Airlines vie for Overflight Rights

Here, however, issues of principle were involved; their mixture with international trade is always explosive. As a consequence, the dispute could well change the way bilateral agreements are negotiated throughout the world.

For Canada, the principle at issue was the use of traffic rights beyond London, granted to Canadian airlines in a 1981 UK/ Canada agreement; most notably, Air Canada’s right to carry end-to-end traffic on the London/Singapore route, as an extension of its transatlantic services. The British proposed curtailing the carrier’s uplift rights on the grounds that they were being used excessively.

Similar rights exist in agreements Canada has negotiated with several other countries; and the Canadians feared that restrictions imposed by the British would be followed by the others.

Also, Canada (like many administrations) was at a watershed in its domestic and international aviation policy- amid the growing realisation that its bilateral negotiating power had waned in an increasingly competitive environment.

Clearly the prospect now loomed of a very difficult series of talks with the British and, ultimately, of a poorer deal for Canadian airlines in any new agreement to apply after October, 1987. So the Canadians cast around for a new negotiating weapon.

The one they came across had lain virtually dormant for over 40 years: The International Air SeNices Transit Agreement, otherwise known as the Transit or ‘Two Freedoms’ Agreement. A multilateral pact with 100 adherents, it guarantees to other signatories’ airlines the so-called non-commercial privileges of overflight and technical stops on scheduled services. Drawn up in 1944, the Transit Agreement was an attempt to offset the strict provision of the Chicago Convention (developed at the same Conference) that “every State has complete and exclusive sovereignty over the airspace above its territory” – and therefore any intrusion into that airspace required express approval.

Commercial rights, to pick up and set down traffic, were thus left for bilateral negotiation; but the bilateral partners could rely on the Transit Agreement to provide free passage for their scheduled airlines over other territories along the routes.

On 12 November, 1986, Canada denounced the Transit Agreement, the first country ever to do so. If the notice is not withdrawn – and it appears unlikely – Canada ceases to be bound by the Agreement on 12 November this year. From that date, any country whose airlines fly through Canadian airspace on scheduled services and which has not previously agreed on transit rights will be forced to seek specific approval and, presumably, to pay for it in one way or another.

Announcing the decision, the Ministers of External Affairs and of Transport made clear that they were prepared to use the threat of withdrawing transit rights against all countries where necessary to protect Canada’s interests.

The British were clearly surprised, describing Canada’s behaviour as ‘immature’ and regretting its decision “to withdraw from an international convention to which most of the free world subscribes”.

As this implies, there are indeed countries which have never adhered to the Agreement: the USSR, China and Brazil are the most significant in size. More importantly for Australia, neither has Indonesia, Papua New Guinea or a handful of Middle-Eastern states sitting firmly astride the Kangaroo route. For a mixture of military and political reasons, flight routings through the Middle East have long been different and therefore costly to operate.

Restrictions have been imposed in our region occasionally; dramatically, by Indonesia during a confrontation in the 60’s; by Malaysia in the in connection with Concorde operations; and, in the 80’s, overflight rights were reportedly made an issue in the ICAP dispute. These have however been temporary and unconnected moves.

But Canada’s action has much broader commercial implications. Here, a respected member of the aviation community, host to ICAO (the UN’s aviation organisation), has taken a aconsidered decision on commercial grounds alone. It has formally sent a warning that it will use its most valuable commercial asset – the corridor to almost all US markets from Europe and the Far East. Only by circuitous and expensive detours can Canadian airspace be avoided.

The power of transit rights was graphically reinforced by a Soviet move almost simultaneously. Again, the UK was on the receiving end; again, vast areas of northern hemisphere long haul potential routings were affected. In response to a British Caledonian overflight request (for London/Tokyo non-stop), the USSR demanded not only onward rights between London and the US for Aeroflot but also imposed a levy of 5% on all revenues gained by BCal in flying the route.

The vital North Pole airspace is virtually inaccessible without passing through Canadian or Soviet territory. Assuming China takes a similar posture, governments are clearly going to have to pay a heavy price in future for their airlines’ access to these technically and economically attractive routes.

How is Australia likely to be affected if this brush fire takes hold? In short, there is little to be gained and much to be given away. Australia is a strong traffic-generating and receiving country and has therefore always enjoyed a fairly strong negotiating position in exchanges of commercial aviation rights.

Its geographical situation and long-haul international route structure has however always meant that negotiators were faced with a complex of different bilateral relations, especially in establishing European routes, but they have always been against the background of the Transit Agreement.

If interning states- hurt by the intensely competitive price environment and overflown by the new generation long-range aircraft- follow the Canadian example, a new range of negotiating formulae will have to be developed. At worst, routes to and from Australia would be made substantially more costly to operate.

There are wide differences between the reactive approach of Canada and the mercantilism of the Soviet Union’s demands, but together they point in a dangerous and unproductive new direction for international aviation. Hopefully these concerns will not come to fruition; certainly, as a restraint on international trade these restrictions on transit should be outlawed by any new GATT talks on services trades. The ICAO forum also offers a means for multilateral resolution of the problem.

In any event, it is now patently clear that the use of words like ‘rights’ and ‘freedoms’ is no longer appropriate; the grant of transit through sovereign airspace is now most clearly a privilege.