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Stabroek News

Air policy and Air Jamaica
published: Sunday | May 13, 2007


Stephen Vascianne, Contributor

Earlier this month, the Government of Jamaica participated in negotiations with the British Government on matters pertaining to the conclusion of a new Air Services Agreement between both countries.

This round of negotiations was the latest in a series undertaken by representatives of the Jamaican Air Policy Committee with other countries.

The series included negotiations with Germany, Chile and Brazil, and the United Kingdom.

The negotiations with individual countries raise a number of technical questions concerning air law and the economics of air transportation; but they also prompt issues that may be of direct importance to Jamaicans at home and abroad, tourism interests and the trade sector.

It may be useful, therefore, to review some of these issues for the benefit of Sunday Gleaner readers.

Air Policy Committee

It should be noted from the outset that Jamaica's air policy initiatives are considered on a monthly basis by the Government's Air Policy Committee.

This committee comprises representatives from various entities, including the Ministry of Housing, Transport, Water and Works, the Jamaica Civil Aviation Authority, the Airports Authority, the Jamaica Tourist Board, Air Jamaica, Jamaica Trade and Invest (JAMPRO), and the Attorney-General's Chambers.

The committee works to reconcile, as far as possible, the competing perspectives of different parts of the Government, so that in air policy negotiations, Jamaica speaks with one voice.

Generally speaking, these competing interests are reflected in the main objectives that the Air Policy Committee has sought to achieve in its recent negotiations.

These objectives include:

  • Ensuring safe, secure, efficient travel within a competitive framework.

  • Obtaining the cheapest airfares for consumers on a sustainable basis.

  • Providing variety< for consumers.

  • Promoting tourist traffic.

  • Protecting the national carrier of Jamaica, Air Jamaica.

    The competing character of some of these objectives is readily discernible.

    So, for example, free market principles are not entirely compatible with the desire to protect Air Jamaica.

    And, similarly, if one places restrictions on the number of flights that may be undertaken on a particular route, this could have the effect of artificially raising airfares and reducing variety to consumers.

    On closer reading, it appears that attempts to protect Air Jamaica may broadly undermine some of the other objectives to be pursued in negotiations.

    This is so because, by opening up routes, Jamaica will allow for lower airfares, enhance variety, possibly increase tourism uptake, and advance competition. But we must tread carefully.

    National Carrier

    In the first place, there may still be the need to protect Air Jamaica where it is apparent, for instance, that competition is unfair.

    Non-Jamaican carriers may well charge airfares below cost in the hope of driving out Air Jamaica and other competitors from the market.

    Secondly, the Air Policy Committee is obliged to accept the formal position of the Jamaican Government, which has been to protect the national carrier in some measure.

    And, it should be noted that this formal position is not eccentric: quite apart from the issue of unfair competition, the Government has to bear in mind considerations of national self-esteem associated with having a national carrier. Jamaica's place in the world is enhanced by having an Air Jamaica,and Jamaicans share in the pride of having our own airline.

    But, to be sure, Air Jamaica can only be defended within reason; and so, the approach taken in air policy negotiations has turned on a case-by-case analysis of each situation.

    For example, Jamaica now has an 'open skies' arrangement with the United States of America, which effectively allows carriers designated by the U.S. to enter Jamaica from any point in that country, and to go beyond Jamaica to any other country. This is full liberalisation between Jamaica and the U.S.

    With respect to the United Kingdom negotiations continue, there is an interim modus operandi. It is open for all British airlines to fly to Montego Bay on a scheduled basis from the United Kingdom, an arrangement that facilitated Virgin Atlantic's entry to Jamaica last year.

    It is also open for one airline (British Airways) to fly from London to Kingston in direct competition with Air Jamaica.

    In respect of the United Kingdom, therefore, there has been increasing liberalisation, but we have not reached the point of full liberalisation.

    European designation

    The tendency towards greater liberalisation is also reflected in the last round of negotiations between Jamaica and the United Kingdom.

    Specifically, the British authorities sought the right to designate any European Community airline (or airline from the European Free Trade Area, EFTA) to come into Jamaica, essentially from any part of the European Union.

    Jamaica has accepted this possibility in principle, but has said that this should be done after a transitional period of three years, after May 2010.

    This period would give Air Jamaica the opportunity to make any necessary adjustments to deal with the new competitive environment. Subject to European Community approval, the British Government has accepted the Jamaican counterproposal.

    The question of European Community designation has also played an important role in Jamaica's negotiations with the Federal Republic of Germany.

    In keeping with European Community mandates, Germany wishes to have a situation in which that country may designate any European Community or EFTA airline to come into Jamaica.

    So, for example, European airline X could fly from X to Germany to Britain to Jamaica. As noted above, Jamaica now accepts this possibility in principle, but we would nonetheless wish to preserve the right to protect the London-Kingston route from unlimited European competition at least in the short run.

    Quid Pro Quo

    Two further points should be noted. The first is that negotiations proceed on the basis of quid pro quo assumptions. Thus, in each case, Jamaica must ask "what is in this for us?"

    In some cases, the benefits will be easy to envisage, as for instance, when the possible opening up of a new route between Spain and Jamaica promises to bolster significant new tourism developments in the country.

    In other cases, however, benefits to Jamaica are not readily discernible; in the latter instances, the question then becomes whether Jamaica should support routes that may serve to enhance the principle of liberalisation, but do little for Jamaican travellers.

    Secondly, in some of our recent negotiations, the question of charter arrangements and related issues of cargo carriage have assumed some prominence.

    As to charters (non-scheduled flights), the general idea is that charter arrangements may promote tourist arrivals as individuals from, say, Britain may wish to come to Jamaica because of attractive package deals: air tickets and hotel rates combined at low rates.

    Such charters are subject to approval of the Jamaica Civil Aviation Authority but, clearly, given the direct benefit charters bring to Jamaica, there is strong incentive in favour of approval.

    Notice, though, that the charters were originally conceived as tied to tour packages. Now, however, some countries wish to remove restrictions on charter arrangements, so that charter operators may bring in charter passengers without any link to tour packages.

    These 'seat only' charters are becoming increasingly popular, as potential travellers (tourists and others) make online bookings.

    In the Jamaican arrangements with the United Kingdom, 20 per cent of the charter seats to Jamaica are 'seat only'. This protects both Air Jamaica and other scheduled carriers to Jamaica (British Airways and Virgin Atlantic) from unpredictable levels of competition in the short run.

    Air Cargo

    As to cargo operations, the Air Policy Committee supports the free trans-shipment of goods through Jamaica, and indeed one hopesthat Jamaica may become a hub for cargotrans-shipment.

    Whether this happens will depend on the logic of the market, but there is reason to believe that some legitimate Central and South American products could use Jamaica as a point en route to Europe or North America.

    If, however, the goods originate in Jamaica, and are headed for Britain, there are restrictions on movement. Specifically, all cargo uplift from Jamaica to Britain (originating in Jamaica) is required to be shipped by Air Jamaica, British Airways or Virgin Atlantic.

    In the event that these three airlines have reached their cargo-carrying capacity, it will then be open to shippers (usually charter operators) to rely o non-scheduled carriers.

    These rules are expressly designed to protect three carriers from unfair competition, but charter interests in Britain and elsewhere would like to have them changed on the basis that they stifle creative solutions to the question of cargo uplift.

    Overall, therefore, Jamaica has entered the era of air policy liberalisation.

    The high water mark for this has been set by the arrangements between Jamaica and the U.S., but other agreements have also sought to incorporate free market principles more rigorously than was previously the case.

    In some instances, safeguards for the protection of scheduled airlines remain, and occasionally it is necessary to protect some routes from the level of competition that could ultimately prove contrary to Jamaica's interests.

    All this requires judgement: the Air Policy Committee exercises that judgement on the basis of reason, and not necessarily in response to the loudest voices.

    Stephen Vasciannie is the chairman of the Air Policy Committee of the Jamaican Government.

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