RESTRICTEDWORLD TRADE
ORGANIZATIONS/C/W/163/Add.3
13 August 2001
(01-3989)
Council for Trade in Services
DEVELOPMENTS IN THE AIR TRANSPORT SECTOR SINCE THE CONCLUSION OF
THE URUGUAY ROUND
PART FOUR
Background Note by the Secretariat
Addendum
This background note provides additional information about developments in the air transport
sector since the conclusion of the Uruguay Round.  The first part discusses the Freedoms of the Air,
while the second part focuses on bilateral, plurilateral and multilateral agreements.S/C/W/163/Add.3
Page 2
TABLE OF CONTENTS
A. INTRODUCTION ............................................................................................................................4
B. FREEDOMS OF THE AIR ................................................................................................................4
1. Operational Freedoms:  First and Second Freedoms............................................................5
2. Traffic rights ............................................................................................................... ............10
(a) Introduction:  The gene sis of traffi c righ ts ...............................................................................1 0
(b) Third and Fourth Freedoms ................................................................................................... ...11
(c) Fifth Freedom ............................................................................................................... ............13
(d) So-called "Six th Freedom" ................................................................................................... ....14
(e) So-called "Sev enth Freedom" ................................................................................................. ..16
(f) So-called "Eig hth Freedom" .................................................................................................. ...16
(g) So-called "Nin th Freedom"................................................................................................... ....17
C. OVERVIEW OF BILATERAL AGREEMENTS ..................................................................................17
D. DESIGNATION ............................................................................................................................19
1. Introduction................................................................................................................. ............19
2. Designation as part of  Operational Rights ...........................................................................19
3. Regulatory Developments ...................................................................................................... 20
E. TARIFFS ............................................................................................................................... ......25
1. Definition of Tariffs ........................................................................................................ ........26
2. Tariff deve lopment ........................................................................................................... ......26
3. Types and Characteristics of Tariffs.....................................................................................27
(a) Principal Types of Fares .................................................................................................... .......27
(b) Cargo Rates................................................................................................................. ..............27
(c) Charter  Rates............................................................................................................... ..............27
(d) IATA Tariff Co-ordination ................................................................................................... ....27
(e) Tariff Libe ralizat ion....................................................................................................... ...........29
F. CAPACITY ............................................................................................................................... ...30
G. C ONCLUSION .............................................................................................................................30
APPENDIX....................................................................................................................... ....................32S/C/W/163/Add.3
Page 3
Abbreviations used in this document
ACAC Arab Civil Aviation Commission
AEA Association of European Airlines
ALPA US Air Lines Pilot AssociationANSConf Conference on the Economics of Airports and Air Navigation Services
APEC Asia Pacific Economic Cooperation
ASA Air Service Agreement
ATRP Air Transport Regulation Panel (ICAO)
BA British Airways
BWIA West Indies Airways (formerly British West Indian Airways)
CARICOM Caribbean CommunityCEMT European Conference of Ministers of Transport
CLMV Cambodia, Laos, Myanmar, and Vietnam
COMESA Common Market for Eastern and Southern Africa
CRSs Computer Reservation Systems
DOT United States Department of TransportEC European  Communities
ECAC European Civil Aviation Conference
ECJ European Court of Justice (EU)
EU European Union
GATS General Agreement on Trade in Services (WTO)GATT General Agreement on Tariffs and Trade (WTO)
IASTA International Air Services Transit Agreement
IATA International Air Transport Association
ICAO International Civil Aviation Organization
ITF International Transport FederationKLM Royal Dutch Airlines
NGMTS Negotiating Group on Maritime Transport Services (WTO)
OECD Organization for Economic Cooperation and Development
OWNCO Task Force on Ownership and Control  (ECAC)
PICAO Provisional ICAO
SAM Australia-New Zealand Single Aviation Market
SAR Special Administrative RegionSAS Scandinavian Airlines
SEA Single European Area
TCAA Transatlantic Common Aviation Agreement
ULD Unit Loading Device
US United StatesWTO World Trade OrganizationS/C/W/163/Add.3
Page 4
A. INTRODUCTION
1. Focussing on tariffs, capacity, designation, and 'other standard elements', this document seeks
to trace the significant changes that have occurred over the past number of years and to indicate how
liberalization is occurring.1  For this purpose, both standard and actual bilateral agreements have been
selected to discuss the relevant articles that are usually included.  Standard or framework agreementsare not bilateral agreements between two States, but rather define structure and general content that
will be fleshed out in bilateral negotiations.
2. Compared to Job Number 2451, the presentation and format in this document will be altered
to comply with the standard framework in th e Digest of Bilateral Air Transport Agreements , Doc
9511, 1988 (hereinafter referred to as Doc 9511).  This ensures consistency with accepted practices
throughout the sector and assists Members in identifying recent trends.  The structure used, which
complies with the accepted International Civil Aviation Organization (ICAO) standards, may alsoprove useful for any future discussions over commercial air transport services in the GATS.
B. 
FREEDOMS OF THE AIR
3. This section describes each of the Eight 'Freedoms' one-by-one, referring to the official ICAO
definition and providing concrete examples drawn from a study of the US Air Lines Pilot Association
(ALPA)2.  As far as possible and for the purpose of this note, peculiarities of the regulatory regimes
have been included and an attempt has been made to categorize the freedoms and to trace changes
between 1993 and 2000.
4. "Freedoms of the Air" are defined in the following chart:
                                                     
1 See Job Number 2451, S/C/W/59 and S/C/W/129.
2 October 2000 report of the ALPA's Global Aviation Strategy Group.S/C/W/163/Add.3
Page 5
Chart 1
Air Freedom Rights in Air Services Agreements
FIRST FREEDOM
To overfly one country en-route to another
Home country Country A Country B
SECOND FREEDOM
To make a technical stop in another country
Home country Country A Country B
THIRD FREEDOM
To carry freight and passengers from the home country to another country
Home country Country A
FOURTH FREEDOM
To carry freight and passengers to the home country from another country
Home country Country A
FIFTH FREEDOM
To carry freight and passengers between two countries by an airline of a third
country on route with origin / destination in its home country Home country Country A Country B
SIXTH FREEDOM
To carry freight and passengers between two countries by an airline of a third 
country on two routes connecting in its home country Country A Home country Country B
SEVENTH FREEDOM
To carry freight and passengers betweeen two countries by an airline of a third 
country on a route with no connection with its home country Home country Country A Country B
EIGHTH FREEDOM OR CABOTAGE
To carry freight and passengers within a country by an airline of another
country on a route with origin / destination in its home country Home country Country A
TRUE DOMESTIC
To carry freight and passengers within a foreign country with no connection
 with the home country Home country Country A
Source:  Association of European Airlines/European Commission/OECD.
1. Operational Freedoms:  First and Second Freedoms
5. The First Freedom is defined by the ICAO Manual on the Regulation of International Air
Transport (hereinafter referred to as Doc 9626) as "the right or privilege, in respect of scheduled
international air services, granted by one State to another State or States to fly across its territorywithout landing".
6. The Second Freedom is defined in Doc 9626 as "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".3
                                                     
3 Doc 9626, page 4.1-5.S/C/W/163/Add.3
Page 6
7. The following considerations suggest that the First and Second Freedoms have a particular
status, different from the other freedoms:
(i) They are not considered as traffic freedoms by ICAO but as "operational" freedoms
since no commercial traffic is involved;4
(ii) They may not be covered by the definition of traffic rights in the relevant GATS
Annex which states that the right has to be exerted for "remuneration or for hire".
(iii) They are not generally dealt with in bilateral agreements, but in a quasi-universal
multilateral agreement, namely the 1944 ICAO International Air Services Transit
Agreement (IASTA).  The relevant provisions are in essence similar to those of
Article V of the GATT.
8. The IASTA has been ratified, as of 4 October 2000, by 118 States, 17 of which have ratified
during the last five years.  The complete list of Members is contained in Table A1 (Annex).
9. ICAO considers universal adherence to the IASTA as an essential policy objective.  The
ICAO Assembly has urged States to ratify the Transit Agreement on a number of occasions, andcontinues to do so as a permanent policy in Resolution A32-17.  The 1994 World-wide Air Transport
Conference in its Recommendation, AT Conf/4, al so called for universal adherence to, and
implementation of, the Agreement.
10. The substantive provisions of the IASTA warrant closer attention;  in Table 1 they are
compared to similar provisions contained in the GATT (transit) and GATS (denial of benefits,security exception).
                                                     
4 Note:  traffic rights are considered to be part of the Third to Eighth Freedoms (Doc 9626 , page 4.1-8).S/C/W/163/Add.3
Page 7Table 1
A Comparison between IASTA, GATT and GATS
International Air Services Transit Agreement
Substantive provisionsComparable GATT and GATS provisions Observations
Article I
Section 1
Each Contracting State grants to the other Contracting States the
following freedoms of the air in respect of scheduled international air
services:
1) the privilege to fly across its territory without landing;
2) the privilege to land for non-traffic purposes.GATT Article V-1:  "Goods (including baggage), and also vessels and
other means of transport, shall be deemed to be in transit across the
territory of a contracting party when  the passage across such territory,
with or without trans-shipment, warehousing, breaking bulk, or change inthe mode of transport, is only a portion of a complete journey beginning
and terminating beyond the frontier of the contracting party across whose
territory the traffic passes.  Traffic of this nature is termed in this Article
"traffic in transit".
GATT Article V-2:  "There shall be freedom of transit through the
territory of each contracting party, via the routes most convenient ofinternational transit, for traffic in tran sit to or from the territory of other
contracting parties.  No distinction shall be made which is based on the
flag of vessels, the place of origin, departure, entry, exit or destination, oron any circumstances relating to the ownership of goods, of vessels or of
other means of transport."
The privileges of this section shall not be applicable with respect to
airports utilized for military pur poses to the exclusion of any
scheduled international air services.
In areas of active hostilities or of military occupation, and in time of
war along the supply routes leading to such areas, the exercise ofsuch privileges shall be subject to the approval of the competent
military authorities.GATS Article I.3(c):  governmental service carve-out.
GATT Article XXI, GATS Article XIV bis:  National security
exceptions.
Section 3
A Contracting State granting to the airlines of another Contracting
State the privilege to stop for non-traffic purposes may require such
airlines to offer reasonable commercial service at the points at whichsuch stops are made.
Such requirement shall not involve any discrimination between
airlines operating on the same route, shall take into account thecapacity of the aircraft, and shall be exercised in such a manner as
not to prejudice the normal operations of the international air services
concerned or the rights and obligations of a Contracting State.None
NoneNeither GATT nor GATS contains such
"hitch hiking" provisions.S/C/W/163/Add.3
Page 8International Air Services Transit Agreement
Substantive provisionsComparable GATT and GATS provisions Observations
Section 4
Each Contracting State may, subject to the provisions of this
Agreement,
1) Designate the route to be followed within its territory by
any international air service and the airports which anysuch service may use;
2) Impose or permit to be imposed on any such service just
and reasonable charges for the use of such airports and
other facilities;
3) These charges shall not be higher than would be paid for
the use of such airports and facilities by its national aircraft
engaged in similar international services…GATT Article V-2:  "there shall be freedom of transit through the
territory of each contracting party, via the routes most convenient for
international transit ..." and V-3 "any contracting party may require thattraffic in transit through its territory be entered at the proper custom
house…"
GATT Article V-4:  "all charges and regulations imposed by contracting
parties on traffic in transit to and fr om the territories of other contracting
parties shall be reasonable having regard to the conditions of the traffic".
GATT Article V-5:  "with respect to all charges, regulations and
formalities in connection with transit each contracting party shall accord
to traffic in transit to or from the territory of any other contracting party
treatment no less favourable than the treatment accorded to traffic in
transit to or from any contracting party".
GATT ArticleV-6:  "Each contracting party shall accord to products
which have been in transit through the territory of any other contractingparty treatment no less favourable than that which would have beenaccorded to such products, had they been transported from the place of
origin to their destination without going through the territory of such
other contracting party".The GATT is apparently more liberal in terms
of choice of routes, which may help to
accommodate technical air traffic constraints.In addition, the air traffic corridors are ipso
facto  the "most convenient routes".
The IASTA imposes a national treatment
obligation, while the GATT only imposes an
MFN obligation.
The IASTA has no provision equivalent to
this standard of treatment based on an
alternative direct route.  The relevance ofsuch a provision for air transport seems
obvious.
Section 5
Each Contracting State reserves the right to withhold or revoke a
certificate or permit to an air transport enterprise of another State inany case where it is not satisfied that substantial ownership andeffective control are vested in nationals of a Contracting State, or in
case of failure of such air transpor t enterprise to comply with the
laws of the State over which it operates, or to perform its obligations
under this Agreement.GATS Article XXVII (denial of benefits).S/C/W/163/Add.3
Page 9
11. In addition to IASTA, certain provisions of the Chicago Convention, which has 185 members
(compared with the 118 members of IASTA), also regulate First and Second Freedoms.  Article 5 of
the Chicago Convention grants to non-scheduled flights, inter alia  First and Second Freedoms.
"Right of non-scheduled flight:
Each Contracting State agrees that all aircraft of the other Contracting States, being aircraft
not engaged in scheduled international air services shall have the right, subject to the
observance of the terms of this Convention, to make flights into or in transit non-stop across
its territory and to make stops for non-traffic purposes without the necessity of obtaining prior
permission, and subject to the right of the State flown over to require landing. Each
Contracting State nevertheless reserves the right, for reasons of safety of flight, to requireaircraft desiring to proceed over regions which are inaccessible or without adequate airnavigation facilities to follow prescribed routes, or to obtain special permission for such
flights.  [Emphasis added]
Such aircraft, if engaged in the carriage of passengers, cargo, or mail for remuneration or hire
on other than scheduled international air services, shall also, subject to the provisions ofArticle 7, 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".
5
12. In a similar vein, Article 15 of the Chicago Convention, in its last sentence, stipulates:  "No
fees, dues or other charges should be imposed by an y Contracting State in respect solely of the right
of transit or entry into or exit from its territory of any aircraft of a contracting state or persons or
property thereon".6
13. The question of transit through sovereign airspace has always been politically sensitive.
Dispute settlement Articles of the Chicago Convention (Articles 84-88) have been invoked in fiveinstances to date, three of which concerned disputes over sovereign airspace infringement.  The three
cases were:  India versus Pakistan 1952-1953, Paki stan versus India 1971-1976, Cuba versus United
States 1996-1998, and all three were settled through diplomatic negotiations.
7  Also it is interesting to
note that four countries with the largest airspace (Canada8, Brazil, Russian Federation and China9) are
not members of IASTA.
14. The charging practices of the Russian Federation, particularly across Siberia and on routes
between Western Europe and the Far East, have been the object of repeated challenges and démarches
by ICAO and WTO Members, including the European Civil Aviation Conference (ECAC) and
European Union Member States, and airlines.  The Association of European Airlines (AEA) estimate
the payments to be approximately €220 million per year.  This is considered to be inconsistent with
the ICAO charging policy and Article 15 of the Chicago Convention.  The Council of the European
Union expressed serious concerns about this system .  The ECAC also challenged this system on two
separate occasions in ICAO, first in the 1999 General Assembly (deferred working paper) and then at
an ANSConf (Conference on the Economics of Airports and Air Navigation Services) meeting
                                                     
5 The Chicago Convention, Article 5.
6 An interpretation of this provision is contained in paragraph 94 of document S/C/W/163/Add.2.
7 ICAO document C-DEC154/16, 22 June 1998.
8 Canada withdrew from IASTA in 1988.
9 Excluding Hong Kong, China.S/C/W/163/Add.3
Page 10
(information paper ANSConf WP/73, dated 8 June 200010).  Another ECAC document11 even
mentions the WTO as an option to solving this problem, should ICAO fail.
15. The principles laid down by Article V of the GATT are a transposition of the pre-existing
Barcelona Convention of 1921.  At the time of drafting the GATT, it was decided not to include the
operation of aircraft in transit as this subject would be dealt with by ICAO, but rather to cover onlythe air transit of goods including baggage.  This explains the actual wording of Article V-7 of the
GATT
12:  "The provisions of this Article shall not apply to the operation of aircraft in transit, but shall
apply to air transit goods (including baggage)."
16. Members might wish to discuss this exclusion in view of:  (i) the wider actual and prospective
membership of WTO as compared to the IASTA agreement;  (ii) discrepancy created between air
transportation of goods and the operation of aircraft in transit;  and (iii) the effectiveness of the
dispute settlement systems of ICAO and GATT-WTO.
2. Traffic rights
(a) Introduction:  The genesis of traffic rights
17. It may be worth recalling that the drafters of the Chicago Convention envisioned a
multilateral system with a complete opening of routes.13  The International Air Transport Agreement,
adopted in 1944 in parallel to the IASTA, reconfirmed the first two Freedoms, and in addition,stipulated:
- "the right or privilege, in respect of scheduled international air services, granted from
one State to another State to put down, in the territory of the first State, traffic coming
from the home State of the carrier (3
rd Freedom);
- the privilege, in respect of 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 (4th Freedom);
- the privilege to take on passengers, mail and cargo destined for the territory of any
other contracting state and the privilege to put down passengers, mail and cargo
coming from any such territory (Fifth, Sixth and Seventh Freedoms)".14
18. The International Air Transport Agreement, however, was ratified by only 19 States, 8 of
which later withdrew.
19. The multilateral framework was completed in 1947 by the drafting of the Multilateral
Agreement on Commercial Rights in International Civil Air Transport  and contains provisions
relating to market access, capacity, and tariffs.  The draft Agreement envisaged free access to markets
subject to four months' notice (Articles 6-9), relatively flexible capacity control operated solely by the
                                                     
10 See http://www.icao.int/icao/en/atb/ansconf2000/docs/wp73e.pdf
11 DGCA/108-DP/8, dated 1 December 1999.
12 For the negotiating history and interpretation of Article V, see Analytical Index , 1995 edition,
Volume 1, pages 214 to 217 and for Article V-7, EPCT/c.II/54/rev1, page 7.
13 See document S/C/W/59, paragraphs 73 to 78.
14 Doc 9626, page 4.1-8 and 4.1-9.S/C/W/163/Add.3
Page 11
state of origin (Articles 10-13), provisions on unfair pricing practices (Articles 14-16), and a system
of dispute settlement, notably for tariff questions. 15
20. In terms of routes, the draft confirmed the multilateral granting of Third, Fourth, Fifth, Sixth,
and Seventh Freedoms.  The following portion of the draft text is still relevant today:  "…if nations,
each sovereign on its own territory, are left to bargain the exchange of rights in international civil airtransport, in limiting and varying degrees, the bargainings will be sources of conflicts.  Such
bargainings will be discriminatory in nature.  A regulated freedom of the air under which all
participating states may exercise commercial rights under rules which shall be the same for all and
which shall include proper safeguards as to capacity, routes and methods of competition is the only
solution".
16
21. This translated into a simple clause, contained in Chapter II ("Freedoms of the Air") Article 6
of the PICAO (Provisional ICAO) reads:  "subject  to the provisions of this agreement, each
contracting state shall have the right that its duly authorized airlines shall be entitled to fly their
aircraft across the territory of any contracting stat e without landing and to make in such territory,
stops for non traffic purposes and for the purpose of putting down and taking on passengers, mail and
cargo".17
22. In November 1947, a final attempt was made in Geneva by the Commission for a Multilateral
Agreement on Commercial Rights in Internationa l Civil Air Transport to find a formula for a
multilateral traffic rights solution.  This failed a nd ICAO Members turned toward bilateral solutions.18
(b) Third and Fourth Freedoms
23. The Third Freedom is defined as "the right or privilege, in respect of international scheduled
air services, granted by one State to another State to put down in the territory of the first State, trafficcoming from the home State of the carrier".
19
24. The Fourth Freedom is defined as "the right or privilege, in respect of international air
scheduled services to take on, in the territory of the first State, traffic destined for the home State of
the carrier".20
25. Aero Accords, a consulting firm, has conducted a study on the evolution of these routes.
Although based on a comparison of two periods (1966 - 1975 and 1986 - 1995) different from our
review period (1993 - 2000), it gives interesting resu lts.  The main tendencies identified in the study
remain valid.   These are long term trends and are based on large statistical samples of over 1000
agreements for each of the periods examined.  The results are summed up in Table 2.  (A comparable
sample by ICAO for 1993 - 1999 includes only 225 agreements and has not, up to now, been the
object of a similar analysis).
                                                     
15 Document PICAO (Provisional ICAO) 4014, A1-EC/1, March 1947, available from the WTO
Secretariat.
16 Ibid.
17 Ibid.
18 See in particular John Gunther, "Multilateralism in International Air Transport - The Concept and the
Quest", Annals of Air and Space Law, Vol. XIX, Part I, 1994, McGill University and Duane W. Freer "The
PICAO Years 1945-1947", ICAO Bulletin, No. 8, July 1986.
19 Doc 9626, page 4.1-8.
20 Ibid.S/C/W/163/Add.3
Page 12
Table 2
Gateway Access by Route
Number of
gateways1966-1975
(number)1966-1975
(per cent)1986-1995
(number)1986-1995
(per cent)
Single 764 72.3 731 60.5
Dual 129 12.2 163 13.5
Three 37 3.5 64 5.3
Four 11 1 14 1.2
Five 4 0.4 6 0.5
Six-ten 5 0.5 25 2.1
Over ten 2 0.2 6 0.5
All specificroutes952 90.2 1009 0.5
Multiple 80 7.6 180 14.9
Multiple implied 24 2.3 20 1.7
Non-specific
routes104 9.8 200 16.5
Total 1056 100 1209 100
Source:  Aero Accords
26. Between the two periods major changes took place:
(i) Proliferation of new and revised routes within established markets;
(ii) a movement away from the traditional single gateway format "from my major city to your
major city and vice versa" towards the exchange of additional gateways;  and
(iii) the use of the "non-specific route format", i.e. of clauses allowing traffic "from points in my
country to points in your country", has also nearly doubled (200 cases compared to 104).  It
now represents 16.5% of all cases against 9.8% in the preceding period.
27. In addition, several regional agreements contain provisions granting Third and Fourth
Freedom Rights (Table 3):
Table 3
Regional Agreements with Third and Fourth Freedom Rights
Andean
Pact
1991
(5 States)Caribbean
Community
(CARICOM)
1996
(14 States)Fortaleza
Agreement
1997
(6 States)Banjul
Accord
1997
(6 States)CLMV Agreement
1998
(4 States)COMESA
1999
(21 States)ACAC
1999
(16 States)
Yes When licenced
and with prior
notification;
day tours/air
taxis may be
subject touplift/direction
al conditions.Only on
routes not
being served
under
bilateral
agreements.For two
traffic points
in each State.No limitation on
3rd/4th freedom
traffic rights; no
limitations on eight
international
airports for origin,destination,
intermediate and
beyond points
within region.Up to two
daily flights
between any
city pair.  No
intra-
COMESAlimitations.Capacity will be
divided into a 60
/40 per cent
ratio by 2001.
No restrictions
by 2003.
Source:  ICAO.S/C/W/163/Add.3
Page 13
(c) Fifth Freedom
28. The Fifth Freedom is defined as "the right or privilege, in respect of scheduled international
air services, granted by one State to another State to put down and take on, in the territory of the first
State, traffic coming from or destined to a third State".21
29. Table 4 shows the number and proportion of agreements containing the granting of some
form of Fifth Freedom rights among the agreements notified to ICAO between 1993 and 1999.
Table 4
Number and Proportion of Agreements Granting  Fifth Freedom Rights among the Bilateral
Agreements deposited at ICAO from 1993 to 1999
1993 1994 1995 1996 1997 1998 1999Total
1993-
1999
Total number of
agreements in the year
concerned68
(100%)44
(100%)32
(100%)36
(100%)30
(100%)14
(100%)1
(100%)225
(100%)
Number of agreements
granting Fifth Freedomrights, among which:30
(44.1%)17
(38.6%)13
(40.6%)16
(44.4%)15
(50%)4
(28.5%)0
(0%)95
(42.2%)
(i) Number of
agreements grantinglimited Fifth
Freedom rights26
(38.2%)14
(31.8%)11
(34.3%)14
(38.8%)8
(26.6%)2
(14.2%)0
(0%)75
(33.3%)
(ii) Number of
agreements grantingFifth Freedom Rightswithout restrictions
on market access4
(5.9%)3
(6.8%)2
(6.3%)2
(5.6%)7
(23.4%)2
(14.2%)0
(0%)20
(8.88%)
(iii) Open Skies*0
(0%)0
(0%)1
(3.1%)1
(2.7%)4
(13.3%)1
(7.1%)0
(0%)7
(3.1%)
* An agreement granting unlimited Fifth Freedom rights is not necessarily an Open Skies Agreement.
For instance, such an agreement could restrict Third and Fourth Freedoms.
30. It is difficult to draw firm conclusions from this table.  First, the relevant sample covers
probably only half of the bilateral agreements signed during this period.  The ICAO database contains
approximately 1,700 agreements out of an estimated total of more than 3,000.  Please note that a
survey of ICAO data compiled by Aero Accords indicates that the average delay in the registration of
an air service agreement is about four years.22  Second, the numbers may be too small to be
representative of any trend.  Nevertheless, there is a relatively clear indication that the granting ofFifth Freedom rights is a relatively common feature,  contained in approximately 40% of the bilaterals
concluded in years with significant statistical data.  Further, agreements granting limited Fifth
Freedom account for a large majority (about four-fifths) of the cases.  Unfortunately, it was not
possible within the timeframe available to provide a more detailed typology of the agreements with
limitations distinguishing, for example, between highly restrictive, moderately restrictive and nearlyopen regimes.  Finally, it is worth noting that the agreements with unlimited Fifth Freedom Rights
(not prescribing any specific number of points as intermediate or beyond) are not limited to Open
Skies agreements, but may also involve, for example, staged liberalization.  Again, the relevant
numbers are too small to give a reliable picture.  However, there is evidence to suggest that open skies
                                                     
21 Ibid.
22 Airline Business, July 2000.S/C/W/163/Add.3
Page 14
agreements are clearly underrepresented in the ICAO sample of 225 agreements (7 versus 73 that
were recorded in Table 23, document S/C/W/163/Add.2).
31. The above information on bilateral agreements should be read in conjunction with Table 5 on
regional agreements containing Fifth Freedom provisions:
Table 5
Regional Agreements with Fifth Freedom Rights
Andean Pact
1991
(5 States)Caribbean
Community
(CARICOM)
1996
(14 States)Fortaleza
Agreement
1997
(6 States)Banjul Accord
1997
(6 States)CLMV
Agreement
1998
(4 States)COMESA
1999
(21 States)ACAC
1999
(16 States)
Fifth:  Yes Fifth:  To be
exchanged on a
reciprocal and
liberal basisbetweenmembers.Carriage of
Fifth Freedom
traffic
permitted onlywith consentof Statesconcerned.Fifth:  Yes,
unrestricted
where no 3
rd
and 4th
Freedom
operations;limited to 20%
of capacity
with 3rd/4th;reciprocal fornon-Africancarriers.Fifth:  No
limitation on
traffic.Fifth:
Unrestricted
where there are
no 3rd and 4thfreedomoperations.Initially, there
are 30-40%
capacitylimitations on 3
rd
and 4thFreedoms.Eventually there
will be no
restrictions.Fifth:  No
restrictions by
2005.
Source:  ICAO.
(d) So-called "Sixth Freedom"
32. Rights beyond Fifth Freedoms are traditionally named "so-called" x th Freedoms, since the
1944 Chicago Conference established only five Freedom s of the Air.  The Sixth Freedom is defined as
"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".23
33. After the Chicago Convention and the adoption of Bermuda I bilateral principles, States
began considering that there was an "ownership" by a pair 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. 24
34. As carriers' routes and traffic volume grew, so did the opportunities for airlines to attract
traffic between two foreign States via their home State.  This developed the concept of the so-called
Sixth Freedom of the Air.  The States affected by potential or actual diversion of "their" traffic by"homeland bridge carriers" sought to develop counter-strategies.  These strategies included:
(i) refusal to negotiate any routes to/from the homeland of the bridge carrier;
                                                     
23 Doc 9626, page 4.1-9.
24 Discussions about Bermuda I and Bermuda II bilateral agreements are a direct reference to the
structure of the actual bilateral agreements between the US and the UK.  Bermuda I became a standard that wasfollowed by other States in developing and signing bilateral air service agreements.  Bermuda I was signed in1946 and Bermuda II was signed in 1977.S/C/W/163/Add.3
Page 15
(ii) strict capacity limitations on the bridge carrier if such routes were established;
(iii) exclusion of the bridge carrier from discount tariffs authorized to its own carrier(s) in
traffic between the home territories;
(iv) prohibitions on offering or advertising any single-plane services on a so-called Sixth
Freedom basis in their country;
(v) implicit incentive by treating traffic having a "legitimate" stopover in the bridge
carrier's homeland for one or more days;  and
(vi) refusal to grant Fifth Freedom rights to the government of a bridge carrier or
limitations on the ability of the carrier to exercise such rights.
35. Generally, such strategies were only marginally successful for two reasons.  The natural
inclination of airlines to maximize profitable carriage by seeking traffic from all sources, and the
preference of consumers for the most convenient on-line connections.
36. However, there are geographic limitations on a carrier's ability to provide a "home-land
bridge".  In particular, the relevant markets must be situated on a reasonably direct route.  For
example, airlines based in Southern Africa, South America and Australia have virtually no "Sixth
Freedom" opportunities.  Carriers based in north-eastern Asia will find it relatively easy to attract
North American, East Asian, and Sout heast Asian traffic flows.  The geographic location of a carrier's
home base also plays a role in its ability to attract intraregional bridge traffic.  Thus, a carrier in
Western Europe is well placed to attract Baltic-Mediterranean traffic;  a carrier in North America
could attract traffic from Canada, Central American, and Caribbean destinations.
37. Aero Accords have noted that in an increasin g (although not specified) number of bilateral
agreements the Sixth Freedom was explicitly authorized as "points behind our country via our countryto your country".
25
38. Among the regional agreements, only two reportedly deal with the Sixth Freedom Rights and
only one explicitly:
Table 6
Regional Agreements with Sixth Freedom Rights
Fortaleza Agreement
1997
(6 States)CLMV Agreement
1998
(4 States)
Carriage of Fifth and Sixth Freedom traffic permitted only with
consent of States concerned.No limitation on Sixth Freedom traffic.  This is implicitly
recognized in traffic points description.
Source:  ICAO.
39. The WTO Secretariat is not aware of publicly available statistics on the Sixth Freedom.
Reporting of such traffic is hampered by its composite nature (the addition of a Fourth Freedombetween A and B and of a Third Freedom between B and C).  However, some States apparently do
provide relevant information.
                                                     
25 Quoted in Airline Business, July 2000.S/C/W/163/Add.3
Page 16
(e) So-called "Seventh Freedom"
40. The Seventh Freedom is defined as "the right or privilege, in respect of scheduled
international air services, of transporting traffic between the territory of the granting State and any
third State with no requirements to include on such operation any point in the territory of the recipient
State i.e. the services need not connect to or be an extension of any service to/from the home State ofthe carrier".
26
41. Among the 1,500 bilateral agreements deposited with ICAO, only one, New Zealand-Brunei
1999, contains full Seventh Freedom Rights for cargo and passengers.  Sixteen agreements provide
Seventh Freedom Rights for all-cargo.27  
42. The EU single aviation market, as well as the planned expansion, provides for the so-called
Seventh Freedom, while the Australia-New Zealand Single Aviation Market (SAM) grants Seventh
Freedom for cargo services.  As far as passengers are concerned, in a Memorandum of Understanding,dated 20 November 2000, the Ministers of the two countries "undertake to examine further the
introduction of seventh freedom traffic rights for passenger services by carriers of both parties in the
light of the ongoing development of a competitive aviation market".  The Memorandum also includes
an asymmetric MFN clause pertaining only to the granting of traffic rights to third parties by Australia
("in the event the airline(s) of a third party are granted traffic rights by Australia, then suchopportunities will be granted to the designated airline(s) of each party under this agreement".
28)
43. The new plurilateral Asia Pacific Economic Cooperation (APEC) agreement also foresees
Seventh Freedom for cargo.29  Regarding passengers, an option can be exercised in the form of an
additional protocol between interested parties.
(f) So-called "Eighth Freedom"
44. The Eighth Freedom or "consecutive cabotage" is defined as "the right or privilege, in respect
of scheduled international air services, of transp orting cabotage traffic between two points in the
territory of the granting State on a service which originates and terminates in the home territory of the
foreign carrier or (in connection with the so-called Seventh Freedom) outside the territory of the
granting state".30  A hypothetical example of this Freedom could be:  US-registered aircraft with a
flight originating in London (or New York) destined for Nice with the ability en route  to land and
pick up passengers in Paris.
45. The granting of the Eighth Freedom is even rarer than that of Seventh Freedom.  Among all
bilateral agreements, only one, the 1999 Brunei-New Zealand grants this freedom for both passenger
and cargo, but this possibility has not been exercised to date.
46. As far as regional agreements are concerned, this freedom has been in existence, and
exercised, in the EU single aviation market since 1 April 1997.  For instance, in November 1998 there
                                                     
26 Doc 9626, page 4.1-9.
27 USA / Singapore (1997), USA / El Salvador (1997), USA / New Zealand (1997), USA / Malaysia
(1997), USA / Chile (1997), USA / Ne therlands Antilles (1997), USA / Uzbekistan (1998), USA / Peru (1998),
USA / UAE (1999), USA / Tanzania (1999), USA / Portugal (1999), USA / Slovakia (2000), USA / Ghana
(2000), USA / Burkina (2000), USA / Gambia (2000), New Zealand / Singapore (1997).
28 "Memorandum of Understanding on Open Skies Agreement Between Australia and New Zealand",
see http://www.mft.govt.nz/foreign/regions/australia/austopenskies.html.
29 The United States, Chile, Brunei, New Zealand and Singapore, all APEC Members, signed this
agreement on 1 May 2001.
30 Doc 9626, page 4.1-10.S/C/W/163/Add.3
Page 17
were 22 cabotage routes operated by EU carriers.31  Nevertheless, EU carriers have preferred entering
other EU markets through take-overs of small national carriers (e.g. British Airways and TAT) or
through the creation of local subsidiaries (e.g. Deutsche BA).  In both instances, use is being made of
the complete removal of ownership restrictions, inside the EU, for Community-registered carriers.
47. The Australia-New Zealand SAM also allows for the exercise of the Eighth Freedom.  Some
"like-minded" APEC countries are pushing for its inclusion, at least as an option, in the form of an
additional protocol of Eighth Freedom rights.  The draft Transatlantic Common Aviation Agreement
(TCAA) also contains provisions for Eighth Freedom rights.
(g) So-called "Ninth Freedom"
48. The Ninth Freedom or "stand alone cabotage" is defined as "the right or privilege of
transporting cabotage traffic of the granting State on a service performed entirely within the territory
of the granting State."32  An example of this would be that a French registered aircraft could pick up
passengers in New York destined for Los Angeles.
49. No agreement registered in ICAO contains a Ninth Freedom and no regional agreement
contains it either, except for the EU single aviation market (and its extensions) and the Australia-
New Zealand SAM.
C. OVERVIEW OF BILATERAL AGREEMENTS
50. This section provides short summaries of each type of standard agreement.  In addition, Table
A2 (Annex) gives a tabular overview of these agreements based on ICAO's standard description.33
Since the steps taken by the EU to create a common aviation area do not fit conceptually with thisdescription, they are described separately in Table A3 (Annex).
51. Air Services Agreements have started from a very restrictive approach with severe market
access limitations, toward gradually embracing more liberal provisions within the bilateral
framework.  These include increased freedom for designated carriers to choose the entry point and the
destination country, freedom to choose the gauge of aircraft,
34 and an increased ability to utilise
behind and beyond destination points.35  Nevertheless, bilateral air transport traffic rights remain the
modus operandi  throughout most of the world.
52. The Digest of Bilateral Air Transport Agreements (Doc 9511), was prepared in response to
the Assembly Resolution A24-11 that called upon the ICAO Council "to prepare and maintain
reference files on the main provisions of existing bilateral agreements".  It includes detailed
explanatory notes on the main elements and also a description of all the provisions in a two-part
format;  part A provides information on:  (i) identification and applicability;  (ii) administrative
                                                     
31 Aviation Week and Space Technology, 9 November 1998.
32 Doc 9626, page 4.1-10.
33 The comparison of the GATS and bilateral ASAs is an expansion of the chart drawn up by the US
Office of International Aviation in its document "Aviation Issues in GATS 2000 and Other Fora", Appendix C"Air Transport Bilateral Provisions and Corresponding GATS General Obligations."  It is not intended to
interpret the scope of the Air Transport Annex.
The second column (entitled ICAO Description) of Table A2 (Annex), reflects the amount of detail and
specificity that has traditionally guided the operational structure of the industry, intended to safeguard nationalflag carriers through capacity arrangements, tariff articles, designation and capacity.
34 Change of gauge specifies inter alia  what type of aircraft equipment may be used on designated
routes.
35  ICAO Doc. wp/2;4;5;7  Paris, 1 February 2000.S/C/W/163/Add.3
Page 18
clauses;  (iii) tariff clause;  (iv) capacity clause;  and (v) the grant of rights;  Part B includes
provisions governing the route exchanges between the signatories.
53. The comparability of individual agreements is limited by a lack of standardization of wording
in bilateral agreements.  Also, similar terminology can reflect different intentions and take on
different meanings, and particular elements can be included by the parties in a variety of ways.  Inview of these factors, and because the purpose is to identify only the existence or absence in an
agreement of specified elements, the codification of agreements has been governed generally by a
broad interpretative approach (Doc 9511 En-viii).  It provides the basis for a comparison between the
US Standard Post 1977, the Standard Open Skies Agreements,  the recently signed five APEC States
Plurilateral, the  Australia-New Zealand SAM,  and the  Australia-New Zealand Open Skies Agreement.
54. The Standard Post 1977 Bilateral Agreement (US) is made up of eighteen Articles and two
Annexes in line with Part A and Part B of the IC AO structure.  Articles 1 - 18 specify all standard
elements, including: definitions, market access, tariffs, security and settlement of disputes.  Annex I
addresses route designation, geographic limitation, and change of gauge.  Annex II relates to charter
services.  The Standard Post 1977 Agreement  is the most restrictive, in terms of market access and
regulatory oversight, of the agreements listed in Table A2 (Annex).
55. The Standard Open Skies Agreement (US) reta ins most of the elements included in the
Standard Post 1977 Agreement.  However, there are also significant changes:  all articles have been
revised either in drafting or in substance (in some cases, text has been added, deleted or consolidated;
an article pertaining to provisions for multilateral agreements has been dropped).  Both Annexes have
been substantively altered and a third Annex has been included to cover "principles of non-
discrimination within and competition among co mputer reservation systems" in open skies
agreements.  The most substantive changes are to be found in the market access area:  increased
freedom over pricing, designation and routes.
56. The Australia-New Zealand Single Aviation Market, and the new  Open Skies Agreement  are
liberal in virtually all market access areas, except foreign ownership restrictions on the flag carriers.
Airlines may be established in both countries by nationals of the other, and there are no capacity orpricing restrictions.  If foreign ownership restrictions were to be lifted, this Agreement could be
considered to establish a true common aviation market.
57. The five APEC Plurilateral retains many elements of the Open Skies Agreements.  In
particular, the designated carriers have no capacity limitations, route or frequency restrictions, and
retain independence over pricing.  The actual fo rmat of the text largely conforms to traditional
bilateral agreements.
58. The Agreement supersedes the bilateral arrangements previously governing air transport
arrangements of the present signatories;  its Annex opens to other APEC members the opportunity to
participate in the future.  There is no alteration or relaxation in the prohibition of cabotage rights or
wet leasing.
59. The most important change, representing a significant departure from the post-1977
framework, relates to the conditions for foreign ownership and effective control of a designatedcarrier.  The signatories have omitted the standard term that a carrier must be both substantially
owned and effectively controlled by the designating State.  Instead, Article 3 (Designation and
Authorization) speaks about "effective control", "incorporation in" and "principle place of business"
by the designating State.  However, it is important to note that the underlying national legislative
conditions, which stipulate foreign ownership levels have not been altered, and continue to be set byeach State.S/C/W/163/Add.3
Page 19
60. The liberalization of the EU's air transport sector marks the first significant departure by
individual States from a bilateral regulatory framework.  Table 8 highlights the incremental steps
undertaken to ensure a smooth transition to a quasi-domestic regulatory environment.  The length of
the transition process was intended to afford carriers  sufficient time to adjust their operations to an
increasingly competitive environment.
61. The first liberalization 'package' (1988) was comprised of four elements:  (i) extension of the
applicability of Articles 85 and 86 in the Single European Area (SEA) to civil aviation in general;
(ii) block exemption from EU competition law for airline co-operation agreements, Computer
Reservation Systems (CRSs), and ground handling;  (iii) liberalized fare regulation;  and (iv) capacity
and market access rules.  The second package (1990) changed the Freedoms of Flight, route access,
and entry and exit within the European market.  Third and Fourth Freedoms were granted between allairports within Europe;  Fifth Freedom rights were limited to fifty per cent capacity (up from thirty in
the first package)
36.  The third and final 'package' completed the liberalization process with the
implementation of full cabotage, and the removal of foreign ownership restrictions.  However, the
liberalization process did not extend to relations out side the European Union.  Member States have
retained authority over third-country bilateral arrangements, and airspace.  The Commission has,however, initiated a case before the European Court of Justice (ECJ) against eight member States on
this subject.  The hearings began in May 2001 and a decision is expected by November-December of
this year.
D. 
DESIGNATION
1. Introduction
62. Designation is granted by a State to an airline to conduct international air services under the
terms of bilateral or plurilateral agreements.  Traditionally, state flag carriers were designated to
operate routes covered by the bilaterals.  The standard practice was then to specify routes, frequency
and aircraft type that the carriers were permitte d to operate.  Designation is included in the
Administration Articles (see Table 9) and is always present in bilateral or plurilateral agreements.
2. Designation as part of Operational Rights
63. An operational right is a market access right specifying how many carriers may be
designated;  how aircraft may be operated;  and what aircraft types, parts of aircraft, or substitute
conveyances may be employed over an agreed route or routes.  In practice, operational rights may be
found in Air Services Agreements (ASA), in the route Annexes, in various articles or in side
understandings, and may or may not be implicitly included.
64. The most basic operational rights are conferre d by carrier designation.  Designation is the
formal diplomatic notification by one State to another of the name of an air carrier chosen to use
market access rights received by that State under its ASA.  Depending upon the terms of the
agreement, a designation may cover any or all market access rights on a particular route, or a
particular part of a route.
65. Single designation37 is the right to designate only one carrier.  Dual designation is the right to
designate up to two carriers.  Multiple controlled designation is the right to designate a specified
number of carriers per route, per gateway, or per route sector.  Multiple unlimited designation is the
                                                     
36 See Chart 1, Air Freedom Rights in Air Services Agreements.
37 Single designation is when one flag carrier from each country is permitted to operate a specific route.S/C/W/163/Add.3
Page 20
right to designate any number of carriers.  In each case there is an implicit right for carrier
substitution.
66. Bilateral agreements usually contain the explicit right for one State to reject the other's
designation only on grounds that the designated carri er is not substantially owned and effectively
controlled by nationals of the designating State.  Carrier choice is otherwise considered a sovereignright of the designating State.  Bilaterals 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 normally are limited to failure to satisfy the requirement that substantial
ownership and effective control of the airline be vested with the designating State or its nationals, or
failure to comply with the national laws and regulations of the State revoking, suspending, or
conditioning the operating authorization.
67. Such provisions are important in the context of transnational mergers.  For instance, the
proposed KLM-British Airways merger in 2000 would have implied that KLM became British-
controlled, since the capitalization of BA was approximately four times that of KLM.  The US
Department of Transport indicated that if such a merger were to take place, it would deny KLM the
routes between the Netherlands and the United States on the grounds that KLM would no longer be
under Dutch control and therefore in violation of the 1992 US-Netherlands Agreement.
3. Regulatory Developments
68. Historically, the treatment of market access in air transport was subject to similar mercantilist
considerations as virtually all areas of trade.  In addition, of course, strong policy considerations
related to national security, safety, et cetera  came into play.  There were also, however, early attempts
to establish a multilateral framework.  The 1947 draft "Multilateral Agreement on Commercial Rightsin International Civil Air Transport"
38 contained (in Article 9) a relatively open
designation/withholding-revocation clause:  "Each contracting party reserves the right to withhold or
revoke the rights granted by this agreement if substantial ownership and effective control of the airline
concerned are not vested in nationals, or in the government of the contracting State or States in which
the airlines is established".
69. The collapse of multilateral attempts and the advent of bilateral agreements governing market
access, led to a standard clause on designation.  It is based on substantial ownership and effective
control by the nationals of one State only.39  Such clauses are generally rendered more restrictive by
the practice of single designation.  This type of provision makes it easier for States to implement an
airline "balance-of-benefits" policy and prevent non-party State carriers from gaining, indirectly,
unreciprocated benefits.
70. Throughout most of the world, bilaterals still tend to be relatively restrictive.  However,
market access has undergone some degree of liberalization.  The relaxation of designation restrictions
began earlier than the open skies polices and the conclusion of regional arrangements, but it has
clearly been fostered by these two tendencies.
71. Nevertheless, there have remained "long-standing exceptions" (where different numbers of
carriers are specified by route) such as the US-Canada, the US-Mexico and the US-UK agreements.For instance, in the latter case the limitation to four designated carriers (BA, Virgin, American,
                                                     
38 See above,  section B.2(a).
39 A "multilateral" ownership clause has survived in the International Air Services Transit Agreement
(IASTA) which grants overflight rights for scheduled air services to an "air transport enterprise" substantiallyowned and effectively controlled by a national of a Cont racting State to IASTA.  For a description of IASTA
see above paragraphs 7-10 and Table 1.S/C/W/163/Add.3
Page 21
United) to serve Heathrow airport persists despit e nearly ten year old negotiations between the UK
and the US.  Another exception is the 1996 Czech-Swiss agreement which allows each party to
designate one or more carriers, requiring that no more than one carrier is designated "on each
individual route".40
72. In the Open Skies agreements (primarily with the US) the numerical limitation on the number
of designated carriers has been lifted, as have the routes each carrier is allowed to operate.  Under
these Agreements, a designated carrier is able to operate, without restriction, between whichever city-
pairs it chooses.  In addition to this market access flexibility, carriers are also permitted to carry from
behind points, and to points beyond.  Flights ca n also be permitted to operate without carrying
overseas and domestic traffic on certain segments; such segments are called "blind sectors".
However, Agreements with the US do not provide for the possibility of picking up and dropping off
traffic within the US (cabotage).
73. Cabotage restrictions have been lifted in the New Zealand-Australia Open Skies, and SAM
Agreements.  Carriers may operate behind, beyond, and within the other Party's territory.  Designation
in the traditional sense has been abolished so long as the carriers remain owned and effectively
controlled by nationals of the two signatories.
74. The criteria of substantial ownership and effective control have remained an important feature
in bilateral agreements.  However, other criteria have emerged such as the "principal place of
business" or the "community of interest" at bilateral, plurilateral and multilateral levels.
75. Firstly, concerning the bilateral level, Table 7 gives an idea of the use of various designation
criteria in the bilateral agreements notified to ICAO during the period 1993-1999.41
Table 7
Designation Criteria in Bilateral Agreements
(1993-1999)
1993 1994 1995 1996 1997 1998 1999Total
1993-99
No
provision1
(1.5%)1
(2.3%)0
(0%)0
(0%)0
(0%)1
(7.2%)03
(1.3%)
Principalplace of
business4
(5.9%)2
(4.5%)4
(12.5%)5
(13.9%)9
(30%)2
(14.3%)026
(11.6%)
Communityof interest2
(2.9%)0
(0%)0
(0%)1
(2.8%)0
(0%)0
(0%)03
(1.3%)
Substantial
ownershipand effectivecontrol61
(89.8%)41
(93.2%)28
(87.5%)30
(83.3%)21
(70%)11
(78.6%)1
(100%)193
(85.7%)
T o t a l 6 8 4 43 23 63 01 4 1 2 2 5
Source: ICAO bilateral agreements date base. Compiled by the WTO Secretariat.
76. It appears that substantial ownership and effective control have remained important criteria in
bilateral agreements.
                                                     
40 Earl Scott, "Freer Skies", Airline Business, July 2000.
41 The information contained in this Table needs to be interpreted with care.  The same qualifications
apply here that have been mentioned in the context of Table 4.S/C/W/163/Add.3
Page 22
77. The criterion of principal place of business has become more important over time.  Close
examination of the agreements shows that among the 52 parties42 involved in 26 agreements that have
principal place of business as a criterion, 30 were from Asia (mostly from the Far East), 13 from
Northern Europe, and the remaining 9 from other regions.  All WTO/ICAO Members on this list,
except Hong Kong, China and Macau, China have signed bilateral agreements containing thetraditional criteria of ownership and control rather than the principal place of business.  This shows
that the use of designation/revocation criteria is variable (the same country can have two different
criteria in two different agreements) and can be made on a case-by-case basis according to
circumstances.
78. Finally, the community of interest criterion covers cases where the carriers remain
substantially owned and effectively controlled by nationals of one or more States which are not
necessarily party to the agreement concerned, but Members of a pre-defined group (e.g. the MemberStates of the EU).  The use of this criterion has remained marginal and geographically disparate,
(South Africa/Senegal, Trinidad/Suriname and Brunei/G ermany);  it may gain in importance with the
expansion of regional integration.  It appears primarily in agreements signed for the benefit of the
multinational airlines such as SAS, Air Afrique, Gulf Air and more recently BWIA in the Caribbean
Islands and Alliance Air in East Africa.
79. There is little documentation available on individual States' policies with regard to
designation/revocation.  To date, the most complete source of information is from a survey recently
undertaken (September 2000) by the International Air Transport Association (IATA) among its
Members.
43  The relevant questions:
"- What are your country's laws, policies and practices (and the resulting requirements)
regarding ownership and control of foreign airlines operating into your country?
- Are there any bilateral air transport agreements concluded by your country which contain
an ownership and control clause in the "desi gnation" and (revocation of) "authorization"
articles which materially deviates from  the standard clause usually employed?
- Did/does your government make any exception in practice to the above ownership and
control requirement imposed on foreign airlines?"
80. Whereas the IATA sample included over thirty States or group of States, answers were only
obtained from ten States (Table 8).
Table 8
Provisions on Ownership and Control of Foreign Airlines Operating in the Reporting Country
States or
group ofStatesProvisions
Brazil There are no restrictions on the ownership of foreign airlines operating into Brazil.
CanadaAs a general rule, foreign carriers operating into Canada must be controlled by nationals of the country from
which the service originates, although there are some exceptions - such as Caribbean States.
ChileThe bilateral agreements signed by Chile continue to contain the "traditional" clause of substantial ownership
and effective control.
IndiaAir services agreements signed by India stipulate that foreign airlines must be substantially owned and
effectively controlled by the government or nationals of the designating country.  There are two exceptions,
                                                     
42 Double counting is possible, e.g. Latvia is counted three times since it is involved in three
agreements.
43 Peter van Fenema, "Ownership and Control:  Report of the Think Tank, World Aviation Regulatory
Monitor 2000", IATA, Government and Industry Affairs Department, September 2000.S/C/W/163/Add.3
Page 23
States or
group ofStatesProvisions
one being Hong Kong.  Some bilaterals include the condition that ownership and control of the foreign
airline's assets must be in the designating country to prevent "indirect" use of bilateral entitlements by third
country carriers through leasing arrangements.
IsraelForeign airlines serving Israel must be substantially owned and effectively controlled by the government or
nationals of the designating country, which must also be a member of ICAO.
JapanAs regards foreign airlines operating into Japan, the Air Law only makes reference to "in accordance with
international agreements" but it seems that up to 50% ownership/control by a third party could be permitted.The bilateral agreements use the standard articles and the government has so far made no major exceptions.  It
has reviewed the Sabena case (where the SAir Group has a majority holding) and decided to take no action.
MalaysiaForeign airlines must in general be substantially owned and effectively controlled by the designating country.
Exceptions have been made for Hong Kong, Macau SAR and, in the case of SAS, for Denmark, Norway andSweden.  They are permissible since a bilateral agreement is an international treaty and can supersede nationallegislation.
MauritiusFor foreign airlines serving Mauritius, the Government normally insists that ownership and control be in the
other contracting country.  An exception is made for Cathay Pacific of the Hong Kong SAR.
SingaporeThere are no rules regarding the ownership and contro l of foreign designated airlines, the criteria being
established in each individual air services agreement.  The agreements with Hong Kong SAR and Macau SAR
use the "principal place of business" as the sole criteri on and that with New Zealand uses "principal place of
business and effective control.  "The ASAs with Laos and Myanmar permit foreign ownership and control oftheir airlines.
USAAs regards ownership and control of foreign carriers operating into the USA, the Department of Transport
(DOT) has been flexible, particularly where there is an "open skies" agreement with the foreign country
concerned.  SAir Group's control of Sabena above 49%, for example, has not been challenged.  A 1991
memorandum between the USA and the United Kingdom noted that UK ownership of less than 50% of an
airline incorporated and having its principal place of business in the European Community would not in itselfconstitute an objection to that airline's entitlement to provide air services under the bilateral agreement withthe USA.
44
Source:  IATA Questionnaire, reproduced with the permission of IATA.
81. It is worth noting that in the preparation of its air transport conference, to be held on
24-29 March 2003, ICAO has recently issued (June 2001) a more detailed questionnaire45 which
should be answered by its 183 Members by the end of August 2001.  The answers are expected to
greatly enhance the level and detail of in formation available for the ICAO membership.
82. The use of criteria other than "substantial ownership and effective control" has also been
considered at plurilateral and multilateral level during the period under review.  In 1997, after careful
consideration of safety risks (e.g. proliferation of flags of convenience) and other problemsinvolved,
46 the ICAO Air Transport Regulation Panel (ATRP) recommended in ATRP/9-4, the
broadening of ownership and control criteria used in bilateral agreements.  The complete text of this
panel recommendation reads as follows:
"The panel recommends:
                                                     
44 IATA describes the US approach regarding third party ownership in the following manner:  "whether
or not the nationality clause is invoked vis-à-vis  a foreign carrier is a matter of choice, of expediency,
determined by political and aeropolitical considerations and national interest.  With more and more "open skies"
agreements in place, the quid pro quo  approach is obviously on the way out".  There is no equivalent description
for the EU since designation has remained under national competence.
45 Attachment to State letter SC 5/2-01/50 June 2001, available from the WTO Secretariat.
46 See ICAO document ATRP/WP/5, 14 November 1996, page 2.S/C/W/163/Add.3
Page 24
that States wishing to accept broadened criteria for air carrier use of market access in their
bilateral and multilateral air services agreements agree to authorize market access for a designated
air carrier which:
(a) has its principal place of business and permanent residence in the territory of the
designating State, and
(b) has and maintains a strong link to the designating State.
In judging the existence of a strong link, States should take into account elements such as the
designated air carrier establishing itself, and having a substantial amount of its operations and
capital investment in physical facilities in the designating State, paying income tax and registering its
aircraft there, and employing a significant num ber of nationals in managerial, technical and
operational positions.
Where a State believes it requires conditions or exceptions concerning the use of the principal
place of business and permanent residence criterion based on national security, strategic, economic
or commercial reasons this should be the subject of bilateral or multilateral negotiations or
consultations, as appropriate."
83. In a similar effort, the European Civil Aviation Conference (ECAC) struck in 1998 the Task
Force on Ownership and Control (OWNCO) which pr oduced a model article for members' bilateral
agreements.  This text was endorsed in 1999 by ECAC47, and reads as follows:
"Draft model article on a strong link between airl ines and the designating state in bilateral air
services agreement:
Each Contracting Party may refuse to grant an operating authorization, [may revoke or suspend such
an authorization] or may impose such conditions as it deems necessary on the operation of a
designated airline, in any case where the said Contracting Party is not satisfied that the airline:
i) is incorporated and has its principal place of business in the territory of the other contracting
party; and
ii) holds a current Air operator's certificate issued by the aeronautical authority of the other
Contracting Party".
84. Some regional agreements also contain liberal designation provisions (i.e. control "by one or
more members or their nationals") as referred to in Table 9.
                                                     
47 The airlines workers' unions, represented by the International Transport Federation (ITF) have been
associated both with the ICAO's ATRP and ECAC's OWNCO initiatives.  They were opposed in both instancesto the final results on the grounds that the precautions envisaged would not be sufficient to prevent theappearance of flags of convenience in air transport.   (ITF News No. 5/99 and ITF Civil Aviation Review
, 1999,
page 15).S/C/W/163/Add.3
Page 25
Table 9
Regional Agreements containing "Community of Interest" Provisions
Caribbean Community
(CARICOM) - 1996 (14 States)COMESA – 1999
(21 States)ACAC - 1999
(16 States)
Air carrier must be owned and
controlled by one or more
Member States or nationalsthereof.Air carrier substantially owned
and effectively controlled by one
or more COMESA members ortheir nationals.Air carrier substantially owned
and effectively controlled by Arab
States or nationals, withheadquarters and registration in anArab State.
Source: ICAO.
85. The EU single aviation market goes further by substituting "community ownership and
control" for "national ownership and control" in its Third Package (Council Regulation No. 2407/92 48
on the licencing of air carriers).
86. These regional designation clauses are, of course, only valid for international trips inside the
regional grouping.  For trips outside the grouping, the designation clauses contained in the relevant
bilateral agreements come into play.  These agreemen ts may, in turn, contain a "community of interest
clause", but this is a relatively rare case.  This situation may change depending on the outcome of the
cases pending before the ECJ between the Commission and eight Member States on Community
competence in external air transport policy.
87. The new plurilateral Agreement between five APEC Members has also substantially
liberalized the Designation Article, and specification of foreign ownership and effective controlrestrictions.  The signatories have omitted the standard term that a carrier must be both substantially
owned and effectively controlled by the designating State.  Instead, Article 3 (Designation and
Authorization), speaks about "effective control," "incorporation in," and "principle place of business"
by the designating State.  However, the underlying national legislative conditions stipulating foreign
ownership levels have not been altered, and continue to be set by each State.  However, the individualStates are still able to establish and/or maintain ownership and control levels in accordance with
national laws.  For example, the US has imposed an equity reporting requirement on air carriers of its
four partners to detect increased US ownership of the foreign-designated carriers.  This is to ensure
that there is no possibility for "flags of convenience" or avoidance of US safety and labour
standards.
49  The relevant provisions commit only the signatories to the Agreement and do not affect
existing bilateral agreements with non-signatory States.
88. The draft TCAA, as envisioned by the AEA, would also entail liberal designation provisions.
For instance, a September 1999 communication by AEA ("Towards a Transatlantic Common
Aviation Agreement") suggests to "allow airlines to enter the market and conduct air transport within
the TCAA provided they are majority owned or controlled by nationals of the parties or their
respective governments."
E. TARIFFS
89. There has been significant movement away from highly detailed tariff clauses to almost
complete freedom by carriers to set their own prices.  This is highlighted in Table A2 (Annex).  The
                                                     
48 Council Regulation No. 2407/92, 23 July 1992, in the Official Journal L240 , 24 August 1992.
49 In January 2001, according to its own terms, the Department of Transport issued a 'Show Cause
Order':  "amending the U.S. licences of carriers of the participating countries, requiring them to notify DOT of
any increase in beneficial shareholding by a U.S. shar eholder by 20% or more, within 30 days after such a
change". (DOT Order 2001-1-13, issued 16 January 2001).S/C/W/163/Add.3
Page 26
underlying intention is to avoid anti-competitive practices;  tariff policies have also come under close
scrutiny by competition authorities.
90. This section discusses changes in the Tariff Articles found in the Open Skies and Plurilateral
agreements and the ongoing role of IATA Tariff Conferences.50
1. Definition of Tariffs
91. In general terms, a tariff is understood to represent the price charged for the carriage of
passengers, baggage or cargo (excluding mail) and the conditions governing its availability and use in
some States.  The term also refers to the document containing prices and conditions that a carrier or its
agent files (either in electronic or paper form) with the competent regulatory authorities.  An
international tariff is for transportation between two or more States (and may encompass domestic
segments of an international journey);  a domestic  tariff is for transportation between two or more
points of a single State.  The term "fare" usually refers to the carriage of passengers while "rate" is a
tariff for the carriage of cargo.  There are definitional variations between States, however, reflecting
the authorities' regulatory approach.  Governments with an ambitious regulatory agenda are inclined
to use a broad tariff definition while some governments are inclined to use a narrower definition.
92. A tariff includes commissions, i.e. fees paid by an airline to intermediaries such as travel
agents and freight forwarders/consolidators.  These are not typically the subject of international
agreements and not usually specified separately in tariffs filed with governmental authorities.  It also
reflects any significant benefits provided to users and can alter the effective price paid by the
purchaser of the transportation and so would, under some countries' laws, have to be filed as tariffs.
93. A tariff condition or rule, is an integral part  of the tariff governing its applicability.  With
respect to a passenger tariff, these conditions include such elements as the number of pieces and/orweight of accompanied baggage which may be carried without additional charges (and charges for
excess baggage), the ability to change the itinerar y or similar benefits, requiring payment during a
specified period in advance of travel, requiring a minimum stay at the destination and limiting the
routing and/or the combination of the tariff with other tariffs.  In general, airlines include these
conditions as a means of minimizing the revenue effects associated with lower-priced fares.
2. Tariff development
94. Tariffs are usually referred to as proposed tariffs, allowing air carriers to develop specific
prices and conditions, either individually or collectively.  In both cases, the rates are submitted for
approval to the governments concerned.  There are three main forms of bilateral tariff regulation:
dual approval;  country-of-origin, and double disapproval.  In most cases, under all three regimes,
airlines serving a specific route submit tariffs for the city-pairs involved to the respective authorities
of the two States for approval.  When both governments must approve a tariff before it can becomeeffective, it is known as an agreed tariff or dual approval.  Under a country-of-origin regime, each
party controls fares and rates for traffic originating in its territory (carried by airlines of either party).
The most liberal arrangement is double disapproval, in which a tariff becomes effective automatically
unless disapproved by both parties within a short, specified period.  This last procedure is in all Open
Skies and in other liberal agreements.
95. There is also a separate tariff development process under-taken through various Traffic
Conferences of the International Air Transport Association to co-ordinate fares and rates on a market-
by-market basis.  Tariffs developed through the IATA process are then filed with the appropriate
                                                     
50 See documents S/C/W59, paragraphs 86 - 91 and S/C/W/129, paragraph 19(c), available from the
WTO Secretariat.S/C/W/163/Add.3
Page 27
national aeronautical authorities under applicable bila teral requirements (see Chart 2 for an illustration
of the Conference Scheduling structure).
3. Types and Characteristics of Tariffs
96. In contrast to other modes of international tran sport, such as rail and water, international air
transport has developed a wide variety of tariffs.  As noted above, this reflects national regulatoryintentions.  For example, by allocating more seats at discount fares to routes, flights or time periods
with weak demand, and vice versa, airlines seek to have as many passengers as possible to fly at
normal economy or premium fares, while concurrently stimulating discretionary travel.
97. Some States have begun to reduce substantially the requirement for tariff filings.  The US, for
example, abolished all charter tariff and domestic scheduled tariff filing requirements in connection
with domestic deregulation in the early 1980s.  It has since unilaterally eliminated scheduled
international cargo tariff filing requirements and substantially reduced the number and type ofinternational passenger tariffs that must be filed.
(a) Principal Types of Fares
98. Full or normal economy fare is the lowest-priced fare which allows a passenger maximum
flexibility in terms of fare combination, refund, changes in itinerary and routing.  First class fare and
business/intermediary class fare, are higher than a fully flexible or normal economy fare, whilespecial, discount or restricted fares are lower and have more restrictions.
(b) Cargo Rates
99. The cargo rates have fewer categories than passenger fares.  They include inter alia :  a
specific commodity rate, an intermodal rate, a  general cargo rate, and a container rate (a ULD
51
discount rate and freight-all-kinds rate).  A class rate is determined by applying a discount or
surcharge to a general cargo rate for certain commodities, e.g. newspapers or goods requiring special
treatment during shipment such as livestock or some dangerous goods.
(c) Charter Rates
100. A charter rate is a tariff for the charter, or lease of all or part of the capacity of an aircraft
while a charter fare is the price charged for passengers.  Charter fares have some of the characteristics
of comparable fares on scheduled services, but are usually lower and more restrictive.  Fare
distinctions are based on benefits and relationships to the type of service purchased.  For example, a
bundled fare includes certain facilities for the passenger for a single price.52
(d) IATA Tariff Co-ordination
101. When discussing tariffs and tariff articles in bilateral agreements it is important to understand
the role of IATA.  It is a worldwide non-governmental organization that represents scheduled airlines.
Established in 1945, its mandate is "to promote safe, regular and economical air transport, to providemeans for collaboration among air transport enterprises, and to co-operate with ICAO, other
international organisations and regional airline associations".
53  The membership is open to any
government-approved scheduled airline whose home country is eligible to join ICAO.
                                                     
51 A "Unit Loading Device" is a container designed especially to fit one or more aircraft types.
52 See Doc 9626, page 4.1-3.
53 See Doc 9626.S/C/W/163/Add.3
Page 28
102. The following Chart has been drawn from Doc 9626  and highlights the co-ordination aspects
of international tariff structures.  All geographic regions are represented through three primary
geographic regions (see below for a detailed list) with sub-areas existing within and between the
primary regions.  Conferences must be held at least every two years, although in practice this occurs
on an annual basis.
103. IATA tariff co-ordinating conferences are divided into three main geographical areas and sub-
areas.  The sub-areas exist within and between the three main areas.  Area 1 encompasses the North
and South American continents and adjacent islands (Greenland, Bermuda, the West Indies and
islands of the Caribbean, the Hawaiian Islands, in cluding Midway and Palmyra).  Area 2 encompasses
all of Europe (including part of the Russian Fede ration) and adjacent islands (including Iceland and
the Azores), all of Africa and adjacent islands (including Ascension Island), and that part of Asia
lying west of and including the Islamic Republic of Iran.  Area 3 encompasses all of Asia and adjacentislands except areas included in Area 2, all of the East Indies, Australia, New Zealand and adjacent
islands, and the islands of the Pacific Ocean other than those included in Area 1.
54
104. Interline fares that are established through the IATA Conference system are normally based
on full fares and facilitate the flexibility of movement between carriers that are not part of an alliance
or co-operation agreement with other carriers.  Interlining permits a passenger to purchase one ticketusing different carriers, pay in one currency, and provides for baggage to be transferred from point of
origin to destination.  Interline fares establish a price for both the individual sectors and the sum of
sectors.  However, they do not alter or reduce the ability of any one carrier to establish different fare
structures or the flexibility of conditions for tickets.
                                                     
54 Doc 9626.S/C/W/163/Add.3
Page 29
Chart 2
IATA Conference Structure
The IATA Traffic Conference Structure
All member airlinesparticipate in:
Procedures
Conferences
Passenger services
Passenger agency
Cargo services
Cargo agency
Optional participation in:
TARIFF COORDINATING CONFERENCES
Passenger Composite     Cargo
Conferences Conferences Conferences
Traffic Conference 1 Traffic Conference 1
Passenger
Traffic Conference 2 Traffic Conference 2
Traffic Conference 3 Traffic Conference 3
Cargo
Traffic Conference 1; 2 Traffic Conference 1; 2
Traffic Conference 2; 3 Traffic Conference 2; 3
Passenger/Cargo
Traffic Conference 3; 1 Traffic Conference 3; 1
Traffic Conference 1; 2; 3 Traffic Conference 1; 2; 3Source:  ICAO Manual on Regulations
, Doc 9626.
(e) Tariff Liberalization
105. While tariffs remain a significant element of an y bilateral agreement, there appears to be a
movement away from detailed articles relating to approval or disapproval procedures.  Table 12
highlights the movement away from strict State control to a more market based framework.S/C/W/163/Add.3
Page 30
Table 12
History of Tariff Articles in Bilateral Agreements
1975 - 1986 1986 - 1995Tariff Article TypeNumber Percent Number Percent
No tariff 4 1% 6 1%
Dual approval 395 99% 310 42%
Limited disapproval 0 0% 421 57%
Total 399 100% 737 100%
Source:  Aero Accords Treaties Database (in "Freer Skies", Airline Business , July 2000)
106. The trend of Tariff Articles until 1996 has been to remove the States' control over the setting
of prices charged on international routes.  The Standard Post-1977 Agreements signed with the US
provide for mutual disapproval between the Partie s.  In Open Skies agreements (post 1992), the
airlines are able to set their own fare while retaining the ability to resort to consultation in the event
that there are disagreements between the Parties.  Similar provisions are contained in other
plurilateral, and bilateral Agreements that are based on the Open Skies concept.  In short, airlines arepermitted increased freedom to set prices.
F. 
CAPACITY
107. Capacity is a quantitative measurement of supply.  When applied to air services in a
regulatory context, capacity can be measured in terms of aircraft, passenger seats and/or units of
weight or space (e.g. tonne or cubic foot);  as well as in terms of frequency of a particular service.  Inother cases (e.g. statistical comparison), air transport capacity may also be expressed in terms of
combined indicators such as seat-kilometres and tonne-kilometres.  National governments generally
view capacity in a broader context than air carriers.  Consequently, capacity regulation involves a
wide spectrum of national interests extending beyond the economics of air transport.
108. Capacity plays an essential role in ma intaining the profitability of routes.
55 The ICAO
classification for capacity in Table A2 (Annex) is consolidated into four general types and then further
classified into eleven individual elements.  The same table indicates the general movement from very
detailed capacity regulations specified in the bilateral Articles to a more liberal approach where
carriers are permitted to set their capacity through the choice of aircraft used and subsequent
variations according to operational requirements.
G. CONCLUSION
109. Bilateral agreements have remained the corn erstone of the international air transport
regulatory system.  The built-in flexibility of the bilateral system has allowed substantial liberalization
to take place in recent years, in particular during the period under review 1993-2000.  This was further
accelerated through the development of plurilateral and regional agreements, which may institute acommon market whose regime can come close to that of an internal market.  The provisions of such
agreements tend to be more liberal on average than those of bilateral agreements, and they are simpler
than those of the standard Bermuda agreement which was used largely as a model for the ICAO
compendium.
110. The formation of regional systems has lead some commentators to imagine "bridged
liberalization scenarios".  Integrated regional mark ets would conclude agreements with each other and
create, in the long term, a wider plurilateral and possibly multilateral framework.  The EuropeanTCAA proposal envisions such a scenario.
                                                     
55 See document S/C/W/59, paragraphs 83 - 85.S/C/W/163/Add.3
Page 31
111. Overall, it appears that structure and substance of ASAs are comparable to maritime or road
transport agreements.  Ownership provisions are also common both in maritime and road transport
and the same goes for many other features (distinction between regular and occasional services,
licences/designation, authorization of certain types of traffic on specified routes, sharing of capacity,
exclusion of third parties, and in certain instances, tariff filing and approval).56  The only real
difference between these agreements, apart from their coverage by the GATS, resides in their
geographical extension. Given the regional character of road transport, road transport agreements are
significantly smaller in number than the current 3,000 plus ASAs.  Cargo sharing arrangements in
maritime transport are likely to be even scarcer as a result of the liberalization that has taken place
over the last twenty years in most regions.
112. The simplification of bilateral agreements, the conclusion of Open Skies agreements, and the
trend towards integrated regional markets will contin ue to provide for a gradual narrowing of existing
regulatory discrepancies.  The intent of ICAO to draft a template bilateral ASA for its 2003 Air
Transport Conference is further evidence of this trend.
                                                     
56 See the European Conference of Ministers of Transport, CEMT/CM(97)21, 20 March 1997,
"Framework for Bilateral Agreements in Road Transport".  A similar compendium does not exist apparently formaritime transport.  However, relevant information ha s been forwarded to the OECD and is contained in the
1995-1996 replies to the NGMTS maritime questionnaire.S/C/W/163/Add.3
Page 32
APPENDIX
Table A1
LIST OF MEMBERS OF THE
INTERNATIONAL AIR SERVICES TRANSIT AGREEMENT
SIGNED AT CHICAGO ON 7 DECEMBER 1944
(Status as of 4 October 2000)
Entry into force: The Agreement entered into force on 30 January 1945.
Status: 118 contracting States
This list is based on information received from the depositary, the Government of the
United States of America.
State Date of Deposit
of Notification of Acceptance
Afghanistan 17 May 1945
Albania 21 October 1997Algeria 16 April 1964Antigua & Barbuda 16 November 1988Argentina 4 June 1946Armenia 29 May 1996Australia 28 August 1945Austria 10 December 1958Azerbaijan 3 March 2000Bahamas 27 May 1975Bahrain 12 October 1971Bangladesh 9 February 1979Barbados 10 July 1970Belgium 19 July 1945Benin 23 April 1963Bolivia 4 April 1947Bosnia and Herzegovina 3 March 1995Brunei Darussalam 4 December 1984Bulgaria 21 September 1970Burkina Faso 25 September 1992Burundi 19 January 1968Cameroon 30 March 1960Chile 24 April 1974China (for Hong Kong, China only) 3 June1997Costa Rica 1 May 1958Côte d'Ivoire 20 March 1961Croatia 9 May 1992Cuba 20 June 1947Cyprus 12 October 1961Czech Republic 3 April 1993
Democratic People' s Republic of Korea 8 February 1995S/C/W/163/Add.3
Page 33
State Date of Deposit
of Notification of Acceptance
Denmark 1 December 1948
Ecuador 28 July 1983Egypt 13 March 1947El Salvador 1 June 1945Estonia 16 August 1995Ethiopia 22 March 1945Fiji 14 February 1973Finland 9 April 1957France 24 June 1948Gabon 15 January 1970Germany 9 May 1956Greece 21 September 1945Guatemala 28 April 1947Guinea 5 November 1998Guyana 28 April 1986Honduras 13 November 1945Hungary 15 January 1973Iceland 21 March 1947India 2 May 1945Iran, Islamic Repub lic of 19 April 1950
Iraq 15 June 1945Ireland 15 November 1957Israel 16 June 1954Italy 27 June 1984Jamaica 18 October 1963Japan 20 October 1953Jordan 18 March 1947Kuwait 18 May 1960Latvia 21 May 1997Lebanon 5 June 1974Lesotho 2 October 1975Liberia 19 March 1945Luxembourg 28 April 1948Madagascar 14 May 1962Malawi 27 March 1975Malaysia 31 May 1945Mali 27 May 1970Malta 4 June 1965Mauritania 11 May 1979Mauritius 13 September 1971Mexico 25 June 1946Monaco 3 January 1996Morocco 26 August 1957Nauru 25 August 1975Nepal 23 November 1965S/C/W/163/Add.3
Page 34
State Date of Deposit
of Notification of Acceptance
Netherlands 12 January 1945
New Zealand 19 April 1945Nicaragua 28 December 1945Niger 16 March 1962Nigeria 25 January 1961Norway 30 January 1945Oman 23 February 1973Pakistan 15 August 1947Palau 3 November 1995Panama 8 October 1982Paraguay 27 July 1945Philippines 22 March 1946Poland 6 April 1945Portugal 1 September 1959Republic of Korea 22 June 1960Republic of Moldova 21 November 1994Rwanda 6 July 1964Senegal 8 March 1961Seychelles 16 October 1979Singapore 22 August 1966Slovakia 14 April 1993Slovenia 12 June 1992Somalia 10 June 1964South Africa 30 November 1945Spain 30 July 1945Sri Lanka 31 May 1945Swaziland 30 April 1973Sweden 19 November 1945Switzerland 6 July 1945Thailand 6 March 1947The former Yugoslav Republic of Macedonia 9 January 1993Togo 24 June 1948Trinidad and Tobago 14 March 1963Tunisia 26 April 1962Turkey 6 June 1945Ukraine 14 August 1997United Arab Emirates 25 April 1972United Kingdom 31 May 1945United States 8 February 1945Uzbekistan 17 February 1997Vanuatu 14 January 1988Venezuela 28 March 1946Zambia 13 October 1965S/C/W/163/Add.3
Page 35Table A2
Summaries of Provisions in Bilateral Air Transport Agreements
Sections
(ICAO
Doc 9511)ICAO General Standard Elements - Part
A and Framework Agreements
Description (ICAO Doc 9511)57US Typical
Post 1977
Agreement58US Model
Open Skies
Agreement59Australia
New Zealand
Open Skies60
 (20 Nov 2000)
(Interim Effect)Australia
New Zealand
Single Aviation
Market61Five APEC
Plurilateral
(1 May 2001)62Comparable
GATS
Provisions
1) Identification and applicability
ICAO number Registration number Art. 17 Art. 16 Art. 20 --- ---
Names ofcountriesContracting partiesNames;
PreambleNames;
PreamblePreamble Preamble Art. 20
Agreement
dateDate signed Art. 18 Art. 17 Art. 2119 September
1996Art. 20
Effective date Entry into force Art. 18 Art. 17 Art. 21 Art. 1 Art. 20
Termination
dateDate of termination Art. 15 Art. 15 Art. 19 --- ---
Notice periodTime-period between date of notice of
termination and date of actual termination.Art. 15 Art. 15 Art. 19 ---Art. 18
Withdrawal
only
Amendmentdate andICAO numberDate the amendment entered into force & ICAO
Number.--- --- Art. 17 --- Art. 17
Scope of
agreementTypes of operations encompassed by the
agreement (scheduled; non- scheduled; both
scheduled and non-scheduled.Annex I
Annex IIAnnex I
Annex IIPreamble
Annex - Sections
1 and 2Art. 2;
 Art. 7;
Art. 14Art. 2
2) Administrative clauses
DesignationEach contracting party names its airline or
airlines which will exercise the agreedoperating rights.Art. 3 Art. 3 Art. 2 Art. 8 Art. 3XVI;  XVII;
XXVII;
Imposition of user charges for airports, airnavigation facilities.Art. 10(1) Art. 10.2 Art. 7.1 --- Art. 10
User charges
Application of user charge principles. Art. 10(2) Art. 10.1 Art. 7 --- Art. 10XXVIII cii
                                                     
57 The Digest of Bilateral Air Transport Agreements is available from the WTO Secretariat.
58 The text is available from the WTO Secretariat.
59 Ibid.
60 Ibid.
61 The Single Aviation Market Agreement should be read in conjunction with the Memorandum Of Understanding to the Agreement (copi es are available from the WTO
Secretariat).
62 This Agreement should be read together with the Protocol to  the Agreement (copies are available from the WTO Secretariat).S/C/W/163/Add.3
Page 36 Sections
(ICAO
Doc 9511)ICAO General Standard Elements - Part
A and Framework Agreements
Description (ICAO Doc 9511)57US Typical
Post 1977
Agreement58US Model
Open Skies
Agreement59Australia
New Zealand
Open Skies60
 (20 Nov 2000)
(Interim Effect)Australia
New Zealand
Single Aviation
Market61Five APEC
Plurilateral
(1 May 2001)62Comparable
GATS
Provisions
Commitment to Tokyo, Hague and MontréalConventions and/or Annex 17 - Security -Safeguarding International Civil AviationArt. 7 (1-7) Art. 7.1 Art. 6 --- Art. 7
Aviation
securityCo-operation in situations involving aviation
security.Art. 7 (1-7) Art. 7Art. 6.2;
Art. 6.6--- Art. 7XIV
WithholdingAuthorization or permission to operate may be
withheld or refused if certain conditions are not
met.Art. 4 Art. 4Art. 2.7;
Art. 2.8;
Art. 2.9---Art. 7.6;
Art. 7.7XVI; XVII
Flight
operationsArrangements for the provision of flight and
other operational information.--- --- --- --- ---
StatisticsExchange of statistics and procedure for
exchange of statistics at specified intervals.--- --- Art. 8 Art. 12 ---
RevocationAuthorization or permission to operate may be
revoked, suspended or limited if certainrequirements are not met.Art. 4Art. 4;
Art. 7.6Art. 2;
Art. 6.8---Art.4;
Art. 6.2XVI; XVII
Accident
investigationProcedures for accidents or forced landings. Art. 7Art. 7;
Art. 7.5Art. 6.6 --- Art. 7.5
ConsultationsConsultation between the aeronautical
authorities or governments.Art. 7(7);
Art. 13Art. 7.6 Art. 16Art.7.6;
Art.6.2XXIII
Application of national laws to the operation,
navigation admission and departure of aircraft.Art. 5 Art. 5 Art. 4 --- Art. 5Application of
laws Simplified control pr ocedures for transit
passengers.--- --- Art. 4.4 Art. 5.4VI
Non-
scheduledoperationsProvision(s) in agreement specifically regarding
non-scheduled operations.Annex II Annex II --- Art. 10 --- XVI; XVII
Procedures for consultation and/or negotiation. Art. 14(1) Art. 14. Art. 18 Art 17 Art. 14Settlement of
disputesReferral of dispute to a specific or ad hoc
tribunal.Art. 14(2) Art. 14.2 Art. 18 Art. 17 Art. 14.2XXIII
Recognition
of certificatesRecognition by each contracting party of
validity of certificates of airworthiness and
certificates of competency and personnellicences of other party.Art. 6 Art. 6 Art. 5 Art. 9 Art. 6 VII
All-cargo
operationsSpecial provision(s) in agreement for all-cargo
operations.Annex IIAnnex I -
Section 1;
Annex II -
Section 4Annex
Section 1--- --- XVI; XVIIS/C/W/163/Add.3
Page 37Sections
(ICAO
Doc 9511)ICAO General Standard Elements - Part
A and Framework Agreements
Description (ICAO Doc 9511)57US Typical
Post 1977
Agreement58US Model
Open Skies
Agreement59Australia
New Zealand
Open Skies60
 (20 Nov 2000)
(Interim Effect)Australia
New Zealand
Single Aviation
Market61Five APEC
Plurilateral
(1 May 2001)62Comparable
GATS
Provisions
AmendmentclauseProcedure for amendment or modification of
the agreement.--- --- Art. 17 --- Art. 17
Exemption from customs duties of specified
equipment and supplies on board the aircraft.Art. 9(1) Art. 9(a) Art. 9 --- Art. 9 Customs
duties andtaxes Exemption from taxes of airline revenues. Art. 8(5) Art. 8.5 --- --- ---XIV; XVII;
XXIII
(footnote 11)
A Establishment of offices and airline
representation.Art. 8(1) Art. 8.1Arts. 12.1;
Art. 12.4;
Art. 13--- Art. 8.1(a)
B Local or convertible currency sales by
airlines.Art. 8(4) Art 8.6 Art. 12.7 ---Art. 8;
Art. 8 1(b)
C Ground handling arrangements. Art. 8(3) Art. 8.3 Art. 12.10 --- Art. 8 1(b)
D Computer reservation systems. --- Annex III --- --- Art. 11.6
E Currency conversion and remittance
by airlines.Art. 8(5)Art. 8.5;
Art. 8.6Art. 12.7 --- Art. 81(c)Commercial
operations
F Other commercial guidelines for
airlines.Art. 8 Art. 8 Art. 12 Art. 6 Art. 8XVI; XVII;
XI; XII
See ground
handling
section,
S/C/W/163.
Add.2;
XVI; XVII
See CRS
section,
S/C/W/163;
XII
MultilateralagreementsModification of agreement to conform
with any future applicable multilateralagreement.Art. 16 Removed --- --- ---
3) Tariff clause
Tariff article applicable to tariffs for
the agreed services.Art. 12 Art. 12 Art. 10 Art. 5(2) Art. 12
Scope of
applicabilityTariff article applicable only to tariffs
between the territories of thecontracting parties.Art. 12 Art. 8.3 Art. 10 Art. 5(2) Art. 12XVI
A Definition of tariffs. Art. 1(f) Art. 1.8 Art. 1(o) --- Art. 1.7
B Relevant factors governing tariff
establishment.Art. 12 --- Art. 10 --- Art. 12 Tariff
establishmentC Airlines given initial responsibility for
negotiating tariffs.Art. 12(1) Art. 12 Art. 10.1 Art. 5(2) ---
D Reference to a multilateral tariff
mechanism or consultation at airlinelevel.--- --- --- --- ---XVIS/C/W/163/Add.3
Page 38 Sections
(ICAO
Doc 9511)ICAO General Standard Elements - Part
A and Framework Agreements
Description (ICAO Doc 9511)57US Typical
Post 1977
Agreement58US Model
Open Skies
Agreement59Australia
New Zealand
Open Skies60
 (20 Nov 2000)
(Interim Effect)Australia
New Zealand
Single Aviation
Market61Five APEC
Plurilateral
(1 May 2001)62Comparable
GATS
Provisions
E Secondary tariff establishment
mechanism if initial airline mechanismfails.Art. 12(3) --- --- --- ---
F Arbitration of tariff disputes. Art 14 Art. 10.4 --- Art. 14 ---
A Justification to accompany submission
of tariffs.--- --- --- --- ---
B For double or dual approval process: Art 12 --- --- --- ---
B1 - express approval by aeronautical
authorities;--- --- --- --- ---
B2 - tacit approval where express
approval not stipulated;  and--- --- --- --- ---
B3 - filing period for submission of tariffs.
(Coding:  number of days.)--- --- --- --- ---
B4 Time-period within which action to be
taken by authorities.  (Coding:number of days.)--- --- --- --- ---
C For double or dual disapproval
process:Art. 12 --- --- --- ---
C1 - tariffs become effective unless both
authorities disapprove.--- --- --- --- ---
C2 Requirement for notification or filing
of tariffs under this process.Art. 12(2) --- --- --- ---
D For country of origin process: --- --- --- --- ---
D1 - only the country of origin of a tariff
may disapprove it.--- --- --- --- ---
D2 Requirement for notification or filing
of tariffs under this process.--- --- --- --- ---
E For pricing zone process:
- disapproval only if outside
established pricing zone(s).--- --- --- --- ---
F For continuation of existing tariffs: --- --- ---
F1 - continuation in certain
circumstances.--- --- --- --- ---Tariff control
process
F2 - time limit on continuation.  (Coding:
number of days).--- --- --- --- ---XVIS/C/W/163/Add.3
Page 39Sections
(ICAO
Doc 9511)ICAO General Standard Elements - Part
A and Framework Agreements
Description (ICAO Doc 9511)57US Typical
Post 1977
Agreement58US Model
Open Skies
Agreement59Australia
New Zealand
Open Skies60
 (20 Nov 2000)
(Interim Effect)Australia
New Zealand
Single Aviation
Market61Five APEC
Plurilateral
(1 May 2001)62Comparable
GATS
Provisions
G Tariff enforcement provision. --- Art. 12.3 --- --- ---
H Non-scheduled tariffs arrangements. Art. 12 Art. 12.2 --- --- ---
4) Capacity Clause
Type ofcapacity
clauseClassification of applicable capacity régime.
ICAO Coding 0 = no capacity clause;  1 =
predetermination;  2 = Bermuda I; 3 = free-
determination;  4 = other (unclassifiable or ahybrid of different types of capacity régime).Annex I
 Section 3Art. 10
(3 - free
determination)Art. 5
(3 --free
determinationArt. 5(1)
(3 - free
determination)3 - free
determinationXVI
A Statement of general principles
governing capacity.--- Art. 11.1 Art. 5 Art. 5(5) Art. 2
B Specific formula or division of
capacity on routes between twocontracting parties.Annex I
Section 1--- --- --- ---
C Statement of principles governing
capacity on routes to or from third
countries.Annex I
Section 3Annex II
Section 3Annex
 Section 3Art. 5(1) ---
D Specific formula or division of
capacity on routes to or from thirdcountries.--- --- --- --- ---
E Principles expressly excluding
unilateral capacity controls.--- --- --- --- ---
F Inter-airline arrangements affecting
capacity.---Art. 8.6;
Art. 8.7Annex
Sections 2 and 3--- ---
G Requirement for filing and approval by
authorities of capacity, frequencies.--- --- --- --- ---
H Non-scheduled capacity
arrangement(s).Annex II --- --- --- ---
I Scheduled all-cargo capacity
arrangement(s).--- ---Annex
 Section 1--- ---Significant
elements
J Change of gauge. ---Annex I
Section 3Annex
Section 3--- Art. 2.4XVIS/C/W/163/Add.3
Page 40 Sections
(ICAO
Doc 9511)ICAO General Standard Elements - Part
A and Framework Agreements
Description (ICAO Doc 9511)57US Typical
Post 1977
Agreement58US Model
Open Skies
Agreement59Australia
New Zealand
Open Skies60
 (20 Nov 2000)
(Interim Effect)Australia
New Zealand
Single Aviation
Market61Five APEC
Plurilateral
(1 May 2001)62Comparable
GATS
Provisions
K Transferring scheduled capacity.
Cross-reference to page number in PartB where the route exchange for thisagreement may be found.---Annex I
Sections 2 and 3Annex Sections 1,
2, and 3--- ---
5) Grant of rights
A Over-flight and technical stops granted
for non-traffic purposes.Art. 2(1)a;
Art. 2(1)bArt. 2Annex
Sections 1, 2,
and 3---Art. 2.a;
Art. 2.b
B Traffic rights granted for scheduled
services between territories of
contracting parties.Art. 2
Annex IAnnex IAnnex
 Sections 1, 2,
and 3Art. 2 Art. 2
C Non-scheduled passenger traffic rights
specifically granted.Art. 2(1)c
Annex IIAnnex II --- Art. 7 Art. 2
C1 Non-scheduled cargo traffic rights
specifically granted.--- Annex II --- Art. 7 Art. 2(c)(ii)
D All-cargo scheduled service traffic
rights specifically granted.Art. 2(1)c
Annex IIAnnex IAnnex
 Section 1Art. 2 Art. 2 (c)(ii)Rights
granted
D1 All-cargo non-scheduled service traffic
rights specifically granted.--- Annex II --- Art. 2 Art. 1(c)(ii)XVIS/C/W/163/Add.3
Page 41
Table A3
Liberalization in the European Union:
Development of a Common Aviation Area
Date from - 01.01.88 01.11.90 01.01.93
Fare
approvalAutomatic approval of discount fares Free pricing on all fares
Double
approval of
full faresDouble disapproval
applied to full faresMember States and/or EC can intervene
against excessive economy fares and
fare dumping
MarketaccessMultiple
designation on
country-to-country routesMultiple designation
permitted on higher
volume city-city routesFull access to all routes between all EU
countries
5th Freedom15th Freedom1 Cabotage (operation of domestic route in
another country) completely free
Starting April 1997, up to 50% capacityallowed if domestic sector is combined
with route to home country.
Protection for routesdesignated as public
service obligations and
certain new routesMore developed public service
obligations and some protection for new
regional routes
Licensing of
CarriersNot provided forFull freedom to start an airline:
1. if EU ownership;
2. if financially sound;
if safety requirements are met.
1 See Chart 1, Air Freedom Rights in Air Services Agreements.
Source:  AEA, 1993.
__________