GOVTS AGREE ON AIRLINE REFORM

17 Nov 2009

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A HISTORIC agreement has been reached between the European Union, the US and six other countries that could revolutionise the troubled worldwide airline industry.

The International Air Transport Association (IATA) announced the signing of an agreement that is intended to lead to greater freedom for airlines to operate on a global basis.

"This is an historic achievement that will help set the foundation for a financially sustainable global aviation industry," said Giovanni Bisignani, IATA's Director General and CEO.

The 65 year-old bilateral system of air service agreements places restrictions on how airlines can do business in ways that no other industry faces, says IATA. National ownership requirements do not allow airlines to merge across borders, precluding the development of global players that has been seen in other previously regulated industries such as telecommunications. Airlines are also restricted in market access, until government negotiators conclude agreements to allow cross-border services.

"Sixty-five years ago, when airlines were divisions of the state apparatus, the bilateral system and its restrictions made sense," said Bisignani. "The world has changed. Airlines are real businesses. Their bottom lines are subject to the harsh discipline of the market that has seen the industry lose a net of US$53 billion since 2001.

"Airlines made global business possible, but they remain a highly fragmented industry unable to cover their cost of capital. We don't want government handouts. What is important is that we have a level playing field and the freedom to do business that every other industry takes for granted. Today's signing is a major step towards that goal."


W: www.iata.org

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