Open skies

TO BOOST tourism, investments and the economy in general, President Aquino recently issued Executive Order (EO) 29 “authorizing the Civil Aeronautics Board (CAB) and the Philippine Air Panels to pursue more aggressively the international civil aviation liberalization policy.” Popularly known as “open skies,” this policy allows foreign carriers to access our “country’s airports other than the Ninoy Aquino International Airport (NAIA).”

Tourism and civil aviation. Immediately, the country’s air carriers – notably Philippines Airlines and Cebu Pacific – declared that while they fully support the tourism industry, the opening of our skies should not impoverish Philippine aviation. It should be subject to the principle of reciprocity. Simply stated, reciprocity means that the advantages granted to foreign carriers should be matched or reciprocated by similar benefits given to local airlines by the home state of the alien carrier.

Tourism and aviation are natural partners. The colossal tourism success of our neighbors was achieved in close collaboration with their national carriers. The phenomenal growth of tourist arrivals in Singapore, Hong Kong, Malaysia and Thailand is matched only by the spectacular rise of Singapore Airlines, Cathay Pacific, Malaysian Air and Thai International as the very best airlines of the world. Statistics show invariably that national carriers always bring in the most arrivals to their home countries.

By itself, open skies has no track record of automatically bringing in tourists in any country. Several other factors must be concurrently undertaken. For example, do we have enough hotels, resorts and lodging houses of the quality and price appropriate for the type of tourists open skies will bring? Do we have the infrastructures, like airport terminals and roads, to support the arrivals? Is there peace and security in the tourist destinations we want to open up?

Reciprocity and fairness. This paper’s editorial on March 26 stressed that reciprocity, while not mentioned in EO 29, is “only fair and just” and “the country’s representatives [who will implement the EO] must be clear and unwavering on that one condition.”

In his letter to the Inquirer published on March 30, CAB Deputy Executive Director Porvenir P. Porciuncula clarified that EO 29 “clearly recognizes” the constitutional principle mandating “equality and reciprocity” in “all forms and arrangements of exchange.”

He added that Republic Act 776 bars “unjust discrimination, undue preferences or advantages or unfair or destructive competitive practices… Hence, the local air carriers are rest assured that in the implementation of EO 29, the CAB will be fair and just…”

Freedoms, frequencies, etc. Aviation agreements are normally negotiated between countries by “air panels.” After concluding their negotiations, air panels execute Air Services Agreements (ASAs). EO 29 authorizes the Philippine Air Panels to “offer and promote third, fourth, and fifth freedom rights… without restriction as to frequency, capacity and type of aircraft, and other arrangements that will serve the national interest.”

“Third freedom” refers to the right given foreign carriers to disembark passengers coming from their home state to the Philippines. Example: a US carrier brings traffic from the United States to the Philippines. “Fourth freedom” refers to the right given foreign carriers to board passengers from the Philippines to the carriers’ home state. Example: a US carrier carries passengers from the Philippines to the United States.

Most highly desired, “fifth freedom” refers to the right given foreign carriers to pick up passengers in the Philippines destined for a third state and vice-versa. Example: a US carrier bound for the Philippines picks up passengers from Japan and brings them to the Philippines; and then picks up passengers in the Philippines and disembarks them in Japan.

These third, fourth and fifth freedom rights are normally exchanged between countries on strict reciprocity. However, EO 29 allows the Philippine Air Panels “to offer and promote” these freedoms “without restriction [i.e., without reciprocity] as to frequency, capacity, and type of aircraft, and other arrangements that will serve the national interest as may be determined by the CAB.”

Example: Say an ASA with state XX grants designated carriers from both the Philippines and XX third and fourth freedom rights with one frequency a week, via narrow body aircrafts with 100 seats. Despite these limitations and without asking any reciprocal rights, the Philippines may – in the national interest – unilaterally grant XX carriers several more frequencies a week, via wide-body jumbo jets with 400 seats.

As part of the President’s program to enhance the economy, open skies aims to boost tourism and investments. Foreign airlines that bring new tourists untapped by Philippine carriers are truly welcome. However, if they merely pouch on the markets already fully served by local carriers, it would be foolhardy to welcome and reward them via EO 29.

Highfalutin’ rhetoric in praise of reciprocity there will always be. But the reality is in the implementation, given the complexities of aviation freedoms, frequencies, capacities, routes, etc. Like natural resources, civil aviation rights form part of the nation’s wealth that must be carefully and strategically used. Ultimately, the “national interest” standard will be invoked vis-à-vis the ability of a foreign carrier to increase traffic to the Philippines from untapped new markets and routes, and not from stealing the existing traffic painstakingly developed by local airlines.

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