Flight treaties hit turbulence: experts say bilateral aviation pacts are inadequate in today's competitive market

0 Comments | Insight on the News, April 22, 1996 | by David Field

Fifty years after Trans World Airlines began regular Atlantic crossings with the first scheduled passenger service between Washington and Paris, international air travel is simpler, faster and cheaper.

In 1946, the Washington-to-Paris hop took 20 hours on TWA's four-engine Lockheed Constellation, which cruised at 300 mph and made stops in New York to pick up passengers and in New-foundland and Ireland for refueling. The $675 round-trip coach fare equaled $5,275 in 1996 dollars and represented about 27 percent of the average American's 1946 annual in-come of $2,500, according to TWA.

Today, travelers can fly nonstop from Washington's Dulles International to Paris' Charles DeGaulle in seven hours for as little as $368 round trip -- although the average ticket runs just under $700. International air travel is vastly more accessible than it was at the end of World War II, a remarkable feat considering that the complex treaties regulating overseas flights are as politically contentious as ever. Negotiators from the State and Transportation departments may have reached "open skies" pacts with major trading partners such as Germany and Canada, but thorny and long-running U.S. squabbles drag on with Japan, England and other allies about routes and landing rights.

Indeed, international air travel still is governed by a 1944 treaty that critics blame for protracted disagreements among nations over commercial aviation. The treaty covered the basics -- rules of the air, crew licensing, accident investigation, airport operations and air-traffic control -- but failed to implement a broad, multilateral agreement for postwar air services. Instead, countries adopted an inherently restrictive system of nation-to-nation agreements: About 3,000 bilateral pacts spell out, in excruciating detail, who can fly where in what size plane; most pacts also limit fare discounting and other pricing freedoms as well as airline investment and ownership.

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The United States has about 70 bilaterals with 95 nations. The treaties give each signing nation the right to choose which airlines will fly the routes allowed by the pact. In America, this has led to bitter disputes among airlines -- in stark contrast to the open competition produced by domestic deregulation, where the ambitions of airlines are limited only by the physical restraints of airports.

"The ability of U.S. airlines to meet the demand for global air service has been seriously hampered by the diverse positions of our trading partners, by their varying degrees of willingness to liberalize aviation and by the framework that has governed international air service for more than 50 years," says Transportation Secretary Federico Pena.

Industry critics argue that the United States has passed up opportunities for long-term change to secure a short-term advantage. They claim negotiators bargained away important chances for United, American and Delta airlines to increase business in 1992 by granting British Airways, or BA, wide access to U.S. airports in return for BA's investment in USAir. The American carrier was in serious financial difficulty -- and BA's $400 million infusion certainly helped keep it aloft -- but the Big Three airlines did not get the London Heathrow landing rights they had sought -- since 1944, in Delta's case.

The bargaining process is inherently a bartering process, according to airline expert Dan Kasper of Coopers & Lybrand, a consulting firm. Because most bilaterals are designed to protect national, political and economic interests, negotiators tend to trade off, making bargaining chips of commercial opportunities. In the end, this process "reduces new service opportunities to the level acceptable to the most protectionist state" and works against the interests of travelers and shippers.

The "bartering process" also encourages nations to play one against another. A U.S.-German accord would increase flights to Germany, thereby eroding the domination of trans-Atlantic traffic now wielded by Heathrow and by British carriers, notes Sen. Larry Pressler of South Dakota, chairman of the Commerce, Science and Transportation Committee. Pressler also sees a valuable negotiating tool in lifting restrictions on foreign investment in U.S. airlines, now capped at 25 percent.

Last year, the United States reached open-skies treaties with nine small European countries, using as a lure the promise that these nations could hope for antitrust immunity -- that is, their carriers would be allowed to team up with a U.S. airline to gain access to the world's richest travel market. For its part, the United States hopes it agreements with blocs of smaller countries will help it crack the protectionist shell of larger nations in Europe and, eventually, Asia and Latin America.