy air transport sector;
g) to aid in national development;
h) to serve national defence; and
i) to meet disaster assistance needs.
1.3 The process of national regulation involves three distinct kinds of actions: legislating; licensing; and
determining ad hoc authorizations. Chapter 2 describes these three components and explains the concepts of comity
and reciprocity used in the national regulation of international air services.
1.4 The structure of national regulation has an organizational component made up of governmental bodies and
a legal component embodied in national laws, policies, rules and regulations with respect to air transport services.
Chapter 3 explains the organizational component by identifying the primary as well as other governmental bodies that
are involved in air transport regulation and explains the legal component by describing its major elements.
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I-1-2 Manual on the Regulation of International Air Transport
1.5 Chapter 4 examines certain key issues of process and structure in the national regulation of international
air transport.
1.6 The topics which make up the subject matter or content of regulation, such as traffic rights, tariffs and
capacity, are presented in Part IV of the manual.
______________________
Chapter 2
PROCESS OF NATIONAL REGULATION
2.1 INTRODUCTION
2.1.1 The process of national regulation of air transport services has three basic components:
a) legislative (i.e. the making of laws, policies, rules and regulations);
b) licensing (i.e. the granting, conditioning, denying or withholding of permission to conduct air transport
services on a continuous or long-term basis); and
c) ad hoc authorization (i.e. the granting, conditioning, denying or withholding of permission for individual
tariffs, flights, etc.);
each of which are complemented by enforcement actions taken if and when required.
2.1.2 These three elements are described in the next three sections. The last section discusses the concepts of
comity and reciprocity employed in the national regulation of international air services.
2.2 THE LEGISLATIVE COMPONENT
2.2.1 The legislative component of the process of national regulation has three elements: law-making, policy-
making and the writing of rules and regulations. Each element of the process is likely to differ from the others and to vary
from State to State according to its particular legislative system, governmental structure and customary practices. In
general, however, the law-making element tends to come into use least often and be employed for establishing laws and
fundamental policies. Once enacted, such laws are usually changed only when issues of far-reaching significance are
involved. The details of implementation are typically left to the rule-making process.
2.2.2 In contrast to the law-making element, the process involved in the writing or amending of rules and
regulations tends to be used more frequently, to be more rapid and to be initiated and completed by air transport
authorities with or without public comment. Rules and regulations are likely to be more detailed and flexible than laws
and to provide possibilities for making exceptions or granting exemptions.
2.2.3 The policy-making element is perhaps the most flexible and most likely to vary from State to State and
even within a given State. This is because a State may choose to express policy within a law or decree, in a rule or
regulation, in a separate policy statement, or by other means.
Note.— A State may also establish some policies, usually more detailed and specific, in certain licensing or
ad hoc approval determinations which can serve as precedents for future similar situations.
I-2-1
2.3 THE LICENSING COMPONENT
2.3.1 The licensing component of the process of national regulation involves the consideration of and action
upon applications received from national and foreign air carriers for authority to provide commercial air services on a
continuous basis and for extended periods of time (for example, scheduled services on a specified route or routes). In
addition to licensing national and foreign air carriers, air transport authorities may also engage in licensing certain
intermediaries in air transportation such as tour organizers, freight forwarders or travel agents.
2.3.2 The regulatory authority typically makes its licensing decision on the basis of an evaluation of the pertinent
facts in the light of established legal and policy criteria. The authorization issued often takes the form of a licence, permit,
or a certificate, i.e. a formal statement of permission from a constituted authority to carry out some service or business
activity. In some States, a licence is issued to a national carrier and a permit to a foreign applicant, while in some others,
a licence is granted for scheduled operations and a permit is given for charter flights. A certificate can be issued at times
by a government or aeronautical authority to an air operator, or air transport related business entity or service provider.
A licence, permit or certificate may be valid indefinitely or for a specified period of time only.
2.3.3 The criteria used in licensing a national carrier vary from State to State but generally include:
a) a national ownership and control requirement;
b) proof of the applicant carrier’s fitness, i.e. its financial health, its willingness to provide the proposed
services and its ability to meet established operational and safety standards; and
c) a finding that granting the authority will be in the public interest.
2.3.4 In addition, in some cases, criteria agreed upon at the international level may be included.
2.3.5 The scope of the authority granted to a national carrier may cover domestic or international air services, or
both. When the requested authority involves operation of an international air service, consideration is also given to the
rights available to the licensing State under pertinent air transport agreement(s). In situations where more than one air
carrier applies for a route which only one such carrier may serve, a selection process is required. Such a selection
process may involve analysis and evaluation of the proposals or intended services of each contender and may or may
not be public.
2.3.6 In considering the grant of a permit or licence to a foreign air carrier, air transport authorities usually rely on
decisional criteria established in the relevant air transport agreement as well as national laws or regulations. Such
criteria are likely to include certain requirements concerning the ownership and control of the foreign air carrier such as
that the substantial ownership and effective control be vested in the designating State or its nationals or it be
incorporated and have its principal place of business in the designating State, as well as the willingness and the ability of
the applicant to comply with relevant national laws and regulations.
2.3.7 The requested authority may be approved in whole or in part, conditioned, denied or withheld on the
grounds established in the applicable national laws and regulations and the relevant air transport agreement. One
condition, for example, could be a requirement that the carrier obtain a certain amount and type of liability insurance.
Part I. National Regulation
Chapter 2. Process of National Regulation I-2-3
2.4 THE AD HOC AUTHORIZATION COMPONENT
2.4.1 Unlike the licensing component which deals with relatively general and longer-term authorizations for air
services, the ad hoc authorization component of the process of national regulation primarily involves making day-to-day
decisions regarding specific matters, such as permitting a single flight or a series of non-scheduled flights or approving
or disapproving a particular tariff or schedule filing. This process could have some or all of the following phases:
a) a fact-finding or information-gathering phase (often the initial responsibility of the applicant) which
includes assembly of the basic elements necessary to reach a decision, i.e. an adequate description
of the approval being sought; the relevant international rights and obligations; the applicable national
laws, policy, rules and regulations; relevant precedents; and views of interested parties;
b) an analysis phase which includes examination of the gathered information and the production of
options for the decision-maker with a rationale for each, including the advantages and disadvantages
of each option;
c) a decision phase which includes weighing the facts and options presented and may also include, in
significant cases, taking into account the views received from other regulatory officials or other
governmental elements as to the course of action to be taken; and
d) an optional review/reconsideration phase which may take place either within the governmental entity
that undertook the previous three phases, or elsewhere in the government; may be done publicly or in
private; and may, in some instances, also involve judicial review.
2.4.2 This process may be quite brief (for example, when a regulator considers a single non-controversial fare or
seasonal schedule) or very long if it concerns a complex or controversial matter (for example, a commercial
arrangement involving codesharing).
2.5 COMITY AND RECIPROCITY
2.5.1 Of particular importance in the national regulation of international air services are the concepts of comity
and reciprocity, especially where a commercial activity is not covered by a specific provision in an air transport
agreement. Comity is due deference given by the authorities of one State to the official acts of another State. In
regulatory practice, comity sometimes underlies the unilateral grant of a right or benefit to a foreign airline with no
necessary expectation of the same treatment by that airline’s State in similar circumstances. For example, a State may,
on the basis of comity, approve reduced fares or rates which a foreign government has ordered its national airline to
provide to its officials.
2.5.2 In contrast, reciprocity is the granting of a right or benefit by a State to a foreign entity such as an air carrier
when it has no international obligation to do so, on the condition that the same treatment will be accorded to its
comparable entity (entities) by the home State of that foreign entity. For example, a State might approve a non-
scheduled flight or flights by a foreign airline if that foreign airline’s State has in the past approved, or promises in the
future to approve, a non-scheduled flight or flights for the first State’s airline(s).
2.5.3 Reciprocity may be narrowly or broadly defined. For example, in relation to non-scheduled air services,
reciprocity in a narrow context might require approval only of a specific type and number of non-scheduled flights, for
example, four non-scheduled flights to carry livestock. A broader concept of reciprocity would make no such distinction
as to the type or number of non-scheduled flights but might require merely that all non-scheduled flights in a general
category, for example, those to/from a third country, be approved.
2.5.4 Comity and reciprocity are often employed together. One such case arises when an air transport
agreement has been terminated and no new agreement or arrangement has been reached to replace it. In such a
situation, when authorizing scheduled services, a State might, as a matter of comity, approve services by a foreign
airline or airlines of its former bilateral partner which involve routes not served by its national airline(s) but insist on
reciprocity with respect to the capacity operated by such foreign airlines on routes also served by its national airline(s).
______________________
Chapter 3
STRUCTURE OF NATIONAL REGULATION
3.1 INTRODUCTION
3.1.1 The structure of national regulation of international air transport has:
a) an organizational component consisting of a governmental entity or entities which function as the

State’s air transport authorities as well as certain other non-aviation governmental bodies, the actions
of which affect international air transport; and
b) a legal component embodied in the pertinent national laws, rules and regulations, judicial and
administrative decisions, licences and/or permits and declared policies as well as relevant
international agreements to which the State is a party.
3.1.2 The next two sections of this chapter explain the organizational and legal components, respectively.
3.2 THE ORGANIZATIONAL COMPONENT
3.2.1 The primary element of the organizational component of the structure of national regulation is that of the
State’s air transport authorities. National air transport authorities (also called aeronautical or civil aviation authorities) are
the governmental entity or entities, however titled, that are directly responsible for the regulation of all aspects of civil air
transport, technical (i.e. air navigation and aviation safety) and economic (i.e. the commercial aspects of air transport).
The functions performed by such entity or entities with respect to the economic regulation of international air transport
are likely to include:
a) the development of economic policies and strategies with respect to air transport;
b) the formulation of specific rules and regulations to implement basic aviation law and to further national
policy goals and objectives;
c) the issuance (or denial or withholding) of national and foreign air carrier licences and permits;
d) the authorization of air carrier schedules, tariffs, etc.;
e) the coordination of air transport policy and regulation with other governmental entities such as those
responsible for trade and commerce, tourism, financial controls, taxation, national development, etc.;
f) the conduct of bilateral and multilateral international relations with respect to air transport; and
g) the conduct of economic oversight audits.
I-3-1
3.2.2 These functions (other than that of international aviation relations where the lead role may be taken by the
ministry or department responsible for foreign affairs) are generally located in a single national entity such as a ministry
of transport or a department of civil aviation. The functions may, however, be divided among two or more entities, for
example, with one responsible for technical regulation and another responsible for economic regulation. In some States
the primary air transport economic regulatory entity may be a quasi-judicial body which is relatively independent and
which performs some or all of the above functions (e.g. a board or commission).
3.2.3 The effective operation of any national organizational structure requires skilled people. The primary skills
needed by air transport regulators include those essential for:
a) the collection and presentation of traffic, financial and other air service statistics;
b) the analysis of relevant quantitative and qualitative data such as that relating to tariffs and air transport
agreements;
c) the forecasting of future traffic in order to meet infrastructure requirements, a proposed establishment
of a new route or routes, etc.;
d) decision making, particularly in licensing and other authorization matters;
e) effective writing of decisions, agreements, policy statements, etc.;
f) foreign relations, both with foreign air carriers and with foreign governments as part of air service
consultations;
g) multinational affairs, particularly relationships with worldwide international organizations such as the
International Civil Aviation Organization and the International Air Transport Association, as well as with
regional and trans-regional organizations;
h) legal matters regarding the interpretation of laws and agreements, the licensing process, etc.;
i) administration, including matters of finance, personnel, information storage and retrieval, etc.; and
j) public relations and coordination with other governmental entities.
3.2.4 In a small air transport regulatory entity, the skills to perform the above tasks could be possessed
collectively and in varying degrees by as few as one or two persons who may rely on a larger body, such as a
governmental department or ministry, for certain services (such as legal, administrative, and public relations).
3.2.5 The other element of the organizational component of the structure of national regulation, i.e. the non-
aviation governmental entities, the actions of which affect international air transport, includes (but is not necessarily
limited to) those national authorities responsible for:
a) customs controls, i.e. on the importation (and sometimes the exportation) of goods;
b) immigration controls, i.e. on the entry and departure of international airline passengers;
c) public health standards (including inspection and quarantine which affect both passengers and
goods);
d) financial controls, i.e. on currency conversion and remittance, including the earnings of foreign airlines;
Chapter 3. Structure of National Regulation I-3-3
e) taxation, i.e. of air carriers’ earnings, traffic, fuel, supplies, etc.;
f) competition maintenance, which can involve the prohibition of certain activities by both national and
foreign air carriers;
g) environmental controls, for example, curfews at airports where aircraft noise is a concern;
h) tourism development, i.e. to promote air travel by foreigners to the State; and
i) labour, whose actions can affect the terms and conditions of employment of air carrier staff, both of
national and, in some instances, of foreign companies.
3.2.6 Air carriers can also expect a certain degree of regulation by local authorities under laws and rules applied
to all commercial activities, for example, regarding the safety of premises on or off airports used for sales offices,
warehouses, etc. Certain other actions taken by a government below the national level in a federal State can also affect
international air services. One example is the imposition of local taxes on fuel and supplies used in international air
services. Another is the levy of income taxes on the earnings of international air services by foreign air carriers. Such
actions can be very controversial and may or may not be affected by international agreements on taxation.
3.3 THE LEGAL COMPONENT
3.3.1 The legal component of the structure of national regulation of international air transport is embodied in
each State’s:
a) basic aviation laws, which typically govern other regulatory actions such as rule-making, licensing, and
enforcement, as well as provide the legal foundation for the organizational structure and process
employed;
b) pertinent national laws which affect particular regulatory actions (for example, a law requiring that due
process be followed in any licensing matter);
c) international agreements, multilateral and bilateral, to which the State is a party, to the extent that the
international rights and/or obligations they contain must be taken into account in the basic process of
national regulation of international air services;
d) policy statements or directives in various forms (for example, as in a White Paper, i.e. an authoritative
report which provides information about the policies, positions and intended course of action of the
issuing party), which set forth goals, objectives, approaches or general or specific guidelines for
international air transport regulation;
e) rules and/or regulations which implement its basic aviation laws by specifying particular requirements
which are imposed on air carriers or others (for example, to provide traffic data, information on the
rights of air transport users, filing schedules and tariffs, etc.);
f) judicial decisions on specific air transport matters (for example, a court or competition authority ruling
in a dispute between companies on anti-competitive issues and practices);
g) licences and/or permits which authorize the ongoing operation of international air services by national
and foreign air carriers, in particular to the extent these permissions constitute or contain precedents
which may influence or determine future licensing actions;
h) ad hoc decisions (for example, approval of a commercial arrangement for cooperation between two
airlines) which may become precedents for future regulatory action in similar situations; and
i) ad hoc authorizations (for example, approval of a schedule or a tariff) which remain a part of the legal
component while they are in effect.
3.3.2 Transparency (the making known of governmental legal decisions to the public) is often carried out by
publication in a gazette, register, or journal, i.e. a periodic (often daily) official government publication which sets out
laws, rules, regulations and decisions taken by the government during the period of time covered by the particular issue
(except for minor ad hoc decisions), including those pertaining to civil aviation.
3.3.3 Because of differences between each State’s governmental structure, legal system, culture and customary
practices, national rules and/or regulations tend to differ in relation to:
a) terminology (for example, an authorization for ongoing air services by a foreign air carrier may be
called a licence by one State and a permit by another);
b) subject matter (for example, some States still have rules and/or regulations for tariff approval but many
already discontinued the practice);
c) the treatment of subject matter (for example, most States have distinctive policies and practices for the
authorization, withholding, denial or conditioning of international charter flights);
d) format (for example, there is no standardization among States in writing their national regulations);
and
e) language or languages used.
3.3.4 The topics covered by national rules and regulations affecting the commercial aspects of air transport are
likely to include, inter alia:
a) the provision of air carrier (and airport) traffic and financial and other data as may be required
including definitions, deadlines, filing formats, etc.;
b) the organization, pricing, authorization and operation of charter flights and other non-scheduled air
services;
c) the filing of tariffs for monitoring or approval (formats developed by ICAO which may be used by
national air transport authorities for the filing of airline passenger tariffs can be found in Appendix B of
the manual);
d) the application for and processing of licences, permits and ad hoc authorizations for air services; and
e) the protection of users, such as in rules requiring compensation for denied boarding of aircraft.
3.3.5 In some States the governmental requirements on many of the above matters may be set forth in decisions
or orders issued by the air transport authorities.
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Chapter 4
KEY ISSUES OF NATIONAL REGULATORY

PROCESS AND STRUCTURE
This chapter discusses three of the key issues of the process and structure of national regulation of international air
transport: first, how international air transport regulators should deal with interested governmental or non-governmental
parties and their different input in the regulatory process, second, where the international air transport regulatory function
can best be located in the governmental structure, and third, how government regulatory practices can be improved to
bring about a more effective outcome.
4.1 THE RELATIONSHIP BETWEEN AIR TRANSPORT REGULATORS AND INTERESTED PARTIES
4.1.1 In the national regulatory process (i.e. legislating, policy-making, licensing and ad hoc authorization),
international air transport regulators are likely to receive input from at least some members of the following three types of
interested parties:
a) governmental entities which have not necessarily been assigned the international air transport
regulatory function but have a direct interest in the outcome of that function and which may at times
seek to control or shape particular policies or decisions; these entities include departments
responsible for foreign affairs, tourism, trade and commerce, and transport and communications;
b) non-aviation governmental entities whose actions may intentionally or otherwise impact upon air
transport regulation; these include departments responsible for customs, immigration, public health,
taxation, finance, currency control, the environment, competition regulation and, in some cases, sub-
national (e.g. provincial/state) authorities or supranational authorities such as those of a grouping of
States; and
c) interested non-governmental parties which may seek to influence policy or decision making; these
include airlines, airports, consumers, communities, business or tourism interest groups, air carrier
labour and possibly aircraft manufacturers.
4.1.2 Each of these parties has its own interests in and emphasis to place on the formulation of policies,
decisions, rules and regulations vis-à-vis international air transport. National regulation is also influenced by the policies
and actions of other States. The issue faced by the international air transport regulators is how to deal with these parties
and their various, often conflicting, input.
4.1.3 As far as the parties in the first group (aviation-related governmental entities) are concerned, the decision
on which entity to consult and how much weight to give to its views may depend largely on their respective primary
regulatory functions relative to that of international air transport regulation, taking into account the priority accorded to
foreign policy goals, tourism, national development considerations, trade and commerce interests, and any government
requirement for formal or informal intergovernmental coordination.
I-4-1
4.1.4 Of the parties in the second group (non-aviation governmental entities), the customs, immigration, public
health, finance and taxation departments are traditionally the ones whose actions affect certain aspects of international
air transport regulation. In recent years, air transport activities have become increasingly affected by regulatory actions
taken by other government bodies, particularly those dealing with trade, competition law, taxation and the environment.
The primary function/ responsibility of these bodies includes regulatory actions outside the aviation field and therefore
their policy objectives may not be the same as those of the air transport authorities. Consequently, their regulatory
actions can have a significant impact on the operating environment of the air transport industry. The overlapping of
certain regulatory functions and responsibilities may also give rise to potential conflicts between governmental entities.
In such situations, national air transport regulators may need to strengthen coordination with these other government
bodies to harmonize their international air transport regulations, policies and decisions.
4.1.5 Among the parties in the third group (interested non-governmental parties), international air transport
regulators traditionally consult national airline(s) on most matters relating to international air services and give
considerable weight to their views since the regulation of these matters directly affects the livelihood of the airline(s).
However, as the air transport industry matures in many countries, other parties are likely to become interested in
influencing the process, increasingly seeking to have their views taken into account in decision making because
international air transport regulation can have a direct or indirect economic impact on them; for example:
a) airport development depends on revenues earned from air traffic;
b) passengers and shippers are the direct users and revenue generators of air services;
c) communities see an important role for air services in local economic development;
d) local commerce or tourism benefit from increased air transport services;
e) aircraft manufacturers depend a great deal on aircraft orders from airlines which may be affected by
regulatory decisions;
f) airline labour’s well-being is affected by the financial health of the airlines; and
g) other modes of transport (such as road and rail) might have concerns about competition from air
services.
4.1.6 Should air transport regulators change their traditional attitude? Should they broaden the basis for their
policies and decisions? On the one hand, giving greater weight to the interests of above parties may help to formulate
more balanced air transport policies and decisions. On the other hand, consultation with more parties may lead to a
longer, more complicated process, possibly requiring more staff to handle the increased workload.
4.1.7 The decision on which party to consult may depend on the subject matter. A major policy decision such as
the making of the government’s basic international air transport policy may involve consultation with all three types of
parties. For licensing decisions, consideration may be given primarily to input from those parties directly involved; for
example, input on the safety record of the airline applicant from the office for aviation technical regulation and/or
comments on possible effects on competition in the market from airline(s) which may be affected by the grant of the
licence. In making specific authorizations such as approving schedules, tariffs or charter flights, the decision-making
process may involve only those parties concerned with the particular matter in question; for example, an air navigation
office or airport authority for input on the availability of take-off and landing slots, and competing airlines for capacity or
tariff matters.
Chapter 4. Key Issues of National Regulatory Process and Structure I-4-3
4.1.8 Certain air transport regulatory actions taken by foreign governments may also influence national air
transport policy and decision making; for example, the international air policy or competition law decisions of another
country which is a major market for the national air carrier(s). In some cases, national air transport regulators will need to
take into account regulations of a supranational authority constituted by a group or union of States to which the State is
a party; for example, the requirement to apply the internationally agreed criteria in licensing a national air carrier for
international air services.
4.2 THE OPTIMUM LOCATION OF THE INTERNATIONAL

AIR TRANSPORT REGULATORY FUNCTION
4.2.1 Each State is in the best position to determine the optimum location for its international air transport
regulatory function within its national governmental structure, taking into account its general structural division of
responsibilities, the degree of its national development, its economic policy, the state of its air transport industry and the
available human and physical resources. States have found a variety of such locations and from time to time individual
States re-evaluate and change their optimum locations for air transport matters.
4.2.2 When the optimum location of the international air transport regulatory function becomes an issue, the
basic consideration is whether the entity (of whatever size) performing such a function should be:
a) independent of or under the control of an entity that regulates the technical aspects of civil aviation;
b) separate from or a part of the domestic air transport regulatory entity;
c) part of a larger government organization (e.g. a department of transport or a ministry of tourism);
d) a quasi-judicial body; or
e) an autonomous or semi-autonomous authority.
4.2.3 In many States, air transport regulation, both economic and technical, is carried out through a single
governmental entity, under the overall control of a minister or director general of civil aviation. The advantages of having
a single entity handling all aspects of civil aviation regulation include consistent, coherent and efficient discharge of
functions; closer coordination between aviation economic and technical regulation, both national and international; and
possibly more responsiveness to the needs of the air transport industry. One weakness may be that too much emphasis
on promotion of civil aviation could result in insufficient attention being paid to its role in serving broader national
interests.
4.2.4 In States where domestic air transport activity is limited, the office responsible for international regulation
may have reasons to incorporate any relevant domestic air service regulations into its own regulations. On the other
hand, the placement of international regulation in an office in charge of domestic regulation could result in lessened
responsiveness to distinctly international matters.
4.2.5 As regards whether the international air transport regulatory function should be placed within some other
governmental entities having different or broader responsibilities than air transport, each possibility has its distinct
strengths and weaknesses.
4.2.6 A department or ministry of transport or communications may argue that it should be responsible for
international air transport regulation because a single governmental body which regulates all modes of transportation (i.e.
road, water, railways, air, etc.) could better coordinate the different forms of transport to build an integrated national
transport network. The weakness of this argument may be that the activities of other modes of transport are mostly
domestic, that they have few characteristics in common and that interface between these modes is relatively rare in
cases other than that of intermodal freight movements.
4.2.7 A department or ministry of tourism may also see itself better placed to assume the functions of
international air transport regulation, particularly in States where foreign tourism is a major component of the national
economy. The rationale is likely to be that the two industries are closely related and largely interdependent because air
service may be the primary means to bring in foreign tourists; thus the benefits of both could be maximized by close
coordination under the same governmental entity. However, decisions made primarily on tourism promotion
considerations may be perceived as compromising the interests of the national airline(s) (for example, by permitting
unreciprocated market access to the State by foreign airlines) and could also have implications for air freight and mail
services.
4.2.8 A department or ministry of trade may find logic in having international air transport regulation under its
responsibility because international air services are an important part of international commerce (particularly in a State
where air services are largely or totally international). Furthermore, because air transport has come to be one of the
sectors in trade in services, putting it under a trade department’s control may help to achieve a better overall trade
balance. However, there is the possibility that air transport interests may be subordinated to other economic interests
and may even be “traded-off” and that air transport regulations produced under influence of trade policies may create
potential regulatory conflicts with other States where the airline industry is still being operated largely under a different
regulatory regime than that of trade.
4.2.9 A department or ministry responsible for foreign affairs may believe that it should have some or even a
predominant role in international air transport regulation because of the international relations aspects and its expertise
in dealing with other countries. It may assert that bilateral air service agreements and their negotiation are a part of
broader international relations and thus involve foreign policy consideration or coordination. However, the foreign affairs
officials may not be familiar with the specificities of civil aviation and lack the necessary knowledge of the technical or
economic aspects of air transport operations and regulation. They could even subordinate air transport to other foreign
policy goals.
4.2.10 A department or ministry of defence may (rarely) claim a role in civil air transport regulation based on the
strategic military importance of the national airline(s) and the aviation experience found in the State’s air force. Yet, the
needs of strategic defence and international air transport are unlikely to coincide and the commercial experience and
expertise required in air transport regulation are not normally found in military organizations.
4.2.11 Some States, typically where the air transport industry is well developed with multiple air carriers of
different ownership and size and in different stages of development (e.g. well-developed incumbents, new entrants, etc.),
may find it preferable to establish a quasi-judicial body to perform certain or all air transport regulatory functions, for
example, to license air carriers and award route authority. The main reason for this is to achieve fairness in regulation
and avoid decisions being made based purely on political rationales. A weakness may be that such an independent
entity may not take full account of government policies which are different and/or envision a different role for air transport.
Chapter 4. Key Issues of National Regulatory Process and Structure I-4-5
4.2.12 Some other States may find it desirable to set up an autonomous or semi-autonomous civil aviation
authority, a partially or fully independent, perhaps even quasi-private, entity entrusted by the State with some or many of
civil aviation functions. This has the attraction of possibly greater operating efficiency and flexibility and an ability to be at
least partially supported by funds generated by its services and facilities (as well as non-aviation revenues) rather than
full government funding. Such an authority, with more control of its human and financial resources, could function under
government policy guidance with due regard to economic factors and thus may achieve better results both in air
transport regulation and in the financial viability of its operation. The major disadvantage is a structural inability (inherent
in autonomy from its government) to perform the functions required of that government under international treaties and
agreements.
4.2.13 Along with the trend of liberalization and privatization, recent years have seen a growing number of States
establish autonomous authorities, particularly in the provision of airports and air navigation services. Experience gained
worldwide indicates that where airports and air navigation services have been operated by autonomous entities
(commercialized or even privatized), their overall financial situation and managerial efficiency tend to improve. ICAO
therefore recommends that where this is in the best interest of providers and users, States consider establishing such
autonomous entities (ICAO’s Policies on Charges for Airports and Air Navigation Services (Doc 9082)). ICAO has also
developed guidance material on the establishment of such entities (e.g. their organizational structures, scope and
responsibilities), which may be found in the Airport Economics Manual (Doc 9562), the Manual on Air Navigation
Services Economics (Doc 9161) and Privatization in the Provision of Airports and Air Navigation Services (Cir 284).
4.3 GOOD REGULATORY PRACTICES
4.3.1 In recent years, along with the socio-economic development and changes in the marketplace, the business
community at large, including the airline industry, has called for governments to improve their practices in policy design
and rule-making process in order to bring about better and more cost-effective outcomes from regulation for the benefit
of all stakeholders.
4.3.2 In response a number of States have adopted some good regulatory practices (also referred to by some as
smarter regulation or better regulation) designed to improve policy making and the regulatory process and reduce
unnecessary burdens on consumers and businesses.
4.3.3 These practices can be categorized into two sets of principles: one for policy design and the other for
regulatory process. The policy design principles include:
a) Consistency and coherence. Newly developed policies or changes with respect to regulations should
be consistent with existing (and planned) rules and practices that are applicable to regulated activities
so that there are no overlaps and contradictions (nationally or internationally). They should also be
predictable and applied with clear oversight responsibility.
b) Proportionality. Regulations should be used only when their necessity is demonstrated and should be
proportionate to the problems identified so that the costs of compliance are minimized by pursuing the
most cost-effective solution.
c) Targeted and well-defined. Regulations should have specific and well-defined objectives that respond
directly to the problems identified and targeted at the actors best placed to solve those problems.
Whenever appropriate, flexibility should be given to those being regulated to meet defined objectives.
d) Fair and non-distortive. Regulations should be applied fairly, uniformly, and without discrimination
against those being regulated and not create discriminatory burdens on any group(s) in particular.
e) Clarity and certainty. Audiences subject to regulatory oversight need to clearly know the regulations
that will apply, what is expected of them, the scope of the application, and have sufficient time to be
able to comply with new requirements.
4.3.4 The regulatory process principles include:
a) Defining a clear need. The objective of the regulation should be identified based on sound evidence
and available alternatives; and the objective should be carefully considered in order to select the most
appropriate solution.
b) Impact assessment. There should be an assessment of the impacts from the regulation prior to
implementation; and the on-going impacts should be regularly monitored.
c) Transparency. The development of the regulation should involve those who are potentially affected
with the minimum requirement being consultations; the decision-making process should be
transparent and objective.
d) Reducing burdens and regular reviews. The process of developing the regulation should allow for
regular, public and systematic review, and subsequent modification if needed, to ensure that the
regulation remains appropriate and effective.
e) Opportunity to respond and revise. There should be clear procedures to respond to adjudications and
appeals and to revise the regulation, before or after implementation, if necessary.
4.3.5 These practices may also be used by national governments for the regulation of the air transport sector
with a view to supporting sustainable economic growth and the development of international air transport.
______________________
Part II
BILATERAL REGULATION
II-(i)
Chapter 1
INTRODUCTION TO BILATERAL REGULATION
1.1 GENERAL
1.1.1 Bilateral regulation is regulation undertaken jointly by two parties, most typically by two States, although
one or both parties might also be a group of States, a supra-State (i.e. a community or other union of States acting as a
single body under authority granted to it by its member States), a regional governmental body or even two airlines (for
example, in the determination of capacity or prices).
1.1.2 The goal of bilateral regulation in the international air transport field is typically the conclusion,
implementation or continuance of some kind of intergovernmental agreement or understanding concerning air services
between the territories of the two parties.
1.1.3 A brief history of the evolution of the bilateral regulation of international air services follows this introduction.
1.1.4 A significant amount of intergovernmental bilateral regulatory activity involves formal consultation
undertaken to conclude, interpret, expand or amend, or resolve a dispute under an intergovernmental agreement,
arrangement or understanding concerning international air services. The many steps and aspects of this process are
identified and discussed in Chapter 2.
1.1.5 Unlike national and multilateral regulation, the bilateral regulation of international air transport has no
organizational structure. It does have an extensive legal regulatory structure composed of several thousand bilateral
agreements and understandings. Chapter 3 explains this structure by identifying the basic document types used in
bilateral regulation, by defining and describing the typical provisions of bilateral air transport agreements and by
identifying several types of bilateral agreements on subjects closely related to air transport.
1.1.6 The bilateral regulation of international air transport has not evolved without challenges and persistent
issues. Chapter 4 sets forth certain key issues of process or structure in bilateral regulation.
1.1.7 In recent years, States have chosen to relate to one another in new and different ways, especially with the
formation of economic communities or other unions of States. As its definition indicates, bilateral regulation can now,
and could increasingly in the future, involve States in various relations other than simply one-to-one. Chapter 5 presents
a typology of existing and possible future air services negotiations.
1.1.8 The content subjects of bilateral regulation, for example, traffic rights, capacity, pricing, etc., are presented
in Part IV of the manual.
1.2 EVOLUTION OF THE BILATERAL REGULATION OF INTERNATIONAL AIR SERVICES
1.2.1 The bilateral regulation of international air services evolved over many decades. Although international air
transport services were first developed in the 1920s, few bilateral intergovernmental agreements were concluded in
those early decades due to the small volume of international air transport activities and then to the virtual cessation of
many commercial flights during the 1939–1945 (World War II) period.
II-1-1
II-1-2 Manual on the Regulation of International Air Transport
1.2.2 Bilateral agreements now in force, which constitute the largest volume of international air transport
regulatory documents, largely date from after the 1944 International Civil Aviation Conference held in Chicago (see Part
III, Chapter 1). This extensive use by States of bilateral agreements to regulate international air transport is a
consequence of agreement in the Convention on International Civil Aviation (hereinafter referred to as the Chicago
Convention) on the principle of national sovereignty over territorial airspace (Article 1), agreement on the requirement for
special permission or other authorization to operate scheduled international air services over or into the territory of a
Contracting State (Article 6), and the lack of success of efforts to establish a multilateral regulatory regime for the
commercial aspects of international air transport. Thus bilateral negotiations and the agreements they produced
emerged as the preferred method for States to exchange commercial rights for air services and to agree on ways of
regulating market access, capacity, tariffs and other matters.
1.2.3 Among the post-1944 bilateral air agreements, the most significant and influential to the development of
international air transport regulation was the 1946 agreement between the United Kingdom and the United States (now
known as the Bermuda I Agreement). This agreement was the result of a compromise between the two broad
approaches to the regulation of international air transport services that had emerged at the Chicago Conference and
been left unresolved. At one extreme it was held that there should be no regulation of capacity or tariffs or narrow
definitions of routes. The opposite view was that capacity should be predetermined, tariffs regulated by an international
agency and routes specified. Under the compromise agreement, tariffs were to be established by the airlines through the
International Air Transport Association (IATA), subject to the approval of both parties. Capacity was to be determined by
airlines subject to certain agreed principles and to possible joint review by the parties or their aviation authorities after a
period of operation. Routes were specified.
1.2.4 Many agreements of the Bermuda type were subsequently signed by each of the original partners with
other States, and by other pairs of States. The Bermuda Agreement thus became a model which predominated during
the next four decades although a large number of agreements, while incorporating the Bermuda principles, also
employed predetermination of capacity. Bilateral agreements produced a relatively stable and balanced regulatory
foundation on which the international air transport system has sustained steady growth.
1.2.5 In the 1970s and 1980s various States adopted more liberal policies for the regulation of international air
transport. As a consequence, some new liberal bilateral agreements were concluded, generally characterized by a
removal of capacity restraints, greatly reduced government involvement in tariff matters, increased market access and
the ability of each party to name more than a single airline to use that access.
1.2.6 The 1990s witnessed rapid changes in both the regulatory and the operating environments of international
air transport, as well as structural changes to the airline industry. Liberalization became widespread. To adapt to the
changes, many States made regulatory adjustments and adopted more liberal policies, typically by relaxing regulation to
varying degrees. Some States concluded new liberal bilateral agreements which essentially remove all restrictions on
market access, capacity and pricing (so-called “open-skies” agreements). There was also growing regionalism in
international air transport regulation, converting some bilateral regulations to regional or subregional multilateral
regulations.
1.2.7 In recent years, liberalization has continued to grow, both under new or revised bilateral agreements and
under other new arrangements, including collective regulation by groups of States, for example, on a regional or
subregional multilateral basis. This also includes the use of new types of agreements such as a plurilateral agreement
among like-minded States (see Chapter 5).
______________________
Chapter 2
PROCESS OF BILATERAL REGULATION
2.1 INTRODUCTION
2.1.1 The process involved in bilateral regulation is very different from that of national or multilateral regulation. It
typically begins when one State (or organization of States) proposes a joint quest for an air services agreement or
understanding with another State (or organization of States) and the involved parties undertake their preparations. It
continues through the actual meetings and negotiations between their representatives. The process does not end with
the formal signing of a binding document; the formal conclusion marks the first step in managing the implementation of
what was agreed. In that activity, States often return to the cycle of preparation, talks and outcomes to interpret, amend
or expand their understandings, or at times to terminate them.
2.1.2 Thus the basic process of bilateral regulation is that of consultation, the communication and interaction
between two parties, typically but not always two States, carried out over a period of time to question or inform, to
establish or change a relationship or to resolve a dispute between them. The term consultation (or consultations) is
applied to a broad range of such bilateral communications and interactions.
2.1.3 Formal consultation typically involves meetings of multi-person delegations led by designated chairpersons,
each having appropriate delegated powers.
2.1.4 Informal consultation, on the other hand, may involve solely written, solely oral, or a combination of written
and oral communication. It can take place in meetings between only two or a few persons (for example, an embassy
attaché of one State and a civil aviation official of the host State) at which a paper or papers may be provided or
exchanged. Alternatively, it may occur by telephone, by electronic transmission of a message or, more traditionally, by
the sending and receiving of an official document, usually through diplomatic channels.
2.1.5 A negotiation is a consultation, usually a formal one, which has become (or which, from the beginning, was
intended to be) a process of bargaining between the parties. Thus, although all negotiations are also consultations, not
all consultations are negotiations.
2.1.6 The next three sections of this chapter discuss the initiation of and preparation for a formal bilateral
consultation, the types of meetings and documents employed in consultations and negotiations, and the strategic and
tactical considerations involved in consultations and negotiations. It should be noted that the information provided in
these three sections represents the optimum in States’ practices; the process may well be less sophisticated in many
bilateral consultations/negotiations. The final section describes the formal conclusion of an agreement and the
processes involved in the implementation, management, dispute resolution and amendment or termination of an
agreement.
II-2-1
2.2 INITIATION OF AND PREPARATION FOR A FORMAL BILATERAL CONSULTATION
2.2.1 A formal bilateral consultation usually begins with a request by one governmental party to another
governmental party to hold talks. In the vast majority of cases, each party will be a national government; however, one or
both could be an organization of States which has requisite authority from its members to hold the consultation. An
informal consultation is then likely to take place about the venue and dates of the initial meeting, or possibly to determine
whether a consensus exists about the desirability of holding a formal consultation.
2.2.2 Prior to requesting a formal consultation, the potential initiator has numerous determinations to make
internally.
2.2.3 The most fundamental determination is that of the character or kind or basic type of consultation (and
potential negotiation) that could occur. In the field of intergovernmental international air transport relations five such
types are distinguishable by their basic objective.
2.2.4 An innovation consultation is one by which the initiating party seeks to establish a relationship for the first
time (such as that characterized by a first air transport agreement between the parties) or to very significantly alter that
relationship (such as by entry into an entirely new agreement in place of an existing one).
2.2.5 A modification consultation is one by which the initiating party seeks some mutually beneficial alteration in
an established relationship (such as a mutual expansion in access, a mutual change in agreed capacity, or the addition
of an aviation safety or security article).
2.2.6 A redistribution consultation is one by which the initiating party seeks to obtain some net increase in
opportunities or benefits for itself under an established relationship (such as new market access, carrier revenues or
other gains measurably greater than its possible new concessions) so as to correct any perceived imbalance.
2.2.7 A dispute resolution consultation is one by which the initiating party seeks normalization, i.e. conformity of
a situation to what that party perceives as appropriate under their agreement (for example, a situation such as that of a
capacity increase by a carrier or carriers of the other party which the first party deems objectionable).
2.2.8 An extension consultation is one by which the initiating party seeks continuation of an agreed arrangement
beyond a previously agreed date (such as the termination date of an agreement or some side understanding, for
example one which established a temporary capacity regime).
2.2.9 Some consultations may possess the attributes of more than one type; however, certain attributes are
likely to predominate. Knowing the character of a potential formal consultation is likely to be useful at all stages of the
process.
2.2.10 Timing is another important preliminary consideration, not so much as regards detailed administrative
arrangements and the availability of personnel, but as regards the broader setting or context:
a) Are the parties involved in some major dispute in another (non-aviation) area?
b) Is either party in a period of possible or actual change in government during which its internal policies
and/or decision-making capabilities are in temporary flux?
c) Would a time-related linkage of air transport consultations to some major future event (for example,
visit by a head of State or head of government) have probable adverse or favourable effects on the
outcome?
Part II. Bilateral Regulation
Chapter 2. Process of Bilateral Regulation II-2-3
d) Are the parties allied in some cooperative and important diplomatic effort during which one or both
feels compelled to avoid any confrontation about an air transport dispute?
2.2.11 These considerations are likely to be undertaken by the diplomatic/foreign office component of a State’s air
transport authorities. While unlikely to be determinative of timing in most cases, they can be significant in some cases.
2.2.12 Other preliminary (although not necessarily determinative) considerations include:
a) the degree of internal consensus (both within the requesting government and with and among its
national air carriers and other interested parties);
b) an assessment of the negotiating leverage available;
c) some idea of what would constitute a successful consultation; and
d) the probability of success.
2.2.13 Upon receipt of a request for formal consultation (or even in advance of a possible request) the other party
has much the same determinations to make, but in many cases clearly from very different perspectives. For example,
the receiving party in a dispute resolution consultation may well perceive its conduct to be fully in accord with the
agreement. It may wish to avoid or defer consultation within the constraints of the dispute resolution procedures in the
case of an existing agreement. In another example, the receiving party in a redistribution consultation may wish to avoid
entirely, or at least to defer for the longest time possible, the outcome sought by the requesting party. However, most
bilateral agreements contain a provision to reply to a request for consultation within a specified period of time (e.g. within
30 or 60 days).
2.2.14 If both parties agree to initiate a formal consultation, they are likely to consult informally on relevant
administrative arrangements such as the date of initiation of the talks, the likely maximum period of availability of the
respective delegations at the talks (or at the opening round) and the negotiating venue, a site in the territory of one of the
two parties, typically a seat of government, or some other mutually agreed location. Some States follow a custom
whereby the delegation of the requesting party travels to the territory of the bilateral partner for the first round, with
subsequent rounds alternating between the two territories. In addition, the rank of an intended delegation chief can be a
matter of concern to the other party, particularly if it is perceived to be too low or too high for the intended consultation.
2.2.15 Also as part of pre-consultation contacts, one or both parties may provide the other with proposed
concepts or even proposed texts for consideration. This provision could include, when no agreement is already in place,
a party’s model bilateral air transport agreement, a standard format document which contains the regulatory
arrangements the providing party typically seeks to include in such agreements and the wording formulations it prefers.
2.2.16 During the pre-consultation contacts, the parties are also likely to indicate to each other the topics they
wish to have considered and even a preferred order of consideration. Disagreements about the topics and their
consideration may arise and persist or an informal or formal agenda may be agreed. Arrangements for interpretation
may require agreement.
2.2.17 Since 2008 many States also use the ICAO Air Services Negotiation Event (ICAN), a meeting facility
established by ICAO that provides a central meeting place for States to conduct a multiple number of bilateral, or
regional or plurilateral, air service negotiations or consultations with their partners, either to initiate bilateral talks or
conduct negotiations.
2.2.18 The amount and kinds of preparation undertaken by the parties during the pre-consultation period may
differ widely. They will depend upon perceptions of the importance of the consultations, available personnel resources
and the degree of time and effort the State is willing and able to apply to the task. Generally, each party gathers and
analyses relevant quantitative and qualitative data.
2.2.19 The quantitative data gathered and analysed in preparation for a consultation are likely to include, inter alia:
a) existing and projected air service and traffic volumes, market shares and relevant load factors (overall,
in particular city-pair markets and on particular types of air services);
b) historic or potential carrier revenues; and
c) airports, tourism and trade data;
as related to known or anticipated issues.
2.2.20 The qualitative data gathered and analysed in preparation for a consultation are likely to include:
a) facts about each party’s relevant policies and overall air transport negotiating objectives;
b) the known concerns of the air carriers of each party and of other interested entities;
c) detailed information about matters in dispute or potentially at issue;
d) information about positions taken or results achieved by the other party in similar circumstances;
e) historical information on the bilateral air services relationship;
f) information about members of the other delegation and how their particular interests might diverge
from the general interests of that delegation; and
g) information about bilateral air transport relationships of the other party with third parties (such
information may be found from an online database kept by ICAO, the World’s Air Services
Agreements (WASA), formerly the Digest of Bilateral Air Transport Agreements (Doc 9511), which
contains both the texts of all the bilateral air transport agreements collected by ICAO including those
filed by States, and summaries of their main provisions that can be sorted by using the search function
of the database).
2.2.21 To prepare for the talks, each party is also likely to hold internal consultations (or further internal
consultations) among the concerned governmental entities (typically those responsible for civil aviation and for foreign
affairs, and sometimes others), as well as with the national airline(s) and interested non-governmental parties. Based on
such consultations, and the prepared data, each party develops its confidential negotiating position. A negotiating
position or position paper is an expression of international negotiating objectives and priorities which reflects the party’s
air transport policies, as well as possible negotiating fall-backs or alternative objectives, if any. It may also set out the
major issues, scenarios for their outcome, strategies to be followed, data and analyses, the relevant views of interested
parties, as well as comments on the anticipated positions of the other party. It usually requires the approval of higher
authorities. When approved, it constitutes the instructions of the delegation.
2.2.22 The delegation or negotiating team is typically composed of civil aviation and diplomatic officials,
representatives of the national airline(s) and in some cases other interested parties (e.g. airport, city, labour, tourism),
and is usually chaired by a designated civil aviation or foreign affairs official. When the consultation takes place outside
the home territory, an embassy official is likely to be on the team. In some States, officials of relevant organizations will
represent groups such as airlines, airports, cities and labour.
2.2.23 Decisions made when putting together the negotiating team can have important consequences both during
the consultation and for its outcome:
a) Should the head of delegation be the highest ranking official or should that person be an official from
the customary lead ministry or department, even if of a lower rank? Alternatively, should diplomatic
and negotiating knowledge, experience and skills be determinative of the selection?
b) Should individual team members be chosen or assigned based solely upon required knowledge,
experience and skills (such as in route analysis or tariff evaluation) or should the selection criteria
include and give weight to the adequate representation of interested departments, bureaus, or interest
groups?
c) Should the number of individuals on the team be maximized within available resources so as to
ensure a variety of potential contributions to the team effort or should it be minimized for greater
efficiency in internal team decision making during the consultation or negotiation?
d) When consultation with a second party tends to occur with some frequency, if not regularity, is it more
important to maintain continuity of experience with the issues involved with that second party by
assigning the same people, or more important to assign people on some other basis?
2.2.24 In practice, a scarcity of available personnel resources may dictate the team composition for all or many
consultations. Alternatively, the decisions taken on team composition may reflect adherence to established practices
and/or practical compromises.
2.2.25 The names and positions of the delegation or negotiating team are usually provided in advance to the
other party, both as a matter of courtesy and for practical administrative considerations, such as for entry into secured
premises, seating at the meeting table and representational social events.
2.3 CONSULTATIONS AND NEGOTIATIONS: TYPES OF MEETINGS AND DOCUMENTS
2.3.1 A formal bilateral consultation or negotiation usually begins with welcoming remarks by the chairperson of
the host delegation and the chairperson of the visiting delegation, which are likely to include or be followed by
introductions of the members of each delegation.
2.3.2 Administrative arrangements, such as agreed working hours and the availability of rooms where
delegations may caucus privately, are indicated and possibly discussed. Agreement may be sought on what
confidentiality the talks should have, in particular on whether there should be independent or joint statements to the
communications media. The order in which topics are to be considered, which may or may not constitute a formal
agenda, is likely to be mutually determined (if not done in advance). Social arrangements are announced.
2.3.3 Substantive oral communication between the delegations can take place in various fora, the most common
being the plenary, any formal meeting between the two delegations. This contrasts with a principals’ meeting, which is
one limited to the chairpersons and most senior members of the delegations, or a chairpersons’ meeting, a private
meeting of the heads of delegations. The chairpersons may also appoint as appropriate, a working group, or expert
group consisting of one or a few expert members from each delegation who are given the task of working out matters of
detail or technical issues. When agreement on major issues is imminent or is reached in the plenary, the chairpersons
may appoint a drafting group, which is composed of one or a few experts from each side who prepare the relevant texts
covering the matters being agreed.
2.3.4 The terms round, round of consultations, round of negotiations, consultation round and negotiating round
are imprecise ones variously used to denote either a period of time, usually one of days or weeks, during which the
consulting or negotiating teams are together at the same venue or (alternatively) a series of such gatherings spaced
over a longer period and held for a single purpose such as the conclusion of a new air services agreement.
2.3.5 Documents examined during a consultation or negotiation (after having been previously transmitted) or
otherwise employed during or at the conclusion of a round of talks, are likely to have names used in diplomatic practice
which may be unfamiliar to air transport regulators, airline officials and other non-diplomats on or in communication with
the negotiating team.
2.3.6 The diplomatic note, or simply note, is the most widely used form of written communication between an
Ambassador or Embassy of one State and the host State’s foreign minister (secretary) or ministry (department). The
diplomatic note takes various forms. A formal note or first person note is a diplomatic note from the signer or initialing
person which is likely to begin “Excellency (Sir), I have the honour to ... etc.” as distinct from a third person note, which is
a signed or initialed communication not written in the first person, a form which is most often reserved in modern practice
for routine messages. It typically begins “The Embassy of ... presents its compliments to the Ministry of Foreign Affairs
and ... etc.” or “The Ministry of ... etc.”. A note verbale is a note in the third person which, as a rule, is neither addressed
nor signed. Some States consider a third person note to also be a note verbale, i.e. that there are only two types of
notes, formal notes and notes verbales.
2.3.7 During a consultation or negotiation, one party to the discussion may present to the other an aide-mémoire,
a paper which serves as a memorandum or written reference regarding the topic(s) of discussion. Alternatively, a non-
paper, a rarely used document type which serves the same purpose but has no identified source, title, or attribution and
no standing in the relationship involved, may be presented.
2.3.8 In the course of a formal consultation or negotiation, either delegation or both may employ some form of
consultation (negotiation) working paper, however titled, a paper which provides information, sets forth a proposal,
suggests draft language or serves some other temporary purpose confined to the talks themselves. In modern practice,
in the course of a consultation or negotiation, whether formal or informal, either party’s representatives may simply
address the other party’s representatives by letter, delivered by hand or electronically.
2.3.9 An agreed minute is an official record, agreed by both parties (typically State delegations to a consultation
or negotiation) of what was said or done at a meeting. A memorandum of consultation is a less formal record of the
outcome of a meeting which typically, but not invariably, does not constitute in itself an agreement or an understanding.
An agreed press release or an agreed joint press release is sometimes issued to inform the public about progress in a
consultation or negotiation.
2.3.10 When a consultation or negotiation results in an agreement on substance and text, the chairperson of each
delegation will initial each page and each correction of the prepared text. This exercise of initialing their agreement
serves as a guarantee of the text’s authenticity prior to its reproduction in a form suitable for formal signature. An ad
referendum agreement or agreement ad referendum is one which has been initialed and is being examined and
reviewed by the competent authorities of each party (either because the negotiators do not have the power to commit
their governments to the agreement or wish to have it reviewed by their governments, a process during which
modifications of an editorial/technical nature, and sometimes agreed substantive changes, may be made) before it takes
effect.
2.4 CONSULTATIONS AND NEGOTIATIONS: STRATEGIC AND TACTICAL CONSIDERATIONS
2.4.1 There are numerous strategic considerations and decisions which a head of delegation is likely to have to
resolve, ones which may well have lasting impacts upon the entire round of meetings.
2.4.2 All negotiations and some consultations concern issues of actual or potential conflict between the parties
and all deal with common interests. The common interests may be identical (for example, in the provision of needed air
services by a carrier of one party to an airport in the territory of the other party), or complementary (for example, the
opening of one new route by a carrier of one party and another new route by a carrier of the other party).
2.4.3 Each head of delegation has a basic choice between attempting to focus discussion on the issues in
conflict, setting out the position of that delegation and perhaps the distinctions between it and that of the other party or,
on the other hand, identifying and focusing on aspects of common interest which could form bases for agreement while
de-emphasizing or remaining silent on the areas of conflict. The former approach may be seen as evidence of a firm
resolve not to back down or compromise. The latter approach can produce a less confrontational and more positive
climate. Its use, however, requires care to avoid conveying unintentionally an erroneous impression, either one of lack of
resolve and determination to achieve objectives, or one of unimportance of the issues involved.
2.4.4 Some heads of delegation prefer to have statements of position or objectives on every issue “on the table”
early in the round. Others prefer to remain silent or vague on their preferred or possible positions on various issues until
they can assess the results achieved on other issues.
2.4.5 In a complex negotiation either or both negotiators may take the position that all issues must be resolved
before any are agreed. This has the advantage of assuring interested parties that certain individual interests will not be
forsaken in order to achieve agreement on other matters which might be deemed of greater importance. The principal
disadvantage of this approach is that it stretches out the overall negotiating period and in so doing increases the risk that
unforeseen outside factors may intervene to unravel the individual understandings reached but not definitively agreed
pending an overall understanding on all issues.
2.4.6 Also, in a complex or otherwise difficult negotiation in which an impasse has been reached, either
negotiator may suggest an exchange of papers presenting new ideas on how to overcome the impasse and proceed
with the negotiation. Fresh ideas can have a positive aspect. The danger is that a comprehensive paper may be
prepared by each side which is likely to focus on and exacerbate issues of conflict while locking in (assuming the
position was achieved by an internal consensus) the party to a particular position from which compromise may not be
possible. An even more risky result could come about should one party agree to negotiate on the basis of the other’s
idea (position) paper.
2.4.7 A negotiator’s own role perception is also quite important. One view is that the principal role should be one
of defender and advocate of the position of the negotiator’s government. An alternative view holds that the principal role
of a negotiator is one of solving the other negotiator’s problems (in ways which, of course, resolve the problems and
meet the objectives of the first negotiator).
2.4.8 Some negotiators may focus on reaching agreement to employ a particular regulatory arrangement or
regulatory device (for example, a specific capacity formula). Others may focus on the broader objectives behind the use
of a regulatory arrangement or device, thus increasing the probability of finding common grounds for agreement through
some alternative arrangement or device.
2.4.9 Where negotiations are deadlocked after several rounds, some States have found it helpful to each assign,
as negotiators/team leaders, higher level officials or appropriately experienced professionals not previously involved.
Fresh, and without memories of failed bargaining efforts, yet with the same or greater negotiating authority, they could
employ new skills, strategies, tactics, etc. to break the impasse.
2.4.10 Alternatively, or additionally, negotiators could make greater or exclusive use of delegation chairpersons’
meetings, principals’ meetings, working groups or expert groups (all previously defined). Using yet another approach,
each State could assign a prominent and experienced person not involved in the negotiations who would communicate
privately with each other, attempting to devise a framework agreement, in this situation a document containing the broad
outlines of a package of mutually acceptable solutions, with the details left to be inserted later, possibly by a drafting
group (with the risk, however, of a future deadlock over some details). Such an agreement could, in theory, also be
reached using any of the above types of sub-delegation meetings, but in practice, a successful outcome by that route is
less likely.
2.4.11 Another strategic consideration is whether or not to use any confidential side understanding(s). Such use
denies transparency to the agreement and either means that a confidential understanding would lose its confidentiality
when it became available to the public upon filing with ICAO (as required by Article 83 of the Chicago Convention) or
that it would not be filed with ICAO and consequently each State’s obligation to file would not be fulfilled.
2.4.12 On the tactical side, a negotiator is likely to consider it objectionable for the other side to introduce a new
issue of conflict or to make a new demand without adequate warning or an opportunity for that negotiator’s team to fully
consider the matter. One approach which ameliorates this effect is to present the issue or demand as one which could
be examined in a future round.
2.4.13 A negotiator may choose to employ warnings, threats, bluff or commitments. A warning is an effort to make
the other negotiator or negotiating team aware of the consequences that are likely to follow from a failure on the other’s
part to act in a certain way. A threat, on the other hand, is an assertion that the negotiator or the government the
negotiator represents will act explicitly in some way to bring about some loss to the government represented by the other
negotiator. A bluff is a threat which the threatener is not determined to carry out. A commitment, in this context, is some
action taken or to be taken by a negotiator, or the government of that negotiator, to lock either one into a difficult-to-
change position (for example, one created by new legislation which is difficult to amend or repeal). When presented as a
warning or a threat before any action is taken, a commitment may provide negotiating leverage.
2.4.14 The use of specificity and ambiguity has both tactical and strategic considerations. Each has different
purposes.
2.4.15 Specificity can lock in one party’s interpretation of a particular arrangement and make the arrangement
clear to all. The danger is that as specificity increases, the usefulness of the text can be reduced when circumstances
change over time.
2.4.16 Ambiguity, in which each party may be tacitly left free to provide its own interpretation, is an often useful
tactical device to get around some issue which cannot be resolved. To the extent a text is purposely ambiguous, it might
be termed equivocal. Strategically, like a partial agreement it intentionally leaves some issue for possible future conflict
and possible future resolution.
Note.— Equivocation in expressing a negotiating position is quite a different matter and adds to the user’s
flexibility while increasing the difficulties of the other negotiator.
2.5 CONCLUSION, IMPLEMENTATION, MANAGEMENT, DISPUTE RESOLUTION,

AMENDMENT AND (EXCEPTIONALLY) TERMINATION OF AN AGREEMENT
2.5.1 The text(s) of a formal agreement, as prepared during the ad referendum process, will normally be
identical for each party in all respects except one. That is, each State is entitled to precedence, i.e. placement of the
name of one State in the title, opening, and signature block, before that of the other State in the basic agreement
document retained by the first State.
2.5.2 The formal signing of an agreement sometimes takes place at a ceremony at which designated officials of
the government party to the agreement sign the agreement. Before a formal signing, the designated officials of each
party may make available to the other their Full Powers, i.e. a document emanating from the competent authority of a
State designating a person or persons to represent that State for negotiating and concluding a treaty/agreement with
another State. Agreements can also be formally concluded by an exchange of diplomatic notes. Some States have a
national requirement that bilateral agreements be subject to ratification, a process of examination and approval by the
appropriate governmental elements or legislature which must be concluded before the agreement can take effect
definitively.
2.5.3 States may decide, for practical reasons, to have the agreement enter into force on a provisional basis
immediately after the signature, followed by a final entry into force after each party has notified the other that it has
performed the acts necessary for ratification.
2.5.4 A State may also assume the rights and obligations of an agreement between two other States by
succession to a bilateral agreement, a formal statement by a State formerly under the jurisdiction of a party to a bilateral
agreement that it will assume the rights and obligations that pertain to it under that agreement. This arrangement is often
temporary, for example, until a State newly independent of the jurisdiction of one of the parties can negotiate its own
agreements, but in some cases the arrangement may continue indefinitely. Succession to air transport agreements has
been accomplished by unilateral declaration to that effect made to the Secretary General of the United Nations or by
entry into a memorandum of understanding or exchange of notes with the former sovereign party or the other party to
the relevant agreement.
2.5.5 Typically the first action taken by a State to implement a bilateral air transport agreement is the designation
or formal naming of its air carrier(s) to perform services under the agreement. It is normally done by diplomatic note. The
carrier(s) may then apply to the second State for appropriate operating authorization.
2.5.6 States use consultation on a continuing basis to manage the relationships established by their bilateral air
transport agreements. Technical problems in bilateral air services relationships are typically handled by routine
consultation between the air transport authorities of the two States.
2.5.7 Consultation is virtually the only means of dispute resolution used between parties to bilateral air transport
agreements. The principal advantage of consultation for dispute resolution is the use of a familiar method, usually by
people who understand the issues. The principal disadvantage is that the only parties involved are those who are likely
to have well-established views on the issues and are thus less likely to be sufficiently objective and flexible to resolve the
dispute.
2.5.8 Bilateral agreements may also provide for arbitration, a means of dispute settlement where the issues are
referred to an arbitral tribunal for resolution. An arbitral tribunal is usually made up of three arbitrators, one nominated by
each party and the third (usually a national of a third State) nominated by the first two, the third person acting as its
President, who decide specific, mutually agreed question(s) concerning actions in dispute under the bilateral air
transport agreement.
2.5.9 Some agreements provide that if the parties or their nominees fail to name their arbitrators within the
specified time a prominent person such as the President of the Council of ICAO or the President of the International
Court of Justice be requested to do so. The tribunal usually decides on its own procedures. The two States may,
however, negotiate the questions to be decided, what documents will be presented and the order in which each State
will present its witness(es) and written and oral arguments. A decision of an arbitral tribunal is binding on both parties.
Arbitration is rarely used because it is a costly and time-consuming process.
2.5.10 The use of good offices, i.e. impartial assistance by a third State, an international organization, or
prominent individual to persuade the two parties to negotiate their differences is rare in air transport dispute resolution.
Similarly exceptional is the use of mediation, i.e. conciliatory efforts by a third State, an international organization, or a
prominent individual which not only bring about negotiation between the parties but do so, on the basis of proposals
made by the mediator.
2.5.11 Some States consider that an adverse unilateral action in a bilateral dispute (for example, suspending a
foreign airline’s authorization) is not permissible until the dispute resolution procedures of the agreement (including
arbitration if agreed) have been exhausted. Other States maintain that a proportionate action, i.e. one taken by a party
which preserves or restores but does not enhance that party’s position, may be taken before or during consultation or
arbitration, or failing the implementation of an arbitral decision.
2.5.12 Amendments or modifications to the bilateral agreements are agreed upon through consultation between
the parties. They may be embodied in a memorandum of understanding, agreed minute, exchange of letters, or protocol,
but are usually effected by an exchange of diplomatic notes.
2.5.13 Most bilateral air transport agreements do not have an expiry date, but almost all have a termination article
or denunciation article.
Note.— Certain parts of a bilateral agreement, for example possible temporary understandings on capacity,
may expire on their own terms after a specified period of time or some agreed occurrence.
2.5.14 Denunciation of an agreement is the formal notice given by one party to the other party to the agreement of
the first party’s intent to cease being bound by the agreement, usually as of the end of a period specified in the
agreement.
Note.— In a rare case, it may be possible to denounce an agreement only in part.
2.5.15 Denunciation is uncommon, but may follow a failure of dispute resolution procedures. The normal
expectation is that during the period between denunciation of an agreement and its consequent expiry, the parties will be
able to negotiate a new agreement. Should renegotiation fail, in the absence of a new agreement States are likely either
to make ad hoc arrangements to enable air services to continue between the two countries or choose to end air services
between their territories by the respective air carriers and rely upon the air carriers of third countries to provide services.
______________________
Chapter 3
STRUCTURE OF BILATERAL REGULATION
3.1 INTRODUCTION
3.1.1 The structure of bilateral regulation of international air transport is that of a large and growing body of
documents, each of which constitutes an agreement, understanding or arrangement between two States, and thus a part
of international law. In contrast to both national and multilateral regulation, bilateral regulation involves no permanent
institutions or organizations.
3.1.2 To explain the structure of bilateral regulation, the first section of this chapter identifies the basic document
types used in the bilateral regulation of international air transport. The second section defines or describes the typical
provisions of bilateral air transport (services) agreements. The final section identifies several types of bilateral
agreements on subjects closely related to air transport.
3.2 BASIC DOCUMENT TYPES
3.2.1 A bilateral Air Transport Agreement or Air Services Agreement, the basic document most often used by
States to jointly regulate their international air services relationships, is likely to consist of a textual body (preamble,
articles, signatures), an annex or annexes, possible attachments and any agreed amendments. Such an agreement is
often referred to by those who work regularly in the regulation of international air transport simply as a bilateral.
3.2.2 Most bilateral air transport agreements cover only scheduled international air services, but a few also
regulate non-scheduled international air services. A Non-scheduled Air Services Agreement or a Charter Agreement
regulates non-scheduled or charter air services separately from scheduled international air services. A Memorandum of
Understanding (MOU) is a less formal type of agreement which, notwithstanding the lesser formality, may be as binding
as a formal agreement and may cover either or both types of international air services.
3.2.3 A Chicago Agreement or Chicago-type Agreement is one patterned on a standard form bilateral
international air transport agreement drafted at the 1944 Chicago Conference for use as an interim measure to
exchange routes and traffic rights pending the conclusion of a multilateral air transport regulatory regime, an objective
which was not reached (the text may be found in Recommendation VIII of the Final Act of the Chicago Conference, 7
December 1944). Capacity and tariffs were not to be regulated under such a regime, therefore a Chicago Agreement
typically does not have capacity and tariff provisions, with an assumption that their exclusion implies non-regulation of
these matters by either party. Relatively few Chicago-type agreements remain in effect.
II-3-1
3.2.4 The Bermuda Agreement between the United Kingdom and the United States, signed at Bermuda on
11 February 1946, effected a compromise between advocates of detailed regulation and those of non-regulation of basic
matters such as capacity and tariffs and in effect, established the Bermuda-type Agreement as a model for many other
bilateral air transport agreements worldwide. However, a large number of agreements subsequently concluded between
States (over half of the bilateral agreements registered with ICAO), while incorporating the Bermuda principles and
terminology (see Part II, Chapter 1), also employ a predeterminist approach to capacity regulation. On 23 July 1977 the
original Bermuda Agreement was replaced by a more complex and detailed Bermuda II Agreement, thus the original
agreement and agreements patterned after it have come to be known as the Bermuda I Agreement and the Bermuda I
type Agreement respectively.
3.2.5 Soon after conclusion of the Bermuda II Agreement, and following the start of deregulation in the United
States in 1978, a number of States entered into agreements generally known as liberalized air agreements which are
characterized by greater market access, minimal (if any) capacity regulation and significantly reduced governmental
controls on air carrier pricing. Some include other liberalizing provisions as well, on matters such as charter flights, all-
cargo services, and computer reservation systems.
3.2.6 With the spread of liberalization in the 1990s and in a return to an idea first espoused in 1942, and
subsequently during and immediately after the Chicago Conference, some partner States have concluded a so-called
Open Skies Agreement, a type of agreement which, while not uniformly defined by its various advocates, would create a
regulatory regime that relies chiefly on sustained market competition for the achievement of its air services goals and is
largely or entirely devoid of a priori governmental management of access rights, capacity and pricing, while having
safeguards appropriate to maintaining the minimum regulation necessary to achieve the goals of the agreement.
3.2.7 To facilitate and assist States in their regulatory reform and adjustment, ICAO has developed, for optional
use by States, two template air services agreements (TASAs), one for the bilateral context and the other for regional or
plurilateral situations; each includes provisions on traditional, transitional and most liberal approaches, including optional
wording, to the various elements in an air services agreement of its type. Explanatory notes are also provided for the use
of the corresponding options or alternative approaches. The TASAs can be found in Doc 9587 — Policy and Guidance
Material on the Economic Regulation of International Air Transport.
3.3 TYPICAL PROVISIONS OF BILATERAL AIR TRANSPORT (SERVICES) AGREEMENTS
3.3.1 Although bilateral air transport agreements and air services agreements, which number in the thousands,
generally tend to have the characteristics of a particular type of agreement, each one is unique. Nevertheless, these
agreements typically have in common numerous types of essential provisions most of which, while not identical, have a
similar thrust. Such commonly found provisions are identified in the following paragraphs.
3.3.2 The Preamble, which is the initial part of the agreement, identifies the contracting parties or simply parties
(the two involved governments), presents their reasons for entering into the agreement, and declares that they have
agreed to what will follow in subsequent parts of the agreement.
3.3.3 An article is the primary sub-part of the agreement, is typically numbered sequentially, and may or may not
be titled; may in some cases identify several such sub-parts taken collectively when they deal with aspects of the same
subject (such as capacity or tariffs); and, in the latter sense, is identical in meaning to bilateral clause (although clause
also identifies a subsection of an article).
3.3.4 A definitions article, often the first article of the agreement, assigns meanings for the purposes of that
agreement to terms used in the text, typically those used more than once.
Chapter 3. Structure of Bilateral Regulation II-3-3
3.3.5 A grant of rights article expresses the main purpose of the agreement, that of the grant by each contracting
party to the other contracting party of rights specified in that article or elsewhere, such as in the route schedule(s), to
operate the agreed air services.
3.3.6 A fair and equal opportunity article (or some variant thereof such as “fair and equitable” or “fair”) sets forth
a general principle which each party to an agreement may rely upon to ensure against discrimination or unfair
competitive practices affecting its designated carrier(s). Alternatively, the principle may be stated in a clause in the
capacity article or elsewhere in the agreement. The article is sometimes expanded to specifically require consideration
of the interests of the other party and its air carrier(s). The opportunity provided is for the designated carrier(s) of each
party and may be stated as “to compete” or “to operate”.
3.3.7 A designation and authorization article grants the right to name an air carrier, or more than one air carrier,
to operate the agreed services and establishes the limited conditions under which the other party may deny an operating
authorization to such carrier(s). The conditions for denying (including withholding) of an operating authorization are
typically those of substantial ownership and effective control not being vested in the designating party or in its nationals,
and/or an insufficient disposition to conform to the laws and regulations of the receiving party and/or an inability to meet
airworthiness standards. More recently, some agreements have used an alternative to the typical ownership and control
requirement by allowing the acceptance of a designated airline which is incorporated and has its principal place of
business in the territory of the designating State.
3.3.8 A revocation or suspension of operating authorization article grants each party a right to revoke or suspend
the operating authorization already granted to an air carrier of the other party if the carrier no longer meets a specified
condition, usually one of the same conditions established for the grant of such authorization.
3.3.9 A capacity article lays down the agreed principles or method for regulation of the amount(s) of services
offered or to be offered under the agreement. Detailed models of a pre-determination type capacity article, a Bermuda I
type capacity article, and a free-determination type article were developed by ICAO to provide guidance on three
alternative regulatory approaches to capacity clauses and may be found in Doc 9587.
3.3.10 A tariff article establishes procedures for the establishment and regulation of prices on the agreed air
services. Detailed models of a double approval clause, a country of origin clause and a dual disapproval clause were
developed by ICAO to provide guidance on three alternative regulatory approaches to tariff clauses or articles and may
be found in the bilateral Template Air Services Agreement (TASA) contained in Doc 9587.
3.3.11 A statistics article typically provides for exchange of airline traffic data related to the agreed services, either
periodically or as needed for the regulation of capacity, for route evaluations, or for other purposes.
3.3.12 A commercial operations article or commercial opportunities article (or articles) specifies the rights granted
to each party’s designated air carrier(s) to carry out commercial activities in the territory of the other party. These rights
are sometimes referred to as “doing business rights” or “soft rights” and are likely to include the establishment and
extent of foreign staffing of airline offices, sales in local or convertible currency, ground handling options, currency
conversion and remittance of funds by airlines, and in some cases, airline cooperative arrangements such as
codesharing and/or leasing arrangements. It may also cover access to landing and take-off slots at airports and/or use of
computer reservation systems (CRS). An airport slots article and/or a computer reservation systems article are
sometimes used to cover these two “soft rights” separately.
3.3.13 “Hard rights” has come into some use as a collective term of contrast to include route, traffic, operational
and capacity rights which are considered more valuable and enduring, hence “hard”. Pricing rights are sometimes
placed in one category and sometimes in the other. In some agreements, one or more of the “doing business rights”
listed above are given their own distinct articles.
3.3.14 A fair competition article, a relatively new inclusion in some recent bilateral agreements, especially liberal
ones, lays down agreed general principles and/or specific provisions governing competition in the provision of air
services by the parties’ designated airlines.
3.3.15 An airworthiness article typically provides for the mutual recognition by the parties of each other’s
certificates of airworthiness, certificates of competency and licences. This provision is sometimes placed in a safety
article, which also covers an agreed course of action for the parties to take concerning the maintenance of safety
standards (such as consultation procedures and corrective action requirements).
3.3.16 An aviation security article, an addition in recent years to many bilateral air transport agreements, sets
forth procedures for cooperation between the parties to avoid or deal with situations involving acts or threats of unlawful
interference with the security of civil aviation. The model clause adopted by the Council of ICAO for use by Member
States can be found in the TASA contained in Doc 9587.
3.3.17 A customs duties and taxes article requires each party to exempt from duties, taxes and charges, the
aircraft fuel, spare parts and supplies used by the other party’s air carrier(s) (see also ICAO’s Policies on Taxation in the
Field of International Air Transport (Doc 8632)).
3.3.18 A taxation article (in the absence of a separate tax agreement) exempts from taxation the corporate
earnings of the air carrier(s) of the other party and may, in some cases, extend to cover the earned incomes of air carrier
employees (see also Doc 8632).
3.3.19 A user charges article sets forth agreed principles regarding charges for the use of airports and route air
navigation facilities by the designated air carrier(s) of the other party (see also ICAO’s Policies on Charges for Airports
and Air Navigation Services (Doc 9082)).
3.3.20 An application of laws article establishes that the national laws of one party related to the operation,
navigation, and admission and departure of aircraft apply to the air carrier(s) of the other party.
3.3.21 A consultation article sets forth the agreed procedures for consultation between the parties or their
aeronautical authorities (often with a time requirement for the consultation to take place) and may include an
amendment clause (sometimes a separate amendment article) which establishes procedures for amending or modifying
the agreement.
3.3.22 A settlement of disputes article sets forth agreed measures for resolving disputes between the parties.
Such measures routinely include consultation and sometimes arbitration.
3.3.23 A termination article or denunciation article specifies how a party may end its commitments under the
agreement, typically one year after receipt by the other party of a formal notice to that effect. Some agreements provide
for a shorter notice period, such as six months, or in exceptional cases, allow for denunciation or termination of only
parts of the agreement.
3.3.24 A multilateral agreement article provides that if a multilateral agreement accepted by both parties,
concerning any matter covered by the agreement, enters into force, the agreement shall be amended so as to conform
with the provisions of the multilateral agreement.
3.3.25 A registration article reiterates the obligation of the contracting parties (when both are Contracting States of
ICAO) to register the agreement with ICAO, as required under Articles 81 and 83 of the Chicago Convention.
Chapter 3. Structure of Bilateral Regulation II-3-5
3.3.26 An entry into force article establishes how and when the agreement will take effect, typically upon the
conclusion of an exchange of diplomatic notes. It may specify provisional effectiveness and may or may not anticipate a
process of ratification by either or both parties.
3.3.27 The signature provisions at the end of the agreement indicate the date and place of signature and specify
the language versions. Although most agreements having more than one language version provide that each version is
equally authentic, agreements can provide that in the event of conflict between the language versions, the text of one
specified language will prevail.
3.3.28 The agreement may have one or more than one annex, an attachment usually considered to be part of the
agreement, which typically sets forth route, traffic and operational rights but may also or separately cover other topics
(e.g. capacity, charter flights). The subjects of an annex are usually ones which, in contrast to the articles in the main
body of the agreement, are likely to be modified from time to time by the parties or their aeronautical authorities to
respond to changed circumstances. An annex can usually be amended more quickly than an article of an agreement,
particularly if formal ratification of an amendment to an article is required under the laws of either party. The most
common annex is the route annex which contains the route schedule(s) or descriptions of the routes over which the
designated airline(s) of each party may operate the agreed services, and the conditions or restrictions applicable to
certain or all routes.
3.3.29 To facilitate and assist States in their regulatory liberalization, ICAO has developed a comprehensive
bilateral template air services agreement which has all the articles typically found in a bilateral air services agreement
(Policy and Guidance Material on the Economic Regulation of International Air Transport (Doc 9587)).
3.3.30 A protocol is an attachment to an agreement which clarifies, adds to, or in some cases, amends it. An
exchange of letters, or more than one such exchange, supplements an agreement or understanding, typically by setting
forth in the initiating letter one party’s statement on a particular action, interpretation, policy, supplemental understanding,
etc., and in the letter of response, the other party’s acceptance or acknowledgement.
3.4 TYPES OF BILATERAL AGREEMENTS ON SUBJECTS

CLOSELY RELATED TO AIR TRANSPORT
3.4.1 In addition to bilateral air transport agreements, States have concluded certain other types of bilateral
agreement on subjects closely related to air transport.
3.4.2 An agreement on the avoidance of double taxation relating to air transport services is an agreement not to
tax the corporate earnings of airlines of the other party, and in some cases, the incomes of the airline employees of the
other party. Alternatively, two States may have a more general agreement on taxation which obviates the need for one
limited to air services tax matters.
3.4.3 A preclearance agreement is an agreement which permits some or all of each party’s or only one party’s
entry formalities (e.g. customs, immigration, agriculture, public health) to be carried out in the territory of the other State.
3.4.4 An agreement on airline crew visas is one which facilitates the entry of airline crew members of one party
into the territory of the other party, often by waiving the visa requirement or by granting multiple entries. Some States
may extend such treatment to resident airline staff of the other State.
3.4.5 Agreements on certificates of airworthiness, agreements on communications, agreements on duties on fuel

(now rare, this topic typically being included in air transport agreements), agreements on meteorology and agreements
on search and rescue cover the topics indicated by their titles and may also be concluded by those who negotiate air
services agreements.
3.4.6 An aviation security agreement serves the same function as an aviation security article in the absence of a
comprehensive air transport agreement or air services agreement.
______________________
Chapter 4
KEY ISSUES OF BILATERAL REGULATORY

4.1 INTRODUCTION
4.1.1 This chapter discusses five key issues of the bilateral regulatory process and structure:
a) balancing benefits in a liberalizing environment;
b) the shortcomings of bilateral regulatory structure, such as lack of transparency and inadequacy of
dispute resolution mechanisms;
c) bilateral relations involving groups of States;
d) application of competition law to air transport; and
e) effects of State aids/subsidies.
4.1.2 The practice of using bilateral agreements and arrangements to regulate international commercial air
services is content-neutral, that is, the regulatory regime may range from one of detailed governmental regulation of
tariffs, capacity and routes, to one where the bilateral partners allow their airlines wide latitude to serve the market as
they wish. Thus, the question is not whether bilateral agreements are, by their nature, restrictive or liberal, but whether
or not States wish to continue to use such agreements (and if so, how) to meet their need to participate in a more
competitive international air transport system marked by new commercial and marketing initiatives of air carriers.
4.2 BALANCING BENEFITS IN A LIBERALIZING ENVIRONMENT
4.2.1 States have consistently used the bilateral regulatory process to create bilateral regulatory structures to
achieve the numerous benefits they seek. The negotiating process thus necessarily seeks such benefits, and the
resulting structures (i.e. air transport agreements) thus necessarily are devised to provide such benefits. When
concluding the negotiating process, each Party independently satisfies itself that a balance of benefits (or an imbalance
favourable to it) has been achieved.
4.2.2 While “fair and equal opportunity” has been accepted by many States as a general principle in the bilateral
exchange of rights, traditional bilateral air service agreements are often based in practice on the concept of a balance of
measurable benefits (traffic carried or revenues earned or projected to be carried/earned) by the respective air carriers
of each State. Market access is thus granted (or restricted) in an effort to achieve an approximate equality of results for
those air carriers in the carriage of traffic between the two States (the “penetration” approach). However, many other
bilateral air service agreements are based on a balance of opportunities or equal access to the markets in each State,
without an expectation that the air carriers of the respective States should or would achieve a quantitative balance in
results (the “access” approach).
II-4-1
4.2.3 Bilateral regulation of international air transport has the flexibility to accommodate the policies of a wide
range of States of different sizes and at different stages of economic development, with air carriers of varying strengths
and capabilities. States often rely on bilateral air service agreements to promote and/or protect the international air
service of their national air carrier(s). Consequently, a State’s participation in the international air transport system is
largely measured in terms of the commercial operations of its national carrier(s).
4.2.4 The tendency of international air carriers to seek to maximize their access to and penetration of global and
regional markets by using cooperative commercial arrangements (such as pooling and interlining) with other
international air carriers has always been present but is now taking new forms (joint ventures, code sharing, alliances,
mergers, franchising) with several implications for the process and structure of bilateral regulation.
4.2.5 The implications of these developments for the process of bilateral regulation include the following:
a) Where the air carriers involved in cooperative arrangements such as code sharing have extensive
market access in third States, they can substantially affect traffic flows to and from such States. This
may require either or both bilateral partner States to consult or negotiate with a substantial number of
third States to secure any necessary authorization for the aspect of the cooperative activity which
occurs in their jurisdictions.
b) Negotiating a bilateral balance of benefits becomes more difficult when a substantial portion of the
benefits are derived in third States and when benefits must be apportioned between and among air
carriers in, for example, a joint venture. In the future, negotiators may have difficulty in determining on
behalf of which air carrier(s) they are negotiating, for example, where there is substantial investment
by a foreign air carrier in a national air carrier.
c) The value of the benefits themselves becomes more difficult to quantify when several international air
carriers are involved in, for example, a joint marketing arrangement.
4.2.6 The implications of these developments for the structure of bilateral regulation include the following:
a) Some cooperative arrangements, for example involving air cargo, can be seen as efforts to avoid
restrictions in bilateral air services agreements and thereby, in effect, to operate outside the bilateral
framework.
b) Other cooperative activities, such as code sharing, could be prevented on some routes and permitted
on others because of the inconsistent treatment or definition of traffic rights among the bilateral
agreements with involved third countries.
c) Extensive investment by foreign air carriers in national ones could undermine the concept of a bilateral
balance of benefits based on nationally owned and controlled airlines.
4.2.7 The growth in the number of bilateral air services agreements itself has tended to undermine the traditional
concept of a balance of benefits between air carriers of the two States. As bilateral air services agreements proliferate,
there are more and more potential opportunities for air carriers of third States to serve bilateral city pairs indirectly, via
their homeland. This increase in opportunities for so-called “sixth freedom” services may be heightened by air carriers
resorting to “hubbing” operations within their States. As more and more traffic between city-pairs of bilateral State
partners moves indirectly via third countries, it becomes more difficult to measure the bilateral traffic flow which has its
true origin/destination in the two bilateral partner States.
Chapter 4. Key Issues of Bilateral Regulatory Process and Structure II-4-3
4.2.8 Adapting bilateral air services agreements to new cooperative activities of international air carriers may
require the use of new criteria to determine a bilateral balance of benefits. These might include, for example, measuring
the balance in terms of international air services per se (regardless of which air carrier provides them) or in terms of
according the same market access in both countries for all designated air carriers (without the need, for example, to
balance the opportunities in terms of an equal number of traffic points for the designated air carriers of the respective
States). At present, in some instances, States consider the benefits of increased tourism and/or exports by air to be
sufficiently important, in effect, to justify exceptions to the principle of a bilateral balance of benefits measured in terms of
the results for the respective designated air carriers.
4.2.9 Use of the foregoing criteria may overcome or ameliorate the balance of benefits issue. It would not,
however, eliminate a need in some circumstances to deal with a substantial number of third States which are affected by
cooperative arrangements authorized bilaterally. This could perhaps be lessened somewhat if States could agree on
standard definitions of terms which reflect the rights air carriers seek via cooperative arrangements. For example, if a
substantial number of States were to agree that the term “traffic rights” included the right to code share or use a blocked
space arrangement to serve a market, there would be less need to deal bilaterally with all the States affected by a
cooperative air carrier activity.
4.3 SHORTCOMINGS OF BILATERAL REGULATORY STRUCTURE
4.3.1 One shortcoming of the bilateral regulatory structure is a lack of transparency, i.e. openness of agreements
and understandings reached and accessibility by non-party States and individuals with an interest in their contents.
Although States are required by Articles 81 and 83 of the Chicago Convention to file all aeronautical agreements with
ICAO where they are open to inspection, some agreements, especially side agreements such as memoranda of
understanding, are kept confidential and not filed with ICAO, other agreements are filed only after delays of many years
and some agreements are not filed by either party.
4.3.2 Full compliance with the requirement of the Chicago Convention to file all agreements with ICAO could
significantly increase badly needed transparency. One possible way to improve this situation, as recommended by ICAO,
is to include a provision in their bilateral agreement which clearly designates a party (for example, the party of the place
of signature of the agreement) to be responsible for the registration of their agreement upon its signature or entry into
force (which can be found in Doc 9587).
4.3.3 A second and perhaps more serious shortcoming is the inadequacy of the dispute resolution mechanisms
contained in bilateral air transport agreements. These agreements generally provide a consultation mechanism,
arbitration procedures and a termination clause. When a dispute arises between the parties that is resolved in a fairly
short time by informal or formal consultation procedures, no shortcoming exists. If, however, the parties remain
deadlocked in the consultation process, their only options are:
a) to consult again, with the probability that positions would not have changed and the additional
consultation would fail; and/or
b) to invoke arbitration, a process so costly and time-consuming that its use in air transport regulation
has been extremely rare; and/or
c) to take unilateral action which the other party is most likely to regard as a violation of the agreement
and a basis for similar action on its part; and/or
d) to give notice of termination of the agreement (typically one year’s notice is required) and, following
termination, to attempt to resolve the problem on the basis of comity and reciprocity.
4.3.4 This shortcoming could possibly be overcome by the use of impartial experts (acting as individuals or in
panels), preferably independently selected, under rules and procedures designed for very rapid dispute resolution at
minimal cost. Based on this concept, ICAO has developed a mediation mechanism, in the form of a model clause, for
optional use by States additional to and in between the traditional consultation and arbitration processes (which can be
found in Doc 9587).
4.3.5 A third and significant shortcoming stems from its ad hoc character. Although the use of bilateral air
services agreements allows States to take into account each other’s differing circumstances and situations, it also
produces a wide variation in how certain key issues, such as traffic rights, capacity and tariffs, are treated. Thus, each
bilateral air transport agreement tends to be somewhat unique in nature and can only be reliably implemented with an
understanding of its particular circumstances rather than by reference to standard terminology. For example, an
agreement may:
a) adhere to the standard format of preamble, articles and one or more annexes, yet have its own
particular order of articles, subject titles, placement of agreed elements, annex structure, etc.; and/or
b) mix standard texts for capacity and price regulation but have deviations or inconsistencies (such as
incorporating so-called “Bermuda principles” of capacity regulation yet intending or allowing for the
predetermination of capacity); and/or
c) have been intended to be a State’s standard form or model text, yet contain many deviations sought
by the partner State that reflect compromises reached.
4.3.6 A fourth shortcoming that can create significant problems for multi-country operations is the difficulty in
obtaining and maintaining the essential consistency in route descriptions in each of the agreements involved. For
example, an air carrier would generally find it helpful and perhaps necessary, when operating a long linear route which
requires stops in several countries, to have the ability to take on and discharge passengers and cargo at each stop. This
would require the State designating the air carrier to secure the appropriate rights from each State where a stop is made
which may take an inordinate amount of time or which may not be possible. However, with the trend of liberalization, this
situation may be improved when States concerned conclude liberal (e.g. open skies) agreements providing for more
open market access and route rights.
4.3.7 A fifth shortcoming is the lack of standard definitions of terms, i.e. the terminology employed in various
bilateral agreements may be defined differently, even in conflicting ways, by different States (for example, fifth and “sixth”
freedoms).
4.3.8 One way to ameliorate or overcome these shortcomings would be to continue to expand the practice of
using “model clauses” (such as various ones developed by ICAO) in addition to certain standard terminology taken from
the Chicago Convention. A second way might be to create a multilateral framework agreement composed of
standardized articles or clauses on relatively non-controversial subjects to serve as an “umbrella” for bilateral
agreements which would contain provisions for sensitive topics such as agreed market access and capacity and pricing
regulation. A third way would be to create a well drafted plurilateral or multilateral agreement text; however, its design
would have to ensure adequate recognition of the differences between particular bilateral relationships that are now
reflected by the ad hoc character of bilateral agreements. In this regard, the template air services agreements recently
developed by ICAO (Doc 9587) could be a useful tool that will assist in the standardization process.
4.4 BILATERAL RELATIONS INVOLVING GROUPS OF STATES
4.4.1 With the growth of regionalism, at times accompanied by some unification in the economies, as well as the
intergovernmental relations of the States involved, issues arise over whether, and if so how, other member States of a
group (such as an economic union) or the regional body itself should become involved in the extraregional bilateral air
transport relations of individual member States. Each ascending level of such involvement presents separate issues.
4.4.2 The first level of involvement by a non-party (to a bilateral relationship between a member State of a
regional group and an extraregional State) could occur when such a member State consults and/or coordinates with
another or other member State(s). Such consultation and/or coordination could:
a) help standardize the extraregional bilateral agreements of member States;
b) mitigate possible concerns of other member States that the results of the consultation or negotiation
could prejudice their interests;
c) lengthen and/or complicate the consultation or negotiation; and
d) increase the difficulties of reaching agreement because non-party interests are involved.
4.4.3 A second level of involvement could be the physical presence at the bilateral consultation or negotiation of
a representative or representatives of other member States of the group or of a group representative, as observer(s).
Considerations for both parties to the bilateral meeting include:
a) what would be the benefits or disadvantages;
b) whether the non-member party would accept the presence of any such observer(s);
c) how would the role of non-party observer be delineated; and
d) which non-party States would be represented, with the assumption that the interests of those not
represented would either be adequately represented or not be affected by the negotiation.
4.4.4 Note that the above considerations would not exist in joint bilateral negotiations where one member of a
regional group has been duly authorized to negotiate on behalf of all members of the group.
4.4.5 A third level of involvement could be the actual conduct of the bilateral consultation or negotiation by a
representative of the regional group on behalf of a member party. Such involvement could raise questions of:
a) acceptability to the extraregional party of dealing with a non-party negotiator;
b) potential uneasiness on the part of the member State party about being represented by a non-national
negotiator; and
c) possible doubts on the part of the extraregional party about the ability and willingness of the member
State party to fully carry out the terms of any agreement reached.
4.4.6 Note that the above questions need not arise in a joint bilateral negotiation with member State parties on
one side and an extraregional party on the other.
4.4.7 A fourth level of involvement could be the conduct of the bilateral consultation or negotiation by a
representative of the regional group where the two signatory parties are or would be the extraregional State and the
regional group as a single entity. Such a potential consultation or negotiation:
a) may have, as a raison d’être of the regional group, the perception of greater negotiating leverage than
possessed by member States acting individually;
b) may well be perceived by outside States, in particular developing countries, as threatening;
c) can only be undertaken by a supra-State that has powers over member States sufficient to ensure that
what it has agreed will be carried out; and
d) may produce an agreement which could be perceived by the group members as benefiting one of the
member States more than (or to the detriment of) another.
4.4.8 Note that a regional body that lacks the legal and institutional structure of a supra-State and thus could not
be an obligated signatory party could nevertheless conduct joint bilateral negotiations, i.e. at the third level of
involvement.
4.4.9 A final consideration is that while consultations or negotiations at the above levels are or could be
considered as being multinational, they are all bilateral or joint bilateral, not multilateral, in character. The distinctions are
that:
a) multilateral consultations/negotiations/agreements deal with binding relationships of each party to

each other party or to all other parties as a collective, whereas at each of the above levels the regional
group member State parties maintain separately governed relationships with each other; and
b) the relationships at each of the above levels are with only one outside party; therefore, withdrawal by
that party from the agreement would terminate it (as in the case of any other bilateral agreement and
in contrast to a multilateral agreement which would normally continue after denunciation by a single
party).
4.5 APPLICATION OF COMPETITION LAWS TO AIR TRANSPORT
4.5.1 International air transport is a commercial activity where strongly differing views exist among States as to
desirable levels of protection, competition and industry cooperation. Prior to the 1990s, States, individually or collectively,
generally either did not apply national competition laws to international air transport, or exempted it from the scope of
such laws, sometimes with certain conditions designed to mitigate perceived anti-competitive effects. Consequently,
bilateral air transport agreements contained no clauses which dealt specifically with the application of competition laws,
although some agreements did contain certain competition principles and commitments to avoid unfair or predatory
practices.
4.5.2 Since then, with increasing globalization and widespread adoption of the market economy, there has been
a marked rise in the adoption of competition laws by States, spreading gradually from developed economies to other
parts of the world. By 2003, some 90 countries had competition laws of some sort. As liberalization progresses and
takes hold in more States, the traditional concepts to ensure fair competition tend to gradually give way to the application
of competition laws, particularly in cases where States have agreed to an open competition system.
4.5.3 In recent years, the use of such laws to deal with air transport has occurred not only with more frequency
but also has encompassed an increasing number of issues, ranging from antitrust immunity, mergers and alliances,
abuse of dominant position, capacity dumping and predatory pricing, sales and marketing, to airport charges and fees,
State aid and loan guarantees.
4.5.4 A major challenge facing air transport regulators is how to define or distinguish between normal and anti-
competitive practices. While efforts have continued at national and international levels to devise competition guidelines,
reliance has increasingly been placed on analyses and development of standards through a case-by-case approach. To
address this issue, ICAO has developed, as part of a safeguard mechanism in the form of a model clause, an indicative
list of possible anti-competitive practices which States may use in identifying unacceptable behaviour in the marketplace
and in considering appropriate regulatory action (which can be found in Doc 9587).
4.5.5 One of the potential problems associated with the application of national competition laws is the differing,
sometimes even conflicting, regimes employed by States (for example, regulations dealing with mergers or alliances,
denied boarding). This could cause particular difficulties for airlines operating international air services when they have
to cope with different rules in different countries. While repeated efforts have been made at the international level with a
view to harmonizing competition regimes, global consensus has proven to be difficult to obtain, due to the different legal
systems involved and the disparity in their scope and content. It is therefore important that States, when dealing with
competition issues involving foreign air carriers, give due consideration to the concerns of other States involved and
avoid taking unilateral action. In order to increase transparency and facilitate harmonized or compatible regulatory
regimes, ICAO developed a compendium of States’ competition policies and practices, which is made available at the
ICAO website: http://www.icao.int/sustainability/Compendium/Pages/default.aspx.
4.5.6 The extra-territorial application of national competition laws could also undermine certain airline
cooperative arrangements (for example, interlining, tariff coordination) which are regarded by many as essential for the
efficiency, regularity and viability of international air transport. Where antitrust or competition laws apply to such
arrangements, States often grant immunity or exemptions, sometimes with certain conditions, to permit inter-carrier
cooperation where they benefit users and air carriers.
4.5.7 With respect to disputes that may arise from applying national competition laws or the various safeguard
measures, States usually rely on the consultation process available under relevant air services agreements. In this
regard, ICAO has also developed a number of specific guidelines for States and a model clause for air transport
agreements on the avoidance or resolution of conflicts between States over the application of national competition laws
(which can be found in Doc 9587).
4.5.8 While national and regional approaches to competition laws continued to differ, a number of bilateral
antitrust enforcement cooperation agreements have been entered into by States, particularly between developed
countries. These agreements have proven useful for dealing with matters such as cartels and mergers/alliances. At the
same time, there has been recognition that enforcement cooperation alone would not resolve some significant areas of
procedural and substantive differences among antitrust regimes, and that these differences would need to be addressed.
4.6 EFFECTS OF STATE AIDS AND SUBSIDIES
4.6.1 Unlike other commercial sectors, participation is an expectation in international civil aviation. This could be
traced to Article 44 of the Chicago Convention which mandates ICAO, as an objective of the Organization, to: “Insure
that the rights of contracting States are fully respected and that every contracting State has a fair opportunity to operate
international airlines.”
4.6.2 The ability of an airline to sustain its operations and continue participating in international air transport is
not only dependent upon its relative input cost base and productive efficiency, realized under different market
circumstances, but also is often supported by various direct, indirect or implicit State assistance.
4.6.3 State aids/subsidies to air carriers by governments have existed since the beginning of commercial air
transport. They have been provided at all stages of national or aviation development and have taken a wide variety of
forms.
4.6.4 At the bilateral level, State assistance has also in effect been common because the bilateral air transport
framework itself has conventionally provided a non-monetary form of implicit assistance to national air carriers in their
own markets by limiting the scope of competition. Liberal air services agreements concluded in recent years have
substantially reduced or eliminated such implicit assistance by a State in some markets.
4.6.5 The objectives of State assistance are varied, but as regards the international arena, have often been
aimed at maintaining the participation of national air carriers in the air transport markets concerned and at ensuring
continuity of air services to/from their territories. Developing countries, in particular, are concerned about
overdependence on foreign carriers to provide international air services, especially in bad times when the services may
be adversely affected. Some States also regard the survival of their own air carriers as a definite means of providing an
effective assurance of services.
4.6.6 However, State aids/subsidies which confer financial benefits on national air carriers that are not available
to competitors in the same international markets could distort trade in international air services and can constitute or
support unfair competitive practices.
4.6.7 For example, a national air carrier which receives a fuel subsidy for all international flights would potentially
enjoy an unfair competitive advantage in all international markets in which it competes directly or on an interline basis. If
the national air carrier uses its fuel subsidy to consistently charge less on routes on which it is a significant competitor,
there would be an adverse impact on competing air carriers.
4.6.8 There are a number of different State aids/subsidies that may distort competition. In the form of financial
aids to national air carriers, they include but are not limited to:
a) the provision of State funds for the purposes of covering operating losses, avoiding insolvency,
financing of restructuring or expansion;
b) partial or full cancellation of air carrier debt to the government;
c) the guarantee of loans;
d) the giving of “soft” loans (i.e. at below-market rates of interest or with insufficient collateral); and
e) the assumption of air carrier debt owed to other parties.

4.6.9 Other State aids/subsidies may take a less direct form, yet still provide the air carrier with a financial
benefit. These include such items as:
a) preferential tax treatment;
b) funding of unemployment benefits to national air carrier workers whose services are declared
redundant;
c) measures in bankruptcy laws which, after a declaration of insolvency, grant legal relief from certain
financial obligations for extended periods in order to permit the air carrier to continue operations while
attempting to reorganize; and
d) cross-subsidization measures, for example, charging higher airport fees for international than
domestic flights, thereby benefiting national air carriers which operate both types of flights.
4.6.10 All the foregoing State aids/subsidies have the potential to enable the air carrier receiving them to engage
in anticompetitive actions, such as excessive capacity, and predatory pricing.
4.6.11 There are also State aids/subsidies which can adversely and unfairly affect competing non-national air
carriers. These include, for example, State aids/subsidies of a direct nature, such as payment of security costs for
national air carriers (but not those of foreign air carriers).
4.6.12 Other types of State aids/subsidies may distort competition and adversely impact competing international
air carriers by reserving certain segments of the market to national air carriers. Examples include the requirement that
originating international mail be shipped only or predominantly on national air carrier(s) and so-called “buy national”
policies, which require that all or most governmentally paid air transport be on a national air carrier.
4.6.13 In an increasingly competitive environment, an increasing number of air carriers, particularly privatized
ones, are concerned about competitors that continue to receive State aids/subsidies. To minimize the potential adverse
effects on competition in the marketplace, particularly in the case of direct financial aids/subsidies, several States (and
groups of States) have developed rules on State aids/subsidies, which provide criteria to meet very specific objectives
only where better alternatives are unavailable. Related information may be found through the compendium compiled by
ICAO on States competition policies and practices: http://www.icao.int/sustainability/Compendium/Pages/default.aspx.
4.6.14 The major practical complication is the difficulty in quantifying the full scale of State assistance owing to the
existence of various indirect or implicit assistance measures. Only direct aids/subsidies in monetary form can be
quantified to some extent, although different accounting methods and reporting practices make it difficult to produce a
comparative assessment of them. Furthermore, actions by States over perceived levels of assistance that may be
considered to distort competition have the potential to lead to retaliatory actions by other States in view of differing
attitudes towards such assistance.
4.6.15 The legitimacy of a State aid or subsidy depends upon its capacity to cause an adverse or distortive effect
on competition. It can do so, for example, by enabling the benefited carrier to offer a below-cost tariff. Yet objectively the
correct cost data to back up a claim of distortive effect is problematic. The allocation of costs to particular city-pairs
involves an arbitrary decision. There may be a plethora of discount fares and conditions. Modern yield management
techniques and marginal pricing allow some seats on a flight to be sold below fully allocated cost while still covering the
marginal cost of filling an otherwise empty seat.
4.6.16 It is also very difficult to determine the impact of a one-time State aid granted to certain carriers in order to
compensate them for losses incurred in situations such as government-imposed closure of airspace or an airport. The
situation becomes worse in cases where such financial aid is considered by competing foreign carriers as beneficial to
the recipient carriers to the extent that it represents a figure that is more than the actual loss incurred by the
compensated carriers. An anti-competitive effect may also come from a State’s (typically a developed State) provision of
unlimited war risk insurance coverage to its airlines. Similarly, State aid in the form of an unfair allocation of scarce
airport landing and take-off slots can be considered distortive of competition. Again, a variety of assumptions and
arbitrary conclusions could be involved in any assessment.
4.6.17 In a situation of transition to liberalization or in an already-liberalized market, there may be exceptional

circumstances where State assistance can produce economic and/or social benefits even though such assistance may
affect market competition. So far as the ad hoc aids/subsidies are concerned, financial restructuring may serve to
facilitate the transforming process of less efficient airlines as was the experience in the European Union.
4.6.18 The government decisions on airline restructuring finances are usually made against a background of
social and political pressures to save national airlines and to ensure that the transition to more efficient operations is
achieved at the lowest cost to those most affected, in particular to labour and creditors. However, without well-defined
conditions (including goals, adequate time frame and long-term plans) and stringent regulatory mechanisms for
enforcement, information disclosure and monitoring, restructuring finances could have the effect of simply protecting less
productive airlines without fostering internal efficiency. Restructuring finance of airlines, therefore, needs to be
accompanied by clear criteria and methodology if it is to achieve its intended purpose.
4.6.19 Some forms of subsidies in support of minimum levels of air services to remote areas may also be justified
from the social interest perspective, provided that they are allocated transparently and effectively. In such circumstances,
they can ensure the provision of a service satisfying fixed standards of continuity, regularity, capacity and pricing,
standards which the air carrier may not assume if it were solely considering its commercial interest.
4.6.20 A traditional method to meet such social needs has been to rely on implicit ways such as cross-
subsidization across the network through the strict regulation of market entry and tariffs, but the regulatory cross-
subsidization system is considered neither transparent nor likely to stimulate efficiency.
4.6.21 A more effective and transparent alternative may be to provide direct financial subsidies for non-
remunerative local services with institutional arrangements such as competitive tendering/bidding systems that clearly
define selection criteria applicable to the ways in which subsidies are awarded. Since the tendering/bidding systems
grant subsidies and operating rights to the most efficient carriers, they may serve to keep the costs of subsidies low, as
demonstrated by the domestic experiences in several States. At issue is to what extent this mechanism used in
domestic contexts could be applied to international services.
4.6.22 With respect to participation aspects of State assistance through air services agreements, some special
supportive measures deviating from the traditional bilateral arrangements based strictly on reciprocity may be justified to
help instil the required level of confidence among various States to pursue diligently the processes of liberalization.
4.6.23 For example, in the case of air services arrangements with a developing country, such assistance may
take the form of preferential measures, i.e. non-reciprocal regulatory arrangements which States in a regulatory
relationship agree are needed by a developing country for its effective and sustained participation in international air
transport.
4.6.24 In other cases, States may consider participation measures, i.e. regulatory arrangements which are
available to all States and are designed to build confidence for States involved in progressively moving to a less
restrictive regime and to ensure that the results of increasing competition, while not equal, do not become too unequal
(e.g. in respect of capacity, tariffs and market access).
4.6.25 In this regard, ICAO has developed a list of potential preferential measures and participation measures
which can be found in Doc 9587. In addition, a model clause has also been included in the ICAO template air services
agreements (also contained in Doc 9587) to address the participation issues as transitional measures. All these are
designed to provide less competitive carriers with an unreciprocated right or preparation time to enable them to develop
a service that cannot be contested fully by competitors in a certain period. In this way, States with less competitive
carriers may be more likely to commit to stepping forward to progressive liberalization. For example, preferential
measures can provide a “head start” for less-competitive airlines wishing to have greater opportunities (for example, by
granting more traffic points), and allow a developing country to introduce liberalization progressively (for example, to
open up its market at a later stage).
______________________
Chapter 5
TYPES OF INTERNATIONAL AIR SERVICES NEGOTIATIONS
5.1 The growth of regional economic communities or unions of States, and the public consideration being
given in some such communities and by individual States to group negotiations involving an organization of States
(and/or intra-group consultations regarding negotiations by a member State), has created a need for a typology of
possible patterns. The initial diagrams in this chapter show a typical bilateral negotiation (Type 1), i.e. a negotiation
between two parties, most often between two sovereign States, and a much less typical joint bilateral negotiation
(Type 2), i.e. a simultaneous negotiation between one State and two or more other States regarding separate bilateral
agreements (which are likely to occur when two or more States have the same airline). They then set forth various types
which do or would involve an organization or organizations of States (Types 3 through 8). The diagrams identified as
Types 9a, 9b and 9c show variants of ways to develop a new form of agreement, one which could arise through a
process which overlaps the typical bilateral negotiation and the multilateral negotiation (Type 10).
5.2 The type of international air services negotiation that occurs most frequently is the typical bilateral
negotiation between two sovereign States (see Type 1).
5.3 In some situations, joint bilateral talks may facilitate reaching separate but similar agreements, particularly
when certain States have the same airline (for example, Denmark, Norway and Sweden) (see Type 2).
5.4 Bilateral agreements can sometimes be facilitated by working through an organization of States. This
occurred, for example, in the negotiation of detailed annexes to the 1982–1991 Memorandum of Understanding between
the United States and certain European Civil Aviation Conference (ECAC) States about North Atlantic pricing
(see Type 3).
5.5 A State which is a member of an organization of States may consult with and receive input from partner
States of a group as it carries on bilateral talks with a non-group member State (for example, negotiations between one
European Union State and a non-EU State) (see Type 4).
5.6 A variant of this could be negotiation between two States, each being a member of a group of States and
each consulting with and receiving input from partner States of their respective organizations (for example, talks
between a State in the Caribbean Community (CARICOM) and a State in the European Union) (see Type 5).
5.7 Another type of bilateral negotiation could involve a State on the one hand and a group of States on the
other (for example, the negotiation between the European Union and Switzerland concerning the integration of the latter
into the European Economic Area (EEA)) (see Type 6).
5.8 Similarly, it could involve two States jointly negotiating separate agreements (with much in common) with a
group of States, but wishing to exclude air services between their territories (for example, possible talks between two
North American States and the European Union) (see Type 7).
5.9 Future bilateral negotiations could even occur between two groups of States (for example, between the
Andean Pact and the European Union) (see Type 8).
II-5-1
5.10 Negotiations could also occur for a plurilateral agreement, i.e. an agreement that could initially be bilateral
but be capable of being expanded to involve additional parties (the so-called “expanding bilateral”) (see Type 9a) or
could, from the start, involve three or more parties, in both cases parties that share similar regulatory objectives which
are not so widely held as to make feasible a typical multilateral negotiation (see Type 9b). It would likely be open to other
States to join. This is exemplified in the “open skies” agreement concluded by several members of the Asia-Pacific
Economic Cooperation Forum (the “Kona Agreement”).
5.11 A variant of the plurilateral agreement could come about if certain parties wish to exclude the coverage of
air services between their territories (see Type 9c).
5.12 In contrast to all of the above types, the typical multilateral negotiation involves many more parties within a
global, regional or other multi-party grouping, which may or may not all share similar regulatory objectives but negotiate
together to create an agreement, usually one open to other States to join (see Type 10).
Type 1
Typical
bilateral
negotiation
State Bilateral State

A agreement B
Process: Negotiation between two sovereign States.
Type 1. Typical bilateral negotiation

Chapter 5. Types of International Air Services Negotiations II-5-3
Type 2
Joint
bilateral
negotiations
Bilateral agreement State

B
State Bilateral agreement State

A C

D
Process: Joint simultaneous negotiation of separate agreements.
Type 2. Joint bilateral negotiations
Type 3 Facilitated
bilateral
negotiations

B

C
Organization
State Bilateral agreement of State
A States D

E

F
Process: Multilateral organization provides common framework for separate

bilateral negotiations.
Type 3. Facilitated bilateral negotiations

Type 4 Bilateral negotiation with one party

consulting with and receiving input from
partner States of a group
State State
A C
State
D
Organization
Bilateral agreement of State
States E
State
F
State State
B G
Process: Multilateral organization provides common framework for intra-

organizational consultations before, during and/or after bilateral negotiation.
Type 4. Bilateral negotiation with one party consulting with and receiving input
from partner States of a group
Type 5 Bilateral negotiation with each party

consulting with and receiving input from
partner States of a group
State State
I State C
A
State State
J D
Organization Organization
State of Bilateral of State
K agreement E
States States
State State
L F
State State State

M B G
State State
N H
Process: Multilateral organizations provide common frameworks for intra-

organizational consultations before, during and/or after bilateral negotiation.
Type 5. Bilateral negotiation with each party consulting with and receiving input
from partner States of a group
Type 6
Bilateral negotiation between
one State and a group
State
B
State
C
State Bilateral Organization State

A agreement of D
States
State
E
State
F
Process: Group of States yields negotiating powers to a common organization or

supranational authority.
Type 6. Bilateral negotiation between one State and a group
Type 7 Joint bilateral negotiations

between more than one State and a group
State
State Bilateral B
A agreement
State
C
Air services by
carriers of A and H much commonality Organization State
between A and H of D
not covered States
State
E
State Bilateral State

H agreement F
Process: Group of States yields negotiating powers to a common organization or

supranational authority.
Type 7. Joint bilateral negotiations between more than one State and a group
Type 8 Bilateral negotiation

between two groups of States
State State
A F
State State
B G
State Organization Bilateral Organization State

C of agreement of H
States States
State State
D I
State State
E J
Process: Two groups of States each yield negotiating powers to their respective
organization or supranational authority.
Type 8. Bilateral negotiation between two groups of States
Type 9a
Development of
plurilateral agreement
State State
A Plurilateral agreement B
Bilateral open to subsequent adherence
State Adherence by other State(s) over time State

C D
Process: Two States sharing similar regulatory objectives which are not widely held
conclude agreements so drafted as to permit subsequent adherence by other States.
Type 9a. Development of plurilateral agreement

Type 9b
Development of
State State
A Plurilateral agreement C
State State
B Multilateral open to subsequent D
adherence
Adherence by other State(s) over time

State State
F E
Process: Three or more States sharing similar regulatory objectives which are
not widely held conclude agreements to which other States may later adhere.
Type 9b. Development of plurilateral agreement
Type 9c
Development of
State State
A B
Plurilateral agreement
Air services by
carriers of A
and C between Open to subsequent adherence
A and C not
covered
Adherence by other State(s) over time
State State
C D
Process: That of Type 9a or Type 9b. Certain States wish to exclude coverage of
their air carriers’ services between their territories.
Type 9c. Development of plurilateral agreement

Type 10
Multilateral negotiation
State State
X A
State State
K B
State State
J C
Multilateral agreement
State State
I D
State State State State

H G F E
Process: Global, regional or other multilateral negotiation.
Type 10. Multilateral negotiation
______________________
Part III
MULTILATERAL REGULATION
III-(i)
Chapter 1
INTRODUCTION TO MULTILATERAL REGULATION
1.1 GENERAL
1.1.1 Multilateral regulation is regulation undertaken jointly by three or more States, within the framework of an
international organization and/or a multilateral treaty or agreement, or as a separate specific activity, and may be broadly
construed to include relevant regulatory processes and structures, outcomes or output written as treaties or other
agreements, resolutions, decisions, directives, or regulations, as well as the observations, conclusions, guidance and
discussions of multinational bodies, both intergovernmental and non-governmental.
1.1.2 The goal of multilateral regulation in the air transport field is, for the most part, the conclusion,
implementation, or continuance of common arrangements, policies, agreements or regulations on matters of interest to
the various parties. This chapter provides a brief history of the multilateral regulation of international air transport.
1.1.3 The most basic process of multilateral regulation is that of communication and interaction at multinational
meetings undertaken to examine issues, adopt recommendations or resolutions, or conclude or amend
intergovernmental or non-governmental agreements. Multilateral processes also include ad hoc and recurrent
interactions between international organizations as well as activities particular to the operation of treaties. Chapter 2
explains process in the field of multilateral regulation.
1.1.4 The structure of multilateral regulation has an institutional component made up of many intergovernmental
and non-governmental organizations. In addition, the structure of multilateral regulation has a legal component
embodied in numerous multilateral treaties and similar instruments as well as in binding and non-binding resolutions,
recommendations and decisions of international organizations. Chapter 3 explains the first component by describing
features such organizations have in common and identifying certain generic terminology of the legal component as well
as relevant worldwide and regional treaties and agreements.
1.1.5 Chapter 4 examines certain key issues of process and structure in the multilateral regulation of
international air transport.
1.1.6 Chapter 5 is devoted exclusively to the International Civil Aviation Organization (ICAO).
1.1.7 Chapters 6 to 8 identify certain other intergovernmental organizations: Chapter 6, worldwide

intergovernmental organizations other than ICAO; Chapter 7, regional intergovernmental civil aviation organizations; and
Chapter 8, other regional and trans-regional intergovernmental organizations.
1.1.8 Chapter 9 is devoted to major air transport industry organizations.
1.1.9 Chapter 10 identifies other worldwide, regional and trans-regional non-governmental organizations which
represent air carriers or other aviation interests or otherwise have air transport interests.
1.1.10 Part IV of the manual presents the topics which make up the subject matter or content of regulation.
III-1-1
III-1-2 Manual on the Regulation of International Air Transport
1.2 A BRIEF HISTORY OF THE MULTILATERAL REGULATION

OF INTERNATIONAL AIR TRANSPORT
1.2.1 The history of multilateral regulation in the field of international air transport could be said to have begun in
1910 when the Government of France invited twenty-one European States to an International Conference of Air
Navigation in Paris. This was the first multilateral diplomatic conference convened to consider international aspects of
flight across State boundaries. No agreement was reached, but the notion arising from and debated at the meeting that
States have and should exercise sovereignty over their airspace ultimately became the basis for air transport regulation.
1.2.2 The 1910 conference laid the groundwork for a 1919 diplomatic conference during which an Aeronautical
Commission of the Peace Conference drafted the Paris Convention for the Regulation of Aerial Navigation, also known
simply as the Paris Convention, an accord (adopted by the 1919 Paris Peace Conference) which, inter alia, confirmed
the notion of States’ sovereignty over their airspace. Ultimately, 38 States became parties to this accord. The
International Commission on Air Navigation (ICAN), a permanent Paris-based organization with a full-time Secretariat,
was entrusted with the execution, administration and updating of the Paris Convention. Due to serious shortcomings of
the Paris Convention, however, several major aviation States of that time chose not to ratify it and some States sought
alternative accords.
1.2.3 In 1926, an abortive attempt was made at Madrid, Spain, to create an Ibero-American Convention Relating
to Air Navigation, also known as the Madrid Convention, an accord virtually identical to the Paris Convention but with
equality for States rather than weighted voting. It did not enter into force. A Pan-American Convention on Commercial
Aviation, also known as the Havana Convention, similar to the Paris Convention in content but with no provisions for a
governing body, was signed in 1928 and subsequently ratified by 16 States in the Americas. In the 1930s several other
multilateral conventions to regulate international civil aviation were concluded for application mainly on a regional basis
including, in Latin America, the Buenos Aires Convention of 1935 and, in Europe, the Bucharest Convention of 1936 and
the Zemun Agreement of 1937.
1.2.4 The Chicago Conference, called by the United States at the time of World War II and opened at Chicago
on 1 November 1944, had as its most important outcome the signing of the Convention on International Civil Aviation
(the Chicago Convention) at the ending of the Conference on 7 December 1944. This Conference also produced the
International Air Services Transit Agreement, the International Air Transport Agreement, drafts of 12 technical Annexes
to the Chicago Convention and a Standard Form of Bilateral Agreement. The Interim Agreement on International Civil
Aviation, also produced at the Chicago Conference, brought into being the Provisional International Civil Aviation
Organization (PICAO). PICAO as well as its permanent successor, the International Civil Aviation Organization (ICAO),
sought, inter alia, to produce a more widely acceptable alternative to the International Air Transport Agreement, but
without success.
1.2.5 The negotiation and conclusion of a relatively large body of worldwide air law conventions, chiefly involving
liability and security, then became the focus of multilateral activity in this field. Also, the increasing regionalization of
international economic activities came to be reflected in the development of air transport policies, regulations and even
air transport agreements at a regional level. Increasing internationalization, globalization, liberalization and trans-
nationalization, as well as the inclusion of some aspects of air transport under a General Agreement on Trade in
Services (see Chapter 4), have created renewed interest in new multilateral arrangements for the regulation of
______________________
Chapter 2
PROCESS OF MULTILATERAL REGULATION
2.1 INTRODUCTION
2.1.1 The multilateral regulatory process is very different from that of national or bilateral regulation. The chief
distinctions are that:
a) more entities are involved (governments, international organizations, companies) and they are based
in numerous States;
b) the decisions taken and agreements reached have limited enforceability, if any, in most cases; and
c) relatively little use is made of this process to exchange air transport market access rights or to
regulate their use.
2.1.2 The basic process of multilateral regulation is that of communication and interaction:
a) among parties from three or more States at formal or informal meetings (typically but not always
conducted by or under the auspices of an intergovernmental organization or a non-governmental
organization) undertaken to exchange information and views on matters of common regulatory
concern and/or to develop and seek agreement on joint policies and/or practices regarding aspects of
regulation;
b) between an international organization and other entities (such as its members or other organizations)
in other than a meeting context; and
c) between entities involved in a multilateral treaty.
2.1.3 The multilateral meeting is the most fundamental element of the multilateral regulatory process. The first
section of this chapter describes, in generic terms, the basic steps, procedures and documentation likely to occur at
formal multilateral meetings.
Note.— Informal multilateral meetings are likely to have many of the same elements.
2.1.4 The next section identifies, also in generic terms, the basic processes likely to be undertaken by an
international organization having a formal structure and staff and involving itself in some way with multilateral regulation.
2.1.5 The final section discusses the multilateral treaty process.
III-2-1
2.2 FORMAL MULTILATERAL MEETINGS
2.2.1 A formal multilateral meeting called by and held under the auspices of an international organization
(intergovernmental or non-governmental) is the most typical way taken to exchange information and views on matters of
common regulatory concern to participating entities from various States and/or to develop and seek agreement among
such parties on joint policies and/or practices regarding aspects of regulation. The meeting could be convened as well
by a State or States, especially when no appropriate organization exists or when an objective of the meeting is to create
such an organization.
2.2.2 Multilateral meetings are convened at regular, predetermined times or as needed for specific purposes. A
multilateral agreement establishing an international organization usually specifies when regular meetings of the principal
body or bodies will be held and the procedure to be followed in convening such meetings.
2.2.3 Any meeting among numerous parties having equal status requires a more formal process than that
typically found in national or bilateral regulation (which requires some formality due to diplomatic protocol and agreed
consultation procedures). The multilateral process typically involves a large number of parties having equal status (which
are likely to have varying outlooks and objectives) and thus requires a far more structured order if it is to succeed.
Questions of what is to be discussed, in what order, with what documentation, in which languages and with what kind of
record keeping can assume much greater significance in a multilateral context. An absence or failure of an agreed,
orderly process can introduce confusion and an unproductive shift in discussion and debate from substantive topics to
procedural questions.
2.2.4 Once a decision has been taken to convene a meeting, invitations are extended and invitees are informed
about the purpose, dates, venue, provisional agenda and/or topics to be discussed, as well as administrative
arrangements, and are requested to name those who will attend as representatives of the invited entity.
2.2.5 The formal multilateral meeting may use an accreditation process to ensure that participants do in fact
represent the particular invited entities. Accreditation is an official designation, made by the accrediting government,
organization or other entity, of a person or persons to represent it at the meeting concerned.
2.2.6 Delegations may be asked to submit their credentials, i.e. documents naming them and signed by or on
behalf of the entity they represent which provide evidence of their accreditation. A very formal and large meeting may
establish a credentials committee to ensure that only those authorized to do so participate in the meeting.
2.2.7 The accredited participants from a State or organization are referred to collectively as a delegation. A large
formal multilateral meeting is likely to register participants and to classify them, e.g. as chief delegates, delegates,
alternates, advisers or observers.
2.2.8 A formal multilateral meeting is likely to be conducted under some pre-established rules which may govern:
a) what constitutes a quorum, i.e. the agreed minimum number of delegations required to be present at
the meeting before it can validly conduct business;
b) discussion procedures;
c) voting procedures;
d) the use and establishment of subsidiary bodies of meetings, e.g. working groups or committees;
e) situations in which the meeting is open to the general public and/or the communications media; and
f) other possible activities or occurrences.

Part III. Multilateral Regulation
Chapter 2. Process of Multilateral Regulation III-2-3
2.2.9 The documentation of the meeting will be in one or more pre-agreed languages. Translation and/or
simultaneous interpretation may also be provided.
2.2.10 The documentation used at a formal multilateral meeting is likely to have been prepared by a secretariat, a
delegation or delegations or, in some cases, by a rapporteur, a person appointed to prepare reports, studies, etc., for a
meeting or conference. Each kind of documentation for a formal multilateral meeting is likely to have a particular type
name customarily assigned to it; however, certain document type names have acquired widespread international usage.
They include:
a) agenda, a list of topics to be discussed/decided at the meeting, including a possible provisional

agenda which, after review and acceptance by the meeting, becomes an adopted agenda;
b) order of business, or provisional order of business, a paper which indicates the order or tentative order
in which agenda items and various papers relevant to them are to be discussed;
c) working paper, a paper which provides information, sets forth a proposal, suggests draft language or
serves a similar purpose and invites action by the meeting;
d) information paper, a paper intended solely to provide information, not to be acted upon, but to be
noted;
e) flimsy, a brief paper having no formal status typically used to provide a written formulation of a
proposal or statement made during the discussion;
f) reference or background material;
g) delegation list;
h) administrative announcement;
i) addendum, an addition to any paper;
j) corrigendum, a correction to any paper; and
k) other documentation as required.
2.2.11 The discussion, debate and decision making at a formal meeting is typically managed by an elected or
appointed chairperson who grants or withholds recognition to a delegate or delegation wishing to make an intervention,
an oral statement of fact or opinion and/or a question to the chairperson of the meeting or to another delegate through
the chairperson. In large multilateral meetings delegates are expected, out of courtesy, to limit their interventions and to
make them brief so that all delegations have an opportunity to speak. Given that a chairperson, to be fair, usually
“recognizes” delegations, i.e. calls upon them to speak, in the order in which they request that opportunity, and given
that numerous interventions may occur between the time a delegation requests that opportunity and the time it is
granted, multilateral discussions can be somewhat disjointed and discontinuous compared to bilateral discussions.
During the discussion minutes, a chronological record of the discussion and actions of a meeting (but not a verbatim
record) may be taken and subsequently provided to participants.
2.2.12 At the conclusion of each item on the agenda, the chairperson of a meeting often will summarize the
results of the discussion of that topic and, if a decision is called for, determine whether a consensus exists or a vote is
necessary. Decisions not made by consensus are likely to be made by a simple majority of votes cast, each delegation
typically having a single vote. In certain specified circumstances established rules may require a qualified majority (e.g.
two-thirds or three-fourths of the votes cast or some minimum number within a category of voters) to reach a decision. A
decision by a meeting of an international body is likely to take the form of a resolution or recommendation and may be
embodied in a report of the meeting. The decision(s) of a diplomatic conference may be set forth in a final act, a
diplomatic conference document which includes the treaty or treaties and/or other agreements(s) reached.
2.3 PROCESS WITHIN FORMAL INTERNATIONAL ORGANIZATIONS
An organization engaged multilaterally in some aspect of air transport regulation, whether as an

intergovernmental or a non-governmental body and having a formal structure and staff, is likely to undertake several or
all of the following basic, generically identified functions:
a) supportive functions in advance of and during formal and informal meetings, such as the preparation
of working papers and other documentation, translation and interpretation services as necessary and
physical arrangements at the venue;
b) relational functions with its members, the host State(s) in which its office(s) is/are located, potential
members, other organizations, the public and communications media;
c) continuous substantive functions, such as the collection and dissemination of data and the monitoring
of relevant external activities;
d) recurrent substantive functions, such as the preparation of annual reports;
e) discrete substantive functions, such as undertaking non-recurrent studies;
f) legal functions associated with organizational activities;
g) administrative functions, such as those of personnel and finance; and
h) associative functions or activities performed in support of or in association with other organizations.
2.4 THE MULTILATERAL TREATY PROCESS
2.4.1 A treaty according to the Vienna Convention is an international agreement governed by international law
and concluded in written form: (i) between one or more States and one or more international organizations; or (ii)
between international organizations, whether the agreement is embodied in a single instrument or in two or more related
instruments. A treaty is typically the final product of a diplomatic conference, a meeting of sovereign States convened for
the purpose of adopting a multilateral legal instrument (e.g. the Convention on International Civil Aviation, the
International Air Services Transit Agreement, and other multilateral treaties). The meeting process involved in drafting a
treaty is likely to be that described in the first section of this chapter, with some important variations, which include:
Chapter 2. Process of Multilateral Regulation III-2-5
a) the likelihood of there being a preparatory phase in which States, groups of States and other
interested/ affected parties seek to build a consensus on the purpose and basic outline of the
contemplated treaty via a variety of means, including the use of diplomatic channels, bilateral and
multilateral meetings and supportive activities within the international organization(s);
b) the possibility of advance circulation of a draft text of the treaty (typically prepared by the international
organization concerned) for the views and comments of States; and
c) the probability that each delegation will have full powers.
2.4.2 The preparations and the strategic and tactical considerations involved are likely to be similar to those of
the bilateral negotiating process.
2.4.3 Once the conference participants agree to the text of a draft treaty, the next step is adoption of the text by
the representatives of all States present or by some agreed voting majority. This is followed by authentication of the text
in one or more languages. The authentication of the text of a treaty is usually done by the signature, signature ad
referendum or initialing of the text (or of a final act of the conference which contains the text) by the representatives of
the States attending the meeting who are so empowered. A signature ad referendum must be confirmed by the signer’s
State, for example, by that State’s subsequent action of ratification of the treaty.
2.4.4 The treaty itself may provide that it will enter into force or effect only after the deposit of a certain minimum
number of instruments of ratification, acceptance or approval, documents which formally express the consent of a State
to be bound by a treaty. Acceptance or approval is a way by which a State that participated in the diplomatic conference
but did not sign or initial the treaty may express its consent to be governed by it. An accession is the giving of the formal
consent of a State, which did not participate in the drafting and adoption of a treaty, to be bound by it. Accession can
take place only if the treaty so provides or all the parties have agreed that consent to be bound may be expressed in
such a way.
2.4.5 The depository of a treaty, a State or international organization as stipulated in the treaty, assumes a
responsibility to maintain the official record of which States are parties to a treaty and to inform other participating States
when new expressions of consent to be bound by the treaty are deposited or other actions calling for such notification
occur. If the diplomatic conference at which the treaty was drafted was held under the auspices of a State or an
international organization, that State or organization is likely to be named the depository.
2.4.6 A State, when signing, ratifying, accepting, approving or acceding to a treaty, may declare a reservation,
i.e. a statement indicating other than full acceptance of the treaty, which has the effect of modifying, interpreting, or
simply not applying certain provisions in so far as the reserving State is concerned. A treaty may prohibit reservations,
may provide that only specified reservations may be made, or may not provide for reservations. A reservation should not
be incompatible with the object and purpose of the treaty. The treaty may require acceptance of any reservation by other
parties, either tacit or explicit.
2.4.7 All of the above can occur at any time after the text of a treaty has been adopted. A treaty may also be
applied provisionally pending its entry into force if this is provided for in the treaty or is otherwise agreed by the parties.
Sometimes, it may take a long time for a treaty or an amendment to a treaty to enter into force because of the difficulty in
obtaining the requisite number of ratifications.
2.4.8 Once a treaty has entered into force a copy is sent to the United Nations Secretariat for registration or filing
and recording. An aviation-related treaty involving any ICAO Member State is required to be registered with the Council
of ICAO.
2.4.9 The most fundamental action in the treaty process is that of observance by the parties of what they have
agreed. The international law principle of pacta sunt servanda means that every treaty in force is binding upon the
parties to it and must be performed by them in good faith. Other actions in the treaty process may include interpretation
of the terms of the treaty and dispute resolution, each undertaken by the means provided for it under the treaty.
2.4.10 Once in force, a treaty may be changed in two ways. A modification to a treaty is a change to it brought
about when certain of the parties conclude an inter se agreement, i.e. an agreed alteration of some part of the
application of the treaty solely as between those parties. An amendment to a treaty is a change to it, likely to be
negotiated by all or most of the parties that takes effect when an agreed number of parties have formally accepted it.
2.4.11 There are essentially two ways for a State to cease being a party to a treaty. Denunciation of a treaty is the
giving of formal notice of withdrawal of consent to be bound by the treaty after the period of time provided for such action
by the treaty. Withdrawal from a treaty by a party may take place with the consent of all the parties as a result of an
occurrence such as a material breach, the impossibility of performance of a treaty obligation, or a fundamental change of
circumstances affecting the party.
______________________
Chapter 3
STRUCTURE OF MULTILATERAL REGULATION
3.1 INTRODUCTION
3.1.1 The structure of multilateral regulation of international air transport has:
a) an organizational component consisting of a large and growing number of international organizations,

including intergovernmental and non-governmental, worldwide and regional, trans-regional, formal and
informal organizations; and
b) a legal component embodied in multilateral treaties and similar instruments as well as relevant
resolutions, recommendations and decisions of international organizations, both binding or non-
binding on their members.
3.1.2 The first section of this chapter discusses the basic elements of the organizational component of that
structure that are generic to most international bodies.
3.1.3 The second section defines the basic generic terms used to identify the legal component of multilateral
regulation.
3.1.4 The third section identifies the three principal multilateral instruments produced by the Chicago Conference.
3.1.5 The fourth section lists and briefly identifies the major components of the Warsaw System and the
Montreal Convention of 1999.
3.1.6 The fifth section identifies other air law instruments related to air transport.
3.1.7 The final section identifies the principal regional multilateral agreements that regulate specific aspects of
3.2 BASIC ELEMENTS OF THE ORGANIZATIONAL COMPONENT
An international organization, in the narrow meaning given in the Vienna Convention, is an intergovernmental
organization, i.e. a body composed of two or more States, and in the broader idiomatic sense (used in the manual)
means any organization having chiefly international activities and membership from more than one State, thus including
the non-governmental organization (NGO), a private body having international activities and membership (such as an
association of air carriers from various States). An international organization can:
a) be a formal one, with some written constitutional arrangement, or an informal one;
b) have membership criteria, responsibilities and privileges;
c) be worldwide, regional or trans-regional (i.e. less than worldwide but not confined to a single region);
III-3-1
d) have or not have a headquarters;
e) have or not have other than headquarters offices;
f) have or not have a secretariat, a staff working within an established organizational structure in support
of the organization;
g) have a sovereign body, such as an assembly or a general membership meeting, however titled, which
is convened regularly or at an agreed time and constitutes the final authority of the organization,
setting its policy and conducting its business;
h) have or not have a governing body, a group which directs and carries out the work of the organization
when the sovereign body is not in session; and
i) have or not have subsidiary bodies or advisory bodies on a standing basis, or special bodies to serve
ad hoc purposes, usually set forth in terms of reference, i.e. an approved statement of the goals,
objectives, tasks and constraints or limitations of the endeavour.
3.3 BASIC TERMINOLOGY OF THE LEGAL COMPONENT
3.3.1 The most basic term in the legal component of the structure of multilateral regulation is treaty. The word
treaty:
a) is defined in the Vienna Convention on the Law of Treaties as “an international agreement concluded
between States in written form and governed by international law, whether embodied in a single
instrument or in two or more related instruments and whatever its particular designation” (the Vienna
Convention on the Law of Treaties, which came into force on 27 January 1980 and is widely but not
universally accepted, is a primary source of international law applicable to treaties between States);
b) is sometimes designated as an act, agreement, arrangement, charter, convention, covenant,

declaration, final act or protocol;
c) in the broadest meaning of the term, is any written international agreement concluded between two or
more States, even an exchange of letters or a memorandum of understanding; and
d) in a more narrow meaning, designates only the most formal (and typically multilateral) agreements,
particularly those which require ratification.
3.3.2 A multilateral treaty is likely to be structured to include:
a) a preamble which typically expresses the underlying reasons for, and aims and objectives of, the
treaty;
b) a main body (which may be divided into several parts) having sequentially numbered articles which
provide definitions, substantive content (i.e. particular agreed rights and obligations) and modalities for
the entry into force and continued operation of the treaty itself; and
c) possible annexes and/or accompanying related documents forming part of the treaty.
Chapter 3. Structure of Multilateral Regulation III-3-3
3.3.3 While some form of treaty is the intended decisional output of a diplomatic conference, the decisional
output of a formal meeting of an international organization is likely to be:
a) a resolution, which is a formal expression of the collective opinion or will of an international

organization, having a binding character, typically concerned with a single topic and including
preambular clauses (typically beginning with “whereas”) which explain the background, circumstances
and reasons for the decisions found in the subsequent resolving clause(s), which set forth the
decision(s) reached by the meeting; or
b) a recommendation, which refers to an action which is advisory in nature rather than one having any
binding effect; or
c) a decision in some other form customarily used by the international organization.
3.3.4 Certain Latin words are used without translation in various international treaties, agreements and other
regulatory contents. Those most frequently encountered, but not defined elsewhere, include:
a) a posteriori, based on observation or experience, for example, a review of the progress achieved in
implementing a particular regulatory arrangement (see also ex post facto);
b) a priori, before examination or analysis, or before actual experience, for example, an a priori decision
taken without first gaining actual experience with that activity;
c) ab initio, from the beginning, for example, the discussion of a regulatory topic restarted from the
beginning;
d) bis, literally means twice or second, used to insert a new provision without affecting the subsequent
numbering, for example, Article 83 bis of the Chicago Convention inserted between Article 83 and
Article 84;
e) de facto, in actual fact but not by legal establishment or official recognition, for example, an air service
being offered but not yet lawfully approved;
f) de jure, by law, lawful, legally established, for example, a fully licensed and approved air service;
g) de minimus, very small, for example, too minor to be included in a treaty text;
h) ex parte, on, or in the interests of one side only, for example, an ex parte representation regarding a
regulatory proceeding, or by an interested non-party, for example, by a non-governmental organization
regarding the negotiation of a treaty;
i) ex post facto, after the fact, for example, a bilateral review of the capacity offered and traffic carried on
an agreed air route (see also a posteriori);
j) inter alia, among other things;
k) mala fide, bad faith;
l) mutatis mutandis, with the necessary changes being made, for example, to adapt the terms of a
multilateral arrangement clause for use in a bilateral clause;
m) per se, as such, by itself;

n) prima facie, at first sight, before further examination, for example, an initial interpretation of a treaty
based on what it appears to say (that may later be contradicted and overcome by other evidence such
as the negotiating record);
o) status quo, as things are;
p) status quo ante, as things were (before some event); and
q) suo moto, in its own way.
3.4 THE CHICAGO CONFERENCE DOCUMENTS
3.4.1 The Chicago Conference, held from 1 November to 7 December 1944, produced, inter alia, three major
agreements of significance to the multilateral regulation of international air transport, the most important being the
Convention on International Civil Aviation (Doc 7300), signed at Chicago on 7 December 1944, also known simply as the
Chicago Convention, which provides the fundamental legal foundation for the regulation of world civil aviation, is the
constitution of ICAO, and contains several articles which bear on the economic regulation of international air transport
including:
a) Article 1 on State sovereignty over airspace;
b) Article 5 on non-scheduled flight;
c) Article 6 on scheduled air services;
d) Article 7 on cabotage;
e) Article 15 on airport and similar charges;
f) Articles 17 to 21 on nationality and registration of aircraft;
g) Article 22 on facilitation;
h) Articles 23 and 24 on customs and immigration;
i) Articles 37 and 38 in so far as standards and recommended practices regarding facilitation are
concerned;
j) parts of Article 44 on the aims and objectives of ICAO;
k) Articles 77 to 79 on joint operating organizations;
l) Articles 81 and 83 on the registration of agreements; and
m) Article 96 on air transport related definitions.
3.4.2 Two amendments to the Chicago Convention, which are of air transport regulatory significance, are Article
83 bis which allows the transfer of certain functions and duties from a State of registry of an aircraft to the State of the
operator in case of lease, charter, or interchange, and Article 3 bis which reconfirms the prohibition against the use of
weapons against civil aircraft in flight and sovereignty over airspace.
3.4.3 The other two Chicago Conference documents of importance to the multilateral regulation of international
air transport are:
a) the International Air Services Transit Agreement (Doc 7500; also reproduced in Doc 9587), also
known as the Two Freedoms Agreement, which provides for the multilateral exchange of rights of
overflight and non-traffic stop for scheduled air services among its Contracting States; and
b) the International Air Transport Agreement (reproduced in Doc 9587), also known as the Five
Freedoms Agreement, which established five freedoms of the air for scheduled international air
services but had no provisions on fair competition or for the regulation of capacity or fares and rates
and came into force for nineteen States, eight of which subsequently denounced it.
3.5 THE WARSAW SYSTEM AND THE MONTREAL CONVENTION OF 1999
3.5.1 The Warsaw System, a group of air law documents, governs air carrier liability with regard to passengers
and consignees, and includes:
1
a) the Warsaw Convention, which is in force and unified the rules concerning the documents of carriage
and the liability of air carriers;
2
b) The Hague Protocol, which is in force and substantially redrafted, modernized and simplified the rules
relating to the documents of carriage as well as doubled the limit of carrier liability (specified in the
Warsaw Convention) with respect to persons;
3
c) the Guadalajara Convention, which is in force and extended the application of the Warsaw
Convention to the carrier actually performing the transport by air when a passenger or shipper
contracted with a charterer or freight forwarder;
4
d) the Guatemala City Protocol, which is not yet in force and would, inter alia, subject the carrier to strict
liability regardless of fault, with respect to personal injury and damage and destruction or loss of
baggage;
5
e) the Additional Protocol No. 1, which is in force and replaces the “gold clause” by the Special Drawing
Rights (SDR) (i.e. a kind of international money created by the International Monetary Fund (IMF) to
supplement the use of gold and hard currencies in settling international payment imbalances), without
increasing the actual limits of liability specified in the original Warsaw Convention (gold having been
demonetized and no longer being an objective, reliable and stable yardstick of value);
6
f) the Additional Protocol No. 2, which is in force and replaces the gold clause by the SDR, without
increasing the actual limits of liability specified in The Hague Protocol;
7
g) the Additional Protocol No. 3, which is not yet in force and would also replace the gold clause by the
SDR, without increasing the actual limits specified in the Guatemala City Protocol; and
8
h) the Montreal Protocol No. 4, which is in force and further amends the Warsaw Convention as
Amended at The Hague, 1955, in respect of postal items and of cargo, by simplifying cargo
documentation, introducing strict liability for cargo, and replacing its currency unit by the SDR, without
increasing the actual limits of liability (specified in The Hague Protocol).
3.5.2 The so-called Montreal Agreement of 1966, which is not an international agreement but only an
arrangement regarding the liability among the air carriers operating passenger transport to, from, or with an agreed
stopping place in the United States, was adopted by the then-Civil Aeronautics Board of the United States on 13 May
1966 and followed by a withdrawal of the denunciation of the Warsaw Convention by the United States which was to
take effect on 16 May 1966. By this agreement, the parties thereto have de facto amended the application of the
Warsaw Convention as amended at The Hague (1955) by providing for a limit of liability for each passenger in the case
of death or bodily injury of 75,000 USD inclusive of legal fees and costs and 58,000 USD exclusive of legal fees and
costs.
9
3.5.3 The Montreal Convention of 1999 , which enters into force on 4 November 2003, in effect, modernizes and
consolidates all Warsaw System instruments, and prevails over all Warsaw System instruments, as between two States
both Parties to the Convention. As between two States not both Parties to the Convention, the relevant Warsaw System
instruments will remain in effect, if such States are both Parties thereto. This Convention enhances the rights of
claimants in cases involving the death or injury of passengers engaged in international air travel.
3.5.4 The relationships between the conventions and protocols comprising the Warsaw System/Montreal
Convention of 1999, as well as the limits of liability for the air carriers, can be seen in Figure 3-1. Further information on
the Warsaw System and the Montreal Convention may be obtained from the Legal Bureau of ICAO.
3.6 OTHER AIR LAW INSTRUMENTS
Other international air law regulatory documents which affect international air transport include:
10
a) the Geneva Convention, which is in force and recognizes various rights in aircraft (property,
acquisition, possession, etc.);
11
b) the Rome Convention, which is in force and entitles any person who suffers damage on the surface
caused by an aircraft in flight or by any person or thing falling from the aircraft to claim just
compensation;
12
c) the Tokyo Convention, which is in force and establishes jurisdiction of the State of registration of the
aircraft over offenses and acts that do or may endanger the safety of the aircraft in flight or of persons
or property therein;
13
d) the Hague Convention, which is in force and originated the concept of universal jurisdiction over
unlawful acts of seizure or exercise of control of aircraft in flight (hijacking) and obliges Contracting
States to institute proceedings against such acts;
14
e) the Montreal Convention, which is in force and expands the concept of unlawful acts to offences
against aircraft in service, air navigation facilities and the safety of civil aviation in general;
15
f) the Protocol Supplementary to the Montreal Convention of 1971, which is in force and is aimed at
suppressing acts of violence at international airports that endanger or are likely to endanger the safety
of persons or the safe operation of such airports;
16
g) the Convention on the Marking of Plastic Explosives for the Purpose of Detection, which is in force
and is intended to prevent unlawful acts against aircraft undertaken by the use of plastic explosives;
and
h) the Cape Town Convention and Protocol to the Convention on International Interest in Mobile
17
Equipment on Matters Specific to Aircraft Equipment which is in force and is intended to create
international standards for registration of contracts of sale, security interests, leases and conditional
sales contracts, and various legal remedies for default in financing agreements.
WARSAW CONVENTION THE HAGUE PROTOCOL GUATEMALA CITY

1929 1955 PROTOCOL 1971
per passenger 125 000 PF per passenger 250,000 PF per passenger 1 500 000 PF
passenger delay 62 500 PF
hand carry 5 000 PF hand carry 5 000 PF hand carry 15 000 PF
goods (per kg) 250 PF goods (per kg) 250 PF goods (per kg) 250 PF
ADDITIONAL PROTOCOL ADDITIONAL PROTOCOL ADDITIONAL PROTOCOL

NO. 1 1975 NO. 2 1975 NO. 3 1975
per passenger 8 300 SDR per passenger 100 000 SDR

passenger delay 4 150 SDR
hand carry 332 SDR per passenger 16 600 SDR hand carry 1 000 SDR
goods (per kg) 17 SDR goods (per kg) 17 SDR
GUADALAJARA ADDITIONAL PROTOCOL MONTREAL AGREEMENT

CONVENTION 1961 NO. 4 1975 OF 1966
Provisions regarding actual carriers per passenger (per kg) 17 SDR per passenger U.S.$ 75 000
(chartereers or freight forwarders)
MONTREAL CONVENTION
1999
Two-tier liability regime for proven damage at or below
100 000 SDR and over 100 000 SDR
KEYS:
PF = Poincaré Francs = De facto amendment = Air law instrument = Not an international

SDR = Special Drawing Rights in force agreement but an
arrangement among carriers
= Amendment = Air law instrument = Replacement
not in force (as between
its Parties)
Figure 3-1. The Warsaw System, the Montreal Convention of 1999 and the limits of carrier liability
3.7 REGIONAL MULTILATERAL AGREEMENTS
Although States have not succeeded in reaching a globally acceptable multilateral agreement for the exchange of
commercial air transport rights, certain regional multilateral intergovernmental agreements and arrangements have been
developed to regulate specific aspects of international air transport. They include, in a chronological order:
a) the Multilateral Agreement on Commercial Rights of Non-scheduled Air Services in Europe concluded
by the European Civil Aviation Conference (ECAC) member States, signed at Paris on 30 April 1956,
which established a policy that aircraft engaged in non-scheduled commercial flights within Europe
which do not harm their scheduled services may be freely admitted;
b) the International Agreement on the Procedure for the Establishment of Tariffs for Scheduled Air
Services, signed at Paris on 10 July 1967, which provided ECAC member States with uniform
principles and procedures regarding tariff establishment and supported the IATA conference
machinery;
c) the Multilateral Agreement on Commercial Rights of Non-scheduled Air Services among the
Association of South-East Asian Nations (ASEAN), signed at Manila on 13 March 1971, which
liberalized non-scheduled air services within the subregion;
d) the International Agreement on the Procedure for the Establishment of Tariffs for Intra-European
Scheduled Air Services by ECAC member States, signed at Paris on 16 June 1987, which provided
uniform principles and procedures for the establishment of tariffs and introduced the zone system of
tariff regulation;
e) the International Agreement on the Sharing of Capacity on Intra-European Scheduled Air Services by
ECAC States, signed at Paris on 16 June 1987, which provided uniform principles and procedures for
the sharing of capacity on intra-European scheduled services and introduced a zonal scheme of
capacity sharing;
f) the Yamoussoukro Declaration on a New African Air Transport Policy, signed by the ministers for civil
aviation of African States in October 1988 and revised in September 1994, which established a
programme for the integration of African airlines and guidelines for cooperation in the air transport field
among States in Africa;
g) Decision 297 of the Commission on the Cartagena Accord to implement the Act of Caracas, signed in
May 1991 and approved by the presidents of the five Andean Pact countries (Bolivia, Colombia,
Ecuador, Peru and Venezuela), which established an “open skies” air transport arrangement for this
subregion;
h) the Multilateral Agreement Concerning the Operation of Air Services within the Caribbean Community
(CARICOM), commonly called the CARICOM Multilateral Air Services Agreement (MASA), which was
concluded on 6 July 1996 by 11 of its 14 member States and entered into force in November 1998;
i) the Fortaleza Agreement, signed on 17 December 1996, which liberalized intra-regional air services
over routes not under bilateral agreements among the four MERCOSUR States and their two
associate member States;
j) the Banjul Accord for an Accelerated Implementation of the Yamoussoukro Declaration, commonly
called the Banjul Accord, signed by Ghana, Gambia, Guinea, Nigeria and Cape Verde, in 1997, which
liberalized air services between each State;
k) the Agreement Among Directors General of Civil Aviation of the Kingdom of Cambodia, the Lao
People’s Democratic Republic, the Union of Myanmar, and the Socialist Republic of Viet Nam on the
Establishment of Sub-regional Air Transport Cooperation, commonly called the CLMV Agreement,
concluded 15 January 1998, by Cambodia, Lao People’s Democratic Republic, Myanmar and Viet
Nam, which established a subregional cooperation regime aimed at achieving air transport
liberalization;
l) the COMESA Agreement among the 21 member States of the Common Market for Eastern and
Southern Africa (COMESA), which moved them in 1999 from the full liberalization of cargo services in
the first phase of their air services liberalization programme to the second phase of liberalization
involving passenger service;
m) a phased programme for the liberalization of air services between members of the Arab Civil Aviation
Commission (ACAC), which was finalized in 2000 and envisages full liberalization of air services
amongst member States by 2005;
n) the Multilateral Agreement on the Liberalization of International Air Transportation, also known as the
Kona Agreement, signed on 1 May 2001 by Brunei Darussalam, Chile, New Zealand, Singapore and
the United States, which is a plurilateral open skies arrangement among the signatory parties and
which is open for accession by any APEC members as well as other States (Peru and Samoa
subsequently adhered to the Agreement);
o) the Protocol to the Multilateral Agreement on the Liberalization of International Air Transportation,
signed on 1 May 2001 by Brunei Darussalam, New Zealand and Singapore, which provides for the
exchange of cabotage and so-called “Seventh Freedom” rights; and
p) a Multilateral Air Services Agreement for Liberalization among States of the Pacific Islands Forum,
endorsed in August 2003 by the Leaders of the Forum States, which provides for phased liberalization
of air services among Parties to the Agreement and is open for conditional accession by other non-
member States.
NOTES
1. Convention for the Unification of Certain Rules Relating to International Carriage by Air, Signed at Warsaw on
12 October 1929.
2. Protocol to Amend the Convention for the Unification of Certain Rules Relating to International Carriage by Air
Signed at Warsaw on 12 October 1929 (Doc 7632), signed at The Hague on 28 September 1955.
3. Convention, Supplementary to the Warsaw Convention, for the Unification of Certain Rules Relating to International
Carriage by Air Performed by a Person Other than the Contracting Carrier Signed at Guadalajara on 18 September
1961 (Doc 8181).
4. Protocol to Amend the Convention for the Unification of Certain Rules Relating to International Carriage by Air
Signed at Warsaw on 12 October 1929 as Amended by the Protocol Done at The Hague on 28 September 1955
Signed at Guatemala City on 8 March 1971 (Doc 8932).
5. Additional Protocol No. 1 to Amend the Convention for the Unification of Certain Rules Relating to International
Carriage by Air Signed at Warsaw on 12 October 1929 Signed at Montreal on 25 September 1975 (Doc 9145).
Carriage by Air Signed at Warsaw on 12 October 1929 as Amended by the Protocol Done at The Hague on 28
September 1955 Signed at Montreal on 25 September 1975 (Doc 9146).
Carriage by Air Signed at Warsaw on 12 October 1929 as Amended by the Protocols Done at The Hague on 28
September 1955 and at Guatemala City on 8 March 1971 Signed at Montreal on 25 September 1975 (Doc 9147).
8. Montreal Protocol No. 4 to Amend the Convention for the Unification of Certain Rules Relating to International
Carriage by Air Signed at Warsaw on 12 October 1929 as Amended by the Protocol Done at The Hague on 28
September 1955 Signed at Montreal on 25 September 1975 (Doc 9148).
9. Convention for the Unification of Certain Rules for International Carriage by Air Done at Montreal on 28 May 1999
(Doc 9740).
10. Convention on the International Recognition of Rights in Aircraft Signed at Geneva, on 19 June 1948 (Doc 7620).
11. Convention on Damage Caused by Foreign Aircraft to Third Parties on the Surface Signed at Rome, on 7 October
1952 (Doc 7364).
12. Convention on Offences and Certain Other Acts Committed on Board Aircraft Signed at Tokyo on 14 September
1963 (Doc 8364).
13. Convention for the Suppression of Unlawful Seizure of Aircraft Signed at The Hague on 16 December 1970
(Doc 8920).
14. Convention for the Suppression of Unlawful Acts against the Safety of Civil Aviation Signed at Montreal on
23 September 1971 (Doc 8966).
15. Protocol for the Suppression of Unlawful Acts of Violence at Airports Serving International Civil Aviation,
Supplementary to the Convention for the Suppression of Unlawful Acts against the Safety of Civil Aviation, Done at
Montreal on 23 September 1971 Signed at Montreal on 24 February 1988 (Doc 9518).
16. Convention on the Marking of Plastic Explosives for the Purpose of Detection, done at Montreal on 1 March 1991
(Doc 9571).
17. Protocol to the Convention on International Interests in Mobile Equipment on Matters specific to Aircraft Equipment
Signed at Cape Town on 16 November 2001 (Doc 9794).
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Chapter 4
KEY ISSUES OF MULTILATERAL REGULATORY

4.1 INTRODUCTION
4.1.1 The key issues of multilateral regulatory process and structure are long-standing ones which focus on
whether to seek, and how to achieve, a viable multilateral agreement or agreements (either worldwide or trans-regional)
to supplant or supplement bilateral air transport agreements.
Note.— These issues are distinct from those of regulatory arrangements within regional economic
communities of States whose memberships are limited geographically and whose internal structures and processes
regulate other activities in addition to air transport.
4.1.2 ICAO Assembly Resolution A33-19 (in force) states that “multilateralism in commercial rights to the
greatest possible extent continues to be an objective of the Organization.”
4.1.3 The first section of this chapter presents arguments for and against seeking multilateral air transport
regulation. The next section explores possible negotiating processes that might be used to seek a multilateral agreement.
The third section identifies likely generic structural elements of such an agreement. A final section discusses the General
Agreement on Trade in Services and its Air Transport Annex, an attempt at multilateral regulation outside any traditional
framework.
4.2 WHY THE MULTILATERAL APPROACH?
4.2.1 The arguments favouring and those opposing multilateral international air transport regulation both focus
upon its adaptation to broader economic phenomena, and its relative efficiency compared to bilateralism.
4.2.2 The favouring arguments related to adaptation to broader economic phenomena include:
a) that air transport is a service industry increasingly affected by the same forces changing other service
industries (i.e. the privatization of, and foreign equity holdings in, national companies; inter-company
alliances aimed at global market access; and regulatory liberalization), yet it remains separately and
differently regulated from such other service industries in ways which retard the air transport industry’s
growth;
b) that air transport does not require distinctive regulation because, having developed, it is no longer an
“infant” or entirely “special” industry;
c) that the bilateral bartering process tends to reduce the opportunities available to the level considered
acceptable by the least competitive and most restrictive party, thus bilateral air agreements are
increasingly seen by entrepreneurial airline managements as imposing unacceptable restrictions on
industry development;
III-4-1
d) that air transport users, airports and airlines deserve to be freed from the constraints of bilateral air
transport regulation (which can sometimes hamper the development of tourism and trade); and
e) that such freedom can best be achieved by multilateralism, which can aggregate gains and offset
constraints more easily than could a series of bilateral agreements and thus is gaining increased
recognition as a better vehicle than bilateralism for achieving widespread liberalization.
4.2.3 The favouring arguments which focus on relative efficiency maintain that multilateralism could:
a) rapidly create many new bilateral air service relationships within a single multilateral framework as
each new party joined the multilateral arrangement without having to negotiate bilaterally with existing
parties to the agreement;
b) thus end the waste of time and the expense of negotiating and renegotiating a large number of
bilateral air agreements, a process which strains the development of the air transport system;
c) achieve more objective results (in particular as regards market access) than numerous bilateral
negotiations because the outcome of bilateral negotiations can be affected by the subjective
circumstances of differing negotiating capabilities and bargaining leverage of the parties;
d) end incompatibilities in market access conditions which now complicate or preclude various multi-stop
route operations; and
e) further promote increased standardization of numerous regulatory arrangements included in bilateral

air service agreements (on matters such as customs exemptions, aviation security, and currency
conversion and remittance).
4.2.4 The opposing arguments related to adaptation to broader economic phenomena include:
a) that multilateral air transport agreements are not needed because bilateralism has been used
successfully to achieve the liberalization of air services between partner States wishing to liberalize;
b) that advocates of multilateralism are mistaken in believing that because it is likely to be very difficult
under a multilateral agreement to limit access to individual bilateral markets (for example, in order to
seek some balance of benefits), such limitations would necessarily be excluded;
c) that if a liberal multilateral air transport agreement is achieved with few limitations it would most likely
favour large and well-established airlines, advancing their interests against those of airlines of the
developing countries (which may not be sufficiently helped to ensure their continued international
presence), thus threatening the continuing access of such countries to adequate air services; and
d) that apart from the concerns it raises, multilateralism is simply not feasible in the foreseeable future in
the absence of a broader consensus.
4.2.5 The opposing arguments related to relative efficiency maintain that multilateralism:
a) inherently tends toward a “least common denominator” result which could reduce the scope and
effectiveness of any agreement;
b) is less flexible because a revision to a multilateral agreement is much more difficult to achieve than
that to a bilateral agreement (it requires not two, but numerous parties to be motivated to bring it
about);
Chapter 4. Key Issues of Multilateral Regulatory Process and Structure III-4-3
c) prevents States from tailoring each regulatory arrangement to individual bilateral situations; and
d) lessens the ability of a State to protect a national air carrier or carriers by use of ad hoc and micro-
level bilateral controls.
4.2.6 The supporters of continued bilateralism also tend to point out that international air traffic has grown at a
prodigious rate under bilateralism and that bilateralism has not inhibited technological and marketing innovations such
as the introduction of jet aircraft and computer reservation systems.
4.2.7 Whether or not to pursue, or to support the pursuit of, some kind of multilateral air transport agreement
entails weighing the above (and possibly other) arguments (noting that some on both sides are conjectural) in
conjunction with an exploration of the possible multilateral processes and the likely structural components involved.
4.3 POSSIBLE PROCESSES IN THE QUEST FOR A NEW MULTILATERALISM
4.3.1 The traditional and other processes that might be used in an attempt to reach some new multilateral
agreement(s) or arrangement(s) to regulate international air transport include:
a) a worldwide diplomatic conference to negotiate and draft a multilateral agreement; or
b) a conference of “like-minded” States at which a multilateral agreement, presumably one open to

accession by non-participating States, would be negotiated and drafted by participating parties; or
c) a State-to-regional body or a regional body-to-regional body negotiation to produce an agreement

between them designed to be open to accession by third parties; or
d) a negotiation and drafting of some form of comprehensive multilateral air transport agreement under
non-air transport (presumably trade) auspices.
4.3.2 Each of these possible processes presents difficult and as yet unresolved problems:
a) successful worldwide diplomatic conferences require some broad advance consensus on the goals to
be sought and the means to achieve them, a consensus not yet evident in this field;
b) a “like-mindedness” sufficient to bring together any substantial number of States from different regions
of the world to seek a new agreement has yet to be demonstrated (given the disparity of national
conditions and the need for each State to act in its national interest, an interest which is rarely if ever
identical to that of any other State);
c) a process by which a regional body can formulate a common negotiating position and carry out, as a
unit, a bilateral negotiation with a second party, can be a very difficult one to establish and can tend to
raise legitimate concerns among smaller States and uninvited or otherwise non-participating parties
that their interests could be prejudiced; and
d) a non-air transport forum (the Group of Negotiations on Services under the General Agreement on
Tariffs and Trade (GATT) auspices) explored a broad multilateral agreement known as the General
Agreement on Trade in Services (GATS), to include air transport market access rights but failed to find
more than minimal support largely due to proposed mandatory (but not necessarily reciprocal) most-
favoured nation treatment.
4.3.3 Some preliminary process of very detailed analysis and design (at an expert level) of the essential
elements of a comprehensive multilateral regulatory structure, carried out over a period of time longer than typically
devoted to a conference, could conceivably develop certain potentially viable regulatory arrangements. If such
arrangements were to have sufficient tentative acceptability, they could bring about a consensus sufficient to begin one
or more of the above negotiating and drafting processes.
4.4 THE LIKELY GENERIC STRUCTURAL ELEMENTS OF A NEW

MULTILATERAL AIR TRANSPORT AGREEMENT
4.4.1 The structure of a new multilateral arrangement could theoretically be that of a traditional multilateral treaty:
it would enter into effect only when a predetermined number of instruments of ratification, acceptance, approval or
accession by the States that negotiated the agreement were deposited; it could be amended only by approval of a pre-
agreed number of parties; it could provide for limited reservations and for accessions by other States; etc. Alternatively,
the structure could: take a non-traditional form; enter into effect (between consenting parties) when as few as two
instruments of ratification, acceptance, approval or accession were deposited; have flexibility sufficient to minimize the
need for amendments; provide for the application of amendments as accepted by each party; provide for accessions by
other States; etc.
4.4.2 The principal objective of such an agreement presumably would be liberalization; however, it could have
additional objectives such as increasing the participation of developing countries and achieving greater regulatory
efficiency. The agreement could be oriented towards immediate liberalization, towards progressive liberalization or
possibly to accommodate both liberalization and some aspects of more traditional regulation. It could be designed with
consideration of the needs of air transport users and workers, of airports and their communities, and of tourism and
trade interests as well as those of airlines and their regulators.
4.4.3 A fundamental question to the design of the new agreement would be whether it would replace existing
bilateral arrangements or complement them. If the multilateral agreement were to complement bilateral agreements, the
question would arise of how such a hybrid regime would work.
4.4.4 A multilateral agreement could:
a) include both scheduled and non-scheduled air services between the parties;
b) cover only scheduled or only non-scheduled air services between the parties;
c) cover only certain traffic, initially or long term, i.e. only passengers or only freight and mail, or could
cover both;
d) include market access (route, traffic and operational rights) possibly subject to further bilateral
understanding, but not necessarily access to all markets (e.g. the drafters might exclude so-called
Seventh Freedom and exclude or limit cabotage rights); and
e) very likely would include some regulatory arrangements specifically for use by a party when and if
ever needed to respond to actions deemed contrary to the aims and terms of the agreement.
4.4.5 In addition to requiring much innovative work in order to express, in a multilateral context, some kind and
level of (presumably liberalized) regulation of the principal matters of bilateral concern (chiefly market access rights,
capacity, tariffs and commercial considerations), a new multilateral structure may possibly:
a) employ or adapt the language used in the ICAO Template Air Services Agreement (TASA), contained
in Doc 9587;
b) employ or adapt some or many elements of multilateral agreements that are in effect (e.g. the Kona
Agreement) or proposed (such as the model Multilateral Agreement for the Liberalization of Air Cargo
Services developed by the OECD Secretariat);
c) employ, and perhaps adaptively improve upon, some concepts and approaches used, or proposed to
be used, in trade agreements (as explained in the following section of this chapter);
d) introduce new dispute resolution approaches not traditionally found in bilateral air transport
agreements; and
e) include provisions for the possible collective consent by States acting as a regional unit.
4.5 THE GENERAL AGREEMENT ON TRADE IN SERVICES (GATS)

AND ITS AIR TRANSPORT ANNEX
4.5.1 The General Agreement on Trade in Services (GATS), produced by the Group of Negotiations on
Services (GNS) (a group of Contracting Parties set up by the General Agreement on Tariffs and Trade (GATT) for the
purpose of promoting international trade by reducing or eliminating trade barriers such as tariffs or quotas during the
Uruguay Round), entered into effect on 1 January 1995 and applies various trade principles and practices to certain
services including, in an Annex, certain air transport services, a departure from their traditional frameworks for regulation.
At this writing, the GATS Annex on Air Transport Services excludes traffic rights, however granted, and services directly
related to the exercise of traffic rights, with exceptions for three soft rights:
a) aircraft repair and maintenance services, meaning such activities when undertaken on an aircraft or a
part thereof while it is withdrawn from service; these activities do not include so-called line
maintenance;
b) selling and marketing of air transport services, meaning opportunities for the air carrier concerned to
sell and market freely its air transport services including all aspects of marketing such as market
research, advertising and distribution; these activities do not include the pricing of air transport
services nor the applicable conditions; and
c) computer reservation system (CRS) services, meaning services provided by computerized systems
that contain information about air carriers’ schedules, availability, fares and fare rules, and through
which reservations can be made or tickets may be issued.
4.5.2 The Annex further provides that the dispute settlement procedures of the Agreement may be invoked only
where obligations or commitments have been assumed by the parties concerned and where dispute settlement
procedures in bilateral and other multilateral arrangements have been exhausted. It also confirms that any specific
commitment or obligation assumed under the Agreement will not reduce or affect a party’s obligations under bilateral or
multilateral agreements that are in effect at the entry into force of the Agreement establishing the World Trade
Organization (WTO) (see Chapter 6.3). It also requires the Council on Trade in Services to “review periodically, and at
least every five years, developments in the air transport sector and the operation of the Annex with a view to considering
the possible further application of the Agreement in this sector.”
Note.— The first review of the Annex began in 2000.
4.5.3 The GATS itself, under which the Annex on Air Transport Services functions, identifies four modes of
supply or different ways services can be supplied in markets that are foreign to the supplier, namely:
a) cross-border, i.e. the supply of a service from the territory of one Party to the territory of another Party
(such as international flights or telephone calls). This does not require the supplier of the first Party to
be admitted to the territory of the second Party, only the service itself crosses national borders;
b) consumption abroad, i.e. the supply of a service in the territory of one Party to the service consumer of
any other Party. Typically this involves the consumer travelling to the supplying country, for example,
for tourism or study. Repair of aircraft outside its home country is another example;
c) commercial presence, i.e. the supply of a service through the commercial presence of the foreign
supplier in the territory of another Party (e.g. an airline ticket office, a subsidiary or branch office to
deliver such services as banking or legal advice); and
d) presence of a natural person, i.e. the supply of a service through the presence of foreign nationals or
individuals in the territory of another Party (e.g. a lawyer, doctor, architect).
4.5.4 The focus of the GATS is on liberalization. There are three GATS core liberalization principles, those of:
a) market access or specification of the levels of access to be granted other parties through the four
modes of supply;
b) national treatment, i.e. treatment of foreign services and suppliers of services no less favourable than
that accorded a party’s own services and service suppliers; and
c) most-favoured nation (MFN) treatment, i.e. non-discrimination, the provision of treatment to all parties
no less favourable than that accorded to any party.
4.5.5 There is an important distinction between these principles. Market access and national treatment are
specific principles under the GATS, i.e. principles which each individual party can choose to apply or not apply to any
particular service or aspect thereof under conditions and limitations contained in its specific commitment for that service.
In contrast, MFN is a GATS general obligation, i.e. one applicable unconditionally to all services, including those for
which a party has made no specific commitment to market access or national treatment.
4.5.6 However, parties may make an exception to MFN for specific services by including that service in their
exemption list. Thus, a party can vary the degree of its liberalization of a specific service by (1) filing an exemption from
MFN for that service or (2) making specific commitments for market access and national treatment, including any
conditions and limitations. This can result in variations in the obligations of different parties with respect to the same
service, a circumstance that critics charge results in free riders, parties which enjoy liberalized access with regard to
supplying a specific service in the territories of other parties without having to provide the same degree of liberalized
access for that service in their own markets. In response, those taking a broader view point out that liberalization with
respect to other services by parties which are free riders tends to mitigate a lack of liberalization for a particular service
with respect to certain parties. They also contend that, over time, progressive liberalization through future negotiations
will result in the removal of MFN exemptions and additional specific commitments to market access and national
treatment, making the free-rider phenomenon less frequent.
4.5.7 Other general obligations in the GATS include those of:
a) transparency, a requirement for prompt publication of all relevant rules and regulations, administrative
guidelines and all other decisions, rulings, or measures of general application which pertain to or affect
the operation of the Agreement (except for certain confidential information the disclosure of which
would impede law enforcement, or otherwise be contrary to the public interest, or which would
prejudice the legitimate commercial interests of particular enterprises);
b) increasing participation of developing countries, to be achieved by improving their access to

technology, distribution channels and information networks; by the liberalization of market access in
sectors, and modes of supply, of export interest to them; and by taking particular account of the
serious difficulty of the least-developed countries in accepting negotiated commitments;
c) not preventing (under certain circumstances) signatories from being a party to or entering into
economic integration agreements which liberalize trade in services;
d) ensuring that all measures of general application with respect to domestic regulation affecting trade in
services, in sectors or subsectors where specific commitments are undertaken, are administered in a
reasonable, objective and impartial manner;
e) according recognition to licences or certification granted, or to education or experience obtained or

requirements met, in a particular country, without discrimination between countries in the application of
its standards or criteria for the authorization, licensing or certification of service providers;
f) ensuring that monopoly service providers in its territory comply with MFN and specific commitments
on market access and national treatment; and
g) not applying restrictions on international transfers and payments for current transactions relating to
specific commitments under the GATS, except for restrictions to respond to serious balance-of-
payments difficulties (which must be applied in a non-discriminatory manner to all parties).
4.5.8 A trade negotiation procedure in the GATS of possible use in a broad multilateral or plurilateral air
transport agreement is that of offers and requests, a procedure in which each party lists the services it is prepared to
liberalize and those it wishes other parties to liberalize. Bilateral or multilateral parties modify their lists in terms of offers
to secure from other parties liberalization of services which they have requested. The expansion of the offers lists of all
parties reduces the lists of requests until parties are no longer prepared to make further changes in their list of offers.
4.5.9 Applying the basic GATS principle of MFN to traffic rights remains a complex and difficult issue. While
there is some support to extend the GATS Annex on Air Transport Services to include some soft rights as well as some
aspects of hard rights, there is no global consensus on whether or how this would be pursued. Whether the GATS is an
effective option for air transport liberalization remains in question.
______________________
Chapter 5
INTERNATIONAL CIVIL AVIATION ORGANIZATION (ICAO)
5.1 INTRODUCTION
5.1.1 The International Civil Aviation Organization (ICAO) is the worldwide intergovernmental organization
created by the Convention on International Civil Aviation signed at Chicago on 7 December 1944 to promote the safe
and orderly development of international civil aviation throughout the world (website: www.icao.int). A specialized
agency of the United Nations, it sets international standards and regulations necessary for safe, regular, efficient
economical and environmentally friendly air transport and serves as the medium for cooperation in all fields of civil
aviation among its 192 Member States (as of November 2017).
5.1.2 As with most intergovernmental organizations, policy is developed in multinational meetings of various
kinds. This chapter deals only with those aspects relating to economic regulation. The first section identifies the various
bodies of ICAO which, in their meetings, develop policy including that regarding the regulation of international air
transport. It also explains how these bodies are organized (structure) and carry out their work (process).
5.1.3 Policy development typically requires a significant volume of preliminary research and analysis, the support
of meetings of policy development bodies, and consequent implementation and monitoring of the decisions taken. The
many related tasks involved for the Organization are largely undertaken by the ICAO Secretariat, a permanent
organizational structure with staff recruited from the Member States of ICAO. The next section of this chapter identifies
those parts of this structure which are involved in international air transport matters and describes their principal
activities.
5.1.4 The activities of both the policy development bodies and the ICAO Secretariat produce policy, guidance
and information for Member States. The final section of this chapter identifies the principal output of both the policy
development bodies and the Secretariat which are related to international air transport regulation.
5.2 POLICY DEVELOPMENT BODIES
5.2.1 The Assembly of Member States, the sovereign body of the Organization, is convened by the ICAO
Council once every three years. An extraordinary session may be called at any time by the Council or at the request of
not less than one-fifth of the ICAO Member States.
5.2.2 The work of each Assembly is carried out by accredited delegations from the ICAO Member States. Each
Member State has one vote in the Assembly and in its subsidiary bodies. The accredited persons register as delegates,
alternates or advisers, with one person on each delegation being designated as the Chief Delegate. Observers from
invited non-Member States and international organizations may participate in the deliberation in open sessions, without
votes. Communications media representatives and the general public may also attend open meetings. Documentation
used at an Assembly is provided in English, Arabic, Chinese, French, Russian and Spanish. Simultaneous interpretation
is provided for these languages as well.
III-5-1
5.2.3 Each Assembly is opened by the President of the Council and meets in plenary sessions to: elect a
president and various vice-presidents from among Member State delegations, adopt an agenda, establish various
committees and commissions and elect their chairpersons, elect States to be Council members, review the work of the
committees and commissions, and adopt resolutions to establish policy as well as a budget and work programme for the
forthcoming triennium.
5.2.4 The Economic Commission is the subsidiary body which is generally established at each ordinary Session
of the Assembly for discussion and resolution of economic issues (including those affecting regulation) in the field of
international air transport. The Economic Commission examines all matters referred to it, usually on the basis of working
papers submitted by Member States, the Council, the Secretariat, or accredited observers, and submits reports on its
work for consideration at plenary meetings of the Assembly.
5.2.5 The Council is the permanent governing body of ICAO responsible to the Assembly, composed of 36
Member States elected by the Assembly for a three-year term. It usually convenes for three sessions per year. The
Council elects its President for a term of three years and three Vice-Presidents for a one-year term. The Secretary
General of ICAO serves as the Secretary of the Council. Any Member State may participate, without a vote, in the
consideration by the Council of any question which especially affects its interests.
5.2.6 The Council submits annual reports to the Assembly, carries out the directives of the Assembly, and
discharges its duties and obligations as laid down in the Convention. In the air transport field, the Council implements
relevant resolutions of the Assembly, adopts policy by Council resolutions and decides the tasks and priorities for the
ICAO air transport work programme.
5.2.7 The Air Transport Committee is the standing subsidiary body of the Council which deals with air transport
matters. The Committee is composed of representatives of the Council Member States who are appointed by the
Council and act in their individual capacities. Its duties and obligations are defined by the Council pursuant to the
Convention. The Committee elects its Chairperson and Vice-Chairpersons for a one-year term. The Director of the Air
Transport Bureau of the Secretariat is the Secretary of the Air Transport Committee. Its meetings are frequently
attended by the President of the Council and the Secretary General.
5.2.8 The Committee has three groups of meetings each year during the Committee phase of each Council
session, typically a period of several weeks preceding the Council phase. Any Member State may participate, without a
vote, in the consideration by the Committee of any question which especially affects its interests.
5.2.9 The work programme of the Committee for each session is decided by the Council. The Committee
examines working papers and reports on its work to the Council whenever relevant. From time to time, the Committee
also examines proposed changes to international standards and recommended practices in Annex 9 — Facilitation to
the Convention.
5.2.10 As the Committee is responsible to the Council, its role is essentially a recommendatory one. It serves as a
sounding board for items on which a Council decision is necessary by allowing a free exchange of the personal
viewpoints of members and detailed discussion of items.
5.2.11 Apart from diplomatic conferences and meetings of the ICAO bodies concerned with policy development in
the air transport field, special worldwide meetings are convened, from time to time, by ICAO for the same purpose, at
which each Member State can be represented.
5.2.12 An air transport conference is a special worldwide meeting held to discuss regulatory issues in the air
transport field.
Note.— While an air transport conference is at the same level as an air navigation conference, it does not
share the same broad scope, since it does not encompass all air transport matters.
Chapter 5. International Civil Aviation Organization (ICAO) III-5-3
5.2.13 A divisional session is a special worldwide meeting convened for the purpose of discussing issues in a
specific area in the air transport field such as statistics or facilitation.
5.2.14 The agenda of a conference is normally approved by the Council and that of a divisional session by the Air
Transport Committee. A special worldwide meeting may establish such committees, subcommittees and working groups
as it may consider to be necessary or desirable. The Chairperson of a special worldwide meeting submits a report to the
Council.
5.2.15 A panel is a group of qualified experts established to advance, within specified time frames or on a
standing basis, the resolution of special problems which cannot be solved adequately or expeditiously by established
ICAO bodies or the Secretariat. The deliberations and conclusions of a panel focus on the resolution of technical
problems and are advisory in nature. When a panel is being formed, all Member States are invited to nominate members.
Between 27 and 33 persons are typically chosen from among the nominees to be panel members.
5.2.16 In the air transport field, a panel may be established by the Council or by the Air Transport Committee (as
were the Airport Economics Panel, the Panel on Air Navigation Services Economics and the Air Transport Regulation
Panel).
5.2.17 When a panel is established, its terms of reference and work programme are set in order to define clearly
and concisely the nature and scope of the work assigned to the panel, and to specify the objectives sought. A panel
elects its Chairperson and Vice-Chairpersons for each meeting and conducts its work in the ICAO working languages
required by the participants. A Secretariat official serves as secretary of the panel. The Chairperson transmits the report
of each panel meeting to the Air Transport Committee, which usually considers the report in conjunction with a
Secretariat paper regarding action on the conclusions or recommendations reached.
5.2.18 A Secretariat study group is a less formal group appointed by the Secretary General to provide the
Secretariat with outside assistance and expertise in carrying out a particular task (e.g. the Study Group on Computer
Reservation Systems (CRS) established in 1987 to assist the Secretariat in undertaking studies relating to computer
reservation systems). A study group differs from a panel in several respects: its function is to advise the Secretariat; a
Secretariat official leads the discussion of a study group; meetings are usually conducted in a single language; and
study group reports are submitted by the appointed Secretariat official.
5.3 AIR TRANSPORT BUREAU
5.3.1 The Air Transport Bureau of the ICAO Secretariat is responsible for the air transport programme of the
Organization, aviation security and environmental issues, provides expertise and assistance on air transport matters to
the various bodies and meetings of ICAO. More specifically, it is responsible for:
a) the provision of expert assistance required by the Assembly, Council, Air Transport Committee, Joint
Support Committee, Committee on Unlawful Interference and the specialized divisional, conference,
panel, working and study group meetings that may be convened in the air transport field;
b) the maintenance and amendment of the air transport and joint support work programmes, preparation
of studies and documentation and the formulation of recommendations on these programmes for
consideration, as appropriate, by the Air Transport Committee, Committee on Unlawful Interference or
Joint Support Committee;
c) the preparation of statistical digests and other statistical publications;

d) the preparation and revision of manuals and guidance materials on aviation security, regulation of air
transport services, airport and air navigation facility tariffs, airport and air navigation services
economics the ICAO statistics and data analysis programme, and air traffic forecasting; preparation of
documentation and meeting reports in the economic regulatory, statistical, aviation security,
facilitation, environmental protection, and joint financing fields; and preparation of annual publications
of The World of Civil Aviation which provide a worldwide review of international civil aviation
development and the work of ICAO in harmonizing global regulatory framework;
e) the planning of periodic air transport meetings and the preparation of the agenda and supporting
documentation; preparation, for publication, of approved amendments to Annex 9 — Facilitation,
Annex 16 — Environmental Protection and Annex 17 — Security, and the compilation and
promulgation of lists of differences to these Annexes which are notified by Member States; provision of
advice and assistance to States on implementation of these Annexes;
f) the coordination of environment-related activities, both within the Secretariat and with other
international organizations; and
g) the coordination of the work of the regional civil aviation organizations with ICAO air transport
programmes; and liaison and cooperation with international and regional organizations on air transport
matters.
5.3.2 The Bureau also provides technical support and assistance to other Bureaus of the Organization and
contributes to the Organization’s work in multi-disciplinary areas such as environmental matters and the implementation
of communications, navigation and surveillance/air traffic management (CNS/ATM) systems, as well as the Aviation
System Block Upgrade (ASBU) schemes. The Director of the Air Transport Bureau serves as the Secretary to the Air
Transport Committee.
5.3.3 Outside of ICAO’s Montréal Headquarters, Air Transport Regional Officers are stationed at ICAO Regional
Offices in Bangkok, Cairo, Dakar, Lima and Nairobi to provide assistance and expertise to the Member States to which
each office is accredited and to the regional civil aviation bodies based in Dakar and Lima. They regularly attend
meetings and conferences involving air transport as well as make periodic visits to Member States in their regions. They
also provide liaison between ICAO Headquarters and those States on air transport matters.
5.4 ICAO POLICY, GUIDANCE AND INFORMATION
5.4.1 ICAO provides Member States with various published statements of its policy on international air transport
regulatory matters, as developed or endorsed by the Assembly or the Council, as well as guidance materials and
information developed by ICAO bodies or the Secretariat.
5.4.2 The ICAO publication entitled Policy and Guidance Material on the Economic Regulation of International
Air Transport (Doc 9587) is a comprehensive reproduction of the conclusions, decisions and guidance material produced
by ICAO on air transport which have received the endorsement of either the Assembly or the Council and are addressed
to States or which directly impinge on the conduct by States of their air transport activities, and of Assembly Resolutions
which are directed to ICAO as well as to States.
5.4.3 In addition to the present manual (Doc 9626), other relevant ICAO guidance material includes:
a) ICAO’s Policies on Taxation in the Field of International Air Transport (Doc 8632), which contains the
consolidated Council Resolution on taxation of international air transport, and an associated
commentary;
Chapter 5. International Civil Aviation Organization (ICAO) III-5-5
b) Statements by the Council, such as ICAO’s Policies on Charges for Airports and Air Navigation
Services (Doc 9082), setting forth its recommendations and conclusions on these topics;
c) definitions, such as the definition of a scheduled international air service (in Doc 9587) which, with
notes on its application, provides guidance to Contracting States on the interpretation and application
of the provisions of Articles 5 and 6 of the Convention;
d) model clauses, such as those on capacity and tariff regulation found in Doc 9587;
e) digests of information, such as the Digest of Bilateral Air Transport Agreements (Doc 9511), a
reference guide to the main provisions of existing bilateral agreements which Member States
concluded or amended and filed with ICAO. Doc 9511 has now been replaced by an online database
renamed as the World’s Air Services Agreements (WASA) with additional features including enabling
subscribers to have access to the text of air services agreements contained in the WASA and search
engine functions to find selected provisions of the agreements;
f) manuals, such as this manual and the Reference Manual on the ICAO Statistics Programme
(Doc 9060), which is a guide for reporting and using ICAO civil aviation statistics, the Manual on Air
Traffic Forecasting (Doc 8991), which sets forth forecasting methods and case studies for civil aviation
forecasters, the Manual on Air Navigation Services Economics (Doc 9161), which provides guidance
material to assist those responsible for the management of air navigation services and the Airport
Economics Manual (Doc 9562), which provides guidance to those responsible for airport
management;
g) studies, such as study on aircraft leasing and on the Regulatory Implications of the Allocation of Flight
Departure and Arrival Slots at International Airports (Cir 283); and
h) State Letters, for the timely dissemination of information on particular topics, such as reports on
developments in trade in services.
5.4.4 From time to time, articles on air transport regulatory topics are presented in the ICAO Journal, a monthly
magazine which gives a concise account of ICAO activities and features additional information of interest to Member
States and to the international aeronautical world.
5.4.5 Each item of ICAO policy, guidance and information material is usually disseminated in one of three types
of ICAO publications: document, circular or digest.
5.4.6 An ICAO document is the publication type used for material considered to have a permanent character or
special importance to all Member States, such as:
a) resolutions, decisions and recommendations formally adopted by the Assembly or the Council, texts
approved by the Council, and the minutes of the meeting of the Council;
b) Council Statements on policy relating to air transport questions;
c) reports of meetings such as worldwide conferences and divisional sessions convened by the Council
or by the Air Transport Committee; and
d) guidance and information on international air transport.

5.4.7 An ICAO circular is the publication type used to disseminate specialized information of interest to Member
States.
5.4.8 An ICAO digest of statistics is the publication type used when considerable quantitative information is
involved.
5.4.9 In addition, an ICAO State Letter (which is not published as a saleable ICAO document) is used to convey
information on specific topics in a timely manner and often contains a request for a response or action by States.
5.4.10 Apart from the dissemination of printed materials and distinct from the policy development bodies identified
earlier, ICAO regional workshops are used to inform persons in national administrations or related autonomous agencies
about relevant ICAO policies, advice and information and to provide an opportunity to informally exchange information
and views.
5.4.11 ICAO Regional Workshops on Air Transport Regulatory Policy focus on current air transport regulatory
issues, including international air transport regulation at the national, bilateral and multilateral levels, both as regards
regulatory process and structure and particular areas of regulatory content (e.g. market access, airline ownership and
control, codesharing, and airline product distribution) and issues of economic regulation and liberalization.
5.4.12 An ICAO Regulatory Policy Seminar has a purpose similar to regional regulatory policy workshops but is
shorter in duration and more focused on the issues and needs of a smaller group of States, typically in a sub-region
where the seminar is held.
______________________
Chapter 6
WORLDWIDE INTERGOVERNMENTAL ORGANIZATIONS
Various worldwide intergovernmental organizations, although not primarily responsible for civil aviation matters, may
influence the regulation of international air transport, directly or indirectly, in the course of discharging their broader
responsibilities. Most maintain relations with civil aviation bodies, in particular ICAO, on matters of mutual concern. The
following sections of this chapter identify three types of such organizations: the organs of the United Nations, the
specialized agencies within its system, and other worldwide intergovernmental organizations.
6.1 ORGANS OF THE UNITED NATIONS
6.1.1 The United Nations (UN), headquartered in New York City in the United States, was established in 1945
under the Charter of the United Nations with the primary objectives of maintaining international peace and security,
developing friendly relations among nations, and achieving international cooperation (www.un.org).
6.1.2 The UN General Assembly is the sovereign body of the organization, composed of its member States,
which convenes every year to discuss and decide matters within the scope of the Charter. On occasion its resolutions on
broader matters have affected the regulation of international air services to and from various States.
6.1.3 The UN Security Council, consisting of five permanent members (China, France, Russian Federation,
United Kingdom and United States) and ten non-permanent members, has primary responsibility for maintaining
international peace and security. When it deals with issues of armed conflict or sanctions, its decisions are likely to
directly affect international air transport to and from the relevant national territory or territories.
6.1.4 The UN Economic and Social Council (ECOSOC), composed of 54 UN member States, coordinates the
economic and social work of the United Nations. UN regional commissions established by the ECOSOC are
headquartered in Addis Ababa, Beirut, Bangkok, Geneva and Santiago. In Africa and Asia these commissions sponsor
United Nations Transport and Communications Decades, each one a ten-year programme designed to mobilize States,
intergovernmental organizations, the UN system and external support agencies for cooperative action in the
development of transport and communications in the respective regions, with air transport being one of the seven
sectors involved.
6.1.5 The International Court of Justice (ICJ), composed of 15 judges and located in The Hague, Netherlands, is
the principal judicial organ of the UN and functions in accordance with the Statute of the ICJ. It has jurisdiction over all
legal disputes referred to it by States regarding the Charter of the United Nations and treaties in force. It has adjudicated
matters involving international air transport regulation, such as the imposition of sanctions in cases of unlawful
interference with civil aircraft.
6.1.6 The UN Secretariat, headed by a Secretary-General, services the other UN organs, administers the
programmes of the organization, and implements its policies. Among other tasks it maintains the United Nations Treaty
Series (UNTS), a formal collection of registered treaties and agreements, including air services agreements, on file with
the UN. The Secretariat also coordinates with ICAO and other UN specialized agencies on matters of mutual concern.
III-6-1
6.2 SPECIALIZED AGENCIES OF THE UNITED NATIONS
6.2.1 Apart from the International Civil Aviation Organization, the specialized agency of the United Nations
responsible for civil aviation, six other such agencies have certain limited international air transport-related activities.
6.2.2 The International Labour Organization (ILO), headquartered in Geneva, Switzerland, was established in
1919 with the primary objective of raising working standards throughout the world and seeking to eliminate social
injustice. The ILO is concerned, inter alia, with the social and labour consequences of economic, regulatory and
technological changes in civil aviation (www.ilo.org).
6.2.3 The International Organization for Standardization (ISO), headquartered in Geneva, Switzerland, was
established in 1947 to promote the development of standardization and related activities in the world with a view to
facilitating the international exchange of goods and services and to developing cooperation. In the international air
transport area, the ISO is involved, inter alia, in uniform specifications for machine-readable travel documents (passports
and visas) as developed by ICAO (www.iso.ch).
6.2.4 The International Telecommunication Union (ITU), headquartered in Geneva, Switzerland, was established
in 1865 with the primary objective of maintaining and extending international cooperation between all member States for
the improvement and rational use of all types of telecommunications. The ITU’s air transport-related tasks centre on its
management of the radio frequency spectrum, particularly those parts allocated to aeronautical services (www.itu.int).
6.2.5 The United Nations Conference on Trade and Development (UNCTAD), headquartered in Geneva,
Switzerland, was established in 1964 to promote international trade and more particularly, trade between and with
developing countries. It serves, inter alia, as a forum for the discussion of air transport issues, particularly those facing
the least developed, land-locked and island developing countries (www.unctad.org).
6.2.6 The Universal Postal Union (UPU), headquartered in Berne, Switzerland, was established in 1874 as
a specialized agency of the United Nations (UN) to promote the development of communication between peoples by the
efficient operation of postal services by coordinating postal policies among member nations, in addition to the worldwide
postal system. The UPU is involved in airmail matters such as conveyance rates, the carriage of dangerous goods by
mail and adaptation of postal services to the increasing competition from private couriers and express/small package
operators (www.upu.int).
6.2.7 The International Bank for Reconstruction and Development (IBRD), headquartered in Washington, D.C.,
USA, part of the World Bank Group, has a mission of strengthening economies and expanding markets to improve the
quality of life for people everywhere, especially the poorest, by lending money to developing countries for projects, inter
alia, that build or upgrade airports and other civil aviation related facilities. It was conceived during World War II in
meetings at Bretton Woods, New Hampshire, USA, and initially helped rebuild Europe after that war. It does not make
grants (www.worldbank.org).
6.3 OTHER WORLDWIDE INTERGOVERNMENTAL ORGANIZATIONS
6.3.1 The World Trade Organization (WTO-OMC), headquartered in Geneva, Switzerland, came into being on
1 January 1995 as the global forum for multilateral trade negotiations and the facilitator of the implementation,
administration and operation of multilateral trade agreements. It replaced the entity, also headquartered in Geneva,
Switzerland, informally known as the General Agreement on Tariffs and Trade (GATT), one dedicated to the promotion
of freer trade worldwide (taking this name from the multilateral trade treaty of the same name which entered into force in
January 1948 and remains in effect), and less known by its formal name of Interim Commission of the International
Trade Organization. Although provisional and intended to last only until its replacement by a proposed specialized
agency of the United Nations to be called the International Trade Organization (ITO), it continued to function as the
Chapter 6. Worldwide Inter-governmental Organizations III-6-3
world’s only global trade organization until the WTO-OMC came into being. The WTO-OMC was established by an
agreement within the Final Act of the Uruguay Round of GATT trade negotiations which began at Punta del Este,
Uruguay, in 1986, ended at Marrakesh, Morocco, on 15 April 1994, and was the first series of trade negotiations to
consider trade in services (including air transport) in addition to trade in goods (www.wto.org).
6.3.2 The World Tourism Organization (WTO-OMT), headquartered in Madrid, Spain, was established in 1975
and entrusted by the United Nations to promote and develop tourism. Leading this field, it serves as a global forum for
tourism policy issues and a practical source of guidance. WTO-OMT’s membership includes States and territories and,
by affiliation, representatives of local governments, tourism associations and private sector companies, including airlines,
hotel groups and tour operators (www.world-tourism.org).
6.3.3 The Organisation for Economic Cooperation and Development (OECD), headquartered in Paris, France,
was established in 1961 to offer its member States a unique forum to discuss, develop and refine economic and social
policies. It provides input to policy debates on current and emerging issues. In air transport (air cargo), the key issues
revolve around regulatory reform and trade liberalization (www.oecd.org).
6.3.4 The United Nations Framework Convention on Climate Change Secretariat (UNFCCC Secretariat),
headquartered in Bonn, Germany, was established in 1995 as the permanent Secretariat to the UNFCCC to offer its
member States practical arrangements for sessions of Convention bodies. It is institutionally linked to the United Nations
and administered under the UN rules and regulations; however, the UNFCCC is not a specialized agency of the United
Nations (www.unfccc.int).
______________________
Chapter 7
REGIONAL INTERGOVERNMENTAL
CIVIL AVIATION ORGANIZATIONS
Three regional intergovernmental civil aviation organizations (in Africa, Europe and Latin America and the Caribbean)
are headquartered in three ICAO Regional Offices (Dakar, Paris and Lima respectively). These organizations, which
bring together national civil aviation officials, seek common regional policies and approaches on air transport regulatory
matters (Doc 9587 summarizes policies adopted by these regional organizations). The three regional organizations, as
well as certain sub-regional ones and that of the Arab States, are identified in the following three sections of this chapter.
7.1 AFRICA
7.1.1 The African Civil Aviation Commission (AFCAC), a specialized agency of the Organization of African Unity
(OAU) now known as (AU), was established in Addis Ababa, Ethiopia, in January 1969. Membership is open to all
African States which are members of the OAU, and to other member States of the United Nations Economic
Commission for Africa (ECA), subject to the approval of the OAU. Fifty-four States are members of AFCAC (as of May
2018) (www.afcac.org).
7.1.2 AFCAC provides members with a framework for coordination to achieve better utilization and development
of the African air transport system and to encourage the application of ICAO standards and recommendations. It is the
Executing Agency of the Yamoussoukro Decision (YD), responsible for the coordination and implementation of the YD in
accordance with the mandate of its Revised Constitution of 2009.
7.1.3 The AFCAC Plenary is the sovereign body of the organization which convenes every three years to
establish the work programme and budget, and to conduct other business. The AFCAC Bureau, composed of a
President and five Vice-Presidents (representing Northern, Eastern, Central, Western and Southern Africa) who are
elected by the Plenary, directs and coordinates the work programme between plenary sessions.
7.1.4 AFCAC’s general air transport policy emphasizes the integration of African airlines via mergers, joint
operations, the formation of consortia, the liberal exchange of traffic rights among member States and a common
external policy. The organization has also been fostering the implementation of the ICAO SARPs by its Member States
with the establishment of the AFI Cooperative Inspectorate Scheme (CIS) to assist those Member States that do not
have the capability to implement the ICAO SARPs.
7.1.5 AFCAC is a sponsor of the African Air Tariff Conference, which was designed to negotiate, coordinate and
act upon all air tariff matters of concern to its members. Since 1982, pending ratification of the convention establishing
the Conference, the African Airlines Association (AFRAA) has used the Tariff Conference machinery, envisioned in the
convention, on an experimental basis for annual meetings in which airline officials discuss and coordinate positions on a
variety of tariff issues, generally in advance of IATA tariff coordination meetings. AFCAC acts as a forum for joint
discussions cooperation between Africa and other regions, States or sister organisations and concludes international
agreements, arrangements and memoranda of understanding or cooperation.
III-7-1
7.2 EUROPE
7.2.1 The European Civil Aviation Conference (ECAC) was established in Strasbourg in 1954 pursuant to an
initiative by ICAO and the Council of Europe. The primary objective of ECAC is to promote the continued development of
a safe, secure, efficient and environmentally friendly European air transport system. In doing so, it seeks to harmonize
civil aviation policies and practices amongst its Member States and promote understanding on policy matters between
its Member States and other parts of the world. Forty-four States are members of ECAC (as of May 2018)
(www.ecac-ceac.org).
7.2.2 The ECAC Plenary Conference is the sovereign body of the organization which meets every three years at
the European Parliament in Strasbourg to consider the work programme and to take basic policy decisions. ECAC
Meetings of Directors General of Civil Aviation (DGCA) are held frequently for consultations, sometimes on a relatively
informal basis, to deal with urgent matters. ECAC also uses numerous working groups, task forces and groups of
experts. The ECAC Coordinating Committee harmonizes the work of the four Standing Committees and the Meetings of
the DGCA, and also supervises the finances of ECAC.
7.2.3 The Conference issues ECAC resolutions and ECAC policy statements which may be incorporated into the
national regulations of each Member State. For example, the Conference adopted a Code of Conduct on Computer
Reservation Systems in March 1989 with the objective of its unified application among member States. It also acts as a
forum for joint discussions between Europe and other regions or States and concludes international agreements,
arrangements and memoranda of understanding.
7.2.4 ECAC enjoys active cooperation with its sister organizations through Memoranda of Understanding and
with the European Commission, EUROCONTROL, the European Aviation Security Training Institute and the Joint
Aviation Authorities (JAA) Training Office.
7.3 LATIN AMERICA AND THE CARIBBEAN
7.3.1 The Latin American Civil Aviation Commission (LACAC) was established at the Second Conference of
Aeronautical Authorities of Latin America, held in Mexico City in 1973. Membership is open to all American States.
Twenty-two States and associates are members of LACAC (as at May 2018).
7.3.2 The primary objective of LACAC is to provide the civil aviation authorities of member States with an
appropriate framework within which to discuss and plan cooperative measures and to coordinate their civil aviation
activities.
7.3.3 The LACAC Assembly, the sovereign body of the Commission, is convened every two years to establish
the work programmes for the Commission and subordinate bodies such as committees, working groups and groups of
experts.
7.3.4 The LACAC Executive Committee, composed of a President and four Vice-Presidents elected by the
LACAC Assembly, administers and coordinates the work programme established by the Assembly. It is assisted by a
number of working groups including, in the field of air transport regulation, the LACAC Group of Experts on Air Transport
Policies (GEPTA) and the LACAC Group of Experts on Costs and Tariffs (GECOT).
7.3.5 The Andean Committee of Aeronautical Authorities (CAAA), composed of national civil aviation authorities
of the subregion, was created by a Resolution of the Fifth Meeting of Ministers of Transport, Communications and Public
Works of member States of the Andean Pact (Bolivia, Colombia, Ecuador, Peru and Venezuela). It is responsible, inter
alia, for ensuring compliance with the “Open Skies Policy” adopted by the Commission of the Cartagena Agreement in
May 1991, and its overall application.
Chapter 7. Regional Intergovernmental Civil Aviation Organizations III-7-3
7.3.6 The Central American Air Transport Commission (COCATRAE) was established in September 1991 under
the auspices of the Permanent Secretariat of the General Treaty on Central American Economic Integration (SIECA) as
a subregional forum on air transport matters.
7.4 MIDDLE EAST
7.4.1 The Arab Civil Aviation Commission (ACAC) was established in 1996 under the auspices of the Arab
League, then known as the League of Arab States, and succeeded the Arab Civil Aviation Council. Twenty-one States
are members of ACAC (as at May 2018). Headquartered in Rabat, Morocco, its membership is open to all States that
are members of the Arab League. Objectives of ACAC are: to establish a plan to develop Arab civil aviation and ensure
its safety; to promote cooperation and coordination among member States in the field of civil aviation and set the
necessary rules and regulations to achieve its uniformity; and to ensure the growth and development of civil aviation to
meet the needs of Arab nations for safe, efficient and regular air transport.
7.4.2 The ACAC General Assembly is the sovereign body of the organization which convenes every two years to
approve the work programme and budget, and to conduct other businesses including the election of the members of the
Executive Council. The Assembly is responsible for adopting guides for cooperation between ACAC, States and
international and regional organizations. The Executive Council acts as the general directorate of ACAC responsible for
pursuing the implementation of the resolution of the General Assembly and the plans and programmes of the
organization, among other responsibilities.
______________________
Chapter 8
REGIONAL AND TRANS-REGIONAL INTERGOVERNMENTAL

ORGANIZATIONS AND TRADE AREAS
8.1 INTRODUCTION
8.1.1 In addition to worldwide intergovernmental organizations, there exist numerous regional and trans-regional
multilateral intergovernmental organizations and trade areas. Certain of these organizations, from time to time, or in a
few cases on a continuous basis, participate in the regulation of international air transport. They typically do so by
seeking consensus among member States on uniform approaches to policy matters affecting air services of concern to
them, and/or through the use of regulations or directives. Others may undertake or sponsor studies, the conclusions of
which could affect international air transport regulation. Still others are not active in air transport matters, but could
become active or may establish policies which affect such matters.
8.1.2 The first section of this chapter identifies, by world region, regional intergovernmental organizations and
arrangements. More extensive information has been provided about the European Union because of its size, complexity
and significant involvement with air transport regulation.
8.1.3 A second section identifies various formal trans-regional groups of States. A third section identifies a
number of informal trans-regional intergovernmental groups.
8.2 REGIONAL INTERGOVERNMENTAL ORGANIZATIONS
Africa
Arab Maghreb Union (AMU)
Founded: 1988.
Members: Algeria, Libyan Arab Jamahiriya,
Mauritania, Morocco, Tunisia.
Central African Economic Union (CAEU)
Founded: 1964 as the Central African Customs and Economic Union (CACEU).
Headquarters: Yaoundé, Cameroon.
Members: Cameroon, Central African Republic, Chad, Congo, Equatorial Guinea, Gabon.
Council of the Entente (CE)
Founded: 1959.
Headquarters: Abidjan, Côte d’Ivoire.
Members: Benin, Burkina Faso, Côte d’Ivoire, Niger, Togo.
III-8-1
Economic Commission for Africa (ECA)
United Nations regional body.

Founded: 1958.
Headquarters: Addis Ababa, Ethiopia.
Members: 54 States of the region.
Website: www.uneca.org
Economic Community of Central African States (ECCAS)
Founded: 1981.
Headquarters: Libreville, Gabon.
Members: Burundi, Cameroon, Central African Republic, Chad, Congo, Equatorial Guinea, Gabon,
Rwanda, Sao Tome and Principe, Democratic Republic of the Congo.
Website: www.ceeac-eccas.org
Economic Community of the Great Lakes Countries (CEPGL)
Founded: 1976.
Headquarters: Kigali, Rwanda.
Members: Burundi, Rwanda, Democratic Republic of the Congo.
Economic Community of West African States (ECOWAS)
Founded: 1975.
Headquarters: Abuja, Nigeria.
Members: 16 States of the subregion.
Website: www.ecowas.int
African Union (AU)
Founded: 1963.
Headquarters: Addis Ababa, Ethiopia. Co-founder of the African Civil Aviation Commission (AFCAC).
Members: 54 African States.
Website: www.au.int
Common Market for Eastern and Southern Africa
Founded: 1994.
Replaced: the Preferential Trade Area for Eastern and Southern African States (PTA), founded in 1981.
Headquarters: Lusaka, Zambia.
Members: 20 member States of the subregion.
Website: www.comesa.int
Chapter 8. Regional and Trans-regional Intergovernmental Organizations and Trade Areas III-8-3
Southern African Development Community (SADC)
Founded: 1992.
Replaced: the Southern African Development Coordination Conference (SADCC), founded in 1980.
Headquarters: Gaborone, Botswana.
Members: Angola, Botswana, Democratic Republic of the Congo, Lesotho, Malawi, Mauritius,
Mozambique, Namibia, South Africa, Seychelles, Swaziland, United Republic of Tanzania, Zambia,
Zimbabwe.
Website: www.sadc.int
Southern Africa Transport and Communications Commission (SATCC)
Founded: 1980 as a Sectoral Commission of the SADCC with the same membership as SADCC.
Headquarters: Maputo, Mozambique.
West African Economic Community (CEAO)
Founded: 1994.
Replaced: the West African Economic Community (CEAO), founded in 1959.
Headquarters: Ouagadougou, Burkina Faso.
Members: Benin, Burkina Faso, Côte d’Ivoire, Guinea Bissau, Mali, Niger, Senegal, Togo.
Asia and the Pacific
Asia-Pacific Economic Cooperation (APEC)
Founded: 1989.
Members: Australia, Brunei Darussalam, Canada, Chile, China, Indonesia, Japan, Malaysia, Mexico, New
Zealand, Papua New Guinea, Peru, Philippines, Republic of Korea, Russian Federation, Singapore,
Thailand, United States, Viet Nam, and two non-State members, Chinese Taipei and Hong Kong.
Website: www.apec.org
Association of South East Asian Nations (ASEAN)
Founded: 1967.
Headquarters: Jakarta, Indonesia.
Members: Brunei Darussalam, Cambodia, Indonesia, Lao People’s Democratic Republic, Malaysia,
Myanmar, Philippines, Singapore, Thailand, Viet Nam.
Website: asean.org/
Economic and Social Commission for Asia and the Pacific (ESCAP)

Founded: 1947.
Headquarters: Bangkok, Thailand.
Members: Governments of 38 countries of the region, but not including those of certain Western Asian
countries which belong to ESCWA (see FORMAL TRANS-REGIONAL GROUPS).
Website: www.unescap.org
Pacific Community
Founded: 1947.
Former name: South Pacific Commission (SPC).
Headquarters: Noumea, New Caledonia.
Members: 27 States/territories of the subregion.
Website: www.spc.int
South Asian Association for Regional Cooperation (SAARC)
Founded: 1985.
Headquarters: Kathmandu, Nepal.
Members: Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka.
Website: www.saarc-sec.org
Pacific Islands Forum Secretariat (PIFS)
Founded: 1972.
Former names: South Pacific Forum and South Pacific Bureau for Economic Cooperation (SPEC).
Headquarters: Suva, Fiji.
Members: 16 States/territories of the subregion.
Website: www.forumsec.org
Europe
Central European Initiative (CEI)
An intergovernmental forum, founded in 1989, for dialogue and cooperation among 17 Central and Eastern
Europe countries and the European Bank for Reconstruction and Development (EBRD).
Website: www.cei.int
Council of Europe (CE)
Founded: 1949.
Headquarters: Strasbourg, France. Was instrumental in the establishment of the European Civil Aviation
Conference (ECAC). The Parliamentary Assembly of the Council of Europe is the principal legislative body
of the CE.
Website: www.coe.int
Economic Commission for Europe (ECE)

Founded: 1947.
Headquarters: Geneva, Switzerland.
Website: www.unece.org
European Economic Area (EEA)
The EEA Agreement unites the 28 EU member States and the three EFTA EEA States (Iceland,
Liechtenstein and Norway) into one single market governed by the same basic rules which facilitate free
movement of goods, capital, services and persons and competition rules.
European Union (EU)
A unique, treaty-based, institutional framework that defines and manages economic and political
cooperation among its 28 European member States.
The EU’s origins go back to 9 May 1950, when French Foreign Minister Robert Schuman proposed pooling
European coal and steel production under a common authority. Building upon this idea, on 18 April 1951,
the European Coal and Steel Community (ECSC) was established by six European States (Belgium,
France, the Federal Republic of Germany, Italy, Luxembourg and the Netherlands) and given portions of
their sovereign powers. Its success led to the creation by the six, by means of the Rome Treaties signed
on 25 March 1957, of the European Atomic Energy Community (EAEC or EURATOM) to further the
development of nuclear energy for peaceful purposes and the European Economic Community (EEC) to
merge national markets into a single market. Collectively, the three became known in 1967 as the
European Communities, the institutions of which were merged into the dominant EEC by treaty signed on 8
April 1965. The United Kingdom, Ireland, and Denmark joined in 1973; Greece in 1981; Spain and Portugal
in 1986; and Austria, Finland and Sweden in 1995. Ten Eastern European States joined in 2014. Bulgaria
and Romania joined in 2007 while Croatia joined in 2013.
The Treaty on European Union, also known as the Maastricht Treaty, which entered into effect on
1 November 1993, significantly changed the founding treaties and created the European Union (EU). The
three founding treaties of the European Communities now formed the European Community (EC), one of
three parts of the EU, the other parts being the Common Foreign and Security Policy (CFSP) and Justice
and Home Affairs (JHA), the latter two operating by intergovernmental cooperation rather than by the
Community institutions. The Maastricht Treaty also cleared the completion of the Economic and Monetary
Union (EMU), which launched the Euro currency on 1 January 1999. The treaty additionally created a
European Central Bank.
The EC operates with five principal institutions, each with a specific role:
The European Commission, consisting of 20 Commissioners, proposes policies and legislation, ensures
that provisions of treaties and Community decisions are implemented and is supported by an
administrative staff divided into 23 administrative departments called Directorates-General (DG). Those
which are most involved in air transport matters are DG VII (Transport), DG IV (Competition), and DG XI
(Environment, Consumer Protection and Nuclear Safety). Draft legislation is usually developed within one
or more of these directorates-general, and then submitted for approval to the Commission. The
Commission represents the EC at ICAO meetings.
Once approved by the Commission, legislative proposals are submitted to the Council of the European
Union, a decision-making body composed of ministers of member States (changing according to the
subject discussed) which, inter alia, exercises legislative power, coordinates economic policies, and
concludes international agreements. Proposals which have been adopted by the Council usually take the
form of Council Regulations, which apply directly to member States and/or other entities, or Council
Directives, which lay down compulsory objectives for member States to achieve by regulation. Where it
has been given the necessary powers on certain subjects the Commission may itself issue Commission
Regulations for direct application to member States and/or other entities, without following the above
process.
The third principal institution, the European Parliament (EP), its 626 members directly elected by the
citizens of the EU, acts as a public forum on issues of importance, has limited legislative and budgetary
roles shared with the Council, and exercises democratic supervision over the Commission.
The other two such institutions are the European Court of Justice (ECJ), comprised of 15 judges assisted
by 9 advocates-general, which interprets EU law, and the European Court of Auditors (ECA), with 15
appointed members, which monitors the EU’s finances.
Two advisory bodies to the Council also exist: the Economic and Social Committee (ECS), which has 222
members who represent employees, farmers, consumers and other such groups and express views on
economic and social issues; and the Committee of the Regions (COR), which also has 222 members, in
this case representing local and regional authorities who express views on regional policy, the environment
and education.
Website: ec.europa.eu/
European Free Trade Association (EFTA)
Founded: 1960 under Stockholm Convention.

Members: Austria, Finland, Iceland, Liechtenstein, Norway, Sweden, Switzerland.
Website: www.efta.int
Nordic Co-operation (NC)
Founded: 1952.
Headquarters: Stockholm, Sweden.
Members: Denmark, Finland, Iceland, Norway, Sweden and three autonomous territories (the Aaland
Islands, the Faeroe Islands, Greenland).
Website: www.norden.org
Single European Market
A unified economic area with the free movement of goods, persons, services and capital among member
States of the EU. The EU’s single market for air transport is based on a phased programme of three
“liberalization packages”, the last of which took effect on 1 January 1993. A transitional period was laid
down for access to intra-community air routes, which became reality on 1 April 1997. Community policy on
liberalizing air transport covers four main areas: market access, capacity control, fares and the issue of
operating licences for companies.
Latin America and the Caribbean
Andean Community
Founded: 1969 under Cartagena Agreement.

Headquarters: Lima, Peru.
Members: Bolivia, Colombia, Ecuador, Peru, Venezuela (see Decision 297 of the Commission on the
Cartagena Accord, which established an “open skies” air transport policy for the Andean Pact member
States, in Chapter 3.7).
Website: www.comunidadandina.org
Caribbean Community (CARICOM)
Founded: 1973 under Treaty of Chaguaramas.

Headquarters: Georgetown, Guyana.
Members: Antigua and Barbuda, Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica,
Montserrat, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname, Trinidad and
Tobago.
Associate members: British Virgin Islands, Haiti, Turks and Caicos Islands.
Website: www.caricom.org
Central American Common Market (CACM)
Founded: 1960.
Headquarters: Guatemala City, Guatemala.
Members: Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua. The same group signed a
framework free trade agreement with Mexico in 1992.
Economic Commission for Latin America and the Caribbean (ECLAC)

Founded: 1948.
Headquarters: Santiago, Chile.
Website: www.cepal.org
Latin American Economic System (SELA)
Founded: 1975.
Headquarters: Caracas, Venezuela.
Members: 28 States of Latin America.
Website: www.sela.org
Latin American Integration Association (LAIA)
Founded: 1980 under Montevideo Treaty.

Headquarters: Montevideo, Uruguay.
Members: Argentina, Bolivia, Brazil, Chile, Colombia, Cuba, Ecuador, Mexico, Paraguay, Peru, Uruguay,
Venezuela.
Website: www.aladi.org
Central American Integration System
Founded: 1951 as Organization of Central American States (OCAS).

Headquarters: San Salvador, El Salvador.
Members: Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua.
Organisation of Eastern Caribbean States (OECS)
Founded: 1981.
Headquarters: Castries, Saint Lucia.
Members: Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, Saint Kitts and Nevis, Saint
Lucia, Saint Vincent and the Grenadines, British Virgin Islands.
Website: www.oecs.org
Southern Cone Common Market (MERCOSUR)
Founded: 1990 under Mercosur Treaty.

Headquarters: Montevideo, Uruguay.
Members: Argentina, Brazil, Paraguay, Uruguay.
Associate member: Bolivia.
Middle East
Secretariat General of the Gulf Cooperation Council
Founded: 1981.
Headquarters: Riyadh, Saudi Arabia.
Members: Bahrain, Oman, Kuwait, Qatar, Saudi Arabia, United Arab Emirates.
Website: www.gcc-sg.org
North America
North American Free Trade Agreement (NAFTA)
Founded: 1994.
Members: Canada, Mexico, United States.
Website: www.nafta-sec-alena.org
8.3 FORMAL TRANS-REGIONAL GROUPS
African, Caribbean and Pacific Group of States (ACP Group)
Founded: 1975 under Lomé Convention.

Headquarters: Brussels, Belgium.
Members: 78 developing countries which relate through this group to the European Community.
Website: www.acp.int
Arab Common Market (ACM)
Founded: 1964.
Headquarters: Amman, Jordan.
Members: Egypt, Iraq, Jordan, Libyan Arab Jamahiriya, Mauritania, Syrian Arab Republic, Yemen.
Economic and Social Commission for Western Asia (ESCWA)

Founded: 1973.
Headquarters: Beirut, Lebanon.
Members: Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Oman, Palestine, Qatar, Saudi Arabia, Syrian
Arab Republic, United Arab Emirates, Yemen.
Website: www.unescwa.org
Economic Cooperation Organization (ECO)
Founded: 1984 under the Treaty of Izmir.

Headquarters: Tehran, Islamic Republic of Iran.
Original members: Islamic Republic of Iran, Pakistan, Turkey. Expanded in 1992 to include Afghanistan,
Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan.
Website: www.eco.int
Arab League, formerly known as the League of Arab States (LAS)
Founded: 1945.
Headquarters: Cairo, Egypt.
Members: 22 Arab States. The Council of Arab Ministers of Transport deals with civil aviation.
Website: www.leagueofarabstates.org
Organization of American States (OAS)
Founded: 1890 as the International Union of American Republics, which became the Pan American Union
in 1910, then the OAS in 1948.
Headquarters: Washington, D.C., United States.
Members: 35 States of North and South America and the Caribbean.
Website: www.oas.org
8.4 INFORMAL TRANS-REGIONAL GROUPS
Group of Eight (G-8)
Group of major industrialized States. Formerly the Group of Seven (G-7) until joined by the Russian
Federation.
Members: Canada, France, Germany, Italy, Japan, Russian Federation, United Kingdom, United States.
The Group of 77 (G-77)
Group of developing States organized to promote their views on international trade and development in
UNCTAD.
Members: 133 States (originally established with 77 States).
Website: www.g77.org
Paris Club
A forum for officials of creditor governments to collaborate on debt collection and debt forgiveness policies.
The composition of the group is likely to vary according to the particular creditor States involved and the
debtor States in question. Based in Paris, the “club” is run by the French Treasury.
Website: www.clubdeparis.org
D-8 Organization for Economic Cooperation (known as Developing-8)
Founded: 1997
Headquarters: Istanbul, Turkey
Members: Bangladesh, Egypt, Indonesia, Iran, Malaysia, Nigeria, Pakistan and Turkey
______________________
Chapter 9
MAJOR AIR TRANSPORT INDUSTRY ORGANIZATIONS
This chapter provides information on three major air transport industry organizations, whose members’ activities are
often the subjects of government regulation in international air transport. The first section describes the International Air
Transport Association (IATA). The second section provides information on the Airports Council International (ACI), while
the last section covers the Civil Air Navigation Services Organization (CANSO). Information on other air transport
industry organizations or non-governmental organizations in aviation related fields is provided in Chapter 10.
9.1 INTERNATIONAL AIR TRANSPORT ASSOCIATION (IATA)
9.1.1 The International Air Transport Association (IATA) is the worldwide non-governmental organization of
scheduled airlines established in 1945 to promote safe, regular and economical air transport, to provide means for
collaboration among air transport enterprises, and to cooperate with ICAO, other international organizations and regional
airline associations (website: www.iata.org).
9.1.2 IATA provides a unified voice which supports and promotes the interests of its members in a number of
different ways, including: international recognition and lobbying, targeting key industry priorities, driving industry changes,
reducing costs, as well as communication and training, and other services. The vision of the organization is to be the
force for value creation and innovation driving a safe, secure and profitable air transport industry that sustainably
connects and enriches our world.
9.1.3 IATA has two main offices, with its Head Office in Montréal and an Executive Office in Geneva. It has
regional offices in Amman, Beijing, Madrid, Miami and Singapore, as well as presence in approximately 40 other cities.
9.1.4 IATA membership is open to any operating company which has been licensed to provide international air
service. Successful completion of the IATA Operational Safety Audit (IOSA) is a condition of IATA membership. As of
May 2018, IATA has over 280 member airlines representing over 83 percent of global total air traffic.
9.1.5 The IATA Annual General Meeting (AGM) is the sovereign body of the association which is held each year
to endorse positions on industry and public policy issues. The AGM provides direction on emerging industry issues and
forums for members to meet and network.
9.1.6 The IATA Board of Governors (BG) is composed of elected Chief Executives of member airlines. The
Board provides year-round policy direction. Its members exercise an oversight and executive role on behalf of the
membership as a whole in representing the interests of the Association.
9.1.7 The six IATA Industry Committees (Cargo, Environment, Financial, Industry Affairs, Legal and Operations)
are composed of experts nominated by individual member airlines. The IATA Industry Affairs Committee (IAC) advises
the Board of Governors and the Director General on all commercial matters connected with international air transport
and oversees the work of the Traffic Conferences.
III-9-1
9.1.8 The IATA Secretariat comprises staff members headed by the Director General and Chief Executive
Officer, which supports the board and committee meetings. The Secretariat also performs several functions for, and
provides various services to, member airlines and others.
9.1.9 Much of IATA’s early work was technical, including providing input to ICAO on the development of
standards and recommended practices for various aspects of international civil aviation, which are contained in the
Annexes to the Chicago Convention, and which govern the conduct of international air transport. It was also charged by
the governments with setting a coherent fare and rate structure for the operation of international scheduled air services,
which was done through its Tariff Coordinating Conferences.
9.1.10 IATA also develops standards which facilitate cooperation among travel industry enterprises. For example,
it developed the standards which led to the introduction of e-ticketing and mobile boarding passes. IATA is the provider
of the three-letter city code system and a two-letter airline code system which is recognized as the standard for
communicating airport and flight information the world over.
9.1.11 IATA maintains relationships with governments and other industry stakeholders around the world,
advocating on behalf of its members on key industry issues and formulating industry policy on critical aviation issues.
9.1.12 For governments, IATA seeks to partner with regulators to implement good regulatory practices that can
realize the aviation’s potential to national economies and societies.
9.1.13 For air carriers, IATA facilitates the establishment of route networks by being a one-stop shop for
standards, manuals, guidelines, resolutions and recommended practices, as well as financial settlement systems and
industry advocacy.
9.1.14 For consumers, IATA maintains a global system that allows seamless travel between practically any two
points across the globe, on one ticket, for one price.
9.1.15 By partnering for mutual benefit, IATA works with governments, ICAO and other relevant authorities to help
define regulatory frameworks for the airline industry on Safety and Security, Infrastructure, Consumer and Passenger
Rights, Environmental Policy, and Taxation.
9.1.16 IATA through its Training and Development Institute (ITDI), offers a wide range of training courses to
stakeholders across the air transport value chain. In addition, the Association maintains a suite of publications that assist
stakeholders in maintaining safe and secure global air transport connectivity.
9.1.17 IATA also analyses economic and policy developments affecting the financial performance of the global
airline industry, and publishes a monthly Financial Monitor that covers all the key metrics on the strength of the airline
industry.
9.2 AIRPORTS COUNCIL INTERNATIONAL (ACI)
9.2.1 Airports Council International (ACI) World is the international association of the world’s airports. It is a non-
profit organization, with the prime purpose of fostering cooperation among its member airports and with other partners in
world aviation, including organizations representing governments, airlines and aircraft manufacturers. ACI World’s
headquarters is based in Montréal, Canada, and its regional offices are located in five geographical regions: Africa, Asia-
Pacific, Europe, Latin America/Caribbean, and North America. Website: www.aci.aero.
Chapter 9. Major Air Transport Industry Organizations III-9-3
9.2.2 ACI’s mission is to advance the collective interests of, and act as the voice of, the world’s airports and the
communities they serve, and promote professional excellence in airport management and operations. Its objectives and
roles are as follows:
a) maximize the contributions of airports to maintaining and developing a safe, secure and viable aviation
industry in a responsible and sustainable manner;
b) promote cooperation among all segments of the aviation industry and their stakeholders as well as
with governments, regional and international organizations;
c) influence international, regional and national legislation, rules, policies, standards and practices,
based on established policies representing airports’ interests and priorities;
d) advance the development of the aviation system by enhancing public awareness of the economic and
social importance of air travel and airport development;
e) provide leadership in airport operations and management through the development of global technical
standards and/or recommended practices;
f) maximize cooperation and mutual assistance among airports;
g) provide members with industry knowledge, advice and assistance, and foster professional excellence
in airport management and operations; and
h) build ACI’s worldwide organizational capacity and resources to serve all members effectively and
efficiently.
9.2.3 The ACI World Governing Board consists of 28 representatives nominated by the Regional ACI Boards,
plus the Immediate Past Chair of the Board. The number of regional representatives is calculated based on each
region’s share of passenger and cargo traffic. ACI presents the collective positions of its membership, which are
established through committees, endorsed by the ACI Governing Board and reflect the common interests of the airport
community.
9.2.4 ACI has six World Standing Committees which prepare policies in their specific areas of competence:
a) The Airport Information Technology Standing Committee, which covers information and
communications technology infrastructure at airports; common use and self-service environments;
flight information display systems (FIDS); Machine Readable Travel Documents (MRTDs); Advance
Passenger Information (API); RFID.
b) The Economics Standing Committee, which covers: airport charging systems; security, noise and
passenger service charges; consultation with users; development of revenues from concessions; peak
pricing; currency considerations; financial statistics; airport financing and ownership; State taxation;
the impact on airports of airline deregulation and consolidation; air service agreements; competition
between air transport and other modes of high-speed transport; collection of passenger and cargo
traffic statistics; forecasts of future air traffic; and trends in airport privatization.
c) The Environment Standing Committee, which covers: noise certification standards and procedures of
jet aircraft, propeller aircraft and helicopters; noise-related operating restrictions; engine emissions
and air pollution; land-use planning in the vicinity of airports; APU and engine ground testing noise;
use of chemicals for anti-icing and de-icing; firefighting training facilities, fuel storage and spillage; site
remediation; storm water management; waste management; natural resource management; and
environmental management systems.
d) The Facilitation and Airport Services Standing Committee, which covers: facilitation of passengers and
their baggage, freight and mail; quality of service at airports (standards and measurement); automated
services for passengers and baggage, freight and mail; use of information technology, automated
systems and telecommunications to support business and operational processes at airports; surface
access to airports and intermodal issues; measures to combat drug trafficking; slot allocation and
schedule coordination and the inter-relationship between facilitation and security.
e) The Security Standing Committee, which covers: airside and landside security; measures related to
access control; aviation security technology; the inter-relationship between security and facilitation;
security implications of code-sharing; employee background investigations; security awareness
programmes for the public; cargo security; and security in airport design.
f) The Safety and Technical Standing Committee, which covers: airport planning and development;
airspace and airport capacity and congestion; future air navigation systems; physical characteristics of
runways, taxiways and aprons; visual aids for navigation; operational safety including airport
equipment and installations; apron (ramp) safety and aerodrome vehicle operation; aerodrome
emergency planning; rescue and fire-fighting; dangerous goods; the removal of disabled aircraft; and
aircraft/airport compatibility issues, including the impact of New Larger Aircraft (NLA).
9.2.5 ACI interacts with other international organizations, including the International Civil Aviation Organization
(ICAO), where ACI has an observer status; and United Nations’ Economic and Social Council (UN/ECOSOC) where it
has consultative status. As of January 2018, provisional figures show that ACI serves 641 members operating 1,953
airports in 176 countries.
9.3 CIVIL AIR NAVIGATION SERVICES ORGANIZATION (CANSO)
9.3.1 Civil Air Navigation Services Organisation (CANSO) is a not-for-profit association, representing the
interests of air traffic management (ATM) worldwide. As of December 2017, CANSO has 87 Full Members and 85
Associate Members. Supporting over 85% of the world air traffic, CANSO Members share information and develop new
policies, with the ultimate aim of improving air navigation services (ANS) on the ground and in the air.
9.3.2 CANSO represents its Members’ views to a wide range of aviation stakeholders, including the International
Civil Aviation Organization (ICAO). CANSO has an extensive network of Associate Members drawn from across the
aviation industry. While CANSO’s Global Head Office is based in Schiphol Airport, the Netherlands, it also has a
presence in Montréal to act as the global voice of air traffic management with ICAO. CANSO’s central functions include
the Director General and the Chief Operating Officer; finance and administration; and communications, events,
development and membership.
9.3.3 CANSO is organized across five regions: Africa, Asia Pacific, Europe, Latin America and Caribbean, and
Middle East, with offices in Johannesburg, Singapore, Brussels, Mexico City and Jeddah respectively. Each office has a
regional director and staff. CANSO also has three programme areas: safety, operations & strategy and integration, with
a programme manager responsible for each area.
Chapter 9. Major Air Transport Industry Organizations III-9-5
9.3.4 CANSO’s regional offices coordinate activities at the local level, within the framework of policies and
positions agreed at CANSO at the global level. They represent the interests of air navigation services providers (ANSPs)
on regional initiatives, such as regional airspace harmonization, and regional roll-out of operational improvements (e.g.
performance-based navigation).
9.3.5 Within the overall context of promoting safe and efficient air navigation service provision, CANSO seeks to:
a) maintain an international forum for the development and exchange of ideas on current air traffic
management related issues and the formation of distinct CANSO policies and positions;
b) develop an international network for ANS experts to enable information exchange between specific
ANSPs and other stakeholders for the promotion of best practice within ATM;
c) liaise with other transport industry stakeholders, particularly airlines, industry suppliers and airports, to
the overall benefit of the aviation industry;
d) contribute to the continuous global air transport debate through the presentation and promotion of the
ANSP perspective across the range of contemporary issues in the industry;
e) represent the views and interests of Members at relevant international institutions, particularly ICAO;
and
f) promote and support international legislation, regulations and agreements that strengthen the position
of Members.
9.3.6 CANSO has three standing committees, Safety Standing Committee (SSC), Operations Standing
Committee (OSC), and Strategy and Integration Standing Committee (SISC), which deliver policy and set standards on
behalf of Members. They bring together experts to address issues of common interest; exchange experience for the
promotion of best practices; and develop specific policies across a broad spectrum of issues. These are ad hoc bodies,
established to examine specific issues, and to initiate targeted policies to guide ANSPs in their strategic development.
9.3.7 Each year CANSO holds a Global ATM Summit and Annual General Meeting (AGM). The Global ATM
Summit provides a unique assembly for ANSP CEOs and industry stakeholders to exchange views and hold detailed
discussions on mutually relevant topics. At the AGM, Members decide and prioritize CANSO’s work programme, set
budgets, and elect CANSO Officers and Committee Members.
9.3.8 CANSO has “observer status” at the ICAO Council and Air Navigation Commission meetings, in which it
represents the views of the industry in discussions on global standardization and regulatory requirements; and
collaborates on the development of industry best practice. In turn, CANSO provides ICAO and the aviation industry with
specialist knowledge and expertise, and the cooperation required to harmonize global ATM.
______________________
Chapter 10
NON-GOVERNMENTAL ORGANIZATIONS
10.1 INTRODUCTION
10.1.1 Apart from intergovernmental organizations, there exist numerous worldwide, regional and trans-regional
non-governmental organizations. Some of these organizations, from time to time, or in some cases on a recurring basis,
seek to influence the governmental regulation of international air transport directly or indirectly. Many typically do so by
aggregating the commonly held views of their members on matters relating to international air transport and articulating
such views, publicly and/or through communications with (and participation in various meetings of) governmental and
intergovernmental bodies. Others undertake or sponsor studies which can inform or influence those conducting
international air transport regulation. Their degree of focus on air transport issues, as distinct from other issues, varies
by organization.
10.1.2 This chapter identifies numerous non-governmental organizations which may influence air transport
regulation. The list is not necessarily exhaustive.
10.1.3 The first section of this chapter identifies air carrier organizations (except for the International Air Transport
Association (IATA) which is treated separately in Chapter 9).
10.1.4 The second section identifies other aviation organizations (except for Airport Council International (ACI)
and Civil Air Navigation Services Organisation (CANSO) which are treated separately in Chapter 9).
10.1.5 The final section identifies other organizations interested in air transport.
10.2 AIR CARRIER ORGANIZATIONS
African Airlines Association (AFRAA)
Founded: 1968.
Headquarters: Nairobi, Kenya.
Members: air carriers owned by member States of the OAU or controlled by nationals of OAU States.
Website: www.afraa.org
Air Charter Carriers Association (ACCA)
Founded: 1971.
Members: non-scheduled operators based in Europe which are affiliates or subsidiaries of IATA airlines.
Air Transport Association of America (ATA)
Founded: 1936.
Headquarters: Washington, D.C., United States.
Members: 22 principal airlines in the United States and 5 associate non-US airlines.
III-10-1
Arab Air Carriers’ Organization (AACO)
Founded: 1965 under the auspices of the Arab League, formerly known as the League of Arab States.
Headquarters: Beirut, Lebanon.
Members: airlines of States which are members of the League.
Website: aaco.org
Association of Asia Pacific Airlines (AAPA)
Founded: 1966, as the Orient Airlines Research Bureau. In 1970 it became the Orient Airlines
Association (OAA).
Headquarters: Kuala Lumpur, Malaysia.
Members: seventeen scheduled international airlines in the region.
Website: web.aapairlines.org
Association de Transporteurs Aériens Francophones (ATAF)
Founded: 1950.
Headquarters: Paris, France.
Members: 16 airlines based in Francophone African States, France and overseas territories.
Website: www.ataf.fr
Association of South Pacific Airlines (ASPA)
Founded: 1979.
Headquarters: Nadi, Fiji.
Members: 16 regional airlines, 2 associates and 18 industry providers in 15 countries and territories.
European Regions Airline Association (ERA)
Founded: 1980.
Headquarters: Chobham, United Kingdom.
Members: some 70 airlines and 160 associate and affiliate members comprising regional airports, aircraft
and engine manufacturers, and avionic suppliers and service providers.
Website: www.eraa.org
Airlines International Representation in Europe (AIRE), formerly the International Air Carrier Association (IACA)
Founded: 1971.
Members: air carriers engaged in non-scheduled air services.
Website: http://aire.aero/
Chapter 10. Non-governmental Organizations III-10-3
10.3 OTHER AVIATION ORGANIZATIONS
International Business Aviation Council (IBAC)
Founded: 1981.
Headquarters: Montréal, Canada.
Members: business aviation companies in over 20 States and territories.
Website: www.ibac.org
International Council of Aircraft Owner and Pilot Associations (IAOPA)
Founded: 1964.
Headquarters: Frederick, Maryland, United States.
Members: national general aviation organizations representing 400 000 pilots in over 53 States.
Website: www.iaopa.org
International Federation of Air Line Pilots’ Associations (IFALPA)
Founded: 1948.
Headquarters: Surrey, United Kingdom.
Members: national airline pilots associations in over 70 States and territories.
Website: www.ifalpa.org
10.4 OTHER ORGANIZATIONS INTERESTED IN AIR TRANSPORT
Consumers International, formerly known as the International Organization of Consumers Unions (IOCU)
Founded: 1960.
Headquarters: London, United Kingdom.
Members: consumer associations, government-financed consumer councils, labour unions and similar
groups.
Website: www.consumersinternational.org
Federation of Air Transport User Representatives in Europe (FATURE)
Founded: 1983, as the Federation of Air Transport User Representatives in the European Community.
Members: various user organizations in the European community.
Institute of International Law (IIL)
Founded: 1873.
Members: individuals and national associations in 49 countries concerned with international law including
air transport studies.
Website: www.idi-iil.org
Institut du Transport Aérien (ITA)
Founded: 1954.
Members: individuals and national organizations concerned with air transport studies in over 70 States.
International Chamber of Commerce (ICC)
Founded: 1920.
Members: national committees representing commerce, industry, transportation and finance in over 50
States.
Website: iccwbo.org/
International Federation of Freight Forwarders Associations (FIATA)
Founded: 1926 as International Federation of Forwarding Organizations.

Headquarters: Zurich, Switzerland.
Members: national associations of freight forwarders in some 90 States and territories.
Website: fiata.com
International Federation of Tour Operators (IFTO)
Founded: 1970.
Headquarters: Lewes, United Kingdom.
Members: national associations of tour operators.
International Foundation of Airline Passengers’ Association (IFAPA)
Founded: 1985.
Members: airline passengers’ associations.
Website: uia.org
International Law Association (ILA)
Founded: 1873.
Members: individuals and national associations concerned with international law, including aviation law.
Website: www.ila-hq.org
International Transport Workers’ Federation (ITF)
Founded: 1896 as the International Federation of Ship, Dock and River Workers.
Members: national transport workers’ unions in over 80 States and territories.
Website: www.itfglobal.org
Chapter 10. Non-governmental Organizations III-10-5
Pacific Asia Travel Association (PATA)
Founded: 1951.
Headquarters: Bangkok, Thailand.
Members: governments, airlines, travel agents, hotels.
Website: www.pata.org
Société Internationale de Télécommunications Aéronautiques (SITA)
Founded: 1949.
Members: over 400 airlines and air transport related organizations (including telecommunication and
information processing services).
Website: www.sita.aero
Universal Federation of Travel Agents’ Associations (UFTAA)
Founded: 1966.
Headquarters: Monaco.
Members: national associations representing over 50 000 travel agents in more than 80 States and
territories.
Website: www.uftaa.com
World Travel and Tourism Council (WTTC)

Members: about 40 chief executive officers from companies in all sectors of the travel industry including
transportation, accommodation, catering, recreation, cultural and travel services.
Website: www.wttc.org
______________________
Part IV
REGULATORY CONTENT
IV-(i)
Chapter 1
INTRODUCTION TO REGULATORY CONTENT
1.1 Regulatory content is defined in the Foreword as “the particular subjects being regulated (such as market
access, pricing and capacity)”. Part IV of the manual deals with subjects which make up the regulatory content in the
economic field of international air transport. Air transport regulators face these regulatory content subjects in all three
venues of regulation, i.e. national, bilateral and multilateral. Though distinct from one another, these subjects, in practice,
are rarely treated in isolation because of their interrelationships.
1.2 Chapter 2 uses a building block approach to identify and explain the three basic market access rights, i.e.
route, operational and traffic rights, which are the most important element of international air transport regulation. The
chapter also discusses market access in terms of the so-called “Sixth Freedom”.
1.3 The subject of capacity, an important element of air transport regulation, is examined in Chapter 3. This
chapter describes the involvement of governments in air carrier capacity regulation, and capacity regulation viewed from
an air carrier perspective.
1.4 Air carrier tariffs, another principal element in economic regulation, are discussed in Chapter 4. Tariff-
related terms, different types and characteristics of tariffs, and methods for regulating tariffs, as well as some key tariff
issues are examined.
1.5 Chapter 5 discusses air carrier ownership and control, a subject that has evoked considerable interest in
recent times because of the changes in the airline industry brought about by globalization, liberalization and privatization
(which often involves transnational investment in air carriers). The chapter describes the traditional criteria used by
States for airline designation and authorization, the rationale for their use, and some exceptions. It also briefly discusses
the implications of foreign investment in air carriers and, lastly, examines some key issues in liberalizing airline
ownership and control.
1.6 Chapter 6 deals with air cargo, an increasingly important component of international air transport,
identifying the distinct features of air cargo and describing how air cargo service is regulated.
1.7 The subject of non-scheduled air services is covered in Chapter 7. It describes the characteristics which
set it apart from scheduled air services, identifies the numerous kinds of international non-scheduled operations and
discusses how governments regulate them.
1.8 Chapter 8 is devoted to airline commercial activities (sometimes referred to as “doing business” matters)
which can be important in the provision of international air services in a foreign country. The activities described in this
chapter are currency conversion and remittance of earnings, employment of non-national personnel, sale and marketing
of international air transport, airline product distribution and electronic commerce, and aircraft leasing. They can, in
certain circumstances, be regarded by air carriers and States with the same degree of importance as the three principal
regulatory elements of market access, capacity and tariffs.
1.9 Chapter 9 provides information on three major airline cooperative activities, namely, airline alliances,
codesharing and franchising, and discusses their regulatory implications.
IV-1-1
IV-1-2 Manual on the Regulation of International Air Transport
1.10 Chapter 10 is devoted to air passengers. It discusses passenger rights, the relatively new topics of unruly
or disruptive passengers, and improperly documented passengers.
1.11 Chapter 11 covers airport-related matters. It contains information on ground handling, slot allocation at
international airports and privatization of airports.
______________________
Chapter 2
BASIC MARKET ACCESS
2.1 INTRODUCTION
2.1.1 An air transport market between any two places consists of the actual and potential traffic in persons and
goods that does move or may move between such places on commercial air services. International air transport markets
can fall into four categories in a hierarchical structure: a city-pair market, i.e. the air route linking two cities (e.g. New
York-London); a country-pair market, consisting of all city-pair routes linking two countries (e.g. United States-United
Kingdom); a region-to-region market, one that includes all routes linking two regions (e.g. North America-Europe, also
known as the North Atlantic market); and the global market which includes all points served in the world by the airline
industry. A scheduled air service is likely to carry traffic moving in numerous city-pair markets on each flight; a non-
scheduled air service typically, but not always, serves a single city-pair market on each flight.
2.1.2 Air transport market access, by any particular air carrier or carriers, is the nature and extent of the basic
rights (with any accompanying conditions and limitations) that are granted/authorized by the relevant governmental
authorities (and identified and discussed in this chapter) as well as ancillary rights such as those covering product
distribution. Air transport market penetration by any particular air carrier or carriers is the extent to which access is
actually used to obtain and carry traffic. Rights can be subject to numerous constraints (outside the scope of this chapter)
such as aircraft range and payload limitations, airport congestion and distribution system problems.
2.1.3 Access by an air carrier to a State’s domestic air transport market is typically obtained (with relatively few
exceptions) only if it is a carrier of that State and is usually acquired by a licensing process. Access to an international
air transport market is also usually acquired by a licensing or approval process in each State involved. The reason for
this dates back to the earliest period of flight when States recognized that every State has and may exercise complete
and exclusive sovereignty over the airspace above its territory. This principle is reaffirmed in Article 1 of the Chicago
Convention, and this exercise of sovereignty is usually expressed in a licensing or approval process. Thus, primarily
because of the need to use the territorial airspace of another State in order to serve an international market, access to
such air transport markets by foreign air carriers has come to be regulated in very different ways than access by foreign
entities in other service industries (e.g. hotel chains and telecommunications companies).
2.1.4 Commercial air transport services, when performed as other than scheduled international air services
involving ICAO Contracting States, are subject to Article 5 of the Chicago Convention. Under that Article, the foreign
aircraft of such a State have the right to fly into or in transit non-stop across the territory of any other ICAO Contracting
State and to make stops for non-traffic purposes (such as refuelling or repairs) without the necessity of obtaining prior
permission, and subject to the right of the State flown over to require landing. That Article also extends the privilege of
taking on or discharging traffic (i.e. obtaining access to the non-scheduled market), subject to the right of any State
where such embarkation or discharge takes place to impose such regulations, conditions or limitations as it may
consider desirable. In actual practice, such impositions may result in denial of or various constraints on market access
by non-scheduled services, and in the absence of agreement between the States concerned, it is regulated unilaterally,
usually on the basis of comity and reciprocity.
IV-2-1
2.1.5 Scheduled international air services are regulated in a basic way by Article 6 of the Chicago Convention.
That Article prohibits such services without the special permission or other authorization of the foreign State involved. In
practice, a State extends such permission or authorization for scheduled international services by foreign air carriers in
licences or permits of fixed or conditioned duration and does so (with rare exceptions) on the basis of the service being
the utilization of market access rights which that State has granted to the home State(s) of the air carrier.
2.1.6 A basic market access right is a conditioned or limited right or privilege (usually set out in an international
agreement) granted by one State to another State for use by an air carrier or carriers designated by that other State and
may consist of agreed: geographic specifications of routes along which the air service may take place; physical
specifications regarding designation of an air carrier or carriers and how a designated carrier may employ aircraft; and
physical and/or geographic specifications of what kinds of traffic may be carried. Such rights in total determine the extent
of market access granted.
2.1.7 Market access rights are usually granted in exchange for similar rights by means of some agreement(s) or
arrangement(s) between States and are usually limited to scheduled international air services. Although a market access
right fundamentally provides an opportunity to serve a market, it is also a limitation on market access because of its
specifications. States limit market access for various reasons including to bring about some perceived balance in rights
exchanged; to retain leverage for possible future exchanges; to avoid or minimize competitive impacts on their national
carriers; to be precise in order to avoid misinterpretation; and to promote or favour some market segment (such as that
of a particular city or national region). Ancillary rights, which relate to how an air carrier may conduct its business in a
foreign State, are sometimes treated by States as elements of market access. These are identified and discussed
separately in the manual.
2.1.8 Foreign investment or inward investment in the air carrier(s) of a State, including investment by foreign air
carriers, i.e. the purchase of equity holdings with some possible degree of influence in management decisions if not
control, is an additional means of obtaining market access. Yet another is that of obtaining a right of establishment, i.e.
the freedom to establish an air carrier in the territory of a foreign State. Both additional means are in limited use in
liberalized markets, either as exchanges between or among States or unilateral grants. (See also Chapter 5).
2.1.9 This chapter uses a building block approach to identify and explain three types of basic market access
rights which, in practice, States tend to intermix rather than keep separate in the annexes, articles, paragraphs and
sentences of their air transport agreements and sometimes even intermingle with capacity or other subjects. The
treatment accorded the many types of market access conditions and limitations in current use is fairly comprehensive;
however, this chapter does not explore the topics of liberalization of market access, simplification of its regulation, or
bilateralism versus multilateralism. Neither does it examine new concepts of progressive liberalization in the grant of
basic market access, i.e. the incremental removal of regulatory restraints, or of a safety net, i.e. some regulatory
arrangement for use in the exceptional event of a clear threat to the ability of a State to sustain some level of market
participation.
2.1.10 The first section of this chapter identifies various kinds of geographic specifications of the routes along
which an air service may take place. The next section focuses on carrier designation and various specifications
regarding the use of aircraft on such routes. The third section deals with specifications of categories of traffic that may
be transported on the routes. The final section discusses market access as affected by the so-called “Sixth Freedom”.
Part IV. Regulatory Content
Chapter 2. Basic Market Access IV-2-3
2.2 ROUTE RIGHTS
2.2.1 A route right is a market access right which is expressed as an agreed geographic specification, or
combination of geographic specifications, of the route or routes over which an air service or services may be held out
and performed and of the order in which authorized places may be served. Generally, route rights are found in the route
annex of an air transport or air services agreement between States, the annex itself setting forth separately a route or
routes for use by the airline or airlines of each party to the agreement. In all following examples, “A” represents the State
receiving the route right and “C” the State granting the route right (typically in exchange for a similar right or rights).
2.2.2 The most basic way of describing the grant of a route right to a State is to name one city in the territory of
that State and a second city in the territory of the State granting the right, for example:
From City A1 to City C1.
The basic approach need not be limited to a single city in each State, for example:
From City A1 to City C1/City C2.
From City A1/City A2 to City C1.
From City A1/City A2 to City C1/City C2.
A point is a city, named or unnamed, on the route granted. The basic approach can be expanded to describe a route
as:
From any point or points in State A to City C1.
A more expansive variation of the basic grant is:
From any point or points in State A to any point or points in State C.
2.2.3 An intermediate point is a point outside but between the territories of the granting and recipient States. (In
exceptional cases, points within the territory of the recipient State lying along the general path of the route may be
considered as intermediate points.) When the territories of the States involved in the grant are not adjacent and the
territories and cities of other States lie between them, the route description may include an intermediate point or points,
for example:
From City A1, via City B1, to City C1.
2.2.4 There are many other ways to indicate the grant of an intermediate point or points on a route with varying
degrees of specificity, for example:
… via City B1 and City X1 …
… via City B1, City B2 and City X1 …
… via State B …
… via State B or State X …
… via State B and State X …

… via an intermediate point …
… via two intermediate points …
… via an intermediate point or points …
2.2.5 In the latter three examples, greater specificity may be achieved when desired by adding a particular
continent, region, or country, for example:
… via an intermediate point in Africa …
… via two intermediate points in Europe …
… via an intermediate point or points in the Indian Ocean …
2.2.6 The provision of an intermediate point or points on a route also serves to indicate a general direction that
the route must follow. There may be an implicit or explicit expectation that the route employed on an actual operation will
be a reasonably direct one (between “A” and “C” in the examples). There may also be a desire to specify one general
route in order to exclude another, for example:
… via the South Pacific … to exclude …

via the North Pacific …
… via a Polar route … to exclude …

via a trans-Pacific route …
… via the North Atlantic … to exclude …

via the mid-Atlantic …
2.2.7 In lieu of various specifications, the parties may make a general grant of the right to serve intermediate
points on any routes granted.
2.2.8 A beyond point is a point on a route which is generally more distant from the territory of the route recipient
than the territory of the granting State (i.e. is situated beyond the latter) and which forms a part of a route description.
For example, a basic route description for use by State A — from City A1, via City B1, to City C1 — may have added to
it:
… and beyond to City D1.
… and beyond to one (two) (three) point(s).
… and beyond to a point or points in Asia.
2.2.9 Note that the latter example, apart from setting a general direction for continuation of the route, confines
the beyond points to a single continent. Note also that the “beyond rights” on the route may be stated simply as:
… and beyond.
2.2.10 Additional flexibility may also be provided by allowing the air carrier operating the route to choose
intermediate points, exchange them, omit them, or vary the order in which they are used. A rover point is an intermediate
point, a second country destination point, or a beyond point to be chosen by the recipient State from among several
named or unnamed points, the choice being notified to (and, if so stated, needing the concurrence of) the granting State,
that choice then precluding service to other such points until some future change of points is made. For example:
… and beyond to any two points to be chosen from among City X1, City X2, City Y1, City Y2 and City Z1.
2.2.11 A route granted to a State in a traditional agreement is most likely to begin in the territory of the recipient
State, follow a single general direction and be capable of being operated (and anticipated to be served) both outbound
from the recipient State and inbound to it on a return service. A route granted to a State in an “open skies” agreement
may well be described as beginning in or behind the territory of the home State. It is extremely rare for a route to be
described for use in a single direction only, and when that occurs, it is likely to be for air freight service and to be either
circular in structure or continuing around the world. In other unusual cases a State may be granted cargo flexibility, i.e.
the right of a designated carrier or carriers to serve points outside the right-granting and right-receiving States with
complete flexibility in the order of points served as intermediate and beyond points for the purpose of picking up and/or
discharging international traffic in cargo and/or mail. It is much less unusual to allow a named point to be served either
as an intermediate or as a beyond point (as in example route 7 on Table 2-1) on a given flight, particularly where
relatively little deviation from the general path of the route is involved.
2.2.12 The majority of route descriptions in bilateral agreements are in sentence form. However, numerous route
exchanges use an alternative tabular format as shown in Table 2-1.
Table 2-1. Routes for State A (tabular format)
Route Points in State A Intermediate points Points in State C Beyond points
1 City A1 City C1
2 City A2 City B1 City C1
3 City A3 City C2 Country D

City A4 City C3
4 City A1 City B2 City C1 City D1
5 Any point or North Africa Cities C1, C2, C3 one point

points in A
6 Any point or Middle East and any point or Australasia

points in A South Asia points in C
7 City A3 City B2 City C1 City B2

2.2.13 A behind point is any point outside the route as described and usually geographically “behind” the
beginning point or points of the route. “Behind points” can be points within the territory of the route recipient and/or
points in third countries. They are usually not included in traditional route descriptions. However, there may be an explicit
or implicit understanding that either or both kinds of behind points may be served (explicit regarding third country behind
points in typical “open skies” agreements), and the through service held out and advertised as such. Alternatively, such
services involving points in third countries may be subject to conditions or be proscribed.
2.2.14 Other terms used in route right grants include:
a) gateway or gateway point, i.e. any point of last departure/first arrival of an air service in the territory of
the recipient State or the granting State;
b) route terminal or terminal point, which may be a gateway or gateway point or a behind point;
c) co-terminal or co-terminal point, i.e. any one of two or more points on the same route and in the same
territory (of the recipient State or of the granting State) which may be served separately or in
combination on any service over the route;
d) double tracking, a term borrowed from the railroad industry to describe establishing a double track
route, i.e. a route for use by a carrier or carriers designated by one State party to a bilateral agreement
which has a mirror-image counterpart route for use by a carrier or carriers designated by the other
State party to such agreement; and
e) single tracking, also a term borrowed from the railroad industry to describe establishing a single track
route, i.e. a route for use by a carrier or carriers designated by one State party to a bilateral agreement
which has no mirror-image counterpart route for use by a carrier or carriers designated by the other
State party to such agreement. A route that has some sector that is not matched may still be
considered as a double-tracked rather than single-tracked route if the principal sector between the two
States is double-tracked.
2.3 OPERATIONAL RIGHTS
2.3.1 An operational right is a market access right which is expressed as an agreed physical specification of how
many carriers may be designated; of how aircraft may be operated; or of what aircraft types, parts of aircraft, or
substitute conveyances may be employed and assigned flight designators over an agreed route or routes. In practice,
operational rights may be found in air transport agreements in the route annex, in various articles or in side
understandings, or may or may not be implicitly included.
2.3.2 One of the most basic operational rights is that of carrier designation. Designation is the formal notification
by one State to another State, usually by diplomatic note, of the name of an air carrier chosen by the designating State
to use all or certain of the market access rights received by that State under its air transport agreement with the second
State. Depending upon the terms of the relevant agreement, a designation may be made for use of any or all market
access rights granted, for a particular route or routes or for a particular part of a route.
2.3.3 Single designation is the right to designate only one carrier (with an implicit right to substitute another
carrier). Dual designation is the right to designate up to two carriers (with the right to substitute). Multiple unlimited
designation is the right to designate any number of carriers. Multiple controlled designation is the right to designate a
specified number of airlines in total or a certain number per route, per gateway, or per route sector (with the right to
substitute).
2.3.4 Bilateral agreements usually do not contain the explicit right for one State to reject the other’s designation,
carrier choice being a sovereign right of the other State, but typically do include the right of the first State to deny, revoke,
suspend, or impose conditions on operating authorizations for such designated airline on specific grounds. These
grounds normally are limited to a failure to satisfy the requirement that substantial ownership and effective control of the
airline be vested with the designating State or its nationals, or a failure to comply with the national laws and regulations
(of the State receiving the designation) which are applicable to the operation of such services.
2.3.5 Operational rights which deal with how aircraft may be operated over an agreed route or routes include
those of overflight, technical stop, optional omission of stops, mandatory stop, positioning flight, extra section flight and
change of gauge.
2.3.6 An overflight right or right of overflight is the right or privilege granted to a State of flying across the territory
of the State making the grant, without landing, on a scheduled or other than scheduled international air service. The
International Air Services Transit Agreement identifies the related term of First Freedom of the Air — the right or
privilege, in respect of scheduled international air services, granted by one State to another State or States to fly across
its territory without landing (also known as a First Freedom Right).
2.3.7 A technical stop right or right of technical stop is the right or privilege granted to a State to land in the
territory of the granting State for non-traffic purposes, on a scheduled or other than scheduled international air service.
This right is most commonly exercised to refuel the aircraft, to make unexpected essential repairs or to respond to some
emergency need to land the aircraft. It may also be used in some instances to carry out the national entry requirements
of a State before proceeding to a traffic point in that State. Even though a technical stop is, by definition, not made for
traffic purposes, it may be necessary or desirable to discharge traffic for a time (even for an overnight stay) with a
requirement to reboard it for onward movement (which could be accomplished on a substitute aircraft or other
conveyance). The International Air Services Transit Agreement identifies the related term of Second Freedom of the Air
— the right or privilege, in respect of scheduled international air services, granted by one State to another State or
States to land in its territory for non-traffic purposes (also known as a Second Freedom Right).
2.3.8 A right of optional omission of stops or optional stop right is a right or privilege, normally granted for use on
a route, authorizing multiple traffic points, provided at least one stop is made in the recipient State and one in the
granting State on each flight. For example: Any point or points specified on the route may be omitted on any or all
services at the option of the designated airline(s); however, all flights must originate or terminate in the territory of the
contracting party designating the airline(s).
2.3.9 On the other hand, a mandatory stop requirement is used to clearly establish the general path of a route or
to preclude a non-stop operation. The first use clarifies the intended extent of the grant. The second use provides
protection for the granting State’s national carrier(s) — the mandatory stop makes the service of the foreign carrier less
attractive to traffic.
2.3.10 A positioning flight is, in the broad meaning of the term, any flight, whether revenue-earning or non-
revenue, whether scheduled or other than scheduled, flown to position the aircraft to be used on some revenue-earning
services and is also, in the narrow meaning of the term, any ferry flight, i.e. a non-revenue flight flown for a positioning or
other purpose (such as to enable the aircraft to undergo maintenance).
2.3.11 An extra section flight, typically a second section flight, is a revenue flight in scheduled service operated to
carry overflow traffic on essentially the same schedule as that of the flight being augmented. The terms “extra section”
and “second (third, etc.) section” were borrowed from the railroad industry. The right to operate extra section flights is
normally considered as implicit under air transport agreements even when capacity is predetermined; however, this right
does not extend to operating extra services at times entirely unrelated to those of the basic flight being augmented.
2.3.12 A change of gauge is a change of aircraft, at an en route point on an international flight outside the home
territory of the carrier, to (on an outbound trip) or from (on an inbound trip) another aircraft having a smaller capacity. A
“Y” change of gauge is a change of gauge to (outbound) or from (inbound) two such aircraft. A “fan” change of gauge is
a change of gauge to (outbound) or from (inbound) more than two such aircraft. A second-country change of gauge is a
change of gauge, as seen in the context of an air service relationship between two States, carried out in the territory of
one bilateral partner State by an air carrier of the other bilateral partner State. A third-country change of gauge is a
change of gauge, as seen in the context of an air service relationship between two States, carried out in the territory of a
third State, which is included in an authorized international route.
2.3.13 A change of gauge enables an air carrier to operate more economically over international route sectors
distant from its home territory by more closely matching the capacity of its flights on such sectors to the lower volumes of
traffic to and from its home State normally expected in the case of the more remote sectors of a long-haul route. The
international term “change of gauge” is not applied to a change of aircraft within the home territory of the carrier in that
such change is domestic or national in character and under the sole jurisdiction of the sovereign State involved. Nor is
any change of aircraft, wherever made, to one of the same size or capacity considered to be a change of gauge.
Historically, the term “change of gauge” derives from the railroad term for the changing, at an en route point on a rail
route, from operations over tracks with one fixed distance (or gauge) between the two rails to operations over tracks with
a different gauge, usually undertaken by replacing the wheel units (bogies or trucks) with those of appropriate gauge for
the onward movement of the train.
2.3.14 A bilateral air services agreement may not specifically mention change of gauge because one or both
partner States may consider it as implicitly allowed or disallowed; alternatively, it may be expressly provided for under
specified conditions or it may be expressly prohibited. When States agree to specify the right of change of gauge in a
bilateral air services agreement, they are likely to include an operational right grant along the lines of the following
provision and one of the five options below:
2.3.15 An air carrier designated by one Contracting party may make a change of gauge in the territory of the other
Contracting party, or at a point on the specified route intermediate to or beyond the territory of the other Contracting
party, provided that:
option (a)
operations beyond the point of change of gauge shall be with an aircraft having a capacity less, for an
outbound service, or more, for a service returning to its home territory, than that of the arriving aircraft;
or option (b)
operations beyond the point of change of gauge shall be with one aircraft having a capacity, or with two
aircraft having a combined capacity, less, for an outbound service, or more, for a service returning to its
home territory, than that of the arriving aircraft;
or option (c)
operations beyond the point of change of gauge shall be with one or two aircraft each having a capacity
less, for an outbound service, or more, for a service returning to its home territory, than that of the arriving
aircraft;
or option (d)
operations beyond the point of change of gauge shall be with any number of aircraft, each having a
capacity less, for an outbound service, or more, for a service returning to its home territory, than that of the
arriving aircraft;
or option (e)
for an outbound service, operations beyond the point of change of gauge are the continuation of a service
from the territory of the Contracting party which has designated the air carrier and, for an inbound service,
a continuation of a service to such territory, in both cases without limitation as to type or number of aircraft,
or capacity thereof, to and from such point.
2.3.16 Operational rights which are specifications of what aircraft types, parts of aircraft, or substitute
conveyances may be employed and of what flight designators may be assigned take numerous forms.
2.3.17 As regards specifications of aircraft types, States may, for example, agree that certain rights may be
exercised only with narrow-bodied aircraft, only with wide-bodied aircraft, only with “small” aircraft or “large” aircraft (as
defined by the States concerned), only with all-cargo aircraft or only with combination (passenger/cargo) aircraft. Note
that such specifications, while they affect capacity, are generally intended for purposes other than capacity regulation
(for example, to preclude significant freight carriage on a route).
2.3.18 As regards parts of aircraft, States may, for example, proscribe the use of aircraft (such as a combination
aircraft) to carry cargo on the main deck or may specify that cargo may be carried in the belly-hold only. Similarly, they
may explicitly or tacitly agree that a service may be performed using blocked space, i.e. a number of passenger seats
and/or specified cargo space purchased by an air carrier for the carriage of its traffic on an aircraft of a second air carrier.
They may also agree to permit codesharing, i.e. the use of the flight designator code of one air carrier on a service
performed by a second air carrier, whose service is usually also identified (and may be required to be identified) as a
service of, and being performed by, the second air carrier.
2.3.19 Codesharing, where authorized, may occur on any parts of a route and may involve a second country air
carrier, a third country air carrier or a domestic air carrier. States may choose to grant and receive certain access rights
that may be used solely on a codesharing basis. Generally, States will require that both carriers in a codesharing
arrangement have proper authorization.
2.3.20 Codesharing and blocked-space arrangements are usually, but not always, found together. The use of
codesharing permits the holding out and sale of transportation involving more than one airline (interline) as if it were
transportation on one airline (online), in particular in an airline distribution system such as a computer reservation
system. This topic is discussed in more detail in Chapter 9 of this manual.
2.3.21 Closely related to codesharing is the concept of franchising, i.e. the granting by an air carrier of a franchise
or right to use various of its corporate identity elements (such as its flight designator code, livery and marketing symbols)
to a franchisee, i.e. the entity granted the franchise to market or deliver its air service product, typically subject to
standards and controls intended to maintain the quality desired by the franchiser, i.e. the entity granting the franchise.
Unlike codesharing which has become a widespread practice for both domestic and international air services,
franchising is still not common for international routes (see also Chapter 9 for more detailed discussion).
2.3.22 A joint service flight is a flight identified by the designator codes of two airlines that typically have agreed
with each other to share revenues and/or costs with the concurrence of their respective States. Some States consider a
joint service flight as a codesharing flight and some do not.
2.3.23 The aircraft used to exercise market access may be owned by the carrier or may be leased. The use of a
leased aircraft may or may not entail a need for some special authorization to exercise a right of access. Generally,
when an aircraft is performing the air service of one air carrier but is under the operating control of another air carrier,
any State whose territory is involved has a right to require that both carriers have its authorization of the arrangement.
Such State may also require that both the State of the air carrier in operational control of the aircraft and the State of the
air carrier holding out the service have received from it a right of market access of the route involved. A more detailed
discussion of this topic including its safety and economic implications is presented in Chapter 8.
2.3.24 Aircraft interchange arrangements normally present no need for specific access rights, conditions or
limitations. An aircraft interchange or interchange flight is a regularly scheduled, single-plane through service linking a
route of one air carrier at the interchange point to a route of a second air carrier, with the same aircraft being crewed by
and under the operational control of the respective authorized carrier on each route. An interchange provides
passengers with the benefit of a single-plane service on what is essentially an interline operation and may provide
additional benefits to the carriers involved in terms of better aircraft utilization.
2.3.25 An intermodal right is a right of access granted by a State for use by a designated carrier or carriers of
another State to extend, substitute for or supplement air services by use of surface conveyances. Examples of surface
conveyances used intermodally (along with their IATA general type designators) include bus (BUS), hovercraft (HOV),
launch (LCH), limousine (LMO), train (TRN) and truck/ road feeder service (RFS). Specific market access rights and/or
authorization by the air transport authority may or may not be required for the use of surface conveyances to carry traffic
under air transport tickets or waybills, depending upon the circumstances of each case. In one example, the area in
which a foreign air carrier may carry out its own pickup and delivery services may be limited by a State to a certain
radius of the airport used. In a second example, an air carrier’s international services to/from a particular State, when
carried out entirely by surface conveyances, even when such services are assigned an air carrier designator code and
“flight” numbers for product distribution purposes, may require the authorization of surface transport authorities only or, if
carried out under a contract with an authorized surface carrier, may require no special authorization. In a third example,
surface movements between two points of an air route authorized to the air carrier, which are held out as substitution for
or supplementation of flights over the route, may be considered as utilizing the market access rights associated with the
route and may be subject to air transport regulation.
2.4 TRAFFIC RIGHTS
2.4.1 A traffic right is a market access right which is expressed as an agreed physical or geographic specification,
or combination of specifications, of who or what may be transported over an authorized route or parts thereof in the
aircraft (or substitute conveyance) authorized. Note, however, that the term traffic rights is, in one usage, applied
collectively to have about the same meaning as market access rights.
2.4.2 The most basic way a traffic right is expressed as a physical specification is that of the right to transport
passengers, cargo and mail, separately or in any combination. If the agreed right is limited to the carriage of passengers
only, it would normally include implicitly the baggage or courier pouches accompanying passengers or couriers and
could include unaccompanied baggage not shipped as air freight. Similarly, cargo normally means freight and express
shipments; however, a right to carry cargo only of necessity includes human attendants when required, in particular for
live cargo. Traffic rights encompass revenue traffic and certain non-revenue traffic (if under a passenger ticket, freight
waybill or other appropriate documentation) such as the carrier’s company cargo or company mail.
2.4.3 The most basic way traffic rights are expressed as geographic specifications is that of one of the freedoms
of the air which relates to traffic (the first two freedoms being operational ones). Figure 2-1 provides a graphic
representation of the Nine Freedoms of the Air.
Nine Freedoms of the Air

1. Overfly
A
Home State B
2. Technical stop
Home State A B
3. Set down traffic
Home State A B
4. Pick up traffic
Home State A B
5. Carry traffic to/from

third State
Home State A B
6. Carry traffic via
Home State
A Home State B
7. Operate from second State

to/from third State
Home State A B
8. Carry traffic between two points

in a foreign State
Home State A
9. Operate only in a foreign State

Home State A
Figure 2-1. The Nine Freedoms of the Air

2.4.4 The Third Freedom of the Air is the right or privilege, in respect of scheduled international air services,
granted by one State to another State to put down, in the territory of the first State, traffic coming from the home State of
the carrier (also known as a Third Freedom Right).
2.4.5 The Fourth Freedom of the Air is the right or privilege, in respect of scheduled international air services,
granted by one State to another State to take on, in the territory of the first State, traffic destined for the home State of
the carrier (also known as a Fourth Freedom Right).
2.4.6 The Fifth Freedom of the Air is the right or privilege, in respect of scheduled international air services,
granted by one State to another State to put down and to take on, in the territory of the first State, traffic coming from or
destined to a third State (also known as a Fifth Freedom Right).
2.4.7 Difficulties arise in assigning a freedom classification to a particular movement or part of a movement
because some States classify particular traffic movements by their true origin and destination, i.e. ticket or waybill origin
and destination, the origin being the first point named on the transportation document and the destination being the last
point on a one-way movement or the point located furthest from the point of origin on a return (round trip) movement.
Other States assign a freedom classification by coupon or flight sector origin and destination, i.e. the origin being any
boarding point (initial or en-route) at which traffic is first taken on board a particular flight and the destination being the
first subsequent point at which it is put down (without regard to where the traffic initially began and ultimately will end its
movement on the same ticket or waybill).
2.4.8 This difference in freedom classification under the two approaches can be seen in the case of a traffic
movement that starts in State A and ends in State C with a flight change en-route at State B, either directly or after a
stopover at State B, when there are three possible carriers: carrier AA of State A; carrier BB of State B; and carrier CC
of State C. Note that using the true origin and destination method produces no change in freedom classification, even
when a different carrier is used on each flight sector (see Figure 2-2), whereas the coupon or flight sector origin and
destination method always produces a change in freedom classification (see Figure 2-3).
3rd 3rd
AA AA
5th 5th
State A BB State B BB State C
4th 4th
CC CC
Figure 2-2. True origin and destination method

3rd 5th
AA AA
4th 3rd
State A BB State B BB State C
5th 4th
CC CC
Figure 2-3. Coupon or flight sector origin and destination method
2.4.9 The so-called Sixth Freedom of the Air is the right or privilege, in respect of scheduled international air
services, of transporting, via the home State of the carrier, traffic moving between two other States (also known as a
Sixth Freedom Right). The so-called Sixth Freedom of the Air, unlike the first five freedoms, is not incorporated as such
into any widely recognized air services agreement such as the “Five Freedoms Agreement”. It is a contentious subject
which is discussed in the final part of this chapter.
2.4.10 The so-called Seventh Freedom of the Air is the right or privilege, in respect of scheduled international air
services, granted by one State to another State, of transporting traffic between the territory of the granting State and any
third State with no requirement to include on such operation any point in the territory of the recipient State, i.e. the
service need not connect to or be an extension of any service to/from the home State of the carrier.
2.4.11 The terms cabotage and cabotage traffic in air transport usage:
a) are derived, respectively, from maritime terms for the prohibition of coastwise carriage of traffic by
foreign carriers and from the traffic thus prohibited which could be equated with domestic traffic, i.e.
traffic moving on a single transportation document (ticket or waybill) involving no origination, stopover
or termination outside the territory of one State;
b) are sometimes expanded to also include (and thus prohibit) certain portions of international
movements such as those between two points on an international route which are located in the
territory of the same State (of which the carrier is not a national), before or after a connection or
stopover at one such point, with an exception sometimes made to allow online en route connections
and stopovers;
c) are sometimes erroneously applied to traffic moving between two States in the same group of States
or economic union of States, when the group or union decides to reserve such traffic for its own air
carriers; and
d) can be applied to a traffic movement that constitutes prima facie cabotage such as a movement by air
or surface across a national border followed immediately by a similar movement back across the same
border, even when pursuant to separate tickets or waybills.
2.4.12 A cabotage right or cabotage privilege is a right or privilege, granted to a foreign State or a foreign carrier,
to transport otherwise prohibited cabotage traffic. Petit cabotage involves traffic movements between two ports on the
same coast of the same country (in maritime usage) and, by extension to air transport, between two airports in the same
contiguous territory of a State. Grand cabotage involves traffic movements beginning and ending on different coasts of
the same country (in maritime usage) and, by extension to air transport, movements between a State and a
noncontiguous territory of that State.
2.4.13 The so-called Eighth Freedom of the Air is the right or privilege, in respect of scheduled international air
services, of transporting cabotage traffic between two points in the territory of the granting State on a service which
originates or terminates in the home territory of the foreign carrier or (in connection with the so-called Seventh Freedom
of the Air) outside the territory of the granting State (also known as an Eighth Freedom Right or “consecutive cabotage”).
2.4.14 The so-called Ninth Freedom of the Air is the right or privilege of transporting cabotage traffic of the
granting State on a service performed entirely within the territory of the granting State (also known as a Ninth Freedom
Right or “stand alone” cabotage).
2.4.15 Another way by which traffic rights at a given point or in a given market are specified is by according
different treatment (i.e. authorization or limitation) to enplaning traffic vis-à-vis direct transit traffic to be transported over
a given flight sector. Enplaning traffic is traffic being taken on board a flight for the first time and consists of:
a) originating traffic, i.e. traffic which is beginning its outbound movement by air or its return movement
by air after a stay at its final outbound destination;
b) connecting traffic, i.e. traffic which arrives at a point on one flight and departs the point (transits the
point) on another flight as part of a continuous movement under a single air ticket or waybill, without a
stopover at the point; and
c) stopover traffic, i.e. traffic which has taken a stopover, an intentional interruption of movement through
a point under a single air ticket or waybill for a period of time beyond that required for direct transit
through or, when changing flights, for a period normally extending to the departure time of the next
connecting flight and (exceptionally) including an overnight stay.
Note.— For the purpose of clarifying the number of stopovers that may be allowed for certain round trip
travel, an airline may count the period spent at the final or most distant destination on such journey as a “stopover”.
2.4.16 Direct transit traffic is traffic which both arrives and departs the point (transits the point) as part of a
continuous movement under a single air ticket or waybill, without a stopover, on the same or different aircraft identified
by the same airline designator and flight number. A flight sector consists of any two points along a route at which a take-
off and/or landing is made and may involve one or more flight stage(s), i.e. operation of an aircraft from take-off to its
next landing.
2.4.17 The right to enplane traffic may be denied or restricted on a particular flight sector or flight sectors other
than the principal international flight sector of the route. On a two-sector or multi-sector route, the traffic that may be
prohibited is all or some part of the enplaning traffic. When enplaning traffic is restricted, a “blind sector” or a “partial
blind sector” is created. A blind sector is a flight sector for which no traffic may be enplaned. A partial blind sector is a
flight sector for which only specified traffic may be enplaned, such as connecting and stopover traffic only or connecting
traffic only. These two categories may be further limited to:
a) online stopover traffic, i.e. stopover traffic which continues its onward movement (after the interruption
of the journey) on the same airline, as distinct from interline stopover traffic, i.e. stopover traffic which
continues its onward movement (after the interruption of the journey) on a different airline; and/or
b) online connecting traffic, i.e. traffic connecting between aircraft identified by the same airline
designator but different flight numbers, as distinct from interline connecting traffic, i.e. traffic
connecting between aircraft identified by different airline designators and flight numbers. Note that
“local traffic” is sometimes prohibited on a given flight sector. Local traffic is an ambiguous term and
can signify all enplaning traffic or all originating traffic or all traffic other than transit traffic, i.e. direct
(same flight number) transit traffic plus connecting traffic.
2.4.18 A blind sector or partial blind sector restriction on an international route inevitably limits the traffic
opportunities of an air carrier, with resultant economic costs to its operation. A State, in its bilateral air service
relationship with another State, may nevertheless insist on a blind sector or partial blind sector restriction between two
points on an international route or routes of the other State to safeguard the revenues of its own carrier(s) (and possibly
the carrier(s)’ pool partners), to reduce the value of the agreed route(s) for the other State so as to achieve some
perceived overall balance of benefits between the two States or, if both the points named are in its own territory, to
impose a cabotage restriction.
2.4.19 Note that one State requires foreign air carriers to obtain the prior permission of its authorities to transport
what it calls “blind sector traffic”, by which it means traffic enplaned and deplaned on flight sectors between foreign
countries that are “blind” only in the sense that they are not otherwise authorized by the agreed route description and the
corresponding licence or permit granted by that State.
2.4.20 Flight sectors entirely within a foreign country may or may not be blind sectors or partial blind sectors. For
example, a carrier’s operation of a circle flight, i.e. a flight that initially serves one point in a second State, goes on to
another point in that State, then returns to the home State of the carrier, is likely to entail the authorized deplanement of
inbound international traffic and the enplanement of return international traffic bound at the first point, and the further
deplanement of inbound international traffic and the enplanement of return international traffic at the second point.
Similarly, if a State that determines the freedom classification of traffic by its initial origin and final destination, rather than
by its coupon origin and destination, wishes to be consistent, it will treat online stopover, interline stopover, online
connecting, and interline connecting traffic with a foreign initial origin or final destination as international traffic, rather
than as cabotage traffic, and allow its carriage by second country air carriers on flight sectors within its territory.
2.5 MARKET ACCESS AS AFFECTED BY THE SO-CALLED “SIXTH FREEDOM”
2.5.1 In 1944 the Chicago Conference formally established only five “freedoms” of the air, two concerning
aircraft operations and three involving movements of traffic. The three traffic-related freedoms, the Third, Fourth and
Fifth Freedoms, encompassed the full range of possible opportunities for international carriage by air (although, as set
forth in the International Air Transport Agreement, their exercise was limited to movement of traffic having both origin
and destination in a signatory State on through services over a reasonably direct route to/from the carrier’s homeland).
The creation of three such freedoms (distinguished from each other by the national origin and destination of the traffic)
rather than of a single freedom to pick up and set down international traffic in the territory of any signatory State
encouraged subsequent development of the concept of “ownership” by pairs of States (and by extension by their airlines)
of air traffic picked up in the territory of one and set down in the territory of the other. The Bermuda principles of 1946
strengthened that concept by establishing the primacy (and primary “ownership” claim) of each pair of States to such
traffic and built upon it by relegating to a secondary and subsidiary role traffic picked up or set down in the territories of
third States.
2.5.2 As carriers, routes and traffic volumes grew, so too did the opportunities for airlines to attract varying
amounts of traffic moving between two foreign States via their home States. Given the further entrenchment of the
concept of national “ownership” of traffic resulting from the bilateral process of exchanging market access rights, it was
inevitable that the “freedom” classification of such “homeland bridge” traffic had to be established.
2.5.3 Rather than agree that this traffic between two foreign States constituted secondary Fifth Freedom traffic to
which they may not be entitled, States whose airlines benefited from such homeland bridge carriage developed the
concept of a new “freedom”, the so-called “Sixth Freedom of the Air”. (ICAO characterizes all “freedoms” beyond the
Fifth as “so-called” because only the first five “freedoms” have been officially recognized as such by international treaty.)
The creators of this new concept maintained that the so-called “Sixth Freedom” consisted of a combination of the Fourth
and Third Freedoms. Thus, by this definition, the traffic originating in a second State moved as Fourth Freedom traffic to
the homeland of the carrier, then as Third Freedom traffic to the State of final destination. In so doing, by this definition,
the traffic was “primary” for the homeland bridge carrier on each segment of the passenger’s journey.
2.5.4 The second and third States involved, to the extent of their concern with this capture of some or much of
“their” rightful traffic (and to the extent their own carrier(s) had few or no opportunities to attract homeland bridge traffic in
other markets), had every incentive to maintain that the so-called “Sixth Freedom” was nothing more than “Fifth
Freedom” and that such traffic could at best provide only a “secondary” justification for air service capacity provided by
the homeland bridge carrier. By extension, this point of view contended that the “freedom” classification of a passenger
should be determined by the ticket or “true” origin and destination, not the coupon/flight sector origin and destination.
Those with the opposing point of view maintained the opposite position.
2.5.5 As the regulation of bilateral air transport developed, States concerned with the potential or actual
diversion of “their” traffic by a homeland bridge carrier undertook various strategies to attempt to prevent, cope with, or
end such diversion. These strategies included:
a) declining to negotiate any routes to/from the homeland of the bridge carrier;
b) severely limiting the capacity allowed the homeland bridge carrier if such routes were established;
c) refusing to allow the homeland bridge carrier to participate in some or all discount tariffs authorized to
their own carrier(s) in markets between their home territories;
d) prohibiting the homeland bridge carrier from holding out and advertising any single-plane services on
a so-called Sixth Freedom basis in their country;
e) attempting to compromise by treating traffic having a “legitimate” stopover in the bridge carrier’s
homeland for one or a few days more favourably than directly connecting traffic for capacity regulation
purposes; and
f) refusing to grant Fifth Freedom rights to the government of a homeland bridge carrier or limiting the
ability of the carrier to exercise such rights.
2.5.6 Generally, such regulatory strategies were only marginally successful. The reasons for this included the
difficulty in countering the natural inclinations of carriers to maximize their profitable carriage by seeking traffic from all
sources, and the preference of air transport users (who are not concerned about esoteric concepts of “freedoms of the
air” or of the national “ownership” of air traffic) to accomplish their travel in the most convenient manner, usually by
movement on a single airline.
Note.— This inclination to use online rather than interline connections is reinforced when free overnight
accommodations/tours, etc., are offered at the homeland base of a bridge carrier.
2.5.7 Notwithstanding the above, the reasons why homeland bridge operations attract traffic, when they do,
involve more than airline market promotion or passenger desires. A carrier can participate substantially in homeland
bridge carriage only when two other factors are present: its home territory is geographically situated to permit it to do so,
and the relevant traffic flows have certain characteristics.
2.5.8 The first factor, the geographic one, comes into play because only those States well situated on a
reasonably direct routing between other States which originate or terminate significant traffic volumes have opportunities
to serve as bridges. For example, airlines based in southern Africa, southern South America and Australia have virtually
no “Sixth Freedom” opportunities because there is literally no place for them to find or take traffic behind their homelands.
Carriers based in northeastern Asia can attract North America-East Asia/Southeast Asia traffic flows on a bridge basis.
Carriers based in the Middle East, South Asia and Southeast Asia have opportunities to attract Europe-other South
Asia/Southeast Asia and Australasia traffic. Carriers based in North America are best situated to attract the limited
volumes of available Asia-South America traffic and some Europe-Latin America traffic. Western Europe-based carriers
are best located to have access to the most bridge traffic flows, i.e. Africa to/from North America, South Asia/Middle East
to/from North/South America, Eastern Europe to/from North/South America and other Western Europe to/from the rest of
the world.
2.5.9 The geographic location of a carrier’s home base also plays a role in its ability to attract intraregional
bridge traffic. Thus a carrier based at or near the centre of Western Europe is well placed to attract Baltic-Mediterranean
traffic; one centre-based in North America to attract northern climate traffic to Mexico/Central America/Caribbean sun
destinations; and one based in eastern Asia near the Tropic of Capricorn to attract Northeast Asia-Southeast Asia traffic.
Nevertheless, with the advancement of technology in the development and manufacturing of aircraft in recent decades,
many types of commercial airplanes nowadays are capable of flying longer distances efficiently. This, coupled with
innovations in business models such as codesharing and alliances, have made possible for air carriers to overcome
geographic disadvantage.
2.5.10 The second factor is that of the volume of traffic or capacity on the flight sectors on either side of the bridge
State relative to the direct second-third State flight sector size and strength. In the following diagrams the width of the
sectors indicates relative traffic and/or airline capacity volumes; States A and C provide the origin/destination points for
the traffic; State B constitutes the bridge and its carrier the homeland bridge carrier; price and airline preference factors
are assumed to be neutral.
2.5.11 In Figure 2-4, a State B-based carrier (BB) is unlikely to attract sufficient A-C traffic away from carriers AA
and CC to cause concern to either State A or State C, as long as both its AB and BC markets and services remain small
relative to AC services.
2.5.12 In Figure 2-5, the relative thinness of the A-C traffic and services (in both directions) enhances the
attractiveness of movement via State B on carrier BB. States A and C may have to wait until the A-C traffic volume
merits direct service competitive with or better than that given via State B and its carrier BB. In some circumstances the
movement of traffic via State B on carrier BB may stimulate the market sufficiently to actually encourage services
between A and C by their respective airlines.
2.5.13 A third situation may pertain. Assume that the carriers of both States A and B have agreed access to the
A-B originating/terminating traffic. Assume that State A’s geographic situation is near the far tip of a continent and its
carrier thus has virtually no opportunity to attract any bridge traffic through its home base, but that State B’s geographic
situation is such that its carrier can attract bridge traffic to numerous countries behind its home territory. The additional
“flow” traffic thus gives State B’s carrier(s) a clear advantage in serving the A-B market.
2.5.14 In the situation portrayed in Figure 2-6, carrier AA could attempt to attract traffic moving via State B, but not
without difficulties, because passengers generally prefer to move on a single carrier rather than on an interline basis.
While difficulties are unlikely to be fully overcome, States and carriers are increasingly turning to relatively newer
approaches such as codesharing, blocked-space arrangements and operating a second country hub which, properly
used, can ameliorate the relative disadvantages of the non-bridge carriers. Because geographic facts are immutable,
this problem and efforts to deal with it promise to be on the regulatory scene for some time.
2.5.15 Increased market access or air links between countries is increasingly seen in recent years as an
important contribution to improving connectivity, a concept denoting broadly the inter-connections in trade, commerce,
travel, economic and people to people exchanges between States. In the context of air transport, air connectivity can be
understood as a seamless movement of passengers, cargo and mail from origin to destination with minimum transit
points, maximum user satisfaction and with lowest cost possible.
2.5.16 There are four main elements which have been identified as enablers of air connectivity. These are
geographical location, airline business models, airport infrastructure to boost capacity and quality of service and a
country’s favourable regulatory and economic framework including liberalisation of market access. These factors play an
important role in the development of a global air network that enhances air connectivity.
2.5.17 Air connectivity is therefore an important value chain which stimulates air transport development. It brings
good end user experience, more travel, more economic development and traffic growth.
State B
BB BB
AA,CC
State A State C
Figure 2-4. Unviable “Sixth Freedom” operations

State B
BB BB
AA,CC
State A State C
Figure 2-5. Viable “Sixth Freedom” operations
AA
E
State A BB State B
F
BB
G
Figure 2-6. “Sixth Freedom” traffic beneficial to carriers from both origin and bridge States
______________________
Chapter 3
AIR CARRIER CAPACITY
3.1 INTRODUCTION
3.1.1 Air carrier capacity is the quantitative measure of air transport services offered or proposed to be offered
by one or more air carriers in a city-pair or country-pair market or over a route. It may be expressed in terms of aircraft
size, aircraft type, number of seats and/or cargo space (by weight and/or volume), frequency of operation, or some
combination of such terms.
3.1.2 Capacity regulation is any method used by governments, separately or jointly, to control the capacity that is
being or may be offered.
3.1.3 Although capacity regulation is a concern of both governments and airlines, it presents different issues for
each, reflecting their different interests and concerns. The first section of this chapter describes the involvement of
governments in air carrier capacity regulation. The next section presents capacity regulation from an air carrier
perspective. When applied to an airport, capacity is usually measured in terms of the number of aircraft movements (i.e.
take-offs or landings) the airport can safely accommodate in a specified period of time. Airport capacity can also be
measured by passenger/freight throughput (expressed in passengers/freight tonnes per hour).
3.2 CAPACITY REGULATION BY GOVERNMENTS
3.2.1 Governments typically regulate the capacity of international air services through negotiation and
implementation of their bilateral air transport agreements. States often consider international traffic originating in their
territories as national property and as an article of international commerce which must be traded on the best possible
terms, whether involving reciprocal rights or other considerations. In bilateral air services negotiations, this “ownership of
traffic” concept has enabled States to claim a capacity share proportional to their homeland originating traffic in the
market and to treat such traffic between the bilateral partner States as “belonging” to them.
3.2.2 National governments generally view capacity in a broader context than do air carriers. Consequently,
capacity regulation inevitably involves a wide spectrum of national interests extending beyond the economics of air
transport. In making capacity decisions, governments must take into account national policy goals (such as promoting
international trade, tourism and economic development) and their general responsibility for the public interest. For
example, governments may want more capacity for passengers and/or cargo to be provided in certain areas or on
certain routes than airlines believe economically justified.
3.2.3 National airlines designated to perform international air services are often regarded as national instruments
or flag carriers and are treated as part business enterprise and part public utility. In this role, they may at times be
required to operate in accordance with the needs of their country’s foreign or other general commercial policies rather
than the needs of an economically viable air service. Thus, although States generally give high priority to the interests of
their own national airlines, they must also bear in mind the air transport capacity requirements of their tourism industries
and international trade.
IV-3-1
3.2.4 Terms commonly used with respect to air carrier capacity and its regulation include the following:
a) load factor, i.e. the percentage of available capacity that is actually sold and used by revenue
passengers and/or freight, on a single flight over a single flight sector;
b) passenger load factor or seat factor, i.e. the load factor applied solely to utilized passenger capacity;
c) average load factor, i.e. the mean load factor achieved over a period of time, on a given flight, flight
sector or route; in a particular market; or by a particular air carrier;
d) break-even load factor, i.e. the load factor at which revenue achieved equals the operating cost,
averaged to reflect results over a specified period of time;
e) authorized capacity, i.e. the amount of capacity, determined by a regulating State or States, that may
be operated on a specific flight or route, between city-pairs or between two States;
f) conversion factor or formula, which is used to equate capacity when aircraft of different capacities are
employed in circumstances in which frequency is used as the unit for capacity regulation by States
seeking to maintain a strict balance in the capacity offered by competing airlines (for example, two
B767 aircraft might be considered to have the same capacity as one B747 aircraft);
g) capacity allocation, i.e. the amount of capacity each airline is permitted to operate when more than
one designated airline from a State wishes to use the authorized capacity.
3.2.5 In developing capacity policy or positions for bilateral air services negotiations, which usually involve direct
participation of or input from their national airlines, air transport regulatory authorities face three basic decisions:
a) how capacity for each type of service (scheduled and non-scheduled, passenger, cargo, combination,
etc.) will be regulated;
b) how capacity will be apportioned among airlines providing those types of services; and
c) how adjustments in capacity will be made.
3.2.6 As policies on commercial air transport regulation vary (sometimes widely) from State to State, the
attitudes and approaches of States toward capacity regulation also differ. Over the last five decades, States have
developed many forms of capacity regulation in their bilateral relations. However, the methods used fall into three basic
categories, for which model clauses have been developed by ICAO as guidance to States and for possible inclusion in
their bilateral agreements. Each model clause is accompanied by a set of criteria, related objectives and guidelines.
(These model clauses have been incorporated in the ICAO bilateral Template Air Services Agreement (TASA) which can
be found in Doc 9587.) The three categories are:
a) the predetermination method, which requires that capacity be agreed upon prior to the
commencement of operation, either by governments or their aeronautical authorities, or between their
designated airlines subject to governmental approval;
b) the Bermuda I type method, which is a form of capacity control modelled after the one negotiated
between the United Kingdom and the United States in Bermuda in 1946, in which the governments set
out the capacity principles for the designated airlines to follow but allow each airline the freedom to
determine its own capacity, subject only to ex post facto review by the governments through their
consultation procedure; and
Chapter 3. Air Carrier Capacity IV-3-3
c) the free-determination method, which allows capacity to be decided by air carriers free of government
control, but may require each party to eliminate all forms of discrimination or unfair practices that
would adversely affect competition.
3.2.7 In the bilateral negotiation of capacity regulation arrangements, difficulties are likely to arise between
States with differing policies or views on:
a) the interpretation of “reciprocity” and “fair and equal opportunity” to operate or compete; and/or
b) the need for capacity to be predetermined and for air carrier coordination of capacity; and/or
c) the probable effects of increasing or decreasing capacity (e.g. on load factor, yields and quality of
service); and/or
d) the provision and validity of traffic data as a means of determining capacity requirements; and/or
e) non-aviation considerations involved in capacity negotiation (e.g. international trade balance,

development of exports, tourism needs).
3.2.8 In such situations, the involved parties have to make compromises to narrow or overcome their differences,
often resulting in agreements which contain combinations or variations of the three basic methods of capacity regulation.
For example, some agreements on capacity reached by States after 1980 combine aspects of predetermination of
capacity with the flexibility and rapid adjustment associated with the free-determination method. These arrangements
essentially give air carriers freedom to determine capacity within predetermined limits. Included among the methods
used are:
a) giving advance approval for minimum levels of service (such as daily) and for annual or seasonal
increases in the number of frequencies in specific city-pair markets;
b) allowing an air carrier to operate a specified percentage, for example 150 per cent, of the capacity
operated by competitor(s) from another State, or to match the capacity offered by competitor(s), or to
operate the unused capacity assigned to another air carrier;
c) allowing the capacity shares between airlines of each State on a route or city-pair to vary by up to, for
example, forty per cent for one and sixty per cent for the other;
d) utilizing formulas which provide for specified increases in capacity provided a certain average load
factor is achieved during a specified period of time; and
e) allowing air carriers to determine capacity provided that the aircraft used does not exceed a specified
capacity (e.g. sixty seats).
3.2.9 One major problem in capacity regulation concerns the capacity for the carriage of Fifth Freedom traffic.
Although the right to carry Fifth Freedom traffic is generally regarded as supplementary to that of the right to carry Third
and Fourth Freedom traffic, it is at the same time considered by many to be essential to the economic viability of multi-
stop international services. In bilateral negotiations, the State granting Fifth Freedom rights is often concerned about the
potential effect of the capacity offered by the Fifth Freedom air carrier(s) of the other State on traffic to/from the third
State which may be served by its national airline(s) on a Third and Fourth Freedom basis. The problem also stems from
the fact that it is difficult to define precisely when the capacity offered by Fifth Freedom carrier(s) has become so
substantial that it is no longer supplemental and is adversely affecting the Third and Fourth Freedom traffic share of
national air carrier(s).
3.2.10 Regulation of scheduled and non-scheduled services in the same markets used to be a major problem to
some States. In the 1960s and 1970s, non-scheduled services grew rapidly and had become quite important in some
major markets (e.g. Europe and the North Atlantic), competing directly with scheduled services. The absence of an
agreed capacity regime for non-scheduled operations aroused serious concerns among some governments and
scheduled air carriers. It was claimed that the significant capacity then offered by non-scheduled operators had or could
have an adverse impact on scheduled air carriers and, therefore, should be subject to stricter control. To address the
issue with a view to maintaining a reasonable balance between the involved interests, States developed several
regulatory devices for authorizing capacity for non-scheduled services, including:
a) permitting a fixed number of flights by type (passenger, cargo, combination) per year or per season;
b) adopting directional ratios for specific markets per year or per season;
c) using a criterion of no undue effect on scheduled services, while preserving a desired balance
between scheduled and non-scheduled services;
d) allowing air carriers operating non-scheduled services to operate only or primarily between points
which do not have scheduled services;
e) allowing air carriers to operate only certain types of non-scheduled flights (e.g. cargo, inclusive tour
charters); and/or
f) limiting non-scheduled capacity to a fixed percentage (e.g. 20 per cent) of scheduled service flights.
3.2.11 As liberalization progresses and along with the recognition that scheduled and non-scheduled services
generally cater to distinct markets, the capacity of non-scheduled services has now become less of a regulatory issue.
An additional factor has been the blurring of the regulatory distinction between the two types of services in certain
markets.
3.2.12 In addition, increasing liberalization has led many States to adopt a more liberal approach in capacity
regulation, to remove or reduce restrictions on capacity arrangements under their bilateral air services agreements, or to
focus on regulation of frequencies rather than on aircraft capacity.
3.3 CAPACITY AS VIEWED BY AIR CARRIERS
3.3.1 Capacity is of vital operational and financial importance to air carriers mainly because of the nature of the
commercial air transport business, which has several distinctive features in terms of the economics of its operations:
a) the means of production (commercial transport aircraft) it uses are very expensive and must be
utilized effectively to generate sufficient revenue to cover the investment;
b) the product (passenger seats and cargo space) it offers is perishable (though in a sense renewable)
and, unlike manufactured goods, cannot be stored because once an aircraft leaves the terminal, seats
or space cannot be sold and are therefore lost; and
c) the customers (passengers and freight shippers) it serves are time and/or price sensitive and have
different service requirements.
3.3.2 As a consequence, the financial success of an air carrier will depend largely on how efficiently it utilizes its
aircraft and how well it matches capacity to demand.
3.3.3 Where possible, air carriers seek to match capacity to traffic demand in order to maximize profits and
minimize unused capacity on each flight. This is relatively easy for non-scheduled service operators, since the entire
capacity of the aircraft (or major portions thereof) are usually sold (or contracted for) well in advance of operation.
However, it can be very difficult for scheduled air carriers because:
a) a scheduled service by definition must maintain a regular pattern of operation and generally is
expected to fly according to the published timetable regardless of how much of the capacity has been
sold;
b) there is normally a need to provide sufficient capacity to cater to on-demand traffic (usually higher
yield passengers) with seats which may be booked near or up to the time of departure;
c) where a multiple stop service is involved, certain seats/space may need to be left vacant for use by en
route joining traffic;
d) while traffic demand may vary by direction and time of day, operational constraints may require use of
the same type of aircraft (with a fixed capacity) for all flights in both directions; and
e) while increases or decreases in demand for a particular service often occur gradually and may not be
concentrated at a specific day and time, capacity cannot be added or subtracted in small amounts, but
only by an entire aircraft.
3.3.4 Due to these reasons, scheduled air carriers generally provide on average more capacity than the actual
traffic (for example, the average passenger load factor worldwide for international scheduled services was 70 per cent in
2001).
3.3.5 Individual air carriers use historical experience and their best estimates of future demand as well as other
techniques to determine the capacity to be offered on a route or in a particular market. However, scheduling the right
amount of capacity can be difficult because the process is subject to, or complicated by, many factors outside the air
carrier’s control.
3.3.6 One significant factor is the regulatory regime within which the air carrier is operating. Certain aspects of
the regime may inhibit its freedom of action. For example, the air carrier may be required to agree with its competitor(s)
on the capacity to be offered on a route. Alternatively, it may be forbidden for competitors to agree on the capacity to be
offered on a route. Desired capacity increases may need to be approved by government(s) and/or competitor(s).
3.3.7 A second and important factor is the nature of demand for international scheduled air services. Traffic
demand can be affected by numerous factors, many of which are interrelated and some subject to regulatory constraints,
such as:
a) price (a tariff, if set too high, may discourage use, while a low tariff may result in a higher load factor
but produce lower yields);
b) frequency (a high frequency service which provides more choices could attract more users, but may
not be economically viable on a route with a low volume of traffic);
c) route structure (a multiple-stop service is not as attractive as a non-stop service serving the same two
cities);
d) service via a hub (the required en route change of aircraft lessens the attraction although the
increased frequency typically provided adds to the attraction);
e) type of aircraft (passengers generally prefer a wide-body to a narrow-body aircraft, or a jet to a

propeller aircraft);
f) season (summer may see more people travelling than winter, warm destinations are more popular in
winter; a pre-holiday period may produce more freight and a holiday period may produce more
passengers);
g) the state of the economies of each involved State and/or the regional or global economy (demand will
be less during an economic recession);
h) the security situation in the destination State which, if adverse, can reduce demand; and
i) concerns about flight security in general.
3.3.8 A third factor is the capacity and pricing actions, actual and potential, of competing air carriers in the same
market. In a competitive market, capacity becomes an essential means for an air carrier to maintain its market share.
Where competing carriers are allowed to decide, independently, capacity and tariffs, there is a tendency that under
competitive pressures each carrier seeks to operate more capacity than the other, or to match another’s capacity in
order to maximize or maintain its share of the traffic. This may lead to a situation of excessive capacity. Viewed strictly
from the airline’s standpoint, excessive capacity may not be considered to exist in terms of economics if the airline can
achieve sufficient revenue to cover cost, even at a low load factor, for example 50 per cent. To individual air carriers,
excessive supply means waste of product (i.e. empty seats/space) and tends to cause prices to go down, resulting in
reduced yield and financial losses; conversely, inadequate capacity risks turning away passengers/shippers, hence
losing potential sales.
3.3.9 Other factors which may have a potential impact on the demand and supply relationship include the
availability of other capacity in the form of indirect routings between the involved States (e.g. services provided by Fifth
Freedom or “Sixth Freedom” operators) or in the form of air charter operations and, in some cases, the availability of
alternative means of transport, such as high-speed rail.
3.3.10 Yet another predicament for air carriers in adjusting capacity to demand is the lead time usually required to
acquire new aircraft (i.e. new capacity). Air carriers usually order additional aircraft according to their forecast of future
demand and arrange deliveries over a number of years. As demand has a close relationship to the performance of
national economies, and collectively to the global economy, which influences airline traffic forecasts, air carriers tend to
place their orders when the economy is growing or at its peak. However, because the performance of the economy is
usually cyclical and sometimes beyond accurate prediction, it may happen that years later when the carriers’ new
capacity arrives, the economy is in a slump or at the bottom of the cycle and traffic demand has fallen off. To mitigate
such situations, air carriers are increasingly adjusting their capacity by leasing aircraft, deferring delivery, or even
cancelling orders.
3.3.11 Given all these features of the industry, air carriers generally deal with capacity in three ways. First, air
carriers participate in, or seek to influence, government policy and decision making with respect to capacity regulation in
order to secure a favourable regulatory environment and to ensure that their interests are taken into account. They also
generally participate in the bilateral consultation process involving capacity arrangements and often rely on government
assistance in solving capacity problems or settling disputes which they themselves are not able to resolve.
3.3.12 Second, in order to achieve optimum operating results, individual air carriers seek to enhance their aircraft
capacity utilization through:
a) better fleet planning based on more accurate traffic forecasts so that capacity will better match
demand; and/or
b) better scheduling, e.g. flying at user-preferred times to the extent possible, minimizing the ground time
of an aircraft spent at arrival/departure gates, and otherwise maximizing aircraft utilization; and/or
c) adjusting the configuration, i.e. the seating and/or cargo space arrangement of an aircraft to better
cater to currently perceived market demands; for example, a passenger aircraft can be arranged to
have a multiple class seating (e.g. first and/or business, and economy class), or a single class seating
(e.g. business only or all economy class).
3.3.13 Optimum operation results may also be sought by employing yield management, a widely used form of
inventory control involving the allocation and frequent adjustment of seat availability for the booking of each of many
booking classes (fare types, e.g. normal economy, various discount tickets, free frequent flyer, etc.) and
origin/destination combinations, in ways calculated to produce the maximum revenue for each flight sector at the fares
offered. Revenue management adds close and ongoing coordination between the price managers who create the fares
and yield managers.
3.3.14 Yet another tool to achieve optimum operating results is overbooking, i.e. accepting more reservations
than the actual seating capacity of one or more classes of services on a given flight sector, typically placing some limits
on the volume of overbooked seats, with the expectation that there will be a sufficient number of cancellations or “no
shows” by departure time to avoid or minimize denied boarding with the passenger compensation costs it entails. When
actual denied boarding is about to occur the carrier will typically seek volunteers to give up their seats for compensation
(such as a free future trip) and re-booking on a later flight, usually of the same carrier. Alternatively, a carrier may reduce
or not utilize overbooking but employ standby lists of potential passengers who, shortly before departure, may be
assigned the seats of confirmed passengers who have failed to appear. Costs can be reduced because standby
passengers are not entitled to compensation; however, this can entail ensuring that the standby passenger’s checked
baggage/luggage is loaded, but only if the standby passenger is allowed to and does board the aircraft.
3.3.15 Third, air carriers coordinate among themselves, where permitted, capacity and tariffs on routes they
operate so as to avoid excessive capacity supply and destructive competition or to obtain benefits from their alliance.
Some air carriers also enter into pooling arrangements, commercial agreements which may involve agreed capacity,
conditions of operation, and the sharing between the parties of one or more of the elements of traffic, frequencies,
equipment, revenues and costs. Though this method has been endorsed and sometimes required by governments, it
has now become less important in capacity regulation and is not permitted in an increasing number of markets.
______________________
Chapter 4
AIR CARRIER TARIFFS
4.1 INTRODUCTION
4.1.1 Air carrier tariffs are one of the three major elements in the regulation of international air transport (the
other two being market access and capacity), although their regulatory importance has gradually decreased along with
the general trend of air transport liberalization.
4.1.2 This chapter lists some of the reasons why States regulate tariffs, defines the term “tariff”, provides
information on different types and characteristics of tariffs including terms and expressions used by the airline industry,
describes methods for establishing tariffs as well as international and national regulatory mechanisms, and discusses
some key tariff issues.
4.1.34 While tariff regulation has become less important, and some are no longer practiced, in many States as
liberalization becomes widespread, this part is useful for readers or users to learn about the history and evolution of tariff
regulation in international air transport.
4.2 WHY STATES REGULATE TARIFFS
4.2.1 Among the reasons why a State regulates international tariffs are the following:
a) to ensure that its national carrier or carriers have a fair opportunity to compete in providing
international air services;
b) to support pertinent national goals and objectives, such as encouraging international tourism and
trade;
c) to promote competition in international air transport by, for example, seeking flexibility for individual air
carriers to use tariffs of their choice; and
d) to respond to the needs of users of international air transport.
4.2.2 The types of tariff regimes States have developed reflect both their reasons for regulating tariffs and the
fact that those reasons are often not shared by all States concerned. Thus, several tariff regimes are compromises
which reflect the different reasons States have for regulating international air tariffs.
4.2.3 This situation, combined with air carrier efforts to use tariffs which respond to different markets and to
different segments of the same market, has resulted in a complex system of international air tariffs which is described in
more detail in the sections below.
IV-4-1
4.3 DEFINITION OF TARIFF
4.3.1 The regulatory importance of how a tariff is defined lies in what aspects of pricing are included (and are
therefore subject to the applicable international and national regimes) and what aspects are in effect left to air carriers’
commercial practices. A State’s definition of a tariff will therefore reflect the extent it wishes to regulate this aspect of
international air transport. States wishing to control all aspects of tariffs will use a broad, all-encompassing definition.
States wishing to liberalize air carriers’ pricing will use a more limited definition.
4.3.2 A tariff is: 1) the price to be charged for the carriage of passengers, baggage or cargo (excluding mail) in
air transportation, including any other mode of transportation in connection therewith, if applicable, charged by airlines,
and the conditions governing its availability and use; and, in some States, 2) the document (also known as a tariff filing)
containing such prices and conditions which a carrier or its agent files (either in electronic or paper form) with the
appropriate regulatory authorities.
4.3.3 An international tariff is for transportation between two or more States (and includes as well any domestic
segment of an international journey); a domestic tariff is for transportation between two or more points of a single State.
The international tariff between Canada and the United States is specifically called a transborder tariff.
4.3.4 Both international and domestic tariffs are divided into two categories, based on what is being transported.
Generally, a fare is a tariff for the carriage of passengers and a rate is a tariff for the carriage of cargo. The term rate
also applies to the charter of an entire aircraft or a part thereof (on scheduled services, referred to as blocked space).
4.3.5 The ICAO definition of an international tariff was developed with emphasis on scheduled services as well
as with the aim to include all relevant areas while removing all areas of uncertainty as to what is encompassed by the
term “tariff”. This definition includes a tariff rule or condition, i.e. an expressed restriction or condition governing the
applicability of the tariff or the price for carriage.
4.3.6 There are two types of tariff rules. General rules are those which are applicable to many different types of
tariffs, for example, fare/rate construction rules, currency conversion rules, refund and claims procedures, conditions of
services, baggage allowances and excess baggage charges, reservation/ticketing conditions, rules of discounts, and
denied boarding compensation. Each tariff filing will have reference to the general rules which apply to it. Specific rules
are those which are associated with each fare and rate or those which override the general rules for a specific fare or
rate. With respect to a passenger tariff, specific rules govern the elements of, inter alia, reservation/ticketing, length of
stay (maximum and minimum stay), stopovers, transfers, fare combination, re-booking/re-routing, and cancellation
(refund, if any).
4.3.7 In some cases, general rules contain conditions of carriage, i.e. the terms and conditions established by an
air carrier in respect of its carriage. Conditions of carriage are incorporated by reference into conditions of contract, i.e.
the terms and conditions shown on the travel documents, i.e. the passenger ticket or freight air waybill. Both conditions
spell out the various benefits and limitations associated with the air transportation being provided. These benefits and
limitations, along with the price, constitute a contract for carriage between the air carrier and the user. Often associated
with the use of an air waybill are the term consignee, i.e. a person or an entity named as the receiver of a shipment (one
to whom the shipment is consigned) and the term consignor, i.e. one who designates the person or entity to whom
goods are to be sent (usually the shipper).
4.3.8 The ICAO definition of “tariff” also includes commissions or standard commissions, i.e. a fixed public level
of remuneration paid by an airline to intermediaries such as travel agents and freight forwarders/consolidators, and the
conditions governing the applicability of the commission payment; any significant benefits provided to users, such as
reduced rates on lodging and car rental, and frequent flyer programmes, in which members earn free or reduced fare
transportation or other benefits on the basis of the amount of their travel on certain airlines or for their purchase of
certain goods and services; and a visit another country tariff, i.e. a kind of domestic or international tariff not available in
the country or region visited and sold only abroad in conjunction with an international carriage.
Chapter 4. Air Carrier Tariffs IV-4-3
4.4 TYPES AND CHARACTERISTICS OF TARIFFS
In contrast to surface modes (such as rail and water), international air transport has developed a wide variety of tariffs
for several reasons. For example, this variety may result from efforts by air carriers to fashion tariffs to respond to
different markets as well as to different segments of the same market. The price disparity among air carriers may reflect
the degree of competition and carriers’ relative strengths in the marketplace, which may depend on the network scale,
flight schedules and frequency, market penetration, goodwill and service levels, etc., of each carrier. The prices
maximizing revenue, therefore, may not be the same for each airline. In addition, States’ reasons for regulating tariffs
and the different tariff regimes developed as a consequence have further complicated the international air tariff situation.
4.4.1 Passenger fares
4.4.1.1 There are broadly two types of passenger fares — published and unpublished — from the air carriers’
pricing perspective. A published fare or a public fare is a fare publicly displayed and distributed and if necessary filed
with a government or governments for approval. An unpublished fare or a private fare (sometimes also called a market
fare or an off-tariff fare) is a fare which is neither publicly distributed nor submitted to the government for approval. A
published fare is distinguished by the following five main criteria, which sometimes overlap.
4.4.1.2 First, there is a distinction based on how published fares are developed. An IATA fare is a published fare
developed by the Traffic Conferences of the International Air Transport Association (IATA), while a non-IATA fare is any
published fare other than an IATA fare. A non-IATA fare includes a bilateral/multilateral fare collectively determined
through bilateral or regional tariff consultation among two or more airlines, a government order fare which is introduced
by order of a government, and a so-called carrier fare which is determined individually based on each airline’s
judgement or is jointly determined by the cooperation of a group of allied airlines. Carrier fare usage has grown rapidly in
recent years because of liberalization. The term agreed fare or fare agreement refers to both an IATA fare and a
bilateral/multilateral fare.
4.4.1.3 Second, published fares can be classified in terms of the number of air carriers which transport the
passenger. An interline fare or a joint fare is one which applies for interline carriage and which is published as a single
amount, while an online fare or a local fare is one for transportation on one air carrier. The term interlining refers to
transportation on more than one air carrier (see also the section on key tariff issues). All IATA fares, most bilateral/
multilateral fares and government order fares, and some carrier fares (for example, alliance partners fares) are interline
fares, although the scope of interlining may vary. Most carrier fares are online fares.
4.4.1.4 Third, there is a distinction of published fares in terms of the specification of a through fare, i.e. a total fare
from point of origin to point of destination. In general, airlines specify through fares between a limited number of gateway
city-pairs. The amount of each such specified fare, i.e. a through fare specifically set out either as a one-way fare or a
round trip fare, is different depending on the point of origin from which the passenger’s journey begins. Through fares for
other city-pairs are constructed by combining a specified fare and an add-on, an arbitrary or a proportional fare which
are specific amounts used only to construct unspecified through fares to be displayed and quoted. For example, normal
fares from Tokyo to Montréal are constructed over Vancouver by combining a specified normal fare from Tokyo to
Vancouver and an applicable add-on from Vancouver to Montréal. These unspecified through fares created by the use
of add-ons are known as constructed fares. When there are neither specified fares nor applicable add-ons to create
constructed fares from point of origin to destination, through fares can be constructed for the purpose of applying fare
construction rules by using the lowest combination principle, i.e. the lowest combination of separate specified fares or
specified fare(s) and applicable domestic fare(s) over an intermediate ticketed point(s).
4.4.1.5 Fourth, there is also a distinction based on the routing control method. A mileage fare is a direct route fare
governed by the mileage principle in calculating the applicable through fare amount for indirect travel. The mileage
principle compares the passenger’s actual itinerary or sum of each ticketed point mileage (TPM), i.e. the shortest
operated mileage between each sector, with the comparable maximum permitted mileage (MPM) from point of origin to
destination, which is generally 120 per cent of the shortest operated mileage. If the sum of TPMs for each sector is less
than the MPM from point of origin to destination, the direct route fare is used. If the sum of the TPMs is in excess of the
MPM, a graduated table of percentages from 5 to 25 per cent is used to calculate a surcharge to be added to the direct
route fare. In contrast, a routing fare or a single-factor fare is a direct route fare governed by the specified diagrammatic
or linear routing, disregarding the mileage principle. As long as the passenger’s itinerary is in line with the specified
routing, a direct route fare can be used.
4.4.1.6 Fifth, published fares are divided into two general categories — normal and special — based on the
availability of certain benefits and how they are priced. A normal fare is a fully flexible fare established for first-,
business- (intermediate), or economy- (coach, sometimes also premium economy) class service, which allows maximum
flexibility in terms of reservation/ticketing, length of stay, stopovers, transfers, fare combination, re-booking/re-routing
and cancellation, etc. In some markets, there is also a restricted normal fare or a point-to-point normal fare, which
retains most of the characteristics historically associated with normal fares but has restrictions, for example, on the
availability or number of stopovers and, in some cases, on the ability to interline transfers. While a normal fare is
regarded as a bundled fare, which includes all the primary facilities for the passenger for a single price, a restricted
normal fare is regarded as an unbundled fare, one which is based on the provision of point-to-point travel only with
additional charges for use of extra facilities such as stopovers and transfers.
4.4.1.7 A special fare is any fare other than a normal fare. There are two types of special fares — non-promotional
and promotional. A non-promotional-type special fare or a status fare is a discount fare the availability of which is
restricted to persons having specified personal attributes, such as student, youth, child, spouse, family, senior citizen,
disabled, government official, military, seaman, voter, worker, refugee, emigrant, travel agent, airline employee, or
pilgrim, some of which have traditionally been established by government orders. Status fares are targeted only to
narrow groups of the population so that airlines can effectively minimize the number of passengers who would have
previously paid higher-priced fares. In contrast, a promotional-type special fare is a discount fare available to anybody
who can meet conditions on reservation/ticketing, length of stay, cancellation, etc. The restrictions attached to lower-
priced fares act as “fences” to minimize the revenue dilution from higher-priced fares. The typical examples include:
a) excursion fare, which is usually the highest and most flexible special fare but with some travel
conditions such as restrictions on length of stay and stopovers;
b) special excursion fare (or instant purchase fare, public excursion fare, PEX fare), i.e. a special fare at
a lower level but with more restrictive conditions than an excursion fare in terms of
reservation/ticketing, length of stay, stopovers, re-booking/re-routing and cancellation, etc.;
c) advance purchase excursion fare (APEX fare), i.e. a special fare with the condition that the passenger
books and pays for a ticket within a specified period of time before travel begins in addition to similar
conditions to those of a PEX fare;
d) group inclusive tour fare (GIT fare), i.e. a special fare used by travel agents for groups of specified
minimum sizes consisting of passengers who have purchased an inclusive tour; and
e) individual inclusive tour fare (IIT fare), i.e. a special fare used by travel agents for individual passenger
travel as part of an inclusive tour.
4.4.1.8 In many markets, airlines apply peak-load pricing, i.e. pricing calculated to smooth the fluctuation of
demand where peak hours/days are experienced. The level and availability of special fares, especially lower-priced ones,
may have two or more seasonal variations known as seasonalities based on the time of year. Some normal and special
fares also vary depending on the day of the week on which travel begins. Airlines also develop a sell-up tariff structure,
i.e. one with a stepped series of restricted, capacity-controlled special fares in addition to normal fares. The fares are
arranged in booking classes for purposes of inventory control, and typically the lower the fare level, the more onerous
the fare conditions. When the limited capacity devoted to the lower, more restrictive fare is filled, passengers are offered
only higher, less restrictive fares. This dynamic seat allocation process is dealt by the latest yield management (revenue
management) system, which aims to maximize revenue by ensuring that passengers buying lower special fares (mainly
leisure passengers) are not allocated seats which passengers buying higher normal fares (mainly business passengers)
might otherwise occupy (see Chapter 3).
4.4.1.9 Published fares are disseminated in paper format, such as tariff manuals and publications, and more
widely in electronic format through the computer reservation systems (CRSs) and the Internet websites. For this purpose,
most airlines use the electronic systems operated either by the Airline Tariff Publishing Company (ATPCO) or SITA
(formerly Société Internationale de Télécommunications Aéronautiques), which collect information on published fares
from airlines and distribute it to CRSs and tariff publishers and, in some cases, submit it to governments as a filing agent.
Then, published fares are sold to passengers directly by airlines and indirectly through travel agents (including third-
party websites) at the same prices without regard to where or by whom. Travel agents will receive standard
commissions on published fares from the airline, though some airlines have abolished commissions altogether or for
online sales.
4.4.1.10 In contrast to a published fare, an unpublished fare has a limitation on distribution and use, based on a
special negotiation or contract deal between an airline and a travel agent (including a consolidator, i.e. an intermediary
who purchases blocks of airline seats and resells them to other retail agencies and a wholesaler, i.e. an intermediary
who coordinates air travel and land content and sells the package mostly to other travel agents), an electronic
reservation service provider including an Internet website, or other entity such as a corporation and an organization.
4.4.1.11 Most unpublished fares fall into negotiated fares, i.e. unpublished fares which are offered selectively to
customers and generally have three layers of linked fare amounts — gross, net and selling. A gross fare is a full amount
of a published fare, which is often shown on the actual ticket’s passenger coupon. A net fare or a starting net is an
amount charged by an airline to a contracting travel agent or other entity, exclusive of any commission paid at the back
end, i.e. after the sales reports are processed. The net fare takes various forms from a specific flat rate to a fixed amount
(so-called knock-off value) deduction or a percentage discount from gross fares. Airlines also usually pay a commission
override, i.e. an amount over and above the standard commission according to route, sales volume, etc., as an incentive
and bonus at the back end. The amount due to the airline after payment of all these back-end commissions, bonuses
and incentives is called a net/net. A selling fare which a contracting travel agent offers to an end-customer is set at a
price higher than a net fare, not only giving the agent its margin but also giving the end-customer a discount from the
published fare.
4.4.1.12 The most prevailing unpublished fare is a so-called discounted fare or a discount ticket, i.e. a fare available
only through travel agents at an amount below a gross fare. Discounted fares are rarely sold by consolidators and
wholesalers, but by their retail agents including so-called bucket shops, i.e. no-frill smaller agents selling heavily
discounted fares. Other examples of unpublished fares include contract discounts for corporations, bulk discounts for
conventions and meetings, auction fares, promotional off-tariff products such as direct-mail special offers and upgrade
coupons for customers. Recently, more airlines use ATPCO to disseminate their unpublished fare information that is
transmitted only to their contracting travel agents and other entities.
4.4.1.13 Since an unpublished fare differs from any published fare with respect to fare level and/or conditions, some
unpublished fares may constitute a tariff malpractice, i.e. excessive discounting, under certain jurisdictions. This raises a
matter of tariff enforcement, i.e. measures taken to ensure that international air transport is sold only at approved prices
and conditions. The particular regulatory focus has been placed on fares sold directly to passengers by airlines through
the new distribution outlets. For example, some States believe that an Internet fare or a Web fare, i.e. a fare available
only through the Internet, if it is offered via the websites of individual airlines or alliances, is no different from any other
published fare and so require airlines to file such Internet fares for approval.
4.4.2 Cargo rates
4.4.2.1 Cargo rates have some of the same distinctions made with respect to passenger fares and are determined
using similar pricing practices and concepts, but with different terminology. The general cargo rate varies with weight by
applying different prices per kilogram depending on whether the weight of the shipment falls above or below a break
point which is a specified weight level at which the price per kilogram changes. General cargo rates do not vary
according to the nature and value of the property transported and are used when the property being shipped does not
qualify for any other cargo rate. As a reference for calculating other rates, the general cargo rate serves a similar
purpose to a normal economy-class fare.
4.4.2.2 A rate which combines the pricing features of both premium and special fares is a class rate, one
determined by applying a discount or surcharge to a general cargo rate for certain commodities (for example, a discount
for newspapers and a surcharge for commodities requiring special treatment during shipment, such as livestock, gold
and securities).
4.4.2.3 A rate which has a similar purpose to special fares is a specific commodity rate, used for certain types of
cargo, which is generally lower in price than the general cargo rate at comparable weights but may also include
restrictions (such as minimum shipment size). As in the case of special fares, airlines use restrictions to minimize the
dilution of revenue from general cargo rates. Where more than one mode of transport is involved, fares for air/sea or
air/rail transport are similar to the intermodal rate, i.e. the rate for the transportation of cargo by more than one mode (air,
rail, road, maritime).
4.4.2.4 Some rates have no counterpart on the fares side. For example, a container rate is applied to cargo
shipped in containers. Two container rates are: 1) a ULD (unit load device) discount rate which provides reductions on
general cargo, class or specific commodity rates for cargo in owner-supplied and owner-packed containers; and 2) a
freight-all-kinds rate which is not calculated by applying a discount or a surcharge to other rates but is determined
separately and applied to cargo in airline-owned or shipper-owned containers.
4.4.3 Charter rates/fares
A charter rate is a tariff for the charter or lease of all or a part of the capacity of an aircraft. In contrast, a charter fare is
the price charged an individual passenger on a charter flight by the charter organizer or charter tour operator. Charter
fares have some of the characteristics of comparable fares on scheduled services. For example, a group inclusive tour
charter fare and an individual inclusive charter fare are comparable to GIT and IIT fares on scheduled services, although
charter fares are usually lower and more restrictive, inter alia, in terms of changes in itinerary and refund availability.
4.5 METHODS FOR REGULATING TARIFFS
There exist two different but interrelated regulatory mechanisms governing air carrier tariffs. The first one is an
international framework based on the relevant tariff provisions of bilateral or multilateral air services agreements. The
second one is a national tariff regulatory regime based on relevant national laws, regulations or policies, which each
State applies to the tariffs used for the air services generally touching its territory.
4.5.1 International tariff regimes
4.5.1.1 In the bilateral or multilateral agreements, States have developed different tariff regimes based on how
many States must approve a tariff before it becomes effective. These include double approval in which both States
concerned must approve a tariff; country of origin in which only the State in which the transportation originates need
approve the tariff; double disapproval or dual disapproval in which both States concerned must disapprove a tariff to
prevent it from coming into effect; flexible pricing zones in which States agree to approve tariffs falling within a specified
range of prices and meeting corresponding conditions (outside of the zone, one or a combination of the above-
mentioned regimes may apply); and free pricing in which tariffs shall not be subject to the approval of any States, though
some agreements may allow States to require notification of tariffs for informational purposes only.
4.5.1.2 The traditional type of double approval regime has usually been accompanied by the requirement that
designated airlines have to consult with other air carriers to develop an agreed tariff or a tariff agreement on all or part of
the route, if necessary and possible. It also has required, implicitly or explicitly, that air carriers use an appropriate
international rate fixing mechanism (often within the IATA Traffic Conferences) wherever possible. If the designated
airlines cannot agree on tariffs, or if the required approval is not given to agreed tariffs, the States themselves seek
agreement on the tariffs concerned. More recent bilateral agreements, however, liberalize the procedure of double
approval by relaxing such requirement. In this case, designated airlines are allowed to develop any tariffs unilaterally at
their option, while the governments refrain from exercising disapproval authority unless filed tariffs are contrary to the
pre-determined relevant factors.
4.5.1.3 Both regimes, country of origin and flexible pricing zones, generally have a transitional nature towards
more liberal regimes such as double disapproval and free pricing. At the bilateral level, few agreements contain both
these regimes. As explained below, flexible pricing zone arrangements are often adopted unilaterally at the State level.
At the multilateral level, the country of origin regime has been introduced by two regional agreements — the Andean
Pact in 1991 and the Forteleza Agreement in 1997. On the other hand, the zone pricing arrangement within the
European Union was replaced by a free pricing regime in 1993, and one by the Memorandum of Understanding (MOU)
on North Atlantic Pricing between the United States and member States of ECAC expired without further renewal in
1991.
4.5.1.4 The double disapproval regime allows the prices of air transportation to be established by each designated
airline based upon commercial considerations in the marketplace. Unilateral intervention by each State is limited to, for
example, prevention of predatory or discriminatory prices or practices, protection of consumers from prices that are
unreasonably high or restrictive due to the abuse of a dominant position, and protection of airlines from prices that are
artificially low due to direct or indirect governmental subsidy or support. Each State may request consultation with the
other State regarding tariffs for which a notice of dissatisfaction has been given, but the tariff in question shall go into or
continue in effect if mutual agreement is not reached.
4.5.1.5 There are also an increasing number of hybrid approaches of more than one regime. One example is a
distinction between the approval process of passenger and cargo tariffs. In this approach, a liberal scheme is applied
only to cargo tariffs. Another notable example of hybrid systems is a country of designation arrangement, under which
each State agrees to follow double disapproval, country of origin or zone pricing schemes, subject to the condition that
each State can unilaterally disallow any tariff in question filed by one of its own designated airlines. By taking this
approach, even under the double disapproval regime, each State can effectively preserve its disapproval authority
against its designated airlines’ tariffs subject to certain conditions.
4.5.1.6 Some recent agreements also developed a single disapproval regime, under which one State may
unilaterally disapprove a tariff, but only when it believes that such tariff is contrary to pre-established conditions. By
nature, this regime is a variation of the double disapproval regime. The only difference is in that the tariff in question may
not go into or continue in effect when States cannot reach mutual agreement during consultation. This regime can also
be used in conjunction with the free pricing regime. For example, within the European Economic Area, community air
carriers have been allowed to set their tariffs freely since 1993, but each member State can withdraw a basic fare, i.e.
the lowest fully flexible fare available on a one-way and round trip basis, which is excessively high to the disadvantage of
users. In a non-discriminatory way, a member State can also stop further fare decreases that would result in widespread
losses among all air carriers on a route or group of routes for the air services concerned, taking into account the long-
term fully allocated relevant costs of the air carriers.
4.5.2 National tariff policies and practices
4.5.2.1 Most States have national laws, regulations or policies for evaluating tariffs or deciding whether to approve
or disapprove tariffs filed by air carriers. If a State chooses unilaterally not to exercise its right to regulate tariffs, that right
would in effect pass to the bilateral or multilateral partners, leaving regulation in their hands. However, partners would
have as their primary concern the interests of their airlines and users. It is therefore important for a State to be able to
intervene, whenever necessary, to protect its interests under any bilateral and multilateral agreements.
4.5.2.2 Similar to the terms used in the bilateral or multilateral agreements, the terms used in the national laws,
regulations or policies are generally vague and subjective in nature. For example, the term predatory tariff may be
applied by a party alleging injury from a tariff such party believes is intended to drive it out from a market, yet predation
is particularly difficult to define with any degree of certainty, and there is no definitive approach to distinguishing between
anti- and normal competitive pricing actions. In order to avoid such ambiguity and administrative difficulties in
implementation, some practical schemes have been developed. Examples are:
a) limitation of price leadership, i.e. the ability to initiate new fares or changes in existing ones in a
market. States sometimes commit themselves bilaterally or unilaterally to limit price leadership to air
carriers exercising Third and Fourth Freedom traffic rights, although the extent of price leadership or
pricing flexibility they wish to permit varies. Price leadership by other air carriers is allowed on a case-
by-case basis or on the condition of reciprocal treatment for their air carrier(s). In contrast, States
generally approve matching tariffs, i.e. fares at the same level and with virtually similar conditions to
those already approved for use in a market, for all air carriers including ones exercising Fifth, “Sixth”
and “Seventh” Freedom rights;
b) a sum of sectors policy, under which any through fare to or from a non-gateway behind point should
be constructed as the sum of an international fare between gateway points and one or more domestic
fares (or approved add-ons) between the gateway(s) and the behind point(s). The applicable domestic
fare chosen (such as a published fare with the same conditions as the international fare with which it is
combined) is one which can be used on an interline basis by the foreign State’s airline, thereby
allowing it to compete for passengers in cities other than the gateway(s) it serves in another State.
This policy is used by States that wish their air carriers to compete on an interline basis for traffic to
and from cities in the territory of another State other than those being served directly by their air
carriers. If this policy is strictly applied, commonrating, i.e. applying the same fare level to two or to
more cities (e.g. Miami and Fort-Lauderdale), is not allowed even if the gateway and behind points are
in general proximity to each other and approximately the same distance from the origin city; and
c) various zone fare systems based on the concept of flexible pricing zones, the most detailed version
relying on a series of so-called zones of reasonableness or zones of flexibility for different types of
fares. A certain range of percentages relating to reference levels defines each zone, which in some
cases has certain types of tariff conditions. Automatic or prompt approval is granted for fares falling
within their appropriate bands and conforming to the prescribed conditions, though this approval does
not guarantee the similar treatment by other States concerned. There are several derivative versions,
for example, the so-called fare-band system, under which airlines are obliged to file a specified range
of prices instead of actual selling levels for each fare that can be decided at their discretion without
any further filing, and the maximum tariff system, under which airlines are obliged only to file a
maximum level of fare, and at their option they can then sell, either directly or indirectly, at any price
below that maximum level. Both fare-band and maximum tariff systems are used by States that wish
to legitimize discounted fares in the marketplace.
4.5.3 Processes for tariff approval/disapproval
4.5.3.1 The term proposed tariff is applied to a tariff in the initial phase of a government approval process. Filing or
notification of tariffs may be required by applicable national laws, regulations or policies, and/or bilateral or multilateral
agreements, except when a filing requirement is specifically exempted by them. A statutory-notice filing is a tariff filing
with the appropriate authorities a specific period prior to its proposed effective date in accordance with the governing
requirements. In contrast, a short-notice filing is a tariff filing in less than the statutory notice period, usually pursuant to
permissive provisions in the governing requirements. In some recent bilateral and multilateral agreements containing
dual disapproval or free pricing tariff regimes, States have agreed to dispense with the requirement for formal tariff filing
altogether for their designated airlines. Even when States are allowed to require notification or filing of tariffs, such tariffs
will be notified or filed for informational purposes only. Also some States unilaterally eliminate an entire tariff filing
requirement or exempt a part of the requirement on a case-by-case or reciprocal basis in certain circumstances.
4.5.3.2 A few airlines file tariff material for themselves, but most use tariff agents such as ATPCO to handle the
filing process. Airlines transmit their instructions to their agents, who have some discretionary authority to manipulate the
data to comply with regulatory specifications. As for the tariff agreements resolved by IATA Traffic Conferences,
depending on the States, filings are handled by national carriers or by IATA on behalf of the industry. For many years,
tariff filing has been based on manual procedures. Generally, a page in a paper tariff manual is replaced by a new one
whenever a single item on that page is changed. Faced with the sheer volume of tariff changes, some States have
introduced an electronic tariff filing system, an automated system that enables airlines and their agents to transmit tariff
changes to a central database via a telecommunication network or an Internet and to provide public access to tariff
information in an electronic format.
4.5.3.3 The form of approval of tariffs by States may be either explicit, in which there is a specific action taken to
approve tariffs; or tacit, in which tariffs are deemed approved if no negative action is taken within a specified period of
time. Generally, the tariff agreements resolved by IATA Traffic Conferences are subject to explicit approval and to the
clearance of applicable antitrust or competition laws. Once approved, the tariffs in such agreements may also have to be
filed separately with governments to comply with the applicable national laws, regulations or policies. Disapproval is
normally explicit.
4.5.3.4 Each tariff filing contains an effective date, the earliest date on which the tariff can be used for
transportation, and a selling date, the earliest date on which the tariff may be sold. States often permit tariffs that have
been filed, but not yet approved, to be sold subject to government approval (except IATA fares and rates which can be
implemented only after receiving all the necessary States’ approvals). An approved tariff has received the required
regulatory approvals; it becomes an established or effective tariff on its effective date. Generally, established or effective
tariffs remain in force until replaced by another approved tariff. Some tariffs, however, include expiry dates, a date
beyond which the tariff may not be used, as a result of an airline’s own volition, of multilateral tariff coordination, or
because of a requirement of a State.
4.5.3.5 Since the late 1970s, many States have relaxed their regulatory control of air carrier tariffs, leaving pricing
matters to each airline’s discretion based on commercial considerations in the marketplace. The relaxation of tariff
regulation, which is often regarded as one of the major elements of overall liberalization of international air transport
regulation, might also be necessitated by States’ administrative difficulties in exercising control due to the increased
complexity and technicality of tariffs. In addition, the proliferation of unpublished fares has significantly undermined the
effectiveness of the existing tariff regulations on published fares, which States might consider no longer appropriate or
enforceable.
4.6 KEY TARIFF ISSUES
This section highlights four key issues in the current regulatory and competitive environments, namely multilateral tariff
coordination, interlining, Internet fares, and predatory pricing. The order of presentation of these key issues does not
indicate their relative importance.
4.6.1 Multilateral tariff coordination
4.6.1.1 Tariff coordination or tariff consultation refers to the process by which two or more airlines negotiate
passenger fare and cargo rate levels and conditions to develop and adopt agreed tariffs or tariff agreements for
submission to governments for approval. The oldest and most widely used system of tariff coordination is that provided
by the IATA Traffic Conferences. In addition, several regional airline associations, such as the African Airlines
Association (AFRAA), the Arab Air Carriers’ Organization (AACO) and the Latin American and Caribbean Air Transport
Association (ALTA), have taken actions involving, or related to, tariff coordination within their respective regions, often
prior to meetings of the applicable IATA Traffic Conference.
4.6.1.2 The IATA system of multilateral tariff coordination has evolved over the years into a more flexible,
transparent and less compulsory means of determining international interline tariffs. No tariff discussed gives rise to a
binding agreement that must be implemented, and thus participating air carriers may file different tariffs. Under certain
circumstances, air carriers that are not tariff coordination members may participate in the meeting. These changes,
although required by States, also reflect a response to an increasingly competitive international air transport
environment. Consequently, one issue is whether the changes in the process of multilateral tariff coordination will permit
the IATA system to adapt to a more competitive environment or make it ultimately incapable of producing effective
results which satisfy the needs of air carriers, consumers and governments.
4.6.1.3 Since inter-carrier activities through the IATA Traffic Conferences involve competitors cooperating, in some
jurisdictions exemptions from competition laws have been granted, where necessary, especially recognizing the public
benefit of the multilateral interline system. In recent years, however, more States have introduced competition laws or
looked more closely at the application of existing rules to the IATA system. With the aim of mitigating the anti-
competitive aspects of the process, some States, individually and collectively, have conditioned or limited their exercise
(for example, by requiring that airlines participating in one of the immunized alliance agreements withdraw from IATA
tariff coordination activities on certain country-pair routes, or that coordinated tariffs be available to all airlines on an
interline basis). This raises the issue of whether the IATA system can function effectively if one or more major air
transport States choose not to authorize it in whole or in part. In 2001, IATA decided to end cargo tariff consultations for
shipments between points in the European Economic Area after failing to secure exemption from competition law
requirements for such activity from the European Commission.
4.6.2 Interlining
4.6.2.1 The interline system is a global network of scheduled international air transport services linking most cities
in the world. On a worldwide basis, for a large proportion of journeys, the services of two or more airlines are necessary
for a passenger to complete a single air trip. No single airline, no matter how large a network it may have, can serve
every point in the world. Relatively few pairs of international cities have direct online air services. The rest depend on
online or interline connecting services. The interline system provides choice and, in so doing, enhances competition. It is
supported by agreed standards and procedures for inter-carrier reservations, ticketing, baggage, passenger/cargo
handling and financial clearance. Technically, there exists two different types of interline methods: IATA interlining and
non-IATA interlining known as club interlining or bilateral interlining.
4.6.2.2 IATA interlining occurs multilaterally based on IATA fares fixed at the same levels regardless of airline,
which simplifies administrative procedures for the interchangeability of tickets. The revenues for interline carriage are
prorated in accordance with either the Multilateral Prorate Agreement (MPA) operated by the IATA Prorate Agency or
the Special Prorate Agreement (SPA) concluded individually by two or more airlines (Appendix D to this manual explains
briefly how this is accomplished). The important point here is that almost all IATA carriers, including non-tariff
coordinating members, assume that passengers using IATA fares can have a full interline privilege with generally high
booking availability as long as the transporting carrier is a party to the Multilateral Interline Traffic Agreement (MITA) or
has a bilateral interline traffic agreement with an issuing carrier, i.e. a carrier whose ticket is issued to the passenger.
This industry commitment has served to facilitate a wide-ranging multilateral interline system, even though the actual
membership does not cover all the airlines.
4.6.2.3 Non-IATA interlining occurs based on carrier fares even without any pre-agreements about fare levels and
conditions as well as scope of transporting carriers and available routing options. Routing is determined solely by the
issuing carrier and thus the transporting carrier does not know it in advance (except in the case of joint fares determined
by member airlines of an alliance where all the participating carriers know the fare levels and conditions in advance).
The transporting carrier simply accepts any ticket issued by another carrier subscribing to MITA or bilateral interline
traffic agreements (normally, except a voluntary change of carrier that is not written on the original coupons), and
receives the prorate revenues for interline carriage from the issuing carrier in accordance with the MPA or SPA. If the
transporting carrier finds its interline revenue too small after the accounting report is processed, then it would ultimately
stop further acceptance of such interline tickets or limit the number of seats providing for interline carriage by
downgrading the booking classes on an ad hoc basis. Compared to IATA interlining, the flexibility to change routing or
use other carriers is therefore limited, but the fare levels are usually lower than IATA fares.
4.6.2.4 The issue here is whether tariff coordination through the IATA machinery is an indispensable element in
order for the multilateral interline system to work efficiently, or whether the same or similar interline benefits from the
current IATA tariff coordination could be secured by a less restrictive system. The proliferation of inter-carrier alliances
and the liberalization of tariff setting are creating a rapidly changing competitive environment, with non-IATA interlining
growing more popular. To respond to a decline in the scope of immunized activities through the IATA machinery and to
enhance the attractiveness of IATA’s multilateral interline system, IATA has developed the concept of IATA standard
premium service fares (SPS fares), i.e. revamped and simplified IATA fares that guarantee a full multilateral interline
privilege at levels more closely related to costs.
4.6.3 Internet fares
4.6.3.1 Airline fares shown on the Internet come through different channels. Most of the fares shown are published
fares distributed through the CRSs. Unpublished fares such as a contract discount for corporations and organizations
are posted on the private websites of airlines and the CRSs, which are visible only to contracting travel agents and other
entities who have negotiated them. Some travel agents’ websites sell discounted fares on their own initiative. Airlines
directly offer auction fares to bid-based websites. In addition, airlines sell Internet fares to the public, quite often lower
than any other published and unpublished fares, exclusively on their own website and on specific third-party websites in
which they participate. Since airlines do not usually provide the CRSs with complete information on Internet fares, the
CRSs do not display Internet fares as part of their normal offering to travel agents (but third-party search software allows
travel agents to access a significant number of Internet fares).
4.6.3.2 Among the issues concerning Internet fares is whether travel agents should be given full access to Internet
fares offered outside the CRSs. On the one hand, the airlines’ refusal to make lower Internet fares available to travel
agents through the CRSs and the lack of integrated information on Internet fares may be an impediment to the
operations of travel agents, undermining the quality of services they provide to their customers in comparing fares and
generating best travel options. On the other hand, airlines have traditionally made use of limited distribution channels to
sell specific types of inventory to target market segments. Examples are unpublished fares, which are available only to
contracting travel agents and some of which are not available in public retail channels. Internet fares are no different
from these unpublished fares by nature. Mandating across-the-board access to Internet fares, therefore, would eliminate
lower Internet fares altogether by discouraging airlines from marketing them.
4.6.3.3 Another contentious issue is a most-favoured nation (MFN) type of agreement between a specific third-
party website and its participating airlines. Under such an agreement, participating airlines must provide a website in
which they participate with all the Internet fares offered through their own website and other third-party websites. In
theory, there is a potential risk that such an agreement might reduce competition and make competing distributors less
attractive to consumers. For example, a MFN agreement may undercut the participating airlines’ incentives to compete
by offering lower Internet fares, and may also provide a convenient means for participating airlines to monitor each
other’s Internet fares, facilitating collaboration and coordination of their prices. Recent regulatory attention to third-party
websites (particularly those jointly owned by groups of airlines) reflects these competition concerns.
4.6.4 Predatory pricing
4.6.4.1 The practice of predatory pricing had been regarded as a relatively unlikely or irrational event simply
because it would be costly and not credible. Along with liberalization, however, more States have expressed their
concern that a major airline with a dominant market position might reduce fares specifically to drive out smaller rivals, or
to discourage future entry, expecting to recoup any losses incurred by subsequently raising its fares above competitive
levels. A dominant airline might also engage in predatory pricing to develop its reputation as a tough competitor and to
send a “signal” to current and prospective rivals that the potential for profitable entry is slight. In addition, an airline,
which receives a subsidy directly or indirectly from the State, could reduce their fares down to levels otherwise
impossible to offer.
4.6.4.2 In dealing with predatory pricing through competition laws and consultation mechanisms, overly inclusive
assessment rules may impose a restraint on the ability of airlines to compete vigorously on price, while a no-rule
approach may have a risk of greater monopoly power or more collusion among competitors. Although there is no
universally accepted clear-cut or so-called “bright-line” rule about what constitutes predatory pricing or how to prove its
occurrence, many courts have used an Areeda-Turner rule, i.e. a firm’s pricing is predatory if its price is less than its
short-run marginal cost, i.e. an increment to cost that results from producing one more unit of output in a brief time
period such that some factors of production cannot be varied without cost, or its average variable cost, i.e. a variable
cost divided by output, as a more practical proxy. In the airline industry, however, a short-run marginal cost of adding
some extra passengers is close to zero at any given time once capacity is provided. Therefore, some have suggested
the use of a long-run marginal cost, i.e. an increment to cost in a sufficiently lengthy period of time such that all factors of
production can be varied without cost, as a yardstick for judging predatory pricing. Since the longer the planning horizon
the more likely it is that a fixed cost will become a variable cost, a marginal cost or an average variable cost becomes
greater in the long-run.
4.6.4.3 In addition to these simple cost-based rules, several more complex rules have also been developed. For
example, some argue that a firm’s pricing is predatory if its output is expanded in response to entry and its price is less
than its average variable cost, while others suggest that a price cut made in response to entry is not predatory if a firm
keeps its price for a considerable period of time after a new entrant has been driven off. There is also a two-tier
approach that focusses first on market structures to examine whether predatory pricing is a workable strategy, followed
by a number of cost-based tests.
4.6.4.4 Most of these rules which try to define illegal action can, however, be difficult to implement in a
straightforward way because of the data limitations and the existence of related factors (such as capacity changes, yield
management for seat allocation, sales and marketing activities). Given these difficulties, States (and groups of States)
tend to rely on a rule-of-reason approach, which involves taking each case on its merits with a thorough examination of
the factual circumstances such as market structures and dominant airlines’ conduct in a relevant market, as a starting
point for assessing alleged cases (see Chapter 4).
______________________
Chapter 5
AIR CARRIER OWNERSHIP
5.1 INTRODUCTION
5.1.1 States regulate air carrier ownership and control at the international level primarily in terms of discretionary
criteria for licensing air carriers to use the market access rights granted under the relevant air services agreements. At
the national level, regulation of air carrier ownership and control can have implications both for discretionary criteria and
for other aspects of international air transport.
5.1.2 The first three sections describe the criteria traditionally used by States for airline designation and
authorization, their use and some exceptions. The fourth section briefly discusses the implications of transnational
investment in air carriers, and the last section examines some key issues in this area and possible ways to liberalize.
5.2 THE DISCRETIONARY CRITERIA
5.2.1 To establish an international air service, a State, under the bilateral regulatory regime, must not only
secure the necessary market access rights from all its partner States but also their acceptance of the airline(s) it has
designated to use those rights.
5.2.2 The criteria used by States in most bilateral air services agreements for airline designation and
authorization have been that the airline must be substantially owned and effectively controlled by the designating State
or its nationals. States also generally retain the right to withhold, revoke or impose conditions on the operating
authorization if the foreign designated airline does not meet such criteria; however, use of this provision by the State
receiving the designation is discretionary.
5.2.3 Some of the main reasons for this approach are that the criteria will allow a State:
a) to refuse to authorize air services by air carriers owned or controlled by certain other States;
b) to establish a link between the air carrier using international commercial rights and the State to which
these rights pertain, thereby preventing a situation of potentially non-reciprocated benefits when an air
carrier from one State uses another State’s rights;
c) to implement a balance of benefits policy in terms of the air carriers of the States involved;
d) to ensure, in certain circumstances, that national air carriers do not use the rights of a foreign State to
serve their own State.
5.2.4 With respect to regulation of airline ownership and control at the national level, many States, in their
national legislation or regulations dealing with air carrier licensing or foreign investment, set statutory limits on
permissible foreign ownership in national carriers (e.g. not more than 49 per cent). Some of the reasons for such rules
include:
IV-5-1
a) national carrier(s) are considered to be a strategic asset;
b) foreign-owned airlines should be excluded from the domestic market;
c) aircraft of nationally owned firms are readily available for national defence or emergency needs.
5.3 USE OF THE CRITERIA
5.3.1 The use of the criteria for airline designation and authorization involves a two-fold test to determine:
a) who has substantial ownership; and
b) who exercises effective control.
5.3.2 In assessing what constitutes “substantial ownership”, States generally focus on the amount of ownership
of the air carrier held by certain parties, usually considering that more than 50 per cent of the equity in an air carrier
constitutes “substantial ownership”. States having a national law or regulation that specifies the percentage of equity in a
national air carrier that may be held by non-nationals consider that ownership in excess of this specified limit is
“substantial”.
5.3.3 Defining “effective control” has generally been more difficult than defining “substantial ownership” because,
while ownership is usually transparent and can often be determined by public or other records of shareholders, effective
control may be exercised in a variety of ways, many of which may not be readily apparent. Moreover, “effective control”
may be exercised by different entities depending on the activity of the air carrier. For example, air carrier management
may exercise effective control over certain operations, such as opening a new route, while financial entities,
shareholders or a government might exercise effective control for the purpose of increasing the air carrier’s capital,
merging it with another air carrier or dissolving the company. Consequently, some States have used the ability to take or
to prevent certain actions (such as increasing the capital of the air carrier) as evidence of “effective control”. Most States
rely on a case-by-case approach, using either the applicable national laws and regulations concerning corporate
responsibility for decision making; or special laws, regulations and policies specifically related to determining who
exercises control of air carriers, or a combination of the two.
5.4 SOME EXCEPTIONS
5.4.1 While the substantial ownership and effective control requirement are the most prevailing criteria used by
States, some exceptions or deviations have long existed, including the following:
a) Parties to the International Air Services Transit Agreement (IASTA) grant overflight rights for
scheduled air services to an “air transport enterprise” that is substantially owned and effectively
controlled by nationals of a Member State to the IASTA. (The text of the IASTA may be found in Doc
9587).
b) Multinational carriers created by intergovernmental agreement, such as the Scandinavian Airline

System (SAS) established by 3 Scandinavian countries; Air Afrique (now defunct) created by 11
African States; Gulf Air founded by 4 Middle East States. When one of these States wishes to
designate their multinational air carrier to serve a third State, a modified ownership and control
provision or other means can be used to ensure that the multinational air carrier will be authorized to
use the commercial rights which the designating State has negotiated with that third State.
Chapter 5. Air Carrier Ownership IV-5-3
c) A regulation of the Council of the European Union, effective 1 January 1993, allows a community air
carrier (i.e. an air carrier majority owned and effectively controlled by member States of the Union
and/or their nationals, with its principal place of business and registered office located in a member
State) to operate air services anywhere within the European Common Aviation Area (ECAA).
d) Under the Andean Pact (concluded by 5 Latin American States), an air carrier entitled to operate
services within the Pact will be determined by national law of the Pact State designating the airline.
e) The Caribbean Community Air Service Agreement requires that a CARICOM airline providing services
under the agreement be owned and controlled by one or more member States or their nationals.
f) The bilateral agreements involving Hong Kong, China, as a party allow the airlines designated by
Hong Kong to be those which are incorporated and have their principal place of business in Hong
Kong, China. The designated airlines of the other party may, however, be subjected to the traditional
substantive ownership and effective control criteria.
g) The plurilateral open skies agreement concluded by some APEC members in 2001 permits the
designated airline of a party to be one whose effective control is vested in the designating party and is
incorporated and has its principal place of business in the territory of the designating party. The
traditional substantial ownership requirement is no longer a condition.
h) The single aviation market (SAM) arrangement between Australia and New Zealand allows a “SAM
carrier” (an air carrier at least 50 per cent owned and effectively controlled by Australian and/or New
Zealand nationals, with its head office and operational base in Australia or New Zealand) to operate
air services within and between both countries, but with limits on beyond rights.
5.4.2 In addition, some States have used the discretionary right under the bilateral agreement to accept, on an
ad hoc basis, foreign designated carriers that do not meet the traditional national ownership and control criteria, although
usually this involves negotiated concessions as a quid pro quo for the acceptance.
5.5 FOREIGN INVESTMENT IN AIR CARRIERS
5.5.1 The other area of airline ownership that has implications for international air transport is the extent of
foreign ownership in national air carriers providing international air services. Where the extent of foreign ownership
raises questions of substantial ownership and effective control, the discretionary criteria will be a factor. However, the
extent of foreign ownership has other implications for international air transport which can also be present with or without
the discretionary criteria.
5.5.2 Recently there has been increased activity and regulatory interest in foreign investment in national air
carriers. Some of the reasons for this include:
a) in some instances foreign international air carriers have acquired an equity interest through the
privatization of formerly nationally owned air carriers;
b) some international air carriers have made transnational investments in national air carriers as an
indirect means of market access; for example, to increase their ability to compete to/from domestic
cities beyond an international gateway through a closer relationship with a domestic carrier serving
those domestic cities to and from the same gateway;
c) in some instances, cooperative marketing arrangements, joint ventures, franchise operations,

alliances and mergers between international air carriers or between international and domestic air
carriers have involved transnational investment intended to increase both the effectiveness of the
specific cooperative arrangements as well as the commercial benefits for all parties concerned.
5.5.3 Among the factors that States consider with respect to foreign investment in their national airline(s), other
than the potential effect on the discretionary ownership and control criteria, are:
a) the identity of the foreign investor; in particular, when it is an air carrier, what management expertise
and commercial benefits might accompany the investment;
b) reciprocity with respect to the State that is the source of the investment; and
c) the potential effect on international air services including, for example, competition.
5.5.4 Individual States will apply these and other factors that are consistent with their particular goals for
international air transport and the means chosen to achieve them. Attitudes toward the permissible limits of foreign
investment in national air carriers will therefore vary widely, depending on the State and its specific circumstances.
5.6 KEY ISSUES
5.6.1 The traditional nationality-based ownership and control criteria were widely accepted during the time when
most national carriers were owned by the designating State or its nationals, and viewed as having important strategic,
economic and developmental roles. However, along with the trend of liberalization and globalization as well as regional
economic unification since the late 1980s, significant changes have taken place in both the operating and regulatory
environment of international air transport.
5.6.2 International air carriers have sought to adapt to increasing cost pressures, the need for capital, and
heightened competition in a number of ways, including through cooperative arrangements such as airline alliances,
codesharing, joint ventures and franchise operations, some of which have involved transnational investment (obtaining
equity in air carriers from other States). Many States have adjusted their policies to relax restrictions on foreign
investment in national carriers, particularly when privatizing them. Transnational investments in air carriers have also
occurred against a backdrop of widespread multinational ownership in other service industries, for example, hotels and
the travel industry.
5.6.3 As a result of these developments, the ownership of national air carriers has become increasingly diverse,
many are no longer State-owned, and some are approaching the point where homeland nationals hold a bare majority of
shares. However, most bilateral agreements including liberal open skies agreements have continued to use the
traditional criteria. This phenomenon is seen by many as increasingly at odds with the changed global business
environment in which the airline industry must operate. There is a growing call both from airlines and governments for
regulatory change in this area and for the application of broadened criteria beyond national ownership and control to
obtain market access.
5.6.4 From the perspective of an air carrier, the traditional criteria can pose severe limitations for its operations,
for example, limiting capital sources, expansion opportunities or rationalization possibilities.
5.6.5 Some developing countries recognize that their economies and markets may not be able to sustain a
national carrier without regional cooperation and/or outside capital. Others have adopted a policy of welcoming new
services from all sources to promote tourism. Some developed States advocate change because they have policies
aimed at developing the overall market and economy; many see a need for cross-border investment and industry
rationalization; some others see more open rules as a means of creating competition for national carriers.
5.6.6 Liberalizing air carrier ownership and control could produce many benefits. For example, it could provide
air carriers with wider access to capital markets and reduce their reliance on government support. It could permit airlines
to build more extensive networks through mergers and acquisitions or alliances. It could also help improve economic
efficiency of the airline industry by enabling more competitive carriers and a greater variety of services in the market,
which in turn could feed through into consumer benefits.
5.6.7 At the same time, liberalization also carries certain risks which may be cause for concern, such as: the
potential emergence of “flags of convenience” (explained below) in the absence of effective regulatory measures to
prevent them; potential deterioration of safety and security standards with increasing emphasis on commercial outcomes;
and possible flight of foreign capital which could lead to less stable operation.
5.6.8 There could be impacts on labour, national emergency requirements and assurance of service. Finally, and
in the long run, there may also be potential implications for airline competition as a consequence of industry
concentration (i.e. the air transport system being dominated by a few mega-carriers through mergers or acquisitions), a
reality that exists in most other service sectors. Therefore, when considering liberalization, each State needs to take into
account all the benefits and risks.
5.6.9 From a regulatory perspective, the debate on liberalizing air carrier ownership and control in international
air services has revolved mainly around two major issues: a) the link with the designating State; and b) the ability to
liberalize.
5.6.10 As explained in the first section of this chapter, one of the main reasons for the traditional criteria is that it
helps to establish the link between the carrier and the designating State. Under the current regulatory regime for
international civil aviation, which is well established and has been functioning since 1944, the lack of, or weakening of,
such a link could have both safety and economic implications.
5.6.11 On the safety side, a clear link is essential in maintaining safety standards because the Chicago
Convention imposes upon each ICAO member State the responsibility for compliance with standards and practices
related to safety and security, including regulatory oversight of its national carriers.
5.6.12 One main concern about liberalizing the traditional criteria is that it may lead to the possible emergence of
“flags of convenience”, a term derived from the maritime industry which denotes a situation in which commercial vessels,
owned by nationals of a State but registered in another State (i.e. the flag State) are allowed to operate freely between
and among other States. As safety is of paramount importance in civil aviation, there is a need for safeguard measures
to prevent any weakening of safety and security standards.
5.6.13 With respect to economic rights, there is concern that air carriers may improperly gain access under
broadened criteria to routes which they would not be allowed to operate otherwise. Therefore, there is also a need to
prevent “flags of convenience” in order to ensure an orderly economic regulatory regime.
5.6.14 With respect to the second issue, the ability to liberalize, the continuing use of the traditional criteria is
seen by some States as a constraint to liberalization. It is argued that each State should be allowed to pursue air
transport liberalization at its own choice and own pace, but the traditional provision, by virtue of the right of refusal held
by other States, effectively prevents a State which chooses to liberalize more rapidly from doing so in respect of airline
designation for the use of market access.
5.6.15 In this regard, the current bilateral mechanism creates two distinctive yet interlocking issues for States: a)
for those who wish to liberalize, how to remove the potential risk that their designated airlines might be rejected by the
bilateral partners; and b) for those who want to retain the national ownership and control requirement for their own
carriers, whether to accept foreign designated airlines with liberalized ownership and control, and if so, how to ensure
that they could still identify the link between the airline and the designating State to prevent “flags of convenience”, and
for matters of safety and security.
5.6.16 In the case of a), a State would be reluctant to liberalize if it might risk losing its traffic rights because of its
designated airline’s foreign ownership. As for the case of b), the approach of the State to accepting designations can
help or hinder the liberalization efforts of the designating States. A major challenge is how to have States that do not
wish to liberalize at present not inhibit others from doing so.
5.6.17 The objective of regulatory liberalization in this area should be to create an operating environment in which
air carriers can operate efficiently and economically without compromising safety and security. Liberalization should also
help increase the participation opportunities of States, particularly developing countries, in international air transport
while ensuring that change will not adversely affect the interest of all stakeholders.
5.6.18 There are a number of ways States can liberalize or facilitate the liberalization of air carrier ownership and
control regulation. For example, States may mutually agree to apply certain broadened criteria for airline designation and
authorization, including the following alternative arrangements developed by ICAO:
a) The airline is and remains substantially owned and effectively controlled by the nationals of any one of
more States that are parties to an agreement, or by one or more of the parties themselves.
b) The airline is and remains substantially owned and effectively controlled by the nationals of any one of
more States that are not necessarily parties to an agreement but are within a predefined group with a
community of interest.
c) The airline has its principal place of business and/or permanent residence in the territory of the
designating State; and is under effective regulatory control by the designating State. In the context of
this arrangement, the evidence of principal place of business may be predicated upon the following:
the airline is established and incorporated in the territory of the designating party in accordance with
relevant national laws and regulations, has a substantial amount of its operations and capital
investment in physical facilities in the territory of the designating party, pays income tax, registers and
bases its aircraft there, and employs a significant number of nationals in managerial, technical and
operational positions.
d) The evidence of effective regulatory control may be predicated upon but is not limited to the following:
the airline holds a valid operating licence or permit issued by the licensing authority such as an air
operator certificate (AOC), meets the criteria of the designating party for the operation of international
air services, such as proof of financial health, ability to meet public interest requirements, obligations
for assurance of service; and the designating party has and maintains safety and security oversight
programmes in compliance with ICAO standards.
5.6.19 States may also treat the ownership and control requirement of foreign designated airlines with more
flexibility to accommodate the needs of other States wishing to liberalize in this area. Some of the measures a State may
take include:
a) allowing its bilateral partners to use the broadened criteria for those partners’ designated carriers while
retaining the traditional criteria for its own designated carriers, such as that practised in the bilateral
agreements involving the Hong Kong Special Administrative Region of China as a party;
b) accepting the designated carriers of its bilateral partners which may not meet the traditional ownership
and control criteria if that carrier meets other overriding requirements such as safety and security; and
c) making public its position on the conditions under which it would accept foreign designations. Such
information, when available from a large number of States (for example, via ICAO), would greatly
enhance transparency and help bring about the certainty needed by governments, from the regulatory
perspective, and the airlines for the planning and operation of international air services.
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Chapter 6
AIR CARGO
6.1 INTRODUCTION
6.1.1 Air cargo or freight refers to any property carried on an aircraft other than mail, stores and passenger
baggage (see Annex 9 to the Convention on International Civil Aviation). The term air cargo is also used in a broader
sense by the airline industry to mean any property (freight, express and mail) transported by air except baggage. An all-
cargo service is an air service that carries cargo only, whether scheduled or non-scheduled.
6.1.2 In the field of international air transport, attention is often paid to passenger air services, yet air cargo is
also an important component of air transport. Economic progress of States, especially Small Island Developing States
(SIDs), Land Locked Developing Countries (LLDCs) and Least Developing Countries (LDCs), depends significantly upon
air cargo services which allow them to overcome infrequent boat services or poor infrastructure for ground transportation.
Air cargo service routes are regarded as regional lifelines for these areas.
6.1.3 To freight shippers, air services render a competitive alternative to other forms of transport (rail, trucking or
shipping) in meeting their shipping requirements in terms of speed, quality (much less en route damage) and cost. As
more companies adopt the philosophy of “just in time” (i.e. goods arrive when needed for production or for use rather
than being stockpiled and becoming expensive inventory), aircraft will be used increasingly as, in effect, airborne
extensions of warehouses in order to reduce inventory carrying cost.
6.1.4 To airlines, air cargo can be an important revenue generator. On some major international routes (e.g.
across the North Atlantic, between Europe and Asia and across the North/Mid Pacific), air cargo has contributed roughly
one-fifth of the total revenue on international scheduled air services.
6.1.5 A more recent development that adds importance to air cargo is the huge expansion of the courier and
express/small package business and the growth of e-commerce, which offers door-to-door air service for time-sensitive
documents or small packages, usually with the delivery guaranteed within specified time limits (e.g. same day or next
day) but subject to size or weight limitations. Some airlines have also become more involved in door-to-door services,
rather than limiting themselves to provision of the air component. Air cargo transportation has become increasingly
integrated and globalized via cross-equity investments between airlines and cooperative arrangements such as co-
branding (i.e. a commercial arrangement under which involved air carriers market a service under one brand name, but
carry out the operation with each carrier’s own aircraft bearing both the brand name and its own carrier identity) and
franchising.
6.1.6 This chapter identifies some distinct features of air cargo transportation and provides information on how
governments regulate air cargo operations.
6.2 DISTINCT FEATURES OF AIR CARGO
6.2.1 Cargo, by nature, is generally less sensitive than passengers to time between origin and destination
(except express), routes and stops. While passengers must be transported to their destinations without delay, cargo can
often wait if space is not immediately available, can move on different routes and make numerous stops.
IV-6-1
6.2.2 While passengers tend to make round trips, air cargo generally moves only one way. There are few routes
where the volume of cargo traffic is the same or similar in both directions, but many where the volume is several times
greater in one direction than the other.
6.2.3 Air cargo tends to use more intermodal transport, i.e. more than one form of transport, e.g. aeroplane,
truck, rail or ship between origin and destination. Special devices are often used for air cargo, such as standardized
pallets (i.e. platforms on which goods are assembled and secured by nets or straps) and containers (i.e. specially
designed receptacles that fit in the cargo compartments of the wide-body aircraft) — such devices are often referred to
by the generic term ULDs (unit load devices). The use of these devices has not only helped enhance efficiency, but has
also facilitated interlining and intermodal transport.
6.2.4 Most scheduled international airlines regard air cargo carried in the aircraft’s lower deck compartment as
an additional source of revenue, treating it as a by-product of their passenger services. However, air cargo can assume
greater importance on a route with a sufficient volume of cargo traffic to justify using a combi aircraft (which carries both
passengers and cargo on the main deck) and is the sole generator of revenue with respect to an all-cargo aircraft or a
freighter.
6.2.5 Although airlines sell air cargo transportation directly to customers, a substantial proportion of their cargo
sales activity involves intermediaries, such as:
a) cargo agents, who act as retailers, selling air cargo transportation to shippers on behalf of airlines on a
commission basis; and
b) freight consolidators/forwarders, who act for shippers as forwarding agents (though some may also
operate their own aircraft) and often consolidate shipments from more than one shipper into larger
units which are tendered to airlines, benefiting from reduced freight rates for bulk shipments.
6.2.6 In many countries, commercial enterprises that are freight consolidators/forwarders are also cargo agents,
although in some States this is prohibited by law.
6.3 REGULATION OF AIR CARGO
6.3.1 In terms of economic regulation of international air transport, air cargo transportation is generally treated as
a component of government regulation with respect to market access, tariffs, capacity and non-scheduled operations,
etc. These elements are examined in separate chapters of the manual.
6.3.2 Most governments traditionally regard air cargo as part of passenger air services, because most national
airlines carry cargo in combination with their scheduled passenger services, with relatively few having all-cargo. Thus, in
the bilateral exchange of market access rights (discussed in Chapter 2), States typically grant the right for their
designated airlines to transport passengers, cargo and mail on the agreed scheduled international air services. The right
to operate all-cargo air services is generally considered as implicit in such grant, but some bilateral agreements are
more specific, referring to “passengers, cargo and mail, separately or in any combination”.
6.3.3 Liberalization in the past two decades has led to significant changes in States policies and regulatory
approaches towards air cargo, recognizing its increasing significant role and contribution to national and world trade and
economic development. This change also led to the establishment of more all-cargo operators, either as an arm of major
airlines or as separate independent carrier.
Chapter 6. Air Cargo IV-6-3
6.3.4 Some bilateral air transport agreements assign special routes for all-cargo services. Recognizing the
distinct nature of air cargo, some agreements provide for special route flexibility for all-cargo services, for example, by
allowing the use of different intermediate points than those authorized for passenger or combination services, while
permitting such services to be operated by the designated airlines on any combination service routes.
6.3.5 Government regulation on air carrier capacity (covered in Chapter 4) also extends to all-cargo operations,
but tends to be less restrictive than that applied to passenger air services because cargo is generally of less concern to
national airlines in terms of revenue generation and market share. Air transport regulators also deal with cargo rates as
part of the government regulation of airline tariffs (see Chapter 3).
6.3.6 A great number of non-scheduled international air transport activities are all-cargo charter operations, such
as those operated by or for freight forwarders/consolidators, couriers and express/small package services. These
charter flights are regulated by States as part of the non-scheduled air transport services (see Chapter 7).
6.3.7 One major problem all-cargo operators experience is the lack of flexibility in market access rights under
bilateral agreements in which air cargo is treated as part of passenger services. In such agreements, the limitations
usually imposed on passenger services in respect of routes, traffic rights, frequency, etc., may also apply to all-cargo
services. Since there are minimal synergies between passenger and cargo operations (e.g. different customers, different
departure/arrival time requirements, directional imbalance of traffic movement), such regulatory restrictions often make it
difficult for air carriers to sustain an economically viable all-cargo service.
6.3.8 Other regulatory problems all-cargo operators may encounter include:
a) airport curfews which often limit the flexibility in flight scheduling, particularly for courier and express
services which tend to wait until late in the day to receive their shipments and operate overnight for
next day delivery; and
b) in some cases, limitation on airport slots that can be used by cargo flights, especially at congested
airports where all-cargo operations are often given lower priority than passenger services.
6.3.9 As the air cargo market’s size and importance grow, more States are adopting more flexible regulatory
approaches that facilitate its development. ICAO has also developed guidance, in the form of model clauses for air
transport agreements, for optional use by States in liberalizing air cargo services, which can be found in the ICAO TASA
in Doc 9587.
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Chapter 7
NON-SCHEDULED AIR SERVICES
7.1 INTRODUCTION
7.1.1 A non-scheduled air service is a commercial air transport service performed as other than a scheduled air
service. A charter flight is a non-scheduled operation using a chartered aircraft. Though the terms non-scheduled and
charter (i.e. a contractual arrangement between an air carrier and an entity hiring or leasing its aircraft) have come to be
used interchangeably, it should be noted that not all commercial non-scheduled operations are charter flights.
7.1.2 Non-scheduled air services emerged as an important category of air carriage first in Europe, spreading
later to North America and other regions. They experienced rapid development in the 1960s and 1970s, fostered by the
growing demand for low-cost air travel. Though often considered by States as supplementary to scheduled services,
non-scheduled services have been instrumental in some regions (notably in Europe) in the development of international
mass tourism, which has assumed considerable economic and social importance for many countries, developed and
developing.
7.1.3 Unlike scheduled international air services which are regulated primarily on the basis of bilateral
agreements between States, non-scheduled international air services are generally authorized on the basis of national
regulation. Aviation regulators also sometimes regulate commercial non-transport operations (such as aerial crop
dusting and surveying) as well as operations such as overflight and landing by private, corporate, military and State
aircraft, whether for transport or not, these are however outside the scope of this chapter and this manual.
7.1.4 The first section of this chapter describes some characteristics of non-scheduled air services which set
them apart from scheduled services. The next section identifies the numerous kinds of international non-scheduled air
services. The last section discusses how governments regulate international non-scheduled air services.
7.2 CHARACTERISTICS OF NON-SCHEDULED AIR SERVICES
Non-scheduled air services may be performed by all types of air carriers and may be distinguished from scheduled
services by the following characteristics. They are usually operated:
a) pursuant to a charter contract on a point-to-point and often plane-load basis (but several charterers
may share the capacity of an aircraft);
b) either on an ad hoc basis or on a regular but seasonal basis;
c) not subject to the public service obligations that may be imposed upon scheduled air carriers such as
the requirement to operate flights according to a published timetable regardless of load factor;
d) with more operational flexibility with respect to choices of airports, hours of operation and other
operational and service requirements than scheduled services;
IV-7-1
e) with the financial risk for underutilized payload being assumed by the charterer rather than the aircraft
operator;
f) generally without the air carrier maintaining direct control over retail prices (the aircraft capacity is
usually sold wholesale by the carrier to tour operators, freight forwarders or other entities); and
g) subject to seeking permission, or giving prior notification, for each flight or series of flights, to/from the
country of origin or destination or both.
7.3 KINDS OF INTERNATIONAL NON-SCHEDULED AIR SERVICES
7.3.1 Over the years, international non-scheduled air services have developed to meet changing air transport
market demands and the various regulatory environments. Indeed their evolution could be described as a demand
inspired growth from a small base with fairly simple regulation into a sizeable field of air transport with more complex
regulation. Their growth encouraged the development of liberalized scheduled air services, which in turn diminished both
the non-scheduled market size and the complexity of its regulation. Thus many of the distinct types defined below have
ceased to be used but the descriptions have been retained for historical purposes. The current and historical types fall
into four categories.
7.3.2 The first category is passenger charter flights. Those that are open to the general public include:
a) the advance booking charter (ABC) or non-affinity group charter, a charter whereby all or part of the
passenger capacity of an aircraft is chartered by a charter/travel organizer who resells seats to the
general public, subject to rules that are or were likely to include various requirements such as advance
payment, pre-listing, minimum stay, cancellation penalties, stopover restrictions and other conditions;
b) the inclusive tour charter (ITC), a charter whereby all or part of an aircraft is chartered for the carriage
of passengers who have purchased an inclusive tour from a tour operator (i.e. a travel organizer who
resells seats in conjunction with accommodation and/or other ground arrangements for a
comprehensive price); and
c) the public charter, a generic charter type where capacity is sold to members of the general public
through recognized intermediaries, often without regulatory requirements such as round trip, advance
booking, etc.
7.3.3 Passenger charters that are or were open solely to eligible segments of the public or that are for the
charterer’s own use rather than resale include four types most often rendered obsolete by liberalization, namely:
a) the affinity group charter, one chartered for the exclusive use of a group (or groups) consisting of
members of an association or club having principal aims and objectives other than travel and sufficient
affinity prior to the application for charter transportation to distinguish it and set it apart from the
general public;
b) the common purpose charter, one chartered by an organizer for resale to persons who share a
common purpose in travel (such as attending a particular event) but are not necessarily members of
any association or club;
c) the special event charter, a charter for the carriage of people attending a special event of a religious,
sporting, cultural, social, professional or other nature;
Chapter 7. Non-scheduled Air Services IV-7-3
d) the student charter, a charter bought entirely for the carriage of students at a recognized
establishment of higher education, usually subject to certain age limitations; and
e) the most basic and timeless type, the single entity charter or own-use charter, one chartered by one
entity (e.g. an individual, corporation, government) solely for its own use for the carriage of
passengers and/or freight, with the cost borne solely by that entity and not shared directly or indirectly
by others.
7.3.4 The second category is cargo charter flights, including those that are chartered for resale purposes by
freight forwarders, consolidators, shipper’s associations, express/small package/courier services and similar charterers,
and those for the charterer’s own use rather than resale.
7.3.5 The third category is combinations or variants of the above, including:
a) the mixed passenger/cargo charter, one used by the same charterer to carry both passengers and
cargo (e.g. people attending a trade fair and exhibits); and
b) the split charter, a charter involving more than one charterer where the capacity of the chartered
aircraft is shared or split.
7.3.6 Also, two practices created other variants, namely that of co-mingling, i.e. carrying on the same flight more
than one kind of passenger charter traffic, such as advance booking and inclusive tour; and intermingling, i.e. carrying
on the same flight traffic originating its travel in the origin country of the round trip flight and traffic starting its travel in the
destination country, both outmoded concepts where regulation has been liberalized.
7.3.7 The fourth category of international non-scheduled air services is non-scheduled non-charter flights for the
carriage of individually ticketed or individually waybilled traffic (sometimes referred to as on-demand air taxi service).
These are flights not operated according to a published schedule but sold to individual members of the public (usually
freight shippers). They fly authorized routes but only make stops at en route points where there is traffic to be set down
or picked up.
7.3.8 International non-scheduled air services are generally not considered to include certain scheduled services
that may be confused with non-scheduled operations, such as:
a) inaugural flights;
b) positioning flights;
c) extra sections of scheduled services;
d) scheduled flights using wet-leased or dry-leased aircraft; and
e) “part charters” on scheduled service flights. Note that a part charter is in effect a marketing method
which allows part of a scheduled service flight (seats or space) to be sold in the manner of a charter
service under a carrier-charterer contract.
7.4 REGULATION OF NON-SCHEDULED AIR SERVICES
7.4.1 The Convention on International Civil Aviation (Chicago Convention) distinguishes between the rights to be
accorded by Contracting States to international non-scheduled flights (Article 5) and to scheduled international air
services (Article 6). It refers to non-scheduled flights as the flights of all aircraft “not engaged in scheduled international
air services”. The first paragraph of Article 5 requires that each Contracting State grant the rights of transit and non-
traffic stops to all international non-scheduled flights by aircraft of other Contracting States “without the necessity of
obtaining prior permission”. The second paragraph of this Article states that commercial non-scheduled flights shall also
“have the privilege of taking on or discharging passengers, cargo or mail, subject to the right of any State where such
embarkation or discharge takes place to impose such regulations, conditions or limitations as it may consider desirable”.
As a practical consequence of Article 5, the regulation of international non-scheduled services has generally been
governed by rules laid down by individual States, with only a few bilateral and multilateral agreements existing to create
joint regulation.
7.4.2 For the guidance of States in their interpretation or application of Articles 5 and 6 of the Chicago
Convention, the Council of ICAO has developed a definition for the term “scheduled international air service” which is
accompanied by “Notes on the Application of the Definition and an Analysis of the Rights Conferred by Article 5 of the
Convention” (see Doc 9587). The Council recognized, when developing the definition, that the right of Contracting States
to impose regulations, conditions and limitations on the taking on or discharging of passengers, cargo or mail by
commercial non-scheduled air transport is unqualified. It has expressed the opinion, however, that it should be
understood that the right would not be exercised in such a manner as to render the operation of this important form of air
transport impossible or non-effective.
7.4.3 Under a unilateral framework where international non-scheduled/charter operations continue to be

regulated, States of origin and destination regulate independently of each other such services between their territories.
In this situation the charterer and carrier must follow the rules of both States for the operation to be charterworthy, i.e
being a valid charter under the relevant regulation. These rules generally appear in national laws, government
regulations, policy statements dealing with air transport and authorizing the regulation of such operations, or in the
licence/permit authorizing the non-scheduled flight or flights. In some cases, ad hoc decisions are made by regulatory
authorities.
7.4.4 National policies with respect to international non-scheduled commercial operations have taken a variety of
forms, ranging from severe limitation to complete freedom. Most State policies lie between these approaches. In
developing policies and regulations concerning non-scheduled air services, individual States usually take into account
the role of such services in the satisfaction of the demand of the public for low-price air transport; their place in the
overall air transport system; and their contribution in meeting some general national priorities and interests (e.g.
promotion of tourism, expansion of airport utilization, job creation and community development).
7.4.5 A carrier must be licensed by its home State to engage in international non-scheduled air transport. Some
States require evidence of this from foreign carriers. Air transport authorities may authorize international non-scheduled
operations by a national or foreign carrier by issuing a licence or permit (i.e. general authorization or permission given on
a relatively long-term, continuing basis, for example, for a year or a season), or an ad hoc authorization for a flight or
flights.
7.4.6 States may also adopt procedures to a) require advance approval of charter programmes or individual
flights; or b) not require pre-flight approvals; and c) require pre-flight notification and/or post-flight reporting. Some States
may continue to use the procedure of advance placement of carriers on a list of those eligible to perform charter flights.
Chapter 7. Non-scheduled Air Services IV-7-5
7.4.7 Various States use combinations of the above and take into consideration reciprocity, the origin of the
traffic, the region involved, the nationality of the carrier (national versus foreign), the type of carrier or size of aircraft, the
kind of charter or other determinants. It is general practice for States to require the filing of a flight plan or some form of
prior notification (usually 24 hours in advance) for air traffic control, customs, immigration and public health purposes.
Note.— Annex 9 to the Convention on International Civil Aviation also contains provisions requiring
Contracting States to minimize such procedures to facilitate non-scheduled operations.
7.4.8 Some States have concluded bilateral non-scheduled air services agreements or bilateral air transport
agreements covering both scheduled and charter services to allow operation of non-scheduled services under mutually
agreed terms. These agreements normally include provisions regarding charterworthiness rules (for example,
acceptance of country of origin rules or harmonization of rules), points which may be served, fair and equal opportunity,
pricing, traffic freedoms covered, designation and licensing of carriers; provisions similar to those found in other
agreements covering technical subjects, such as customs exemption and consultation and arbitration.
7.4.9 Only a few multilateral agreements have been concluded on non-scheduled air services, all on a regional
basis (such as the 1956 Multilateral Agreement on Commercial Rights of Non-scheduled Air Services in Europe between
ECAC States, and the 1971 Multilateral Agreement on Commercial Rights of Non-scheduled Air Services Among the
Association of South-East Asian Nations (ASEAN)). These agreements generally provided for a more liberalized regime
in authorizing non-scheduled operations between the signatory States, for example, by permitting free admission of
certain types of non-scheduled flights (e.g. humanitarian, emergency charters, single entity charters or charter flights
serving routes not being directly served by scheduled services), subject only to prior notification.
7.4.10 A basic problem experienced by many States in respect of regulating international non-scheduled services
is how to strike a balance between the commercial interests of the scheduled services operators and those of the charter
operators in the same markets, while taking into account the overall economic interests of the country concerned. States
that maintain significant regulation generally impose various restrictions or controls to ensure that non-scheduled air
services do not impair the profitability and efficiency of their scheduled air services and/or to satisfy a need for some
balance in the charter benefits received by carriers of each involved State. The controls which such States may use on
commercial non-scheduled operations include:
a) marketing restrictions through charter definitions and rules (for example, by not permitting certain
types of charters);
b) geographical and route restrictions (for example, by allowing the operation of certain types of charters
only to defined areas or only on specified routes);
c) capacity control (involving, for example, a specific numerical limit or one related to a specific
percentage of scheduled flights); and
d) price control.
7.4.11 Another problem encountered by various States in regulating international non-scheduled services stems
from the absence of an agreed clear definition of a non-scheduled service (it is defined only as other than a scheduled
air service). This is especially true in situations when the distinction between the two types of air services has become
blurred. For example, as charter services became more readily open to use by members of the public they came to be
called “schedulized charters” or “programmed charters”, i.e. charter flights open to the public that are so regular or
frequent that they constitute a recognizable systematic series.
7.4.12 Most scheduled carriers now offer reduced fares and conditions which were once more common to charter
services. As the air transport industry has evolved and as more States have adopted a liberal policy towards
international air transport regulation, the usefulness of making such distinctions for charters has been questioned. In the
case of the European Union, the “third package” of air transport liberalization has effectively eliminated the regulatory
distinction between the two (by allowing non-scheduled/charter carriers to operate scheduled flights and sell flights
directly to the public), although the distinction tends to be retained by the industry in terms of how non-scheduled
services are marketed and operated.
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Chapter 8
AIRLINE COMMERCIAL ACTIVITIES
8.1 INTRODUCTION
8.1.1 This chapter discusses the commercial and related aspects of international air transport (sometimes
referred to as “doing business” matters). Although not given as much importance by regulators as the principal
regulatory elements of market access, capacity and tariffs, they are of regulatory interest because of their potential for
increasing or decreasing market access and the effectiveness and/or profitability of air carriers.
8.1.2 The first three sections of this chapter present subjects that have been regulated since the beginning of
international air services, namely, currency conversion and remittance of earnings, employment of non-national
personnel and the sale and marketing of international air transport.
8.1.3 The fourth section of this chapter presents the ever-evolving environment of airline product distribution and
electronic commerce including computer reservation systems and the Internet. The fifth section discusses regulation of
the growing activity of aircraft leasing.
8.1.4 The sale and marketing of international air transport services, airline product distribution (including
computer reservation systems), and aircraft leasing are regulated to various extents largely by air transport authorities.
In contrast, two other activities (currency conversion and remittance of earnings, and employment of non-national
personnel) are regulated primarily by non-aviation authorities using exchange controls and immigration laws,
respectively, along with regulations of general applicability. Internet activities (such as online sales via the Internet) are
virtually unregulated at the time of this writing but may become topics of future governmental regulation.
8.2 CURRENCY CONVERSION AND REMITTANCE OF EARNINGS
8.2.1 The extensive worldwide network of travel agents and the ability to provide international air transport on an
interline basis combine to permit air carriers to sell tickets in many countries in the world, including those which they do
not serve directly. Thus, air carriers accumulate revenues in many currencies, some of which are subject to exchange
controls. Currency conversion and remittance, changing local currency remaining after local expenses have been
subtracted from local revenues into a convertible currency which can be transferred by the air carrier to its head office or
elsewhere, have been long-standing problems in cases where States, for a variety of reasons, have imposed exchange
controls which do not permit, which restrict, or which result in extensive delays in currency conversion and remittance.
8.2.2 In a number of instances, air carriers have, often under the auspices of the International Air Transport
Association (IATA), made collective efforts to secure the conversion and remittance of their blocked earnings in certain
countries. There have also been a few instances of joint representations by the governments concerned for the same
purpose.
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8.2.3 Formal regulatory efforts to ensure currency conversion and remittance have, however, tended to fall in the
bilateral area. A small minority of the bilateral air services agreements registered with ICAO contain provisions according
designated airlines the right to convert and remit any excess of local receipts over local disbursements. In this regard,
ICAO developed a model bilateral clause for currency conversion for use by States in their bilateral air services
agreements. (The text of the model clause can be found in Doc 9587).
8.2.4 In almost all cases where conversion and remittance of local currency are dealt with bilaterally, there is
some type of limitation, such as subjecting the process to an agreed formula or special payment regime, limiting the
transfer to the air carrier’s head office, or specifying the convertible currency. In some cases the provisions require that
the conversion be prompt or at a particular rate of exchange (e.g. the rate of exchange in effect on the date of
conversion, the rate for current transactions, or the official rate) and that remittance be without tax or other limitation.
8.2.5 A more general condition (whether stated or not) which can in some instances unduly lengthen the
conversion and remittance process is that the conversion and remittance be in accordance with the procedures
established in the State’s exchange control regime. In many cases, this will result in the civil aviation authorities having
to convince officials of another government department and/or a private entity, such as a bank, of the importance of
complying with the bilateral commitment to convert and remit.
8.3 EMPLOYMENT OF NON-NATIONAL PERSONNEL
8.3.1 International air carriers, by the nature of their business, employ personnel of different nationalities. With
respect to some activities, they prefer to employ non-national personnel, persons who do not have the nationality of the
State in which they are to work (and who usually have the nationality of that State in which the air carrier has its
headquarters). Consequently, such personnel require authorization from that State to reside and work therein.
Depending on the laws and regulations of the State concerning residence and employment and how they are applied,
these personnel may be able to qualify for admittance for residence and employment with the air carrier. Where this is
not the case, however, States have sought other means to ensure that their air carriers could employ non-national
personnel in some categories of activities.
8.3.2 A small minority of the bilateral air services agreements registered with ICAO contain provisions allowing a
foreign air carrier to bring in and maintain in a State certain types of non-national employees. Almost all of these
provisions contain some type of restriction, such as:
a) a reciprocal numerical limit;
b) a requirement that a certain percentage of the foreign air carrier’s local employees be nationals;
c) a requirement that employees be located at airports/ cities served directly by the air carrier; and
d) a requirement that their entry and stay be governed by national law or mutual agreement between air
carriers.
8.3.3 The principal difficulty in this area lies in the requirement (explicit or implicit) that the admittance for
residence and work of the non-national employee of the air carrier be subject to national law and regulations. In some
cases, national law and regulations either make no provision for non-national employees of air carriers or impose
requirements that the non-national employee cannot meet. Consequently, a few of the bilateral provisions on
employment of non-national personnel are stated in fairly broad, unrestricted terms; for example, work permits will not be
required.
Chapter 8. Airline Commercial Activities IV-8-3
8.3.4 Another aspect of the situation concerning non-national personnel is that, as in the case of conversion and
remittance, civil aviation authorities find themselves in the position of having to convince officials of another government
department (in this case, immigration authorities) of the importance of complying with a bilateral commitment to allow the
entry and residence of certain non-national personnel employed by foreign air carriers. In this regard, ICAO also
developed a bilateral model clause on non-national personnel and access to local services for use by States, which can
be found in Doc 9587.
8.4 SALE AND MARKETING OF INTERNATIONAL AIR TRANSPORT
8.4.1 The ability to sell and market international air transport is an important element of an air carrier’s
operations. Although there are provisions on the sale of air transport services in over one-third of the bilateral air
services agreements registered with ICAO, marketing, the promotion of sales by such means as advertising and
incentives, can be subject to several different regimes, depending on the activity.
8.4.2 Almost all of the provisions in bilateral air services agreements concerning the sale of international air
transport include the right of a foreign air carrier to maintain sales offices and to sell its products directly or through
agents. Some of these provisions specify the right to sell in certain currencies and require that users be free to purchase
the air services of the carriers concerned.
8.4.3 Among the restrictions found in sales provisions are a requirement for airline agreement on all commercial
matters and a requirement allowing sales offices only online, i.e at airports/cities directly served by the foreign air carrier,
though in some other cases, a foreign designated airline may be allowed to set up sales offices offline, i.e. at cities not
within the system of scheduled services of that airline. ICAO developed a bilateral model clause on the sale and
marketing of air service products which is provided in Doc 9587.
8.4.4 Although the term “marketing of international air transport” is not found in bilateral air services agreements,
some States consider that the term “freely sell its services” or that the right to a fair and equal opportunity to compete
with air carriers of the other party necessarily includes marketing activities. The term does appear in the Annex on Air
Transport Services of the General Agreement on Trade in Services (GATS — see Chapter 4). In the Annex, the
marketing of air transport services includes “all aspects of marketing such as market research, advertising and
distribution”. The Annex states, however, that the activities of selling and marketing do not include “the pricing of air
transport nor the applicable conditions”.
8.4.5 Depending on the type of marketing activity involved, States have relied on one or more of the following
types of regulation:
a) for incentives (such as frequent flyer programmes), some States use the applicable tariff regime,
including such incentives in the definition of tariff;
b) for advertising, some States use national laws designed to ensure fair trading and consumer
protection; and
c) in general, most States use the bilateral provision according air carriers a fair and equal opportunity to
compete or to operate air services covered by the agreement.
8.5 AIRLINE PRODUCT DISTRIBUTION AND ELECTRONIC COMMERCE
8.5.1 Airline product distribution generally refers to the ways and means by which air transport services are
marketed and sold, such as the traditional sales outlets of airlines and travel agents, and the more modern means of
computer reservation systems and the Internet.
8.5.2 Airline product distribution had traditionally its principal locus in airlines’ own sales outlets and travel agents
before the 1990s, but became a very effective and valuable tool with the advent of computer reservation systems
(CRSs), which provide information on air carrier schedules, space availability and tariffs, and through which reservations
on air transport services can be made. In the past two decades, the airline industry has undergone fundamental changes,
so have the regulatory approaches of States towards CRSs, from regulation in the 1990s to less regulation and now
virtually no regulation. This section describes the functions of CRSs and associated regulations so that readers can
learn about their evolution.
8.5.3 Computer reservation systems provide travel agents, on whom airlines rely heavily in conducting their
sales, with up-to-date information not only on airlines’ flight schedules, fares and seat availability but also on a range of
other travel and leisure services. CRSs also facilitate their work in making reservations and issuing tickets. In large
markets, many air carriers regard participation in one or more computer reservation systems as essential.
8.5.4 Soon after their introduction, however, CRSs attracted considerable regulatory attention because of their
increasing influence on the sale and distribution of international air transport services. A number of States were
concerned that as a powerful marketing tool, CRSs could have the potential to be abused to unfairly favour certain air
carriers or air services because most CRSs were then owned by major airlines. During the introduction and early
development of CRSs, regulatory activity centred around four general areas:
a) display of information (the sequence in which flights are displayed, how different types of flights
(online, codeshared) should be treated);
b) participation of air carriers (including conditions, charges, inclusion of schedules of non-participating

air carriers and participation by dominant air carriers in certain markets);
c) data questions (releasing information on individual bookings, safeguarding the privacy of personal
data, releasing aggregated data); and
d) the inclusion (or exclusion) of non-scheduled flights.
8.5.5 Regulation of CRSs occurred at both national and international levels. At the national level, several States
(such as the United States and Canada) have developed detailed CRS regulations. At the regional level, there also exist
a few codes of conduct on CRSs, including the ones adopted by the European Community (EC), the European Civil
Aviation Conference (ECAC) and the Arab Civil Aviation Commission (ACAC).
8.5.6 At a general, worldwide level, ICAO developed a Code of Conduct for the Regulation and Operation of
Computer Reservation Systems for States to follow (adopted by the Council in 1991 and revised in 1996). As noted in
Chapter 4, the GATS also includes, in its Air Transport Annex, computer reservation systems as one of the three air
transport services to be liberalized under the multilateral trade rules.
8.5.7 Specific aspects of CRS regulation tend to reflect different approaches based on whether such regulation
should be general or more detailed. For example, the ICAO Code requires a neutral display or displays of air carrier
schedules, space availability and tariffs. To achieve this, the regional European codes prescribe detailed requirements
for flight displays, differentiating among non-stop flights, other direct flights and connecting services; while the national
regulations of the United States do not prescribe detailed requirements but require the same flight display criteria to be
used for all participating air carriers.
8.5.8 For bilateral regulation, States have generally relied on the provision in their bilateral agreements that
accords their air carriers a “fair and equal opportunity to compete/operate” and on reciprocity to deal with CRS issues
involving international air transport. Some recent bilateral agreements have also included specific provisions on CRSs
designed to protect air transport users and to ensure non-discrimination and fair competition amongst CRS service
providers and participants.
8.5.9 In the mid-1990s, the world’s CRS industry consolidated into four major global CRS vendors — Amadeus,
Galileo, Sabre, and Worldspan. With the expansion of their presence and scope of business, these global vendors have
increasingly seen themselves as global distribution systems (GDSs), i.e. providers of comprehensive travel information
and reservation capability not only on airlines but also on hotels, car rentals, rails and leisure tours.
8.5.10 Another significant development is the change in the ownership structure of the CRSs. There was a steady
overall decline in airline ownership of all the major CRSs in the 2000s, and by 2010, all the four global CRS vendors
became totally non-airline owned.
8.5.11 Along with the advancement of technology and the general growth of electronic commerce (e-commence),
i.e. commercial activity conducted through electronic means, there has been a rapid increase in online sales of airline
products via the Internet.
8.5.12 There are broadly two types of e-commerce activity in airline product distribution:
a) business-to-consumer (B2C), which allows a business entity to sell products or provide services to
end-user consumers via the Internet (e.g. with access to airline flight schedules, seat availability and
fares, as well as to permit bookings and other activities). There exist several different types of B2C
websites. They are: 1) traditional travel agents’ websites which constitute a simple extension to retail
outlets and business processes; 2) online travel agents who do not have conventional retail outlets; 3)
airlines’ own websites; and 4) websites jointly owned by groups of airlines which offer wider product
choices than the ones offered by a single airline’s website; and
c) business-to-business (B2B), which allows the exchange of products, services, and information
between business entities (e.g. airlines, travel agents, CRS vendors and suppliers of air transport)
directly via the Internet. One example is an e-marketplace for airframes, engines and avionics
components, maintenance services, and fuel, etc. Such B2B websites connect buyer airlines with
suppliers through the Internet with the objective of creating cost savings by integrating and
streamlining the supply chains. Another example is a CRS business. CRSs serve as a booking engine
behind most B2C websites and as an online travel booking system for major corporations and airlines.
8.5.13 Major CRS vendors are also further expanding their B2B activity to the area of business-to-business-to-
consumer (B2B2C), in which a business entity sells a service or product to end-user consumers by using other
companies as intermediaries. For example, CRS vendors provide participating travel agents with a customized web-
booking facility so that CRS vendors can reach consumers indirectly via their travel agents.
8.5.14 A number of the original regulatory concerns with CRSs have diminished as ownership has moved away
from air carriers, some other concerns have emerged from the rapid development of e-commerce, especially the Internet.
Since no websites are completely independent of CRSs, regulatory attention has tended to focus mostly on the
consumer and competition aspects of the Internet.
8.5.15 With respect to the consumer aspects, the issue is how to ensure that Internet-based systems provide
consumers with comprehensive and non-deceptive information. While the traditional CRSs are required to provide a
comprehensive source of neutral information on air services, this is not necessarily the case with websites on the
Internet, though such websites can provide consumers with additional choices of travel options with a greater variety of
new products such as Internet-only fares and auction fares. One other consumer concern is the use and disclosure of
personal information on the Internet. To protect consumers from incomplete and misleading information and improve
consumer confidence, several States have addressed the issue under the umbrella of airline passenger rights; other
States have applied general consumer protection laws/rules to the Internet transactions.
8.5.16 The primary issue regarding competition is whether certain practices associated with the use of the
Internet are likely to undermine competition and consumer benefits, despite a competitive impetus carried to the
marketplace by the Internet. On the one hand, the use of the Internet may provide greater opportunities for more
vigorous competition and for new businesses, which could result in new products and services and more dynamic
technological innovation. On the other hand, some areas of the Internet business may give rise to anti-competitive
behaviour, where market incumbents seek to sustain or enhance their market power at least for a certain period. For
example, B2B and B2C websites jointly owned by horizontal competitors holding dominant positions in the relevant
markets may have the potential to use these sites to collaborate and coordinate their prices and services indirectly by
signalling, or directly, thereby stifling competition. Also the owner airlines may discriminate against competing airlines,
travel agents and service providers by refusing access to their Internet-based systems on fair and reasonable terms. In
this regard, some States are examining the issue under the existing CRS rules/regulations, competition laws and
consumer protection laws.
8.5.17 Regulatory response to product distribution is not easy for regulators because of the ever-changing
marketplace and business practices. In addition, multiple parallel distribution channels currently coexist, and the pace
and extent of acceptance of the new Internet-based systems vary amongst States, making it difficult to find appropriate
regulatory formulas, or keep regulations current. As a result of the changes in the CRS industry, some States after a
long review process, have decided to cease their regulation of CRSs. Nevertheless a large volume of airline ticket sales
are still being made by traditional travel agents, while online sales through airlines own websites or online travel
agencies (such as Expedia, Travelocity and Orbitz) have become increasingly widespread and popular.
8.5.18 Another important development is electronic ticketing (e-ticketing), i.e. a method for documenting and
distributing airline tickets without producing paper coupons. In an era of increased competition, electronic ticketing offers
considerable cost savings for airlines and travel agents and provides convenience for consumers. Although the use of
electronic tickets has in the early stage been applied mostly to single-carrier online itineraries, interline electronic
ticketing (einterlining), which permits the use of electronic tickets on more than one airline, has gained increased
popularity as more airlines introduced the practice or expanded the capability for additional routes. This practice may,
however, have some potential regulatory implications, for example in the liability and security aspects of international air
transport.
8.6 AIRCRAFT LEASING
8.6.1 The practice of aircraft leasing, i.e. the rental, rather than purchase, of aircraft by an air carrier from
another air carrier or a non-airline entity, has been growing steadily in the last two decades. The use of leased aircraft
plays a significant role for airlines in the provision of international air services, reflecting in particular the economics and
flexibility of leasing over purchasing, such as reducing initial cost burden or debt level, gaining tax benefits, and meeting
seasonal demands for additional capacity. In a liberalized regulatory environment, leasing of aircraft facilitates the entry
of new carriers into the market.
8.6.2 There are various types of aircraft leases. They can be characterized by their purpose. A financial or
capital lease is used by air carriers to avoid the otherwise substantial capital outlays/debt required in purchasing aircraft
directly from the manufacturer, or to reduce taxation or other costs. For example, an air carrier may sell all or part of its
fleet to a bank or other financial institution and then lease the aircraft back. Financial leases are long-term arrangements
which give the outward appearance of ownership, e.g. the aircraft bears the air carrier’s name/logo and is usually
registered in the air carrier’s State.
8.6.3 In contrast, an operating lease is designed to meet an air carrier’s immediate need for additional aircraft,
often on a seasonal or short-term basis. An air carrier with excess or under-utilized aircraft can lease them to other air
carriers.
8.6.4 For regulatory purposes, there are two basic types of aircraft leases, namely, a dry lease where the aircraft
is leased without crew; and a wet lease where the aircraft is leased with crew. A wet lease with partial crew (such as
cockpit crew or cabin crew) is sometimes referred to as a damp lease. A wet lease is normally for short-term use while a
dry lease is for a longer-term use.
8.6.5 In this connection, the term lessor means the party from which the aircraft is leased; the term lessee
means the party to which the aircraft is leased. For example, if air carrier A leases an aircraft to air carrier B, air carrier A
is the lessor air carrier and air carrier B is the lessee air carrier.
8.6.6 The increasing use of leased aircraft in international air transport can, however, raise potential safety and
economic issues in a situation where the leased aircraft is registered in a State other than that of the operator using it in
international commercial services. Current policies and practices of States concerning the use of leased aircraft are
mainly designed with a view to ensuring compliance with safety standards and that the economic rights accorded in
bilateral or regional agreements are not used by third parties not entitled to them.
8.6.7 With regard to the safety aspects of aircraft leasing, several definitions contained in Annex 6 to the
Chicago Convention are of particular interest. These are: State of Registry, the State on whose registry the aircraft is
entered; State of the Operator, the State in which the operator’s principal place of business is located or, if there is no
such place of business, the operator’s permanent residence; operator, a person, organization or enterprise engaged in
or offering to engage in an aircraft operation; and air operator certificate (AOC), a certificate authorizing an operator to
carry out specified commercial air transport operations.
8.6.8 The fundamental safety question is which State, the State of the aircraft’s registry, or the State of the
aircraft’s operator, is responsible for compliance with the applicable safety standards of the Chicago Convention and its
Annexes, and which operator is responsible for compliance with the safety standards in applicable national laws and
regulations. In some situations the safety responsibilities of the State and the operator are clear. Potential safety
problems arise where a leased aircraft is registered in a State other than that of the operator using it for international air
services.
8.6.9 States have addressed safety concerns arising from aircraft leasing using the established procedures in
the Chicago Convention and its Annexes and, more recently, through Article 83 bis of the Convention. The Convention
assigns the task of ensuring compliance with applicable safety standards primarily to the State of Registry of the aircraft
but also, for certain aspects, to the State of the Operator. Article 83 bis of the Convention, which entered into force on
20 June 1997 (see Doc 9587), sets out a means of transferring all or part of the duties and functions pertaining to
Articles 12, 30, 31 and 32(a) of the Convention from the State of the Registry (the lessor air carrier) to the State of the
Operator (the lessee air carrier).
8.6.10 Additionally, regulatory concerns about safety are increasingly being dealt with in bilateral air transport
agreements, in regulations or resolutions of regional bodies (e.g. the European Union, the European Civil Aviation
Conference) and in various ICAO meetings and studies. ICAO has also developed guidance on aircraft leasing,
including model clauses on aircraft leasing for optional use by States in bilateral or regional contexts (see Doc 9587). To
assist States wishing to apply Article 83 bis, ICAO developed detailed guidance material which is contained in the
Manual on the implementation of Article 83 bis of the Convention on International Civil Aviation (Doc 10059).
8.6.11 National regulations can have an impact on the use of leased aircraft in international air transport. For
example, for safety reasons, the United States does not approve the wet lease to its national air carriers of aircraft
registered in another State. However, given the widespread use of leased aircraft in international air transport, States
appear to approach the approval/disapproval of leased aircraft primarily on the basis of their use by foreign air carriers
and more often on a case-by-case basis than on the basis of broad, general policies.
8.6.12 Since aircraft leasing can be arranged in many ways, which can result in varied and complex safety
situations, there is a need for coordinated and cooperative action by the different States concerned to ensure that safety
responsibilities are clearly understood and met. In this regard, no single predetermined formula will fit all situations from
the perspective of safety.
8.6.13 In the economic regulation of aircraft leasing, States either approve or do not regulate leases where the
lessor is not an air carrier or controlled by an air carrier. In other words, financial and long-term operating leases where
the lessor is a leasing company, bank or other entity are generally permitted in international air transport.
8.6.14 From a bilateral perspective, economic concerns regarding aircraft leasing tend to focus on any potential,
in a bilateral air transport market, that an airline of a third country could, via a leasing situation, exercise or benefit from
traffic rights to which it is not entitled. States generally permit aircraft leases between airlines of the two parties, while
restricting or not allowing leases, particularly wet leases, from airlines of third countries. However, the increase in the
number of liberalized bilateral agreements, such as “open skies agreements”, which grant unrestricted traffic rights
would decrease the number of situations in which a third country airline does not have the underlying route rights. In
other words, a State will have more opportunities to use leased aircraft when the countries involved all have liberalized
air services agreements.
8.6.15 From an economic perspective, dry leases do not appear to raise the level of regulatory concern that wet
leases generate. To the extent that dry leases, which involve non-airline parties as lessors, are specifically mentioned in
bilateral air services agreements, it is to state that such leases do not require approval but only notification to the
bilateral partner. However, some bilaterals do not make any distinction between wet or dry leases and apply the same
criteria to both types.
8.6.16 At the regional level, only the ECAC recommendation on leasing touches this area in a general fashion,
stating that the use of wet-leased aircraft should not be used as a means of circumventing applicable laws, regulations
or international agreements.
8.6.17 The use of leased aircraft to meet sudden, unforeseen needs for short periods of time, such as the
mechanical failure of an aircraft awaiting boarding/loading, are dealt with at the national level, generally either through
waiver or some form or prior approval. Given the extremely short notice in such situations, which makes prior approval
impractical in most cases, one possible solution (as suggested by the ECAC recommendation on leasing) is to establish,
based on submissions by airlines, a list of air carriers approved by national aeronautical authorities from which an air
carrier may lease an aircraft at short notice, for a short period, to meet an unforeseen need.
8.6.18 To assist States in formulating clear, effective and transparent policies on aircraft leasing in international
air transport, ICAO has developed the following checklist of factors to be considered in reaching decisions to approve or
disapprove the use of leased aircraft:
a) In every leasing situation, determine:
1) which States are responsible for which aspects of safety oversight;
2) which operator is responsible for complying with the safety standards established by the Chicago
Convention and its Annexes;
3) what measures are necessary for the safe operation of the leased aircraft (e.g. crew
familiarization/licence validation, etc.);
4) if an agreement under Article 83 bis would be effective and appropriate. If so, decide:
i) which States will be involved;
ii) which safety functions will be transferred; and
iii) which aircraft will be included.
b) Establish the types of leases that can be approved or need not be regulated, such as:
1) financial and operating leases of non-airline entities;
2) leases of aircraft owned by air carriers of parties to the relevant bilateral agreement; and
3) wet leases in short-term, unforeseen situations, using a list of potential lessor airlines as approved
sources.
c) Establish criteria for the approval of wet leases of aircraft from airlines of third countries, such as:
1) possession of traffic rights involved;
2) reciprocity; and
3) no benefit related to the traffic carried or use of the route.
8.6.19 In the case where a dispute occurs between a State or a party with another State or a party involving
leased aircraft, concerned parties normally resort to dispute resolution or settlement mechanisms available to them,
through bilateral consultation or negotiations.
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Chapter 9
AIRLINE COOPERATIVE ACTIVITIES
As the operating environment of the airline industry becomes increasingly competitive, international air carriers are
adopting various strategies in order to adapt to the changes, including innovative cooperative arrangements. This
chapter discusses three of the most notable and growing airline cooperative practices which have attracted regulatory
attention in recent times, namely, airline alliances, codesharing and franchising. Because of their potential implications
for market access, competition and consumer interests, they are not only dealt with by air transport regulatory authorities,
but may also or alternatively be regulated, in some instances, by government entities with responsibility for competition
or consumer protection.
9.1 AIRLINE ALLIANCES
9.1.1 Airline alliances, i.e. voluntary unions of airlines held together by various commercial cooperative
arrangements, are a relatively recent and rapidly evolving global phenomenon in the airline industry.
9.1.2 An alliance agreement may contain a variety of elements such as codesharing, blocked space, cooperation
in marketing, pricing, inventory control and frequent flyer programmes, coordination in scheduling, sharing of offices and
airport facilities, joint ventures and franchising.
9.1.3 Airline alliances, especially transnational ones, are a consequence of air carrier response to, inter alia,
perceived regulatory constraints (for example, bilateral restrictions on market access, ownership and control), a need to
reduce their costs through economies of scope and scale, and a more globalized and increasingly competitive
environment. They are perceived by many airlines as an effective tool to maximize revenue and traffic feed.
9.1.4 Modern alliances differ from traditional airline cooperation (such as pooling) in that the latter usually
involves an inter-airline agreement on tariffs and/or sharing of capacity, cost and revenue, which usually covers duopoly
routes and provides little incentive for competition or efficiency; whereas modern alliances are normally built around
possible synergies and complementary route structures and services.
9.1.5 Alliances may be domestic, regional, intercontinental or global and can be of any size, for any particular
purpose or objective, or for any length of time. While numerous agreements concern cooperation on a limited scale (for
example, codesharing on certain routes), the number of wide-ranging strategic alliances has been on the rise in recent
years. Most notable was the emergence of several competing mega-alliances, i.e. alliance groupings of geographically
spread large and medium airlines with extensive combined global networks. Three typical examples of such global
alliance groupings are:
a) Star Alliance, founded in May 1997 by Air Canada, Lufthansa, Scandinavian Airlines System (SAS),
Thai Airways International and United Airlines. (As at February 2018, it has 28 member airlines with its
headquarters in Frankfurt, Germany. Website: www.staralliance.com);
b) Oneworld, founded in February 1998 by American Airlines, British Airways, Cathay Pacific and
Qantas. (As at October 2017, it has 14 member airlines with its headquarters in New York, United
States. Website: www.oneworld.com.); and
IV-9-1
c) SkyTeam, founded in 2000 by AeroMexico, Air France, Delta Air Lines and Korean Air. (As at
November 2017, it has 20 member airlines with its headquarters in Amsterdam, The Netherlands.
Website: www.skyteam.com).
9.1.6 The partnership of each alliance group, however, can be unstable. An example is the alliance group
dubbed “Wings” led by KLM and Northwest Airlines which formed one of the earliest strategic alliances in 1989. This
alliance has since seen many partnership changes to its members, the most significant was that its founding member,
KLM, entered into a merger agreement in October 2003 with Air France, another founding member of SkyTeam.
9.1.7 While most alliance arrangements centred around passenger-related services, some alliances have been
formed with a focus on air cargo business. Intermodal alliances with railways have also grown in Europe and North
America. Furthermore, cross-alliance partnerships, usually bilateral, have also entered the already complex scene.
9.1.8 The impact of global alliances on the airline industry is significant. The marketing power of global alliances,
together with their competitive consequences, including their dominance at some hubs, has small and medium-sized
airlines concerned about their survival which has prompted these airlines to either develop a particular segment of a
market or to compete as low-cost point-to-point airlines. Some small airlines also moved to form regional alliances with
neighbouring like-minded carriers (for example, Carib Sky Alliance), and to enter into franchise agreements with major
airlines (see discussion under airline franchising).
9.1.9 Alliances have also attracted considerable attention from regulatory authorities because of their potential
impact on market access, competition and consumer interests. Some proposed major alliances have been examined
closely by relevant national and regional regulatory bodies; and, in some cases, certain regulatory measures were
introduced to ameliorate the anti-competitive aspects of the arrangements (e.g. requiring the surrender of a certain
number of slots to facilitate other airlines’ entry into the market). Regulatory treatment of airline alliances varies among
States and is mostly on an ad hoc rather than systematic basis, often dictated by general aero-political considerations of
the States concerned.
9.2 AIRLINE CODESHARING
9.2.1 Closely related to the subject of alliances is the practice of codesharing, which developed earlier than the
growth of alliances and has been a major element of most alliances.
9.2.2 The practice of codesharing, by which one carrier permits a second carrier to use its airline designator
code on a flight, or by which two carriers share the same airline code on a flight, can take different forms. It may, for
example, involve a major carrier sharing its code with a smaller feeder carrier; it may also be an arrangement between
two or in some instances three or more international carriers for an international flight operated in cooperation, or for a
connecting service that uses the same code.
9.2.3 Like other forms of airline cooperative ventures, codesharing has been adopted by many international
carriers to adapt to the increasingly competitive environment. From the carriers’ perspective, the main reasons for
codesharing are the following:
a) to achieve a better display position in computer reservation systems in cases where the flight is
treated as an online service with a higher priority in listing than an interline service;
b) in the context of an increasingly competitive environment, to form some kind of cooperative links with
other carriers to maintain, protect and improve their positions in the market;
c) to achieve better presence on routes they do not fly, by means of an inexpensive marketing tool;
Chapter 9. Airline Cooperative Activities IV-9-3
d) to enable two carriers to operate a viable joint service where traffic volumes do not justify individual
operations by the two carriers;
e) to obtain feeder traffic;
f) to remain competitive or in some cases to enhance competitive position by drawing traffic within the
orbit of codesharing partners; and
g) to obtain increased market access to points hitherto restricted by capacity provisions in bilateral air
services agreements.
9.2.4 In practice, the effects on airlines differ depending on their specific situation. In some cases, airlines that
are parties to a broader alliance can clearly benefit from codesharing when the practice brings in additional traffic and
extra revenue. In other cases, within the context of a transnational alliance, the codesharing arrangement may benefit
only other carriers and other countries if the services are exclusively operated by the other party, with possible
consequences for the first party in terms of employment and revenue.
9.2.5 For airports and passengers alike, codesharing per se will not automatically be beneficial in every situation;
although when circumstances are favourable, it can be of value to airport operators and the travelling public (e.g. where
it results in more frequent flights to/from the airport, and more choices for passengers).
9.2.6 Airline codesharing may have advantages for developing countries insofar as it can offer the possibility of
serving very thin routes at minimal cost and using heretofore unused rights. It can thus be an instrument to facilitate the
participation of airlines of developing countries in international air transport. However, the practice has yet to take hold.
This may change as the potential benefits of this form of cooperation come to be viewed as a means of adapting to the
changing competitive environment and of enabling airlines of developing countries to participate more economically and
effectively in international air transport.
9.2.7 As with alliances, codesharing has given rise to a number of regulatory concerns since it is perceived as a
means of indirectly increasing market access. It is now the general practice that international codesharing is dealt with in
the bilateral negotiating process and that underlying traffic rights are required in order for any codeshared services to be
approved. In some cases, specific provisions in bilateral agreements may also be required for codeshared services,
especially when a third country is involved. Other than its link to underlying traffic rights, codesharing is not subjected to
systematic regulatory treatment, but rather ad hoc treatment dictated by general aero-political, economic or competition
considerations.
9.2.8 Codesharing affects competition in two ways, either enhancing it through the provision of additional or
better services or reducing it through a concentration of forces playing in the market. Therefore, the potential pro- or
anti-competitive aspects of a proposed codesharing operation need to be weighed carefully on a case-by-case basis.
9.2.9 Codesharing may give rise to uncertainties concerning carrier liability. Two important legal issues are
posed by codesharing: which air carrier is liable under the Warsaw regime and which air carrier is responsible to the
passenger in user-/consumer-related matters? In the case of the former it would appear that codesharing, when it
involves a connection, need not necessarily be equated to successive carriage, such as is the usual case with interlining,
but that ultimate legal responsibility could nonetheless be determined by the contract of carriage between the passenger
and the contracting carrier, depending on the interest of the passenger or its claimants. Where the codeshared service
does not involve successive carriage, then other legal considerations concerning the right of liability redress may arise.
With respect to responsibility regarding user-related issues, the usual airline industry rules and practices apply, i.e.
responsibility rests with the operating carrier. In any event, before providing services, codesharing partners should agree
on liability issues and give notice to the public so that these become part of the terms and conditions of carriage.
9.2.10 The consequences of codesharing for the consumer raise the question of whether it is a deceptive practice
or, alternatively, whether it is beneficial to the consumer. The overall concern is that information on actual or potential
travel given to the travelling public must be accurate and complete and not confusing or in any way misleading. In this
regard, ICAO recommends that information provided to consumers should include flights, operators, intermediate stops
and changes of aircraft, airlines and airports. Although airlines have the main responsibility for taking action, others in
the information chain such as travel agents, internet sales systems and airports should also be involved. It is further
recommended that, as a minimum, passengers be provided with the necessary information in the following ways:
a) orally and, if possible, in writing at the time of booking;
b) in written form, on the ticket itself and/or (if not possible), on the itinerary document accompanying the
ticket, or on any document replacing the ticket, such as a written confirmation, including information on
whom to contact in case of problems and a clear indication of which airline is responsible in case of
damage or accident; and
c) orally again, by the airline ground staff at all stages of the journey.
9.2.11 Codesharing can have implications for some other aspects of air transport regulation. For example, the
practice has some governments concerned about the safety standards of foreign airlines with which their national
airlines have codesharing arrangements. This concern has been alleviated to some extent in recent years thanks to the
introduction of IATA’s Operational Safety Audit (IOSA) to its member airlines. Another concern relates to the security
implications of the potential transfer of a security threat, which may exist against one airline and be spread to its partner
or partners in a codesharing arrangement, and any subsequent additional security measures imposed by the appropriate
authorities. It is therefore essential that clear lines of accountability and responsibility be established for the parties
involved in a codesharing arrangement since technical and operational regulations may vary considerably from one
airline partner to another.
9.2.12 More detailed information and analysis of codesharing can be found in Circular 269 — Implications of
Airline Codesharing.
9.3 AIRLINE FRANCHISING
9.3.1 Airline franchising is a commercial arrangement that involves a franchiser carrier granting a franchise or
right to use various of its corporate identity elements (such as its flight designator code, livery and marketing symbols) to
a franchisee carrier to market or deliver the latter’s air service products, typically subject to standards and controls
intended to maintain the quality desired by the franchiser.
9.3.2 Under a franchising arrangement, the franchisee (usually a small airline) typically pays a fee and royalties
to use the brand of the franchiser (usually a major air carrier) and other services associated with that brand (e.g.
uniforms and other marketing symbols, computer reservation systems and frequent flyer programmes, sales and
marketing, customer service procedures, etc.), with the intent that passengers will feel as though they are flying with the
major airline. Although the franchisee assumes the public face of the franchiser, it usually maintains its independence in
running its operations and carrying out its revenue management and, in some cases, may continue to use its own name
for its services.
9.3.3 The practice of airline franchising began in the United States in the early 1980s. It usually involves a major
carrier with smaller regional airlines, with the latter acting as feeders and operating under the former’s brand (e.g. Air
Wisconsin Airlines, Atlantic Coast Airlines as United Express; Comair, SkyWest Airlines as Delta Connection; and Mesa
Airlines, Air Midwest as US Airways Express, etc.). In Europe, franchising was first experimented with in the United
Kingdom, led by British Airways and has been used by several other major European carriers such as Air France,
Chapter 9. Airline Cooperative Activities IV-9-5
Lufthansa and Iberia, and has now been extended by these airlines to Africa and the Middle East (e.g. British Airways
franchise agreements include three African carriers: Comair of South Africa, Regional Air of Kenya and Zambian Air
Services of Zambia).
9.3.4 It should be noted, however, that there is a distinction between the kind of franchise operation that has
existed in the United States for many years and the franchising arrangements developed by the European carriers. For
example, there is often a financial connection between the United States franchiser carrier and its feeder airlines
(typically with the major carrier having equity investment in the latter). This is not the case in Europe. Also, in the United
States there is normally a close operational connection between the partner airlines, with the major carrier having a
greater measure of control and influence over the feeder airlines, and the arrangement often involving closer
coordination in terms of marketing, equipment interchanges, ground handling and so on. In Europe, these elements do
not exist to the same extent, and traffic feed is not the primary objective of the arrangement as it is in the United States.
Therefore, in terms of the method of franchising, the European arrangements adhere more to the franchising concept
described above.
9.3.5 While franchising is currently not widely practised (except in North America and Europe), it is becoming
increasingly common as air transport liberalization continues to spread.
9.3.6 The major advantage of franchising is that it allows partner carriers to marry their respective strengths, i.e.
a small airline can combine its low-cost operations with a major airline’s strong brand and powerful distribution system
while the major carrier can extend its brand to routes without actually operating air services on such routes.
9.3.7 From a franchiser’s respective, benefits may include:
a) more brand exposure, and traffic feed from the franchisee carrier;
b) increased income from fees and royalties;
c) extension of its network, with minimum financial risk, to thinner regional routes that it could not serve
profitably or to markets where it was absent; and
d) better utilization of slots at congested airports for more lucrative routes (when it transfers thinner
routes to its franchisees).
9.3.8 As for the franchisee carrier, benefits may include:
a) more brand recognition, and traffic feed from the major carrier;
b) access to the major carrier’s product distribution systems and frequent flyer programme (FFP);
c) access to skills and training; and
d) enhancement of services and reputation.
9.3.9 However, there can also be certain risks associated with franchising. For example, the franchiser may risk
damage to its brand image if things go wrong with the franchisee’s service (such as an accident, poor quality service).
Where the franchiser airline depends on its franchisee to serve certain markets, it may risk a hole in its network if the
franchisee terminates the partnership. As for the franchisee carrier, such an arrangement may lead to potential loss of
identity and increased cost or pressure to maintain standards set by the franchiser.
9.3.10 Since franchising, by way of branding/marketing, essentially allows an airline to assume the public face of
another, it may raise many issues similar to those of codesharing which also involves more than one airline. For
example, in terms of technical and operational aspects, there can be questions regarding attribution of rights and
responsibilities of the parties concerning the services operated under such an arrangement (e.g. Whose call sign should
be used for air traffic purposes? Under whose route, traffic and operational rights should the services be operated?
Whose slots should be used for the services? Who should be responsible for filing schedules, tariffs?).
9.3.11 From an economic regulatory perspective, issues can arise in three main areas: a) market access rights; b)
effects on competition; and c) need for consumer protection.
9.3.12 Franchising is unlikely to create major regulatory problems when it involves only carriers of the same
country (such as those in the United States) or of the same common market (e.g. the European Union) because the
services involved are mostly domestic and are subject to the same regulatory regime (especially in a fully liberalized
environment). However, when franchising involves international services, particularly carriers of different countries, it has
been known to cause certain regulatory problems or even disputes.
9.3.13 In the area of market access rights, for example, a problem may arise when the franchisee airline operates
a service on routes where it has its own underlying route/traffic rights, but it flies its aircraft and holds out its service
using the franchiser’s brand (which does not have the underlying route/traffic rights on those same routes). Some States
(e.g. South Africa) are more flexible in allowing their local carriers to operate services using a foreign franchiser’s name
on both domestic and international routes. Some other States may, however, require that both the franchiser and the
franchisee possess the necessary rights under relevant bilateral agreements. Questions may also arise regarding
designation. Can a franchisee use the designation of franchiser? If yes, how can a foreign franchisee meet the
franchiser country’s designation criteria on ownership and control? Or, can the franchisee operate under its own
designation but hold out its services using the franchiser’s brand?
9.3.14 With regard to the effects on competition, although many of the routes operated by franchisees tend to be
too small to support multi-carrier competition, it might still be questioned, under certain circumstances, if relevant
competition law requirements are being met because of the nature of such arrangement, which involves a high degree of
cooperation between two independent airlines, especially when a major franchiser carrier coordinates schedules and
pricing with its franchisee partner airlines on routes covering major markets.
9.3.15 In the area of consumer protection, since franchising, like codesharing, involves an operator using the
brand and/or code of another airline, it may have similar deceptive effects on passengers (e.g. passengers may find
themselves booked with one carrier but flying with another). Therefore, there is a regulatory need to address the
disclosure issue. In this regard, many of the regulatory measures for codesharing may also be applied to franchising.
Regulatory concerns about clear lines of responsibility between the partners for safety, security, liability, and economical
issues (e.g. denied boarding compensation, mishandled baggage, etc.) should also be properly addressed.
______________________
Chapter 10
AIR PASSENGERS
10.1 INTRODUCTION
10.1.1 The enormous growth of international air travel, coupled with multiple innovations in services and tariffs,
particularly in liberalized markets, has created several new areas of concern to air transport regulators. One of these
areas relates to consumer interests which has received increasing attention and covers many issues including “air
passenger rights” and the contractual relationship between air carriers and their users.
10.1.2 The first section of this chapter discusses the positive development in recognized passenger rights and
related issues. The next two sections present topics that represent somewhat negative or troublesome developments
from the standpoints of both passengers and air carriers, namely, unruly or disruptive passengers and improperly
documented passengers.
10.2 PASSENGER RIGHTS
10.2.1 Although there is no formal, internationally agreed definition, the term passenger rights has been used to
generally refer to the entitlements of passengers to protection from or compensation for certain actions by airlines and/or
airports that are adverse to their interests, which are specified in government regulations or in the airline’s contract of
carriage and/or other published commitments. The subject is sometimes addressed broadly in the context of consumer
protection. Some such rights have been protected for many years. One example is the Warsaw Convention, superseded
by the Montreal Convention of 1999. See also Chapter 3, which governs the liability of air carriers in the case of
accidents, loss of baggage, and delays.
10.2.2 Along with the continuing liberalization of international air transport regulation, the protection and
improvement of passenger rights have achieved greater importance, particularly, but not exclusively, in major markets.
For airlines of developing States operating to and from major markets, the treatment of this matter has longer term
consequences for their competitive viability.
10.2.3 Despite the emphasis liberalization places on opening up markets to meet user needs, the focus by airlines
on cost pressures and competitive market forces has sometimes had an adverse impact on consumer interests. The
quality of service offered by airlines has not always met consumers’ expectations. Infrastructure limitations at some
airports (such as airspace congestion, and passenger handling capacity) have also compounded the situation. These
have often led to passenger dissatisfaction with the service conduct of airlines and/or airports such as inadequate
handling in the case of flight delays and cancellations, and insufficient information for users.
10.2.4 In response to a perceived decline in customer services, a significant number of States, in recent years,
have adopted regulatory measures that address some of the issues such as denied boarding compensation, bans on
smoking, on-time performance statistics and access for passengers with disabilities. Some governments have also
required airlines, inter alia, to ensure that all tariffs are made available to the public, to disclose information on
cancellation policies and to avoid misleading advertisements.
IV-10-1
10.2.5 At the industry level, many airlines have also taken the initiative by making voluntary commitments (i.e.
non-legally binding self-regulation) to clarify or improve their policies or practices with regard to certain customer
services (such as fare offers, ticket refunds, denied boarding, flight delays and cancellations, baggage handling,
response to complaints, and special passenger needs), often in response to public pressure and to avoid regulatory
measures.
10.2.6 On a worldwide basis, the International Air Transport Association (IATA) has developed conditions of
contract (Resolution 724), which lay down the contractual conditions applicable to the international flights of its member
airlines as a binding resolution. IATA has also developed conditions of carriage (Recommended Practice 1724), aimed
at the harmonization of the general conditions under which passengers travel on inter-carrier journeys. Unlike Resolution
724, this Recommended Practice, which focuses on “best practice”, does not bind member airlines, nor does it apply to
domestic flights or to services operated by non-member carriers. In addition, IATA produced a Global Customer
Services Framework in June 2000 as guidance for its member airlines in developing their own voluntary commitments.
In June 2013, IATA adopted core principles on consumer protection as the global airline industry position for national
and regional regimes on passenger rights. (http://www.iata.org/pressroom/pr/Pages/2013-06-03-03.aspx).
10.2.7 From a regulatory policy perspective, the improvement of the quality of passenger service may be
achieved by different approaches including competitive response, regulatory measures and/or voluntary commitments.
But each approach may raise certain issues and concerns.
10.2.8 States that consider air transport primarily a commercial activity governed by market forces tend to rely on
competition and, at least initially, voluntary air carrier measures supplemented as necessary with regulatory measures.
10.2.9 Advocates of this approach believe that competition in the marketplace is the best way to meet consumers’
expectations, especially in the areas relating to “value for money”, such as seat configuration, in-flight services, meals
and e-commerce services. On the basis of their own commercial judgement of the market demands, airlines provide
various combinations of service quality and prices. Consumers benefit from the availability of different product options,
and if a carrier does not meet their expectations, they can switch to competing airlines. Consumers’ comparison
shopping should, in general, enhance service competition so that the marketplace itself generates better performance.
10.2.10 Nevertheless, there exist some instances where competition does not necessarily guarantee a minimum
level of service that customers can expect, either directly or indirectly, and below which no carriers should fall. This is
particularly true when consumers cannot make an informed choice of airlines in planning their travel arrangements due
to the lack of information available to them. Certain elements (for example, the treatment of passengers with disabilities
or special needs) might not even be a matter of competition between airlines. Also consumers’ negotiating position is
relatively weak because they have to accept contractual conditions and business practices decided by airlines and fully
pay for the service before actually taking the flight.
10.2.11 Recognizing the limits of competitive response, some States have introduced certain regulatory measures
to strengthen passenger rights, create contractual certainty and make more information clearly and readily available to
consumers on a wide range of subjects. These range from airline business practices (such as codesharing, availability of
fares, and ticket refunds), contracts (such as conditions of carriage, denied boarding, liability provisions, misplaced
baggage, and special passenger needs) to operational performance disclosure (such as on-time performance and
complaints).
10.2.12 However, a major complication with government intervention generally in consumer interest matters is that
regulatory measures which tightly define the quality of service may remove a key competitive element, thereby limiting
the scope of the service areas where competition might be the best means of improvement. Regulations often impose
additional costs on airlines, thereby affecting airlines’ competitiveness, pricing and product differentiation. Furthermore,
regulations, once introduced, may be difficult to withdraw or amend promptly according to a change of situation, and the
attempt to regulate one element can result in a proliferation of regulations involving other elements. Authorities may also
incur administrative costs for regulation.
Chapter 10. Air Passengers IV-10-3
10.2.13 To avoid the potential problems associated with the regulatory approach, States may choose to rely initially
on voluntary commitments by airlines (and service providers if applicable), which are regarded as complementary to the
regulatory approach. The airline industry also favours the voluntary commitment approach by outlining service targets or
“best practices” that individual airlines agree to build upon according to the type of services they offer. If voluntary
commitments are prevailing and attainable, and the monitoring system is well established, then regulatory measures on
subjects covered by the commitments would generally be unnecessary.
10.2.14 In practice, different levels of interest in and response to consumer issues have resulted in the emergence
of regimes in various States or regions with similar aims and objectives on passenger rights but with differing regulatory,
self-regulatory and contractual requirements. A potential consequence of this patchwork of emerging regimes for
international air transport is that carriers with broader networks, especially ones involving major markets, could face
numerous and sometimes conflicting regulatory and contractual requirements, creating confusion for airlines and
consumers alike.
10.2.15 A fragmented system of consumer interest regulatory regimes may also make it costlier for airlines to apply
consistent internal training and to maintain adequate communication, and may affect common or compatible industry
systems and standards as well as the multilateral interline system. Therefore, uniformity of standard terms for conditions
of contract/carriage, together with international liability regimes and required ticket notices, would greatly assist in the
smooth functioning of interline carriage.
10.2.16 Another consequence, if the regulatory approach is increasingly applied vis-à-vis voluntary commitments,
is that there is a potential risk of extraterritorial application of national (or regional) laws by a State (or a group of States).
Although existing regulatory measures are applied internationally on the country-of-origin basis, a State may wish to
apply them irrespective of the origin or destination of the flights operated by its national carriers, or to further extend the
scope of application to foreign carriers that pursue their commercial activities in its territory, especially where it considers
that foreign carriers could avoid its jurisdiction. An example of such a case would be a State applying its denied boarding
regulation to all flights to and from its territory, including those operated by carriers of third countries.
10.2.17 It is also possible that a State may wish to regulate a contract of carriage irrespective of where the contract
was concluded because e-commerce makes it difficult for a State (and the courts) to determine the exact place where a
contract was concluded. However, since the application of national laws with such broad scope would impose
obligations on foreign carriers or affect contracts established in the territories of third countries, it would create potential
legal uncertainty and raise objections by some States concerned.
10.2.18 ICAO has done considerable work in this field, including the development of guidance material in such
areas as conditions of carriage, fare guarantee, baggage, tariff disclosure, denied boarding and codesharing. In 2015,
ICAO adopted a set of core principles on consumer protection pursuant to a recommendation of the Sixth Worldwide Air
Transport Conference (ATConf/6), providing guidance to regulatory authorities and air transport operators to deal with
air passengers before, during and after their travel. The ICAO core principles are developed with a view to facilitate and
foster convergence or compatibility of consumer protection regimes worldwide. This set of principles can be found in
Policy and Guidance Material on the Economic Regulation of International Air Transport (Doc 9587). In addition, ICAO
has developed a database to provide information on national rules on consumer protection, which can be accessed at:
https://www.icao.int/sustainability/pages/eap_ep_consumerinterests.aspx.
10.2.19 Furthermore, Annex 9 to the Chicago Convention sets out standards and recommended practices for
passenger facilitation designed to allow air transport users to proceed through airports with minimal delay and difficulty.
10.2.20 The issues identified above were also addressed by the fifth ICAO Worldwide Air Transport Conference
(ATConf/5), held in March 2003, which drew the following conclusions in respect of possible action by States:
a) As a premise in addressing consumer interest issues, States need to carefully examine what elements
of consumer interest in service quality have adequately been dealt with by the current commercial
practices of airlines (and service providers if applicable) and what elements need to be handled by the
regulatory and/or voluntary commitment approaches.
In this regard, the following indicative list, together with airlines’ conditions of contract/carriage (see
summary in the box following this section), could serve as a checklist of many of the consumer interest
subjects a State may wish to monitor:
1) the availability of lower fares including fares on websites;
2) reservation, ticketing and refund rules;
3) advertisements;
4) airline’s commercial and operational conditions;
5) check-in procedures;
6) handling of and compensation for flight delays, cancellation and denied boarding;
7) baggage handling and liability;
8) operational performance disclosure such as on-time performance and complaints; and
9) assistance for passengers with disabilities and special needs (i.e. people with reduced mobility).
b) States need to strike the right balance between voluntary commitments and regulatory measures,
whenever government intervention is considered necessary to improve service quality. States should
rely generally and initially on voluntary commitments by airlines (and service providers), and when
voluntary commitments are not sufficient, States should consider regulatory measures.
c) In implementing new regulatory measures, States should minimize the unnecessary differences in the
content and application of regulations. Efforts to minimize differences would prevent potential legal
uncertainty that could arise from the extra-territorial application of national laws, without diminishing
the scope for competition or hampering the operating standards and procedures for interlining.
10.3 UNRULY OR DISRUPTIVE PASSENGERS
10.3.1 The term unruly or disruptive passengers refers to passengers who fail to respect the rules of conduct on
board aircraft or to follow the instructions of crew members and thereby disturb the good order and discipline on board
aircraft.
10.3.2 In recent years, there has been an increase in the reported incidents involving such passengers. According
to IATA, there were 38,230 reported cases of unruly incidents from 2007 to 2014. The incidents involved various types of
offences and reprehensible acts, including assault on crew members or passengers; fights among intoxicated
passengers; child molestation, sexual harassment and assault; illegal consumption of drugs on board; refusal to stop
smoking or consuming alcohol; ransacking and sometimes vandalizing of airline seats and cabin interior; unauthorized
use of electronic devices; destruction of safety equipment on board; and other disorderly or riotous conduct. These
incidents are not restricted to a particular airline, country, customer, class of service, or length or type of flight. Such acts
and offences can sometimes directly threaten the safety of the aircraft. There were cases where the aircraft commander
had to make an unscheduled stopover to disembark the unruly passenger(s) for safety reasons. These incidents have
caused growing international concern.
10.3.3 The increase of these incidents also presents new challenges for both governments and air carriers,
particularly when such acts occur on board international flights. Authorities and airlines are often faced with legal and
regulatory issues in handling unruly passengers due to the existence of certain gaps in their relevant national laws and
existing international aviation security conventions.
10.3.4 One major issue concerns what constitutes an offence that is subject to prosecution. The movement of
aircraft across national borders means that they will be subject to the laws and regulations of different jurisdictions. Due
to the diversity of laws and regulations, an act or omission which is regarded as an offence in one jurisdiction may not be
so regarded in another jurisdiction.
10.3.5 When suspected offenders are to be prosecuted in a State where a foreign aircraft has landed, the
question may arise whether their acts or omissions constitute offences not only in the State of landing but also in the
State of Registry of the aircraft and in the State where the acts or omissions occurred. Therefore, it is necessary to
establish a uniform list of offences that would be regarded as a common denominator for all States involved. Such a list
will be instrumental in incorporating the relevant offences into States’ respective national laws or regulations allowing
prosecution and application of sanctions.
10.3.6 Another major issue concerns jurisdiction. There are many cases in which unruly passengers have to be
released without being submitted to judicial proceedings due to the lack of jurisdiction of the State where the aircraft
lands. Under most domestic laws, States other than the State of Registry of the aircraft normally do not have jurisdiction
over offences committed on board the aircraft outside their respective territory, except for certain offences covered by
international treaties or international customary law, such as hijacking, sabotage and hostage taking.
10.3.7 Under international law, while international conventions relating to aviation security have proven to be an
effective tool in combating hijacking, sabotage and similar forms of unlawful interference against civil aircraft, these
conventions are not specifically designed to deal with other, less serious types of offences committed by unruly
passengers. For example, under the Convention on Offences and Certain Other Acts Committed on Board Aircraft
(Doc 8364), signed at Tokyo on 14 September 1963, offenders could not be held in restraint beyond the first stopover;
by the time the aircraft had returned to the State of Registry, the offenders, as well as the witnesses, would be long gone.
Many offenders have taken advantage of this situation to avoid prosecution.
10.3.8 To address these issues, ICAO has done considerable work, focusing on three major areas, namely, a list
of specific offences for inclusion in national law, the extension of jurisdiction over such offences, and the appropriate
mechanisms for addressing these offences. Drawing on States’ experience, it has developed some guidance for States
which mainly addresses the legal aspects of unruly passengers.
10.3.9 To address the issue of what constitutes an offence, a list of offences has been drawn up by ICAO in order
to provide a common denominator for offences as a basis for national prosecution.
10.3.10 With respect to the jurisdiction issue, some States have, in their respective domestic legislation, extended
their jurisdiction to cover offences committed on board foreign aircraft that next land in their respective territories. On the
international level, the Montreal Protocol of 2014 amended the “Convention on Offences and Certain Other Acts
Committed on Board Aircraft” (known as the Tokyo Convention of 1963) to address the issue of jurisdiction and offences
that constitute unruly and disruptive behaviour. This Protocol has resolved the problems faced by States on the right of
jurisdiction to prosecute offenders for unruly and disruptive behaviour on board an aircraft.
10.3.11 International Standards and Recommended Practices (SARPs) were developed by ICAO for States to deal
with unruly or disruptive passengers which can be found in Annex 9 (Facilitation) to the Chicago Convention. ICAO also
developed guidance material on the legal aspects of unruly or disruptive passengers which can be found in Circular 288
- Guidance Material on the Legal Aspects of Unruly/Disruptive Passengers. It includes a list of offences and the
jurisdictional clause of proposed model legislation.
10.3.12 Among the legal and regulatory measures that States could take to address the problem of unruly
passengers are the adoption of national laws, bilateral arrangements, and the interpretation and application of existing
international conventions. In addition, other practical or preventive measures could also be taken or considered on the
part of airlines and other involved parties. For example, airlines could develop or update policies and programmes
specifically designed to address the problem of unruly passengers. Some key areas to be covered in this regard include:
a) Passenger management and operating procedures. This involves the process of dealing with airline
passengers and may include measures and procedures to prevent or deal with incidents, such as
denied boarding procedures, passenger information policies, smoking and alcohol policies, and
conflict-resolution training for cabin crew and passenger-handling staff.
b) Improvement of the air travel environment and experience. This involves identifying factors which may
cause passenger stress and aggression, such as overbooking, delayed flights and lack of information
for passengers.
c) Increased passenger awareness. Passengers should be made aware that unruly acts on board aircraft
are against the law and may result in convictions or being denied boarding in the future. The policy
may need to be specified in the terms and conditions of carriage. Campaign material such as posters,
airline ticket inserts and social media may be utilized for this purpose as well.
10.3.13 In this respect, efforts have been made both within and outside ICAO to develop guidelines and other
material containing preventive measures concerning unruly passengers, in particular, the ICAO aviation security training
package material (ASTP 123/Airline), as well as relevant airline programmes and other relevant documentation such as
the IATA “Guidance on unruly passenger prevention and management”.
10.4 IMPROPERLY DOCUMENTED PASSENGERS
10.4.1 Another negative development associated with air passengers is the problem of improperly documented
passengers. These include persons who travel or attempt to travel with an expired travel document or an invalid visa; or
with a counterfeit, forged or altered travel document or visa; or with someone else’s travel document or visa; or without a
travel document, or a visa if required. Since the mid-1980s, such attempted migration, whether for political, economic or
social reasons, has become a worldwide phenomenon, placing extensive economic burdens both on governments and
air carriers.
10.4.2 In recent years the problem has been compounded by the involvement of criminal elements in the
organization of such illegal movements and the adoption by would-be migrants of various methods of evading or
prolonging the immigration process in their chosen destination State. Such methods include the use of fraudulent travel
documents (or the fraudulent use of valid documents by imposters), the destruction of travel documents during the flight
or voyage, and mala fide applications for asylum upon arrival at the intended destination.
10.4.3 The use of improper travel documentation as a tactic for gaining access to air transportation to a desired
destination adversely affects the general security of States, regardless of whether their territories may be a source of, a
transit point for, or a recipient of this type of traffic.
10.4.4 Traditionally States have relied upon legislative provisions making transport operators responsible for
ensuring that their passengers are adequately documented for travel, and imposing fines or penalties as deterrents to
the international carriage of inadmissible persons. Many international airlines, in cooperation with States, have been
obliged to implement intensive programmes to detect fraudulent documents and to identify and intercept passengers
who are travelling with the intent to migrate without proper documentation.
10.4.5 However, the increasing volume of illegal traffic and the sophistication of methods employed have called
for more effective measures and concerted efforts at the international level to counter travel document fraud and
address issues related to inadmissible persons, i.e. persons refused admission to a State by its authorities.
10.4.6 In this connection, the principal concern of the civil aviation community is the use of improper travel
documents contrary to Article 13 (Entry and clearance regulations) of the Chicago Convention rather than the traveller’s
status as “admissible” or “inadmissible”, which is an immigration issue.
10.4.7 Another problem that has caused some concern is the lack of cooperation and communication between
States sending and receiving inadmissible persons. For example, there have been cases where passengers are shuttled
back and forth between States because of disagreements about their “inadmissible” or “deportee” status. Aircraft are
detained on the ground for days, and even weeks, because of disputes between administrations on their respective
responsibilities with regard to such persons.
10.4.8 These border control problems consume an inordinate amount of the civil aviation community’s service
resources, including control authorities at airports. Reactive measures are often time-consuming which degrade the
clearance service for the general travelling public. Moreover, inadmissible persons and deportees being repatriated
against their will have been known to pose problems for the security of the flight.
10.4.9 ICAO is leading the international efforts to address these problems and issues. It has developed relevant
Standards and Recommended Practices (SARPs) in Annex 9 (Facilitation) to the Chicago Convention, and
accompanying guidance material. The SARPs of the Annex set out general procedures to be followed by States and
airlines when dealing with inadmissible passengers. The objective of the SARPs and guidance material is to: encourage
better cooperation and communication between industry and government, and among States affected; help States
enhance their border controls through, inter alia, preventive measures (including, for example, better use of modern
technology such as machine readable travel documents) and improved immigration procedures; and clearly define the
responsibility of the State and the operator involved in the handling, including repatriation, of inadmissible persons.
Annex 9 also requires States to remove from circulation fraudulent, falsified and counterfeit documents.
10.4.10 Details of the SARPs and guidance material can be found in Annex 9 and Doc 9303 — Machine Readable
Travel Documents.
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Chapter 11
AIRPORT-RELATED MATTERS
This chapter presents four airport-related matters that have attracted increasing regulatory interest in recent times.
Discussed in the first section is ground handling at international airports, which has historically been subject to regulation
at the national, bilateral and even multilateral levels. The second section examines the topic of allocation of flight arrival
and departure slots at international airports, an issue faced by an increasing number of States where demand outstrips
supply as a result of the substantial growth in air transport. The third section describes the issue of night curfew or night
flight restrictions, which can affect operation of scheduled international flights, while the fourth section discusses airport
privatization.
11.1 GROUND HANDLING
11.1.1 Although there is no formal, official definition, ground handling is generally understood to broadly include
services necessary for an aircraft’s arrival at, and departure from, an airport but to exclude those provided by air traffic
control. The Airport Economics Manual (Doc 9562) separates the ground-handling function into terminal handling
(passenger check-in, baggage and freight handling) and ramp handling (aircraft handling, cleaning and servicing).
Ground handling generally excludes maintenance and repair of aircraft, although in some instances so-called line
maintenance may be considered as a part of ground-handling services.
11.1.2 Services related to ground handling may be provided at an airport by one or more airlines, by one or more
concessionaires, by the airport itself, or by a combination of any of these means.
11.1.3 States usually regulate ground handling as an airport activity, either as operators of airports (directly or via
autonomous agencies) or by relying on national laws and regulations concerning such matters as non-discriminatory
treatment. This regulatory activity will take into account provisions on ground handling contained in bilateral air services
agreements and, where applicable, measures of regional multilateral regulatory authorities, such as the European
Commission.
11.1.4 ICAO guidance on ground handling includes, for example, Recommended Practice 6.6 in Annex 9
(Facilitation) to the Convention on International Civil Aviation. That provision recommends that air carriers, in agreement
with and subject to reasonable limitations which may be imposed by the airport authorities, be offered several choices
with respect to ground-handling arrangements, including providing their own services. In cases where airports provide
such services or derive concession revenues from their provision, appropriate guidance is contained in ICAO’s Policies
on Charges for Airports and Air Navigation Services (Doc 9082) with supplementary guidance being provided in the
Airport Economics Manual (Doc 9562).
11.1.5 In terms of bilateral regulation, a small minority of the bilateral air services agreements registered with
ICAO contain provisions concerning ground handling. These provisions tend to fall into two general categories. The first
and larger category is composed of provisions which stipulate that ground-handling services are to be provided
reciprocally by the respective designated airlines of the two States or by a national agency approved by the State in
which the ground-handling services are provided. The provisions in the second category recognize the right of a
designated airline to perform its own ground-handling operations or to use other airlines or service providers but this
right is often subject to conditions established by the State in which the ground-handling services are performed.
IV-11-1
11.1.6 Along with the trend of liberalization in international air transport, many States, in recent years, have
introduced liberal ground-handling provisions in their bilateral air services agreements, and ground handling is now
frequently outsourced to specialized companies. Unlike air carriers, ground-handling companies are not constrained by
national ownership restrictions, and they have been undergoing a process of globalization and consolidation. This has
given rise to some concern that the outsourcing of ground handling will have an adverse impact on safety, on the
premise that private companies without previous experience of a safety culture are becoming involved. To address this
concern, ICAO conducted, in 2001, a study on the safety aspects of ground handling, which led to a review of, and
amendments to, the existing Standards and Recommended Practices (SARPs) in Annex 6 to the Chicago Convention,
and other ICAO guidance material. These amendments were designed to ensure that States give adequate
consideration to the safety aspects of ground-handling arrangements in the certification and surveillance of aircraft and
airport operators and ground-handling companies. In addition, ICAO also developed an amendment to the existing ICAO
model clause on ground handling to take account of the requirement for compliance with applicable safety and security
provisions (see Doc 9587).
11.2 SLOT ALLOCATION
11.2.1 An airport slot is a specific designated day and time (usually within a 15- or 30-minute period) for an
aircraft to arrive at or depart from an airport.
11.2.2 Slots are important to air carriers not only for operational reasons (e.g. for aircraft, crew, and gate use
scheduling) but also for commercial reasons (e.g. matching departure and arrival times to time periods believed to be
preferred by most travellers provides a more attractive service). The availability of slots at an airport can be limited due
to various physical constraints such as the capacity limitations of the runway(s), terminal(s), boarding gates and air
traffic control facilities. Therefore, in situations where an airport becomes congested and the demand for slots exceeds
available supply, some type of rationing or slot allocation mechanism, i.e. a formula for the allocation of slots among
their users, will be required.
11.3.3 The allocation of slots is typically carried out among the airlines serving the same airport and involves
consultation with the airport authorities. Since a slot change at one airport may have major implications for a flight in
terms of securing corresponding slots at other airports, it is often necessary to have wider coordination.
11.2.4 The mechanism most often used by airlines for schedule coordination and slot allocation has been the
IATA Airline Schedule Coordination Conferences, which are held twice yearly, about four months prior to each
scheduling season (one runs from April to October, the other from November to March). Participation is open to any
airline (IATA member or non-IATA member). An important element in this system is so-called “historical precedence” or
“grandfather rights”, i.e. rights to retain what was held before, in this case slots used in the previous equivalent season.
Schedule changes and/or adjustments including those required by new flights or services are accommodated mainly
through voluntary adjustments or exchanges of slots between the airlines concerned. The worldwide membership of the
Conference gives it a unique ability to accommodate the necessary adjustments in flight schedules at all affected
airports, as long as sufficient slots are available. However, a system based on “grandfather rights” can, in the view of
some observers, result in new entrant airlines and new services not being accommodated at particularly congested
airports.
11.2.5 States generally endorse the use of the IATA mechanism in schedule coordination and slot allocation.
However, in some States where the problem of insufficient airport capacity is more serious, regulatory authorities have
found it necessary to introduce certain additional measures to limit or ration access to congested airports. In some cases,
airlines not presently serving the congested airport are not allowed to begin service, and certain types of operations
(such as non-scheduled flights or all-cargo services) are either not permitted or severely limited. In some cases,
international services with rights granted under a bilateral air services agreement are given priority for slots over
domestic flights. Limitations at some congested airports are sometimes mitigated where slots are available at other
Chapter 11. Airport-related Matters IV-11-3
airports serving the same city. In some severe cases, government-to-government negotiation and/or agreement is
required for resolution of specific slot allocation problems. In some States, internationally agreed slot allocation rules are
applied (e.g. the European Union member States follow the EU common rules for the allocation of slots at Community
airports, which essentially use the IATA mechanism within certain constraints; for example, new entrant airlines are
given priority in the allocation of 50 per cent of the slots that become available).
11.2.6 Over the last two decades, the increase in commercial air services has continued to outstrip available
capacity at more and more airports, chiefly in Europe but in other regions as well. States, airports and airlines have
sought to deal with this problem through measures that focus on either increasing the capacity (supply-side approach) or
managing the lack thereof (demand-side approach).
11.2.7 Among the supply-side actions which can overcome or reduce a shortage of airport slots are: a) building
new airports or expanding existing ones; b) improving air traffic control capabilities through new technology and
procedures; and c) increasing efforts and resources in passenger and cargo facilitation.
11.2.8 Among the regulatory policies and practices States have used aimed at the demand-side of the problem
are:
a) setting annual limits on the number of aircraft movements or passengers;
b) negotiating new or expanded traffic rights only when these can be accommodated at the airport(s)
concerned;
c) negotiating access to slots bilaterally in advance;
d) applying a policy of reciprocity;
e) developing and encouraging the use of alternate airports;
f) recognizing the link between noise rules and demand; and
g) employing peak period pricing in landing charges to help spread the demand for slots to periods when
the airport’s capacity is not fully utilized.
11.2.9 Some States, where airport capacity constraints have been particularly severe, have used one or more
measures from both the supply-side and demand-side approaches.
11.2.10 Clearly, increasing airport capacity through new or expanded airports, runways and terminals has the
greatest impact on resolving a scarcity of slots. However, these types of improvements usually take years to put in place
and, in some cases, the additional capacity is quickly used up by traffic growth. Moreover, it is also equally clear that for
some airports environmental and physical constraints make substantial expansion of the existing facilities impractical or
prohibitively expensive. Nevertheless, even at these airports incremental capacity increases are possible.
11.2.11 Improvements in facilitation and air traffic control services can be employed to use the existing airport
infrastructure more efficiently. These can provide important incremental increases in the number of aircraft, passengers
and cargo which can use a capacity-constrained airport, and these merit continuous evaluation by airlines, airports, and
customs and immigration authorities. Improvements in air traffic control involving coordination with many States can take
time and patience but will ultimately provide benefits in terms of increased use of both en -route and airport capacity.
11.2.12 With regard to regulatory measures on slot allocation, since the situation at each congested airport tends
to be particular to that facility, States have dealt with the situation in a number of different ways. One approach is to
allow air carriers to preserve the so-called “grandfather rights” but provide slots for new entrants and new services by,
for example, reserving a fixed proportion of new capacity for them. Another approach is a “use or lose” rule, which
requires that an air carrier use its assigned slots at a specified level (e.g. 80 per cent of the annual or seasonal total) or
lose them. A third approach is to allow air carriers to exchange slots on a one-for-one basis to use the available slots
more effectively.
11.2.13 Other potential devices include buying and selling of slots, auctioning, and some combination or variation
of the above methods. Although some such practices exist (e.g. the United States permits the purchase, sale and lease
of certain domestic slots at some airports subject to the Federal Aviation Administration’s High Density Rule), whether
they can be applied to international air services remains to be addressed. For example, there has been concern over the
commercial trading of slots because of possible effects on competition, and unresolved legal issues.
11.2.14 There has been a continuing debate as to the “ownership” of airport slots, primarily in terms of claims by
airlines which have historically used them for long periods of time. However, some formal regulatory regimes either
explicitly or implicitly exclude this concept, for example, stating that airlines do not acquire property rights to the slots
assigned to them and that the slots must be returned to the aeronautical authority under certain circumstances. The
implicit approach ties the continued use of the slot to its use at a specified level (the “use or lose” rule) and allows the
exchange of slots on a one-for-one basis.
11.2.15 Some issues related to capacity-constrained airports will involve broader regulatory policy questions, such
as the enhancement of competition, the avoidance of excessive concentration and abuse of dominant positions, as well
as the compatibility of broad market access with capacity-constrained airports. Although the broad granting of traffic
rights bilaterally and regionally with multiple airline designation creates additional potential demand for airport slots, it
also provides some relief in the form of flexibility to use alternate airports and cities which can accommodate new and
increased air services.
11.2.16 A number of States will nevertheless have the task, in the long term as well as the short term, of balancing
conflicting objectives in terms of which international air services will be able to use their capacity-constrained airports. In
fashioning responses to this problem, States will have to take into account the legal framework provided by the Chicago
Convention (e.g. Article 15 which establishes a national treatment principle in the context of the use of airports and other
air navigation facilities), air services agreements, regional and national slot allocation rules and existing voluntary
mechanisms for managing insufficient airport capacity. However, the response will have to fit the situation of the
individual airport(s) concerned and will therefore vary depending on the nature of the constraint and the means taken to
overcome it.
11.2.17 Additional information on this subject can be found in Circular 283 entitled Regulatory Implications of the
Allocation of Flight Departure and Arrival Slots at International Airports. ICAO has also developed model clauses on
airport slot allocation for optional use by States in their bilateral air services agreements, which can be found in the ICAO
TASA contained in Doc 9587.
11.3 NIGHT CURFEW OR NIGHT FLIGHT RESTRICTIONS
11.3.1 Airport night curfews or night flight restrictions are rules or regulations imposed by States that prohibit
aircraft take-offs and landings during a specified period of time. The restrictions are at times adopted as a measure to
address the adverse effects of aircraft noise on the affected airport and nearby communities. The regulations, apart from
helping to reduce the problem of aircraft noise at the airport, can have impact on the operation of international air
services to and from the airport as well as on the economic well-being of the local community and the country at large.
11.3.2 This situation has existed for many years and continues to remain despite the existence of various ICAO
specified aircraft engine noise restriction standards, and the advancement in aircraft engine technology. The pressure to
impose night flight restrictions is quite intense for some major hubs and, in some cases, at secondary airports which are
located in very densely populated areas. In many instances, inadequate land-use management policies have allowed
urban encroachment around airports, resulting in an increase in the number of people significantly exposed to aircraft
noise in spite of an actual reduction in noise emissions.
11.3.3 Night curfew or flight restrictions have had significant impact on network airlines by reducing their ability to
offer connecting services in the morning or evening. They have also affected the operations of all-cargo operators,
particularly on express delivery operations which are built around late-day pick-ups and morning deliveries. At congested
airports, night flight restrictions have equally impacted on availability of slots. A study carried out by ICAO in 2009 in the
context of its environmental programme on the effect of night curfews imposed in one region on another region,
indicated that a number of influencing factors, including time zones, airline economics and passenger demand,
contribute to the impact of night flight restrictions.
11.3.4 It is generally agreed that the partial or total removal of night curfew restrictions would considerably
improve market access, alleviate slot problems and contribute to economic development and trade. This would be
difficult to achieve by any prescribed across the board solution, due to the specific circumstances of each airport and the
need to evaluate related conditions and weigh the full range of associated factors.
11.4 PRIVATIZATION OF AIRPORTS
11.4.1 Until the late 1970s, the great majority of international airports were owned and managed by governments.
Many changes have since occurred in ownership and management structure of airports, generally in the direction of
reducing direct government involvement. Private sector involvement in this area began in the 1980s, gaining momentum
in the 1990s, especially in Asia, Europe and Latin America. It is reported that the share of fully privately owned airports
in Europe increased from nine per cent in 2010 to 16 per cent in 2016.
11.4.2 The changes have generally been thought of as “privatization”. However, these changes can take various
forms and, while they generally reflect a move away from government ownership and management, they do not
necessarily (and indeed rarely) denote outright privatization per se, particularly as regards ownership.
11.4.3 In the context of airports, privatization connotes either full ownership or majority ownership of facilities and
services by the private sector, while private participation or private involvement refers to situations in which the private
sector plays a role in the ownership or management, or both, of the airport (e.g. in the form of a management contract, a
lease or minority equity) but the majority ownership remains with the government.
11.4.4 Corporatization refers to the undertaking of creating a legal entity (a corporation or company) outside the
government to manage and operate the airport, either through a specific statute or under an existing general statute
such as company law. Normally, the ownership of the corporation remains with the government. However, private sector
participation in a corporatized body is possible.
11.4.5 Commercialization refers to a management approach which applies business principles or places special
emphasis on the development of commercial activities. Commercialization should not be equated to private participation
or privatization because the former connotes an approach to management while the latter refers to change in the
ownership or control of management.
11.4.6 Autonomy refers to the powers of the managers of airports to utilize revenues generated and make
independent managerial decisions on issues falling within the charter of the organization. An autonomous airport
authority is an independent entity established to operate and manage one or more airports and empowered to use the
revenues it generates to cover its costs. An autonomous airport authority can be a unit within the government, a
corporate authority or a company wholly owned by the government.
11.4.7 Privatization and private participation in the provision of airport services has been part of the general
process of globalization and liberalization of the economies of the world and the movement toward privatization of
commercially oriented industries and services managed by States or State-owned entities. A number of other factors,
such as financial problems faced by States in airport development, the need to reduce budgetary deficits and the
emergence of a global airport management industry, have motivated States to move towards privatization and private
participation.
11.4.8 Faced with increasing difficulty in the financing of airports, many governments have come to realize that
where traffic volumes are relatively high, it may be possible to pass the burden of financing airport development
programmes to the private sector. Moreover, private participation and privatization in the provision of airport services has
been seen as a source of revenue to cover or reduce budgetary deficits. Profit-making airports can provide a regular
source of tax revenue. Financial bids for private participation and privatization of airports have further encouraged States
to move in this direction.
11.4.9 The current approach of governments is to move away from the ownership and management of non-core
public utilities, and airports, at least the major ones, are considered as commercial entities rather than public utilities.
Larger airports are turning into cities in themselves with marketplaces and meeting points for people and business.
Experience gained worldwide indicates that where airports are operated by autonomous entities, their overall financial
situation and managerial efficiency have generally improved.
11.4.10 From the commercial perspective of the business and financial communities, an airport can be a sound
investment. Growth in traffic is generally continuous and faster than the growth of the gross domestic product over the
intermediate and longer terms. The credit ratings of airports are generally very high, and they have strong cash flows.
Although airports are subject to government regulations, commercial activities at airports, which produce significant
revenues, are generally less regulated or not regulated at all. Consequently, there has been a gradual emergence of a
global airport management industry.
11.4.11 In most States, private participation and privatization in the provision of airport services has taken place in
stages. For example, in the United Kingdom, major airports were initially transferred to a government corporation.
Several years later they were transferred to a government-owned company. Soon thereafter, the shares of this company
were sold to the private sector. In some European countries, the airports were first transferred to separate companies
owned by the State, and the divestiture of shares was gradual. Evidence suggests that States have generally benefited
from a gradual change in ownership and management structure.
11.4.12 Airports are strategic infrastructure, major airports can hold significant market power. In order to avoid
abuse of dominant position by such airports, economic oversight has been established in almost all States in which
privatization or private participation has taken place, including through price controls or capping of user charges Related
guidance produced by ICAO can be found in ICAO’s Policies on Charges for Airports and Air Navigation Services (Doc
9082) and the Airport Economics Manual (Doc 9562).
11.4.13 The primary objective of airports and air navigation services is to provide safe, secure, efficient and
economical services to users. There are several ownership and management options that may be considered to achieve
this end. It should be noted however that a change in the ownership and management structure in the provision of
airport services may not necessarily solve all the problems that an airport or a group of airports may be facing. The
change may even be harmful in the long run if poorly planned. The objectives of any change should therefore be clearly
defined.
11.4.14 Private participation in the provision of airport services has basically taken four forms: management
contract, lease (which is sometimes called concession), transfer of minority ownership and public-private partnerships
(PPP). Apart from airports originally owned by private entities, fully privatized airports or airports with majority private
ownership are few. In some cases, including in developing countries, project financing mechanisms through private
sector participation were used. These include schemes such as Build-Operate-Transfer (BOT), Build-Own-Operate-
Transfer (BOOT) and Build-Own-Operate (BOO). There is no single best option for global application. A State should
choose an option best suited to it after careful consideration and planning. Regardless of the organizational form or legal
status adopted for a particular airport entity, the State remains ultimately responsible for safety, security and economic
oversight.
11.4.15 In this connection, ICAO has developed guidance material which provides information and analyses of the
options available for States when considering a change in ownership and management in the provision of airports and
air navigation services, together with the possible implications of these options, and discusses major issues to be
examined. This guidance is contained in Doc 9980 – Manual on Privatization in the Provision of Airports and Air
Navigation Services.
11.4.16 Finally, for States considering privatization of their airports, it is important to bear in mind that Article 28 of
the Chicago Convention places on each Contracting State the responsibility for the provision of airports and air
navigation services in its territory in accordance with ICAO Standards and Recommended Practices (SARPs). Thus, the
ownership and management of airports or air navigation services may be delegated to the private sector, but the overall
responsibility for the provision of services in compliance with SARPs remains with States. In addition to the Chicago
Convention, other international agreements, such as bilateral or regional air services agreements, may impose
obligations on signatory States with respect to the provision of airports or air navigation services.
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Part V
GENERAL TERMINOLOGY
V-(i)
Chapter 1
INTRODUCTION TO GENERAL TERMINOLOGY
1.1 The first four parts of the manual have presented and defined many terms, each in its particular context
within the regulatory content, process and structure of the national, bilateral and multilateral regulation of international air
transport. Part 5 presents general terminology which is common or supplemental to all parts of the manual.
1.2 Unlike the usual alphabetical listing of terms in a glossary, the terms in this part of the manual are
presented under four distinct generic groupings: Part V, Chapter 2 — Air Carriers; Part V, Chapter 3 — Aircraft; Part V,
Chapter 4 — Air Services; and Part V, Chapter 5 — Airports. Most of the terms defined or identified are routinely used in
connection with the economic regulation of air transport. Some terms are frequently used in other contexts but as they
fall under the generic groupings, they have also been included in this part for comprehensiveness and for additional
useful information.
1.3 The terminology in these four chapters is drawn from a variety of sources and is not intended to be
exhaustive (ICAO’s numerous publications, primarily manuals in other disciplines, are sources where specific aviation
terminology can be found). Some terms have definitions that are widely accepted, such as those developed by ICAO or
those found in the Convention on International Civil Aviation. Most of the definitions or descriptions herein, however,
have no formal status. Some have, nevertheless, been developed and applied by States in particular contexts, such as
in bilateral regulation. Some terms have different meanings when applied in different contexts, while others are in
common usage and appear frequently in the media. A few of the definitions are relative, evolving in meaning as
technology advances and as applicable regulatory regimes change. In general, as air transport evolves, so does its
terminology and the use of it. All of these considerations have been taken into account in the development of this part of
the manual.
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V-1-1
Chapter 2
AIR CARRIERS
2.1 An air carrier is an enterprise that engages in provision of transportation services by aircraft for
remuneration or hire.
2.2 Air carriers can be identified by the type of operations they offer:
a) a scheduled air carrier or airline is one that engages mainly in scheduled services (though it may also
operate some non-scheduled flights). (See Doc 9587 and Part V, Chapter 4 of this manual for the
definition of scheduled and non-scheduled services);
b) a non-scheduled air carrier is one whose primary activity is non-scheduled operations;
c) a charter carrier is a non-scheduled air carrier that operates only charter flights.
2.3 An international carrier is one that provides air transport services on routes involving more than one State
and that may also operate domestic air services.
2.4 A scheduled international carrier is a carrier authorized to operate scheduled international air services,
while a non-scheduled international carrier is one authorized to operate international non-scheduled flights.
2.5 A domestic carrier is one that primarily provides air transport services wholly within the territory of its home
State.
2.6 Under national regulation of air transport, a licensed carrier (in some cases, referred to as a certificated
carrier) is an air carrier that holds a formal authorization from a constituted authority to operate air transport services. In
some States a licence is issued to a national carrier and a permit is given to a foreign applicant, while in some others, a
licence is granted for scheduled services and a permit for charter flights.
2.7 A national carrier is an expression used to refer to an air carrier, established in accordance with the
national law of a State, which is usually the only or the principal air carrier of that State in the provision of air transport
services including international air services, and which is regarded as a national instrument in air transport.
2.8 A flag carrier is a term often used interchangeably with “national carrier” but more from an international
perspective because the aircraft of such carrier usually bears the national flag of the State in the provision of
international air services. Note, however, that Article 20 (Display of marks) of the Chicago Convention only requires that
aircraft engaged in international air navigation bear its appropriate nationality and registration marks (States generally
use letters and numerical numbers for this purpose). Therefore, there is no legal requirement under international law that
the aircraft of a national carrier engaged in the operation of international air services must bear the national flag.
2.9 A designated carrier refers to an air carrier designed by a State under the relevant air services agreement
for the operation of air services authorized under the said agreement. A designated carrier, in most cases, is the national
or flag carrier of the designating State, but in some cases may also be an air carrier of another State when this is
permitted under the relevant air services arrangement (e.g. in the case of a “community of interest” provision. See
Chapter 5).
V-2-1
V-2-2 Manual on the Regulation of International Air Transport
2.10 Carriers may be categorized by the type of traffic they transport. Thus:
a) a passenger air carrier is primarily involved in the transportation of passengers by aircraft (although
such aircraft may also carry freight);
b) a cargo air carrier will primarily be involved in the transportation of freight and mail by aircraft.
2.11 Air carriers are often characterized by the role they play in national or international markets or by the scale
of their operations.
2.12 Generally, a major air carrier provides scheduled air services on domestic trunk routes and/or on
international routes, usually having a relatively large scale of operation covering an extensive route network;
a) a regional carrier provides short-haul scheduled passenger and freight services, operating mostly
turboprop and/or small jet aircraft and connecting small and medium-sized communities with major
cities and hubs;
b) a feeder carrier operates short-haul services connecting small and regional points to a hub airport,
generally using small to medium-capacity aircraft;
c) a commuter carrier operates feeder and/or regional services, more often of the point-to-point type,
usually with aircraft seating no more than 30 passengers; this capacity limit, however, has been
continually growing over the years and may now refer to aircraft with up to 50 seats;
d) a mega-carrier is an expression used to refer to a very large carrier in terms of its scale of operation
and/or route network. Such size may have been attained through its own growth, acquisitions of, or
equity investment in, other carrier(s), or certain forms of alliance.
2.13 Some definitions concerning air carriers are based on marketing/economic considerations:
a) a niche carrier is an air carrier specializing on particular routes or in a particular segment of the
market;
b) a start-up carrier is a newly established air carrier;
c) a new entrant carrier means a carrier, newly established or not, that attempts to enter a market
already served by other carriers.
2.14 Others are based on the characteristics of their business models:
a) a full-service carrier is an air carrier, typically a traditional national or major carrier that operates on a
relatively extensive route network (thus also referred to as a legacy carrier or network carrier) and
provides a full range of services including different seating classes, in-flight entertainment, meals and
beverages, on-board store, and ground facilities such as waiting lounges for premium class
passengers or frequent flyer programme members;
b) a no-frills carrier refers to an air carrier that, unlike a full-service carrier, focuses on providing low-cost
air transport service to customers with simple or limited in-flight services;
c) a low-cost carrier generally refers to an air carrier that has a relatively low-cost structure in comparison
with other comparable carriers and offers low fares or rates. Such a carrier may be independent, the
division or subsidiary of a major carrier or, in some instances, the ex-charter arm of an airline group.
Part V. General Terminology
Chapter 2. Air Carriers V-2-3
2.15 Air carriers can also be identified by their trade membership, for example, an IATA carrier, i.e. a carrier that
is a member of the International Air Transport Association; conversely, a non-IATA carrier is one that is not an IATA
member.
2.16 Carriers are also qualified according to their ownership and control:
a) a state-owned carrier is a carrier whose total or majority share of capital is held by the State
(government agency, parastatal holding, etc.);
b) a private carrier is a company whose total or majority share of capital is held by private interests;
c) a joint venture carrier is an air carrier that is jointly owned by two or more major investing parties,
which may be entities of the same or different countries;
d) a community carrier is a term that refers to an air carrier whose substantial ownership is vested with a
member State of the European Community, now known as the European Union.
2.17 In terms of airline liability, the term common carrier refers to a carrier that is prepared to provide transport
of passengers and cargo for anyone who wishes to engage its services and is prepared to pay its charges.
2.18 Associated with air carriers are some terms commonly used in measuring airline capacity and performance
and in determining their ranking in terms of traffic carried:
a) Available seat-kilometres (ASKs) or seat-kilometres available, which are equal to the sum of the
products obtained by multiplying the number of passenger seats available for sale on each flight stage
by the stage distance (a seat kilometre is available when a seat is flown one kilometre).
b) Available tonne-kilometres (ATKs) or tonne-kilometres available, which are equal to the sum of the
products obtained by multiplying the number of tonnes available for the carriage of revenue load
(passengers, freight and mail) on each flight stage by the stage distance (one ATK is a metric tonne of
available payload space flown one kilometre).
c) Passenger tonne-kilometres performed, which are obtained by applying a standard weight per
passenger to the passenger-kilometre performed. (See also revenue tonne-kilometre below.)
d) Revenue passenger-kilometres (RPKs), i.e. the sum of the products obtained by multiplying the
number of revenue passengers carried on each flight stage by the stage distance. The resultant figure
is equal to the number of kilometres travelled by all revenue passengers.
e) A revenue tonne-kilometre (RTK) is generated when a metric tonne of revenue load is carried one
kilometre. Where such load includes passenger load, the number of passengers is converted into
weight load, usually by multiplying this number by 90 kilograms (to include baggage). The total tonne-
kilometres performed (TKPs) equals the sum of the products obtained by multiplying the number of
passengers, freight and mail loads carried on each flight stage by the stage (one TKP is a metric
tonne of revenue load carried one kilometre).
f) Revenue passenger, a term which, for ICAO statistical purposes refers to passengers paying 25 per
cent or more of the normal applicable fare.
______________________
Chapter 3
AIRCRAFT
3.1 Aircraft, when used as a generic term, means any heavier-than-air flying machine. An aeroplane (or a
fixed-wing aircraft) is a power-driven heavier-than-air aircraft, deriving its lift in flight chiefly from aerodynamic reactions
on surfaces which remain fixed. A helicopter (or a rotary-wing aircraft) is a heavier-than-air aircraft supported in flight
chiefly by the reactions of the air on one or more power-driven rotors on substantially vertical axes (cf. Doc 9569). A
STOL aircraft (i.e. short take-off and landing aircraft) is an aircraft designed for taking off and landing on short runways.
In practice, the term aircraft commonly implies “aeroplane” or “airplane” and is often used interchangeably.
3.2 The nationality of aircraft is the State of its Registry (see Article 17 of the Convention on International Civil
Aviation).
3.3 Transport aircraft are aircraft that are designed for the purpose of transporting persons and/or cargo.
Commercial transport aircraft are transport aircraft that are used for remuneration or hire.
3.4 State aircraft include any aircraft used for military, customs, police or other law enforcement services of a
State (see Article 3 of the Convention on International Civil Aviation).
3.5 Private aircraft are any non-State aircraft used for non-commercial purposes.
3.6 In the context of economic regulation, aircraft are often categorized according to the type of traffic they are
designed to carry:
a) a passenger aircraft is an aircraft primarily designed and configured for the transport of persons and
their accompanying baggage;
b) an all-cargo aircraft or freighter is an aircraft configured for the carriage of freight only (although
persons who accompany certain kinds of cargo, such as livestock or oil rig machinery, may also be
carried);
c) a combination aircraft (often referred to as combi aircraft in the airline industry) is a transport aircraft
capable of carrying both passengers and cargo on the main deck, often in varied configurations.
3.7 Aircraft can be characterized by their size. Although mostly used in marketing, terms a) and b) are also
used by some States in connection with capacity regulation.
a) a wide-body aircraft is a large transport aircraft with internal cabin width sufficient for normal
passenger seating to be divided into three axial groups by two aisles (in practice this means not less
than 4.72 metres (15.6 feet)).
b) a narrow-body aircraft is an aircraft having only one aisle in the cabin with passenger seating divided
into two axial groups.
c) A jumbo jet is a popular term applied to a large wide-body aircraft such as the Boeing 747, Airbus
A380, Boeing 777 and 787.
V-3-1
3.8 The term “large aircraft” can have various definitions serving specific purposes (e.g. for pricing airport
landing charges or capacity regulation). A large aircraft, for ICAO statistical purposes, is an aircraft of 9 tonnes
(approximately 20 000 lbs) maximum certificated take-off weight (MTOW) and over; and in the context of technical
regulation, an aircraft having a MTOW of over 5 700 kg (approximately 12 550 lbs).
3.9 Some other aircraft terms by size include:
a) a small or light aircraft, i.e. an aircraft with an MTOW less than 5 700 kg (approximately 12 550 lbs);
b) an ultra-light aircraft, i.e. an aircraft having an MTOW not exceeding 454 kg (1 000 lbs) and not usually
used for public transport purposes.
3.10 For analytical purposes (such as in fleet planning and forecasting), aircraft can be categorized according to
their seating capacity:
a) a high-capacity aircraft is one usually in the approximate capacity range of 350 to 500 seats;
b) an ultra-high-capacity transport aircraft (UHCT) or a very large commercial transport aircraft (VLCT) is
a type of aircraft that has over 600 seats.
3.11 A widespread method used by air carriers to obtain equipment or increase their fleet capacity is through
leasing:
a) a leased aircraft is an aircraft used under a contractual leasing arrangement;
b) a wet-leased aircraft includes a crew;
c) a dry-leased aircraft does not include a crew;
d) a damp-leased aircraft is a term used in some cases to refer to a wet-leased aircraft that includes a
cockpit crew but not cabin attendants.
3.12 In this connection, the term lessor means the party from which the aircraft is leased and the term lessee is
the party to which the aircraft is leased.
3.13 Aircraft are also classified by other criteria, for example, by the type of engine they use:
a) a piston-engine aircraft, now rarely used in commercial air transport, is one powered by piston
engine(s);
b) a turboprop aircraft is an aircraft driven by turbo-propeller engine(s);
c) a turbojet aircraft or simply jet aircraft is an aircraft powered by turbojet engines;
d) a turbofan aircraft is an aircraft having turbofan engines.
3.14 Aircraft are sometimes referred to in terms of the number of their engines:
a) a twin jet is a jet aircraft with two engines; and
b) a tri-jet is one having three engines.

Chapter 3. Aircraft V-3-3
3.15 Many twin-engine commercial transport aircraft have now been authorized for long-range operations
known as ETOPS (i.e. extended range twin-engine operations).
3.16 Aircraft may be distinguished by the speeds at which they can fly:
a) a subsonic aircraft means an aircraft incapable of sustaining level flight at speeds exceeding a Mach
number of 1 (i.e. the speed of sound);
b) a supersonic aircraft is one capable of flying at speeds exceeding the speed of sound;
c) a hypersonic aircraft is one able to fly at speeds exceeding a Mach number of 5;
d) the term high-speed civil transport aircraft (HSCT) is generally used to refer to various future
supersonic commercial transport aircraft under study.
3.17 Aircraft can also be defined by the distances they can fly:
a) a short-range aircraft is an aircraft having a non-stop flying range usually not exceeding 2 224
kilometres (1 200 nautical miles) with a full payload at normal cruising conditions;
b) a medium-range aircraft is one usually capable of flying between 2 224 to 5 556 kilometres (1 200 to
3 000 nautical miles) with a full payload at normal cruising conditions; and
c) a long-range aircraft is an aircraft capable of exceeding 5 556 kilometres (3 000 nautical miles) with a
full payload at normal cruising conditions.
3.18 Commuter aircraft and regional aircraft are transport aircraft used for the operation of commuter or regional
air services, usually having a relatively small seating capacity (ranging from 10 to 70 seats) or payload. A regional jet is
a jet-powered commuter aircraft or regional aircraft.
3.19 In the context of aircraft noise regulation:
a) a Chapter 2 aircraft is one that complies with the noise certification Standards set out in Chapter 2 of
Annex 16 to the Convention on International Civil Aviation (since 1995, such aircraft are being phased
out);
b) a Chapter 3 aircraft is one that complies with the noise certification Standards set out in Chapter 3 of
Annex 16 to the Convention on International Civil Aviation (which are more stringent than those in
Chapter 2); and
c) a Chapter 4 aircraft is one that complies with the noise certification Standards set out in Chapter 4 of
Annex 16 to the Convention on International Civil Aviation (which are even more stringent than those
in Chapter 3).
3.20 Note that the terms Stage 2 aircraft, Stage 3 aircraft and Stage 4 aircraft are terms applied in the United
States that have meanings essentially the same as those of “Chapter 2 aircraft”, “Chapter 3 aircraft” and “Chapter 4
aircraft”, respectively.
______________________
Chapter 4
AIR SERVICES
4.1 Air service, in its broadest sense, includes any service performed by aircraft for public transportation,
whether on a scheduled or non-scheduled basis. For regulatory purposes, however, the term always has a specific
meaning (defined in Article 96(a) of the Convention on International Civil Aviation and used in most bilateral air transport
agreements between States) and refers to any scheduled air service performed by aircraft for the public transport of
passengers, mail or cargo.
4.2 A commercial air service means an air service performed by aircraft for the public transport of passengers,
mail or cargo for remuneration or hire.
4.3 Air services can be classified by the geographical areas they serve, for example:
a) a domestic air service, i.e. an air service operated wholly within the territory of a State;
b) an international air service, i.e. an air service that passes through the airspace over the territory of
more than one State;
c) a regional air service, i.e. either an air service offered on routes serving smaller cities within a region
or between regions of a State; or an air service offered on secondary routes serving smaller cities in a
regional area involving the territories of more than one State;
d) a cross-border service, i.e. an international short-haul air service operating across the borders of two
contiguous States.
4.4 In economic regulation, air services are often categorized according to the type of traffic carried by the air
carrier:
a) a passenger air service is an air service performed primarily for the transport of passengers;
b) a cargo air service is an air service provided for the public transport of freight and mail;
c) a combination service refers to one that carries both passengers and cargo on board the same
aircraft.
4.5 Air services can also be distinguished by their operational features:
a) a scheduled air service is typically an air service open to use by the general public and operated
according to a published timetable or with such a regular frequency that it constitutes an easily
recognizable systematic series of flights;
b) conversely, any air service that is performed other than as a scheduled air service is regarded as a
non-scheduled operation, including but not limited to charter operations. Note that “non-scheduled” is
a public law term, while “charter” is a private law term pertaining to the contract between an air carrier
and a charterer (although these two terms have come to be used interchangeably).
V-4-1
4.6 In international air transport regulation, air services have been regulated under different regimes
depending on whether they are performed on a scheduled or non-scheduled basis (see also Chapter 7). As defined by
the Council of ICAO (see Doc 9587), a scheduled international air service is a series of flights that possesses all of the
following characteristics:
a) it passes through the airspace over the territory of more than one State;
b) it is performed by aircraft for the transport of passengers, mail or cargo for remuneration, in such a
manner that each flight is open to use by members of the public; and
c) it is operated so as to serve traffic between the same two or more points, either according to a
published timetable or with flights so regular or frequent that they constitute a recognizable systematic
series.
4.7 Any international flight performed other than as a scheduled international air service is a non-scheduled
international flight.
4.8 A trunk service is an air service operated on routes linking major cities, usually with a large volume of
traffic.
4.9 The term air taxi service can have two meanings:
a) a type of on-demand air service usually performed by small capacity aircraft on short notice in a very
similar way to an automobile taxi service; or
b) in some cases, a service operated on a scheduled basis with stops made only at points where
passengers and cargo are to be picked up or discharged.
4.10 A shuttle air service is a high-frequency, no reservation passenger air service operated at regular intervals,
typically on a city-pair route with high traffic density. In some cases, boarding is a continuous process and an aircraft
may depart before scheduled time, if full.
4.11 A feeder service is an air service offered on regional routes that feeds traffic to major domestic or
international services.
4.12 For marketing purposes, an air service is often termed as:
a) a non-stop service, an air service provided between two points with no intermediate stops (not even a
technical stop); or
b) a direct air service (also referred to as through service), an air service provided between two points by
a single aircraft with intermediate stops but without change in flight number.
______________________
Chapter 5
AIRPORTS
5.1 An airport (or aerodrome, a term that is almost synonymous, though used more in a generic sense) is a
defined area on land or water that is used for the arrival, departure and surface movement of aircraft (cf. Doc 9569).
5.2 Airports can be differentiated by the type of aircraft they serve:
a) a heliport is an aerodrome or a defined area on a structure used for the landing, take-off or surface
movement of helicopters;
b) a stolport is an airport specifically designed for STOL aircraft separate from conventional airport
facilities.
5.3 Airports can also be characterized by type of activity:
a) a commercial airport is an airport used by the general public that includes facilities for processing
passengers, handling cargo and servicing commercial aircraft;
b) a private airport serves primarily small privately owned aircraft, flying clubs, etc.
5.4 An international airport is a designated airport of entry and departure for international air services, where
formalities such as customs, immigration, public health, animal and plant quarantine and similar procedures are carried
out (see Annex 9 to the Convention on International Civil Aviation). A gateway airport is an international airport that is
the first point of arrival or last point of departure in a State for international air services.
5.5 A domestic airport is an airport used for domestic air services only.
5.6 A regional airport generally refers to an airport of a medium or small city that is mainly served by short-haul
regional services.
5.7 A congested airport is one whose capacity for handling traffic (air or ground) is inadequate to
accommodate demand. To cope with congestion problems, one State has designated certain airports as reliever airports,
i.e. airports that divert traffic from major commercial airports; and supplemental airports, i.e. airports that attract general
aviation away from busy airports, thus relieving congestion in particular markets.
5.8 Several terms are often used in connection with congested airports:
a) airport capacity is the number of passengers and amount of cargo which an airport can accommodate
in a given period of time; it is a combination of runway capacity and terminal capacity.
b) runway capacity is the number of aircraft movements which aeronautical authorities determine can
safely be operated, usually stated as the total number of landings and take-offs per hour, taking into
account such factors as the physical characteristics of the runways and the surrounding area, altitude,
the types of aircraft involved (larger aircraft may mandate greater separation) and air traffic control
(approach and aerodrome control) capabilities.
V-5-1
c) terminal capacity is the number of passengers and tonnes of cargo per hour which can be processed
in a terminal building (sometimes referred to as passenger throughput or cargo throughput). The type
of passenger or passenger mix can influence the rate of passenger throughput. International
passengers who must clear customs and immigration require more time and space than domestic
passengers who are not subject to these procedures. Domestic and international cargo presents a
similar situation.
5.9 An alternate airport is an airport to which an aircraft may proceed when it becomes either impossible or
inadvisable, for technical reasons, to proceed to or to land at the airport of intended landing (cf. Doc 9569).
5.10 A hub airport or hub, when used in a general context, means any airport having numerous inbound and
outbound flights and a high percentage of connecting traffic; while in the context of scheduling and marketing from a
hub-operating air carrier’s perspective, it denotes an airport where many of its inbound and outbound schedules are
coordinated with the aim of producing the most convenient connections and/or transshipment for passengers, freight
and/or mail. The same airport may serve as a hub for more than one air carrier although this is exceptional.
5.11 A major hub is one with a large volume of connecting traffic, usually a centrally located airport served by
more than one airline with long-haul connections.
5.12 A regional hub is a hub that serves a region of a State or a region comprising more than one State.
5.13 An interline hub is a hub at which connections or transferring of traffic are chiefly made between flights of
different carriers.
5.14 An online hub is a hub at which connections or transferring of traffic are mostly made between different
flights of the same airline.
5.15 Associated closely with the online hub is the hub-and-spoke system (also known as hubbing), i.e. an
operational system in which flights from numerous points (the spokes) arrive at and then depart from a common point
(the hub) within a short time frame so that traffic arriving from any given point can connect to flights departing to
numerous other points. The “power” of such a system lies in its unique ability to combine traffic from numerous city-pair
markets on the same aircraft, thus permitting a service to a spoke point that would not otherwise be viable or could not
support the same volume and frequency of service. The hubbing system works by moving waves or banks of flights from
different origins through the hub within a period of time sufficient for traffic to interconnect.
5.16 A mini-hub is a secondary hub set up by a carrier.
5.17 A mega-hub or a super-hub is a very large hub.
5.18 A second country hub is a hub set up by an air carrier in a foreign country, typically to allow it to
interconnect traffic between numerous points in its home country and numerous third countries.
5.19 While most hubs are passenger hubs, other types of hubs, in terms of traffic handled, also exist including:
a) a cargo hub, i.e. an airport where facilities are provided for easy and fast connections and
transshipment of air cargo traffic;
Chapter 5. Airports V-5-3
b) a postal hub or mail hub, i.e. one which serves as a transit centre for postal or mail shipments;
c) an intermodal hub or multi-modal hub, i.e. a hub that enables convenient connections or
transshipment of traffic from one mode of transport to another, for example, surface to air on a sea-air
routing.
______________________
APPENDICES
App-(i)
Appendix A
FORMATS FOR TARIFF FILINGS
1. INTRODUCTION
1.1 In March 1985, the Council approved Recommendation FRP/8-2 of the Fares and Rates Panel which
called for the development of guidelines for the format for tariff filings submitted by airlines to governments. The
Secretariat, in consultation with members of the Fares and Rates Panel, produced the formats and guidance material for
passenger fares which are contained in Parts I and II of this appendix. They are for optional use by States and for
adaptation to particular situations.
1.2 In 1986, the Fares and Rates Panel, in Recommendation FRP/9-2, addressed the question of filing tariffs
by electronic means. As approved by the Council in March 1987, this called for compatibility amongst tariff filing systems
in different States and with airline industry databases, including those in computer reservation systems, along with
provision of continued manual filing of tariffs by airlines where required. In 1992, the ICAO Secretariat sought
information from States concerning their current tariff filing procedures and the requirements of those States wishing to
use an electronic tariff filing procedure to assist in developing some common worldwide basic requirements aimed at
ensuring the compatibility envisaged in Recommendation FRP/9-2. In addition to national administrations, some regional
intergovernmental aviation organizations, such as the European Civil Aviation Conference (ECAC) and the Latin
American Civil Aviation Commission (LACAC), have studied methods and implications of electronic tariff filing.
1.3 One example of the minimum elements of an electronic tariff filing system, which was developed by ECAC
in consultation with companies designing such systems, is included in Part III of this appendix.
2. PART I — FILING REQUIREMENTS
2.1 The following checklists of filing requirements for international scheduled passenger fares contain more
information items than individual States may require. In order to ease their administrative burden and that of airlines,
States may wish to select and apply from the checklists only filing requirements which relate to those aspects of fares
which they actively regulate and which they consider to be fundamental for evaluation purposes.
Section 1 — Information required for all types of filings
Requirement Commentary for the information of States
Filing reference number To be assigned by the authority upon receipt.
Relevant previous reference number(s) In case of revision or update of previous filing, this should be
entered by the airline. States may also require airlines to provide
reference numbers for related tariff filings and/or relevant
previous government notices of action.
App-A-1
App-A-2 Manual on the Regulation of International Air Transport
Date/time of filing To be entered by the authority upon receipt.
Name of submitting airline(s) Depending on national legislation and subject to proof of

authority, some States may accept filings by a designated
agency of the airline(s).
Nature of filing
Airline to specify:
a) whether the filing relates to general tariff Filing of general tariff rules is dealt with in Section 2. For other
rules, particular fare level and associated types of filing, see Section 3.
conditions, currency adjustment, or add-on;
b) whether the proposal is for new or for revised In the case of revisions, States may wish to limit the filing
tariffs; requirement to identification by the airline of changes only.
c) whether the filing flows from IATA or other In order to evaluate the robustness of an IATA or similar
multilateral airline agreement, bilateral airline agreement, States may wish to require the airline(s) to specify
agreement, or is a single carrier filing; the geographical scope of application of the agreement, i.e.
whether it is a “full” or “limited” agreement, and whether it
includes “escape” and/or “short-notice” amendment provisions.
d) whether approval is requested under regular In the case of “matching filings”, States may wish to limit the
statutory provisions or under exemption filing requirement to identification by the airline of the tariff to be
provisions for “short-notice” or “matching” matched.
filings.
Date of introduction proposed The date proposed by the airline on or after which travel should
be at the fares, conditions or rules in the tariff filing.
Section 2 — Filing of general tariff rules
Text of relevant IATA resolutions or other The types of resolutions or rules specified are basic to the
multilaterally agreed airline tariff rules and/or establishment of tariffs and have an impact on existing and
text of individual airline general tariff rules proposed fares. Other general rules or conditions govern such
matters as children’s, infants’ and agents’ discounts; reservation
and payment conditions; ticket validity; as well as cancellation,
re-routing and refunds. All such resolutions and rules would
generally apply to all fares unless they are specifically
overridden by the conditions attached to particular fares (see
Section 3).
Appendix A. Formats for Tariff Filings App-A-3
Airline to provide:
a) conditions of carriage (not applicable for fares

to and from Canada/United States);
b) conditions of service (e.g. seat pitch and

seats abreast for each class of service);
c) baggage allowances and charges;
d) fare construction rules;
e) currency conversion rules;
f) agents’ commission rules;
g) other general tariff rules or conditions (airline

to specify).
Period of proposed effectiveness Dates proposed by the airline. Basic IATA rules such as those
governing fare construction and currency conversion may
technically cease to exist in the absence of an IATA agreement
on particular fares. States may wish to require the airline to
designate whether the rules on file would, nonetheless, remain
effective in these circumstances or whether the airline would file
replacement rules.
Availability of promotional benefits States may wish to require airlines to notify them of all incentives
offered to passengers in conjunction with international fares,
such as “frequent flyer” programmes or discounts on hotel
accommodations. Where such incentives are attached to a
particular fare and States require them to be filed, they would
form part of the fare submission (under Section 3).
Section 3 — Filing of particular fare levels and associated conditions

(including filing of currency adjustments and “add-ons”)
Fare type (e.g. “normal economy”, “advance Where the filing is made pursuant to a bilateral or multilateral
purchase excursion” — airline to identify) intergovernmental agreement which incorporates a “fare band”
arrangement, States may wish to require the airline to designate
the “fare band” with which the proposed fare is intended to
conform and to declare whether it does so. (Such a declaration
could reduce or eliminate the need for most additional
information).
Fare code to be used (e.g. YLE45 — airline to States may wish to encourage clarity and consistency.
identify)
Class of service (e.g. first, intermediate or This would include notification by the airline of the provision of
economy) facilities such as sleeper seats; in such cases, any applicable
surcharge should be reflected in a separately specified fare
level.
Trip type (e.g. one-way, round trip, circle trip, —

open jaw — airline to specify)
Date of sale proposed (where different from the Where States permit airlines to offer or sell proposed fares in
proposed date of introduction) advance of the date of introduction while the fares are still
“subject to government approval”, States may wish to require
airlines to specify arrangements for the provision of advice to
purchasers about the potential consequences of the unapproved
status of the fares, for example, possible non-applicability,
possible surcharge, and rights to refund.
Date of expiry proposed Some air services agreements specify that a tariff remains in
force until replaced. However, the provisions of many
agreements make specification by the airline of a proposed
expiry date necessary in order to define the period of
prolongation of existing tariffs in cases where replacement tariffs
are disputed.
Geographical area, routes or specific city- See comments under “fare levels” below. Where applicable,
pairs of application specific routings or directions of travel should also be indicated.
Fare levels Unlike fare conditions, which may be common to a number of

city-pairs, fare levels generally differ according to city-pair and
must therefore be specified separately by the airline. See the
chart at the end of this section entitled “Presentation of proposed
fare levels” for possible forms of presentation.
Currency adjustments Revisions should be reflected as changes in local currency fare

levels and filed as above. Depending on national legislation
and/or applicable air services agreements, States may also
require notification of the changes in the currency adjustment
factor and/or “IATA” exchange rate concerned.
Add-ons Add-ons (also known as proportional fares) are used in

conjunction with specified fares to establish through fares to and
Airline to specify: from many additional points, and as such, they create many
more fares which may fall under the jurisdiction of States in the
a) points between which the add-ons apply (that same way as the specified fares themselves. Add-ons may be
is, origin, destination and construction points); filed by the airlines at the same time as the relevant fares or
separately for intended application to already approved fares
b) routings for which the add-ons are applicable; and to subsequent fare filings.
c) fare types to which the add-ons apply;
d) any restrictions on combinability;
e) currency in which the add-ons are expressed;
f) proposed levels.
Rules and conditions specific to the fare The checklist includes the most common rules and conditions.
concerned States may find it helpful to prescribe or agree with airlines a
standard presentation framework for the rules and conditions
Airline to specify: they require airlines to file, with standard numbering for each
rule or condition. (In this regard, IATA Resolution 100, “Standard
a) period of application, e.g. all year or within Condition Resolution for Special Fares”, lists 30 rules/conditions
defined periods (seasonal, time of day or applicable to all such fares unless the resolution concerning a
week); particular fare specifies otherwise.) Airlines should specify
details against any such rule or condition that applies to the fare
b) specific reservations, payment and ticketing in question.
conditions (e.g. those for advance payment,
“instant” purchase or standby fares);
c) minimum stay;
d) maximum stay;
e) stopover conditions (number/places/charges);
f) routing conditions (including online and/or

interline transfer restrictions);
g) restrictions on the number of seats available

for sale at the fare concerned (other than
constraints of class of service or aircraft
capacity);
h) restrictions on combination with other fares;
i) restrictions on advertising or sales;

j) eligibility restrictions (e.g. in connection with

preferential fares restricted to persons having
specified attributes in terms of age,
occupation, religion, etc.);
k) documentary requirements (proof of age,

residence, occupation, etc.);
l) promotional benefits (including availability of

discount hotel accommodation, “frequent
flyer” arrangements, etc. (see also Section
2));
m) other applicable rules or conditions (airline to

identify).
Additional rules and conditions specific to States may wish to require airlines to specify details against any
group fares rule or condition that applies to the fare in question.
Airline to specify, where applicable:
a) minimum group size;
b) group requirements (e.g. affinity, incentive

group) and method of formation;
c) requirements for travel together (outbound

and return);
d) permissible changes from initial composition

of group;
e) other applicable rules or conditions (airline to

specify).
Additional rules and conditions specific to States may wish to require airlines to specify details against any
inclusive tour fares rule or condition that applies to the fare in question.
Airline to specify, where applicable:
a) inclusive tour requirements (ground package,

tour organizer, etc.);
b) minimum tour price;

c) permissible changes from initial itinerary and

facilities;
d) applicable tour conductor’s discount;
e) other applicable rules or conditions (airline to

specify).
Applicability of general tariff rules and For ease of administration, States may wish to require that
conditions airlines present these in the form of specified exceptions, in the
case of the particular fares concerned, to the general tariff rules
Airline to specify any exceptions in case of: dealt with in Section 2. The most common items against which
exceptions arise, usually involving additional restrictions on
a) conditions of carriage; users, are listed.
b) conditions of service;
c) baggage allowances and charges;
d) fare construction (including indirect routing

options);
e) currency conversion;
f) agents’ commission;
g) children’s and infants’ discounts;
h) circumstances under which waiver of

minimum stay may be granted;
i) circumstances under which ticket validity may

be extended;
j) reservation, payment and ticketing

procedures;
k) voluntary re-routing conditions;
l) involuntary re-routing conditions;
m) cancellation and refund conditions;
n) passenger expenses en-route;
o) inaugural flights;
p) agents’ discounts;
q) tour conductors’ discounts;
r) other general rules or conditions (airline to

specify).
2.2 Presentation of proposed fare levels
Basic requirements
2.2.1 The form below is designed for the provision by airlines of basic data regarding proposed fare levels and
applies only to fares for travel originating in or destined for the country of filing. Where fare data are required for travel
between third countries (for example, in relation to traffic carried by a national airline under Fifth Freedom traffic rights),
the form could be readily adapted by using only the data columns under “For travel originating outside country of filing”.
2.2.2 For comparative purposes, States generally find it expedient to require data by fare type for each city-pair
as shown, but an alternative approach is to list data by city-pair within each fare type. Fare types should be listed by the
airline along with trip type and any seasonal indicator and indicator of service or routing conditions. For example:
First class (one-way, sleeper seat)

First class (one-way)
Intermediate (business) class (one-way)
Normal economy (one-way, unrestricted)
Normal economy (one-way, online)
Economy excursion (round trip)
Apex (round trip) — Introductory
— High season
— Low season
Possible additional requirements
2.2.3 Where fares are evaluated on a regular basis or where detailed examination of a particular submission is
to be carried out, States may require additional information which could vary according to circumstances. Each of the
more commonly sought data elements identified below could be obtained through the addition of data columns and
appropriate sub-headings to the above form of presentation:
a) fares for travel originating outside the country of filing converted to equivalent levels in currency of sale
of the country of filing at prevailing bankers’ exchange rates, which should be specified;
b) all fares in terms of one or more convertible currencies using, for example, IATA conversion rates;
c) historic (previous year) data; and
d) percentage change between proposed and current fare levels (and historic levels, if appropriate).
Table A-1. Fare level data
FOR TRAVEL ORIGINATING

FOR TRAVEL ORIGINATING IN OUTSIDE COUNTRY OF
COUNTRY OF FILING FILING
(Point A to Point B) (Point B to Point A)
Current level Proposed level Current level Proposed level
CITY-PAIRS AND (in currency of sale in (in currency of sale in

FARE TYPES country of filing) country of origin of travel)
City-pair (A-B): ........................................... Currency: ....................................
Fare types:
................................................................. .................... .................... .................... ....................

................................................................. .................... .................... .................... ....................
................................................................. .................... .................... .................... ....................
(continue for each city-pair and fare type as

required)
3. PART II — JUSTIFICATION REQUIREMENTS
3.1 The following enumeration of possible justification requirements for proposed international scheduled
passenger fares contains more information items than individual States are likely to require. In establishing their own
justification requirements, States may wish to take into account that data may not be obtainable from airlines of other
States, that certain information may be commercially sensitive and airlines may not wish it to become publicly available,
and that the provision of data may be a particular burden on small airlines.
3.2 Detailed justification would normally be required only in special circumstances such as in connection with a
radical change in a fare level or structure, the introduction of a fare for a new route, an airline appeal against a
government disapproval of a fare, or the settlement of a dispute. Justification requirements may also differ between
filings of fares flowing from multilateral airline agreements and those of fares agreed bilaterally or submitted by individual
airlines.
Section 1. General information
3.3 Justification of a proposed fare would normally include an explanation of the rationale behind any new fare
or any changed level or condition of a particular fare. In the case of a general change in fares, the rationale should be
directly related to developments in the operating environment such as the introduction of new aircraft types, economic
trends (including, in particular, trends in consumer prices in each country concerned), changes in currency exchange
rates, or increases in specified costs such as the price of aircraft fuel, and should include the reasons for any major
variation from the changes being sought in other areas.
3.4 Where relevant, comments should be provided on the competitive effects of the tariffs proposed or applied
by other carriers with (scheduled or non-scheduled) operations on the same, overlapping and/or neighbouring routes.
The impact of the proposed tariffs on user interests and any other anticipated effects would also be identified. Where
appropriate, the filing airline should indicate whether there had been any consultation with user groups or associations of
agents and the outcome of such discussions. Where changes to general tariff rules are proposed, any actual or potential
impact on particular fares and/or on the fare structure should be explained.
Section 2. Specific data
3.5 For a fully effective evaluation, data on fare levels may need to be expanded beyond basic requirements
as indicated in Section 3 of the tariff filing format dealing with the Presentation of Proposed Fare Levels (Part I above).
Other fundamental information requirements, apart from the tariff filing and the general explanations referred to in
Section 1 above, are the current and anticipated revenues, costs, traffic and capacity. Detailed data by individual city-
pair or route would normally be required only in special circumstances as indicated above. More general data
aggregated by group of routes would be useful on an annual basis and/or in conjunction with proposals for general
changes in fares; such data should be readily available, particularly from airlines that submit data for ICAO’s annual
studies of regional differences in fares and costs or for IATA’s Cost Committee.
3.6 Both the detailed and the more general data requirements are included in the possible form of presentation
provided in the table on the following page. Together with the related explanatory notes, this table is designed to give
States general guidance on data requirements and presentation. Specific requirements will vary from State to State and
according to particular circumstances.
Table A-2. Presentation of justification data for proposed fares
A. COMPARATIVE TIME PERIOD
Anticipated (year 3)
Actual Estimated
historic current Without fare With fare
(year 1) (year 2) changes changes
1
B. CURRENCY OF SUBMISSION: .....................
Exchange rate against other major currencies:
1 2 2 2
Currency: .................................... .................. .................. .............................
(data continued as required for additional

currencies)
C. DATA BY INDIVIDUAL CITY-PAIR FOR

EACH ROUTE
Route: ......................................
City-pair: ..................................
a) number of revenue passengers: .................. .................. .................. ..................
– estimated percentage of revenue

passengers that originates in country .................. .................. .................. ..................
of filing:
– estimated percentage of revenue

passengers that is prorate traffic: .................. .................. .................. ..................
b) revenue from passengers: .................. .................. .................. ..................
– estimated percentage of passengers

that originates in country of filing: .................. .................. .................. ..................
c) revenue from excess baggage: .................. .................. .................. ..................
(data continued in above format as required

for each city-pair)
D. SUMMARY BY ROUTE
Route: .......................................
Passenger-kilometres performed: .................. .................. .................. ..................
Seat-kilometres available: .................. .................. .................. ..................
Passenger load factor (%): .................. .................. .................. ..................
Revenue from passengers and excess .................. .................. .................. ..................

baggage:
(data continued in above format as required

for each route)
E. SUMMARY BY GROUP OF ROUTES
Group of routes: ...............................
3
Passenger-kilometres performed: .................. .................. .................. ..................
3
Seat-kilometres available: .................. .................. .................. ..................
Passenger load factor (%): .................. .................. .................. ..................
Revenue from passengers and excess .................. .................. .................. ..................

3
baggage:
Other revenues (freight, mail and pertinent

incidental revenue): .................. .................. .................. ..................
Operating costs (broken down by cost item if

required): .................. .................. .................. ..................
Return on investment (%): .................. .................. .................. ..................
1. For insertion of name or ISO code of currency.

2. For insertion of exchange rate per unit of currency of submission.
3. Compiled directly from D above.
Commentary for the information of States on the above justification data
3.7 Comparative time periods. For the evaluation of most types of tariff filing, States may require from airlines
two or more chronological sets of data covering (i) a base reference period or periods; and (ii) a comparable period or
periods after the intended effective date of the tariff proposal. The annual period shown here is the most expedient as it
smooths out seasonal fluctuations. However, where tariff changes are proposed with greater than annual frequency or
where the tariffs are for seasonal application, it would be valuable to have the revenue and traffic data broken down
amongst the periods for which the fares concerned were or would be applicable. Since a “current” year’s data would
almost always, in part at least, include estimated elements, it could be useful, as shown here, to establish a base
through the provision by airlines of “actual” data for the previous year. It would also be useful to request “anticipated”
data both with and without the proposed tariffs implemented. For new fare types, it may be valuable to consider
“anticipated” data for a period beyond the first year of planned effectiveness in order to assess the consequences in a
fully matured situation.
3.8 Currency of submission. All revenue and cost data would normally be provided by the airline in the
currency of sale in the country of filing (consistent with the currency used for the tariff filing in Part I for travel originating
in the country of filing) or the national currency of the country of filing as required. Where the rate of exchange against
major currencies, such as the United States dollar, has a significant impact on traffic, revenues or costs, and is not
steady, historic and assumed future exchange rates should be provided, and revenue and cost data may need to be
broken down (to the extent possible) by the currency of the submission and other major currencies concerned.
3.9 Data by individual city-pair for each route. These data could be required for a single tariff proposal which is
likely to have a significant effect on the traffic or operating economics between a city-pair. As with the tariff filing itself
(Part I), the data would generally apply to those city-pairs involving travel to and from the territory of the country of filing,
but some States may require data for additional city-pairs. Where at least one origin and destination are common to
more than one route, States may find it convenient to request airlines to amalgamate the data for the routes concerned.
3.10 Traffic data are presented here in terms of numbers of on-flight origin and destination passengers between
each city-pair; particularly when broken down by origin as shown, this enables evaluation of the impact of the tariff
proposal on the national aviation infrastructure (for example, airport capacity) and on the national economy (for example,
tourist flows). The concomitant revenue data enable direct measurement of the impact of the proposal on revenue yield
for comparison both chronologically and against revenue yield for other city-pairs. The difference between fare levels
and revenue levels is determined by commission payments, discounts (such as those for children), and the impact of
prorating. The latter, in particular, varies significantly from route to route and has a direct effect on the level of fares to be
offered; hence, it can be useful to measure its impact, which may be done through the provision of an estimate of the
percentage of prorate traffic as shown.
3.11 A further breakdown into revenue and traffic by fare type may be necessary, including estimates of the
anticipated diversion of traffic between fare types as well as of the overall impact on traffic. Some States require a
breakdown on a regular basis but in most other cases such data would only be required where major changes to the fare
structure are being proposed. Freight revenue and traffic data may also need to be taken into account, particularly where
combination passenger/freight (“combi”) aircraft are concerned.
3.12 Summary by route. These data could be required for a tariff proposal which is likely to have a significant
effect on the operations or economics of a route as a whole; the data should cover all city-pairs on the route concerned.
3.13 Traffic data are presented here in terms of passenger-kilometres. Together with capacity data in terms of
seat-kilometres, they enable calculation of the passenger load factor and the impact of the tariff proposal on the
operations of the route. Together with the revenue data, they give some insight into the economics of the route. Freight
revenue and traffic data may also need to be taken into account, particularly where combination passenger/freight
aircraft are concerned.
3.14 Summary by group of routes. These data would normally be required only on an annual basis and/or in
conjunction with proposals for general changes in fares. Substantive insight into the economics of a route is gained here
by the addition of non-passenger related revenues and of operating costs. Such data are normally provided only at the
aggregate route group level, primarily because operating costs cannot be segregated with any great degree of precision
because of the generic or joint nature of many cost elements (for example, general administrative costs or combined
passenger/freight (“combi”) aircraft flight costs). However, provided the cost allocation methods and criteria are identified
and consistently employed, valid comparisons over time may be made.
3.15 Where proposals for general changes in fares are made to reflect changes in costs, and particularly where
they are designed to respond to specific cost changes such as increases in fuel prices, operating cost data would need
to be broken down by cost item. Some States may wish to designate (or agree with the airline on) a specific format for
the systematic identification of cost items.
3.16 Short-term anomalies affecting costs should be eliminated. For example, the major change between short-
run and long-run costs might be high start-up costs for the introduction of new aircraft which would be the main
equipment used on the route for a substantial period. Return on investment would be calculated in accordance with
national practice and would normally cover such items as return to shareholders and contribution towards the cost of re-
equipment.
4. PART III — MINIMUM ELEMENTS OF AN ELECTRONIC TARIFF FILING

(as specified by ECAC guidelines)
4.1 As a minimum, a tariff filing should contain:
a) A filing identification. An identification, such as the IATA filing advice number, unique to a particular
filing and generated when filing takes place through an automated filing system. Once the
identification has been issued, it cannot be changed.
b) A date and time stamp. Generated by the automated tariff filing system and indicating the date and
time of completion of a tariff filing and its entry into the filing systems’ database. Once the stamp has
been issued, it cannot be changed.
c) A carrier code.
d) A justification element. Provided by the filing carrier(s) to justify the introduction, deletion or
amendment of a filing.
e) A point of contact element. Containing the name and contact information of the person dealing with
the filing at the carrier(s) concerned.
f) A geographical identification. Showing the point of origin and the point of destination, or a wider
geographical area, as applicable.
g) A fare class code. An alphanumeric code used by the carrier(s) to reflect a carrier-specific tariff.
h) At least one of the following:
1) a fare and/or add-on element (to add, change or delete a fare and/or add-on). Where the filing
contains either a fare or add-on element (or both), it should also include:
i) a currency code (showing the applicable currency code);
ii) a one-way/round trip indicator (to identify whether the fare or add-on is one-way or round trip);
iii) where a change in fare or add-on amount is involved, the existing fare or add-on should also
be given, together with the percentage change;
2) a rule element (to add, change or delete a rule);
3) a routing element (to add, change or delete a routing for a specific fare);
4) a footnote element (to add, change or delete a footnote);
i) together with the proposed corresponding date(s) of effectiveness and expiry date(s), if any.
4.2 For a filing of general conditions, such as commission, baggage rules and fare construction rules, the
requirements in points f) and g) need not apply.
______________________
Appendix B
IATA CURRENCY CONVERSION SYSTEM
1. INTRODUCTION
Since airlines and air transport intermediaries (e.g. travel agents, freight forwarders) often have to make conversions
from one currency into another when calculating international passenger fares and cargo rates, IATA has developed
rules and procedures for making currency conversions. The IATA currency conversion system enables fares or rates to
be quoted in one single currency for multi-sector trips/shipment involving one or more airlines, or for trips originating in
another country.
2. CURRENCY CONVERSION SYSTEM FOR CARGO RATES AND CHARGES
Introduced by IATA in 1984, the system enables all cargo rates and charges to be expressed in local selling currencies.
When it is necessary to combine or compare cargo rates expressed in different currencies for rate construction purposes,
such rates are converted into a common unit, United States dollars, by using the exchange rates published by the IATA
Clearing House; the necessary calculations are performed in dollars.
3. CURRENCY CONVERSION SYSTEM FOR PASSENGER FARES
Under this system, which was introduced in July 1989, all IATA passenger fares are established and quoted in the
currency of the country where passengers commence their travel, except in some countries and territories with relatively
weak currencies where fares are established in U.S. dollars instead. A traveller may pay the fare in local currency or in
some other acceptable currency based on conversion at the bank exchange rate. For ticket sales made outside the
country where travel actually commences (i.e. “foreign” sales), the fare in that country’s currency is converted into the
currency of the country of sale at the bank exchange rate on the day the ticket is issued (see example 1). Where a trip
involves a combination of different currency fares, each fare is converted into the currency of the country of
commencement of travel by using the IATA Rate of Exchange (IROE) against the U.S. dollar (see example 2). These
rates, as mentioned on the IATA Exchange Rates Services website, provide monthly updates of IATA currency rates of
exchange used by the industry for fare/rate construction. They are built based on the average of the five banking days
ending on the 10th of each month. However, if a currency weakens or strengthens against the U.S. dollar by more than
10 per cent during the period, a new exchange rate is issued for that currency.
App-B-1
App-B-2 Manual on the Regulation of International Air Transport
4. EXAMPLES OF CURRENCY CONVERSION FOR PASSENGER FARES
The following two simple examples illustrate how the IATA system works.
Example 1 — Foreign sale
A passenger in Montréal buys a New York to London ticket:
Local fare (in Canadian dollars) = New York-London local fare (in U.S. dollars converted into Canadian
dollars at the bank exchange rate on the day the ticket is issued).
Example 2 — A combination of different currency fares
A passenger in Montréal buys a Montréal-London-Tokyo-Sydney (A-B-C-D) ticket (in the absence of a through fare):
Local fare (in Canadian dollars) = A to B local fare (in Canadian dollars) + B to C local fare (in U.K. pounds
sterling converted into Canadian dollars using the IATA exchange rate) + C to D local fare (in Japanese yen converted
into Canadian dollars using the IATA exchange rate).
______________________
Appendix C
PRORATING
1. Many international journeys by passengers and shipments of cargo involve transportation on more than
one air carrier at a single through fare or rate. This creates a need for a method of “prorating” revenues, i.e. allocating
total revenues earned for the carriage of passengers or freight between origin and destination among two or more air
carriers which provide the transportation for different segments of a journey.
2. To facilitate such interline journeys and to reduce the administrative burden of revenue-sharing procedures
on airlines, two Multilateral Proration Agreements have been developed by the airline industry, one for passengers and
one for cargo, which together provide revenue allocation rules for interline fares and rates worldwide. The Prorate
Agency’s terms of reference are specified in the Prorate Agency Agreement, and its administrative expenses funded
directly by airlines signatory thereto. The agreements are open to all airlines operating scheduled services.
3. The prorate agreements, as voluntary private commercial agreements which do not set or modify tariffs but
apply agreed rules on sharing revenue derived from approved tariffs, are not filed with governments for approval.
4. The agreements allocate revenues in basically two ways: by using solely prorate factors based on distance
and costs (referred to as straight rate proration) or by using the factors in conjunction with provisos or requirements filed
by individual airlines. These provisos or requirements specify a share for the filing airline (a percentage or a stated
amount) to be deducted from the amount to be prorated before the application of the prorate factor.
5. A minimum prorate rule is used in conjunction with provisos and requirements to ensure that an airline
performing a segment will receive a certain minimum amount equivalent to about 30 per cent of the applicable fare for
the segment it operates.
6. The prorate agreements also contain a number of associated rules on how the prorate factors are to be
applied, for example, in the case of stopovers, discounts for infants, voluntary and involuntary re-routings, and round
trips.
7. In cases where an airline is not a member of the prorate agreements, bilateral arrangements between
concerned airlines are made for the division of revenues derived from interline transportation.
— END —
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Manual on the Regulation of

Third Edition, 2018

Approved by and published under the authority of the Secretary General

INTERNATIONAL CIVIL AVIATION ORGANIZATION

Third Edition, 2018

Approved by and published under the authority of the Secretary General

INTERNATIONAL CIVIL AVIATION ORGANIZATION

For ordering information and for a complete listing of sales agents

Third edition, 2018

Doc 9626, Manual on the Regulation of International Air Transport

All rights reserved. No part of this publication may be reproduced, stored in a

Amendments are announced in the supplements to the Products and

RECORD OF AMENDMENTS AND CORRIGENDA

No. Date Entered by No. Date Entered by

BASIC COMPOSITION OF THE MANUAL

FUNCTIONS AND SCOPE OF THE MANUAL

WHAT IS NEW IN THE THIRD EDITION

PART I — National regulation ......................................................................................................................... I-(i)

Chapter 1. Introduction to national regulation ........................................................................................... I-1-1

Chapter 2. Process of national regulation .................................................................................................. I-2-1

2.1 Introduction..................................................................................................................................... I-2-1

Chapter 3. Structure of national regulation ................................................................................................ I-3-1

3.1 Introduction..................................................................................................................................... I-3-1

PART II — Bilateral regulation ........................................................................................................................ II-(i)

Chapter 1. Introduction to bilateral regulation ........................................................................................... II-1-1

1.1 General........................................................................................................................................... II-1-1

Chapter 2. Process of bilateral regulation .................................................................................................. II-2-1

2.1 Introduction..................................................................................................................................... II-2-1

Chapter 3. Structure of bilateral regulation ................................................................................................ II-3-1

3.1 Introduction..................................................................................................................................... II-3-1

4.1 Introduction..................................................................................................................................... II-4-1

Chapter 5. Types of international air services negotiations ..................................................................... II-5-1

PART III — Multilateral regulation .................................................................................................................. III-(i)

Chapter 1. Introduction to multilateral regulation ..................................................................................... III-1-1

1.1 General........................................................................................................................................... III-1-1

Chapter 2. Process of multilateral regulation ............................................................................................ III-2-1

2.1 Introduction..................................................................................................................................... III-2-1

Chapter 3. Structure of multilateral regulation .......................................................................................... III-3-1

3.1 Introduction..................................................................................................................................... III-3-1

4.1 Introduction..................................................................................................................................... III-4-1

Chapter 5. International Civil Aviation Organization (ICAO) ..................................................................... III-5-1

5.1 Introduction..................................................................................................................................... III-5-1

Chapter 6. Worldwide intergovernmental organizations .......................................................................... III-6-1

6.1 Organs of the United Nations ......................................................................................................... III-6-1

Chapter 7. Regional intergovernmental civil aviation organizations ....................................................... III-7-1

7.1 Africa .............................................................................................................................................. III-7-1

8.1 Introduction..................................................................................................................................... III-8-1

Chapter 9. Major air transport industry organizations .............................................................................. III-9-1

9.1 International Air Transport Association (IATA) ............................................................................... III-9-1

Chapter 10. Non-governmental organizations ........................................................................................... III-10-1

10.1 Introduction..................................................................................................................................... III-10-1

PART IV — Regulatory content ...................................................................................................................... IV-(i)

Chapter 1. Introduction to regulatory content ........................................................................................... IV-1-1

Chapter 2. Basic market access .................................................................................................................. IV-2-1

2.1 Introduction..................................................................................................................................... IV-2-1

Chapter 3. Air carrier capacity..................................................................................................................... IV-3-1

3.1 Introduction..................................................................................................................................... IV-3-1

Chapter 4. Air carrier tariffs ......................................................................................................................... IV-4-1