1. ‘There are three major considerations in the development of international air service: route patterns, which define the markets to be served; capacity, meaning the number of flights and types of aircraft flying in these markets; and the fares charged for different kinds of services and consumers. All three are integrally related economic issues …’ Source: The 1976 US International Aviation Policy. It is noteworthy that the subsequent 1978 policy statement specifically included ‘charters’.Google Scholar

2. This is of course a different question from whether regu lation internationally is inevitable, for no country has ever seriously suggested total deregulation of international air services. No government is prepared to ‘give away’ all its gateways to any foreign carrier. Similarly, Michael Levine, in discussing the terms of a Deregulation Bill in 1975, also noted that ‘Regulation of foreign air transportation… would also remain. Foreign air transportation must continue to be regulated only be cause the pervasive involvement of other governments in the economic activities of international carriers creates a need for co-ordinated strategic behaviour to deal with their efforts.’ Alternatives to Regulation: Competition in Air Transportation and the Aviation Act of 1975, 41J Air L. and Sea, p 703 at p 708 (1975).Google Scholar

3. ‘Valid scientific generalisation can be drawn and useful general guidelines to regulatory policies can be developed… But intelligent application in particular situations, like the decision to regulate in the first place, can only be done on the basis of a full consideration of the special characteristics of the industry in question … and of the varying mix of public purposes, economic and other, that regulation is supposed to serve.’ Source: Alfred Kahn, The Economics of Regulation. Google Scholar

4. Maritime transportation is gradually taking on some of the commercial restrictions characteristic of aviation, but there has for some centuries been a ‘strategic’ limitation on the free passage of shipping. Most States espouse the concept of territorial waters associated with a need to protect the territory of the country from attack by sea. In some ways, the ground rules for operation of inter national air services, and many of the policies applied by governments, are directly attributable to the lessons learned in war.Google Scholar

5. Lowenfield, , Andreas, . Foreign Affairs, Vol 54, No 1, October 1975.Google Scholar

6. British Air Transport in the 1970s. HMSO London, 1970.Google Scholar

7. Civil Aeronautics Board. Order 73-155, 1973.Google Scholar

8. Hoffman's Domestic and Political Interdependence in From Marshall Plan to Global Interdependence, OECD 1978.Google Scholar

9. George Baker, leader of the United States delegation to Bermuda Conference. See also the views of the UK leader: ‘The United States had witnessed the steady expansion of a prosperous domestic air transport system, based on a regulatory system of licensing administered by the Civil Aeronautics Board. In the international field, their main pre-war and wartime activities had extended southwards to Latin America, where they encountered little competition and air transport was welcomed by most of these countries for the benefit it conferred on communities inadequately served by surface transport. They were undoubtedly inclined to interpret their re quirements of worldwide international air transport in the light of their own experience in Central and South America, but they failed to realise that the British plan was intended to be the international counterpart of the regulatory system they had found necessary to control their own domestic air transport development.’—SirCribbett, George, ‘Some International Aspects of Air Transport’, Journal of the Royal Aeronautical Society, pp 669–677 (1950).Google Scholar

10.In 1919, six airlines then operating in Europe formed the International Air Traffic Association. This Association contributed significantly to the development of standard airline tickets and air waybills; to the establishment of interline reservation arrangements; and to the promotion of a worldwide airmail network. In addition, important advances were made in encouraging the standardisation of technical aspects of air transportation, e.g., aircraft instrumentation and controls.Google Scholar

The Association also co-operated with interested governments in the drafting of international treaties standardising the rights of passengers and shippers in the event of loss, injury and death. By 1939, the Association's membership had grown to include 33 carriers. However, the outbreak of war in Europe brought most Association activities to an end.Google Scholar

11. A proposal at the Conference to discuss the possible rela tionship between these operator associations and the proposed ICAO was rejected by the USA as being contrary to the United States anti-trust law. For this reason, there is no reference in the Chicago Convention to any tariff negotiating function by carrier associations. It was agreed, however, that the carrier representatives present at the Chicago Conference could meet immediately after the governmental sessions ended.Google Scholar

12. Mr. George Baker's comments were contained in a lecture entitled ‘The Bermuda Plan as the Basis for a Multilateral Agreement’, delivered at McGill University, 18th April 1947.Google Scholar

13. The Joint Statement of 19th September 1946 is contained in Department of State Bulletin XV, pp 577-578. The statement refers explicitly to following the capacity guide lines, but also, in general, ‘the basic principles agreed at Bermuda’.Google Scholar

14. SirCribbett, George, ‘Some International Aspects of Air Transport’, Journal of the Royal Aeronautical Society, (1950).Google Scholar

15. Baker, , op cit. Google Scholar

16. Little, Virginia, Control of International Air Transport, 1949, p 29.Google Scholar

17. As the structure of bilateral agreements spread, the operational underpinnings of a standardised global air transport network were established. Through the IATA machinery, basic procedures and documentation were developed to provide access to worldwide transportation in local currency in any country. In 1955, the CAB chairman characterised the contribution of the IATA processes as follows: ‘The great strides made by the International Air Transport Association in developing uniform procedures and documentation, in providing the elimination of red tape in international travel, and in creating a worldwide integrated fare and rate structure have been major factors in the progress made by inter national aviation.’Google Scholar

18. South American countries have never adhered to the Bermuda principles and as a region have generally favoured pre-determination of capacity and careful control on designation and foreign carrier fifth-freedom operations.Google Scholar

19. With the exception of the United States, very few States possessed more dian one international scheduled flag carrier. This remains true today (although many now authorise charter operators). Where two or more scheduled airlines are authorised, they are generally subject to ‘spheres of influence’ control.Google Scholar

20. In 1955, the majority of international carriers partici pated in the Conferences, representing over 88% of international passenger traffic. It should be noted that the pricing structure of the non-IATA airlines bore close relations to the Conference structure.Google Scholar

21. Throughout the 1950s, it should be recalled that on the North Atlantic, the economics of operation, even on whole-planeload service, were so high in relation to the existing levels of disposable income that the capability to stimulate through low fares was limited. Also, as most countries were intent on building up consistent flows of traffic, to establish permanent links and ensure use of facilities and equipment, it was necessary to safe guard carefully the emerging scheduled links.Google Scholar

22. The documentation prepared for the discussions contained an extract from CAB ‘Economic Regulations Draft Release No 14’ of 22nd November 1946. This read: 'Proposed Revision of Sections 292.1 of the Economic Regulations, Pages 1 and 2. “(c) Definitions (1) Non-certificated Irregular Air Carriers: Non-certificated Irregular Air Carriers shall be defined to mean any non-certificated air carrier which directly engages in inter-state or overseas air transportation of persons and property and which does not hold out to the public, expressly or by a course of conduct, that it operates one or more aircraft between designated points regularly, or with a reasonable degree of regularity, upon which aircraft it accepts for transportation, for compensation of hire, such members of the public as apply therefore or such express or other property as the public offers. Within the meaning of this definition a “point” shall mean any airport or place where aircraft may be landed or taken-off, and any area with a 25-miles radius of such airport or Place.“'—ICAO Doc 4522, A1/EC 74, pp 29-30, May 1947.Google Scholar

23. ICAO Document 7278-C/841, p 12 (1952).Google Scholar

24. It was in this year also that the United States Department of Defense ended its policy of competitive bidding for military charter services, which had driven a number of supplemental out of business. Instead, a new system of negotiated bidding was created, open only to partici pants in the Civil Reserve Air Fleet programme. At the same time, the CAB established machinery for formulating price floors for military charters at economic levels.Google Scholar

25. The Statement was the product of a Steering Committee commissioned by President Kennedy in 1961; its main objectives were, according to one contemporary writer, ‘(1) to determine the causes of the diminishing share of the transatlantic serviced by United States carriers, and (2) to determine the effect of this diminution on the United States’ balance of payments.’ Sackrey, , ‘Over capacity in the United States International Air Transport Industry', 32 Journal of Air Law and Commerce, 24, p 48 (1966).Google Scholar

26. Lowenfield, . ‘A New Take Off For International Air Transport’, Foreign Affairs, Vol 54, p 36 at p 41 (1975).Google Scholar

27. ‘Reopened Transatlantic Charter Investigation’ (1966).Google Scholar

28. In 1968 a United States Supreme Court decision determined that the grant of 1TC authority to the supplemental carriers was ultra vires the Federal Aviation Act. Shortly afterwards, however. Congress amended the legislation to legalise the CAB's action, and in doing so also authorised scheduled carriers to perform ITCs.Google Scholar

29. By 1967, European flags’ share of the total North Atlantic charter market had dropped to 27%. European charter carriers (including several ‘daughter’ companies of the designated scheduled carriers) accounted for a further 13%, and the balance was carried on the United States scheduled and supplemental, operators (fifth-freedom carriers were not permitted to participate in this traffic).Google Scholar

30. Market share and balance of payments considerations were again accorded some prominence, but the main, specific thrust was at the role of charters and supple mental carriers.Google Scholar

31. 1969 UK Policy White Paper states: ‘… the distinction between scheduled and non-scheduled services is changing. The Government accepts that inclusive tour prices must in general be related to public fares on scheduled services, but agree that they do not need to be identical, or indeed that there must be a relationship in every case.’ However, ‘where the demand for scheduled service warrants, it is right to protect the scheduled carrier from the effects of lower priced charter competition’. This policy was also applicable to the UK's European charter operations and no distinction was made between policy for this area for the North Atlantic.Google Scholar

32. The government of the receiving country has no control over the conditions of carriage and price, etc, of the charter operation other than outright disapproval of the operations themselves.Google Scholar

33. In 1976 ECAC formally proposed a transatlantic multi lateral charter regime. This however, proved unaccept able to the USA since it required relativity between scheduled and charter services.Google Scholar

34. CAB Order 73-6-79.Google Scholar

35. Following the failure of the conference, the CAB on 7th September 1973, issued a Notice of Proposed Rule Making for minimum charter rates between the USA and Europe, with a proposed effective date of 1st January 1974. Owing to strong opposition within the USA, particularly from ACAP and the Department of Justice, the rules never became more than proposals.Google Scholar

36. Taken from a United States Commerce Department circular as reported in Aviation Daily, 28th January 1975.Google Scholar

37. In recent years, formal policy reviews have been under taken in many countries, e.g., Australia, Argentina, Brazil, Canada, Japan, UK; in many others renegotiations of major bilateral agreements have necessitated informal reviews of regulatory policy. The Australian policy review has potentially far-reaching consequences because of its over-riding emphasis on third and fourth- freedom operations. The potential for conflict with other national and regional aviation interests is covered later in this paper.Google Scholar

38. The 21st Plenary Session of the International Civil Aviation Organisation Assembly (1974) had expressed concern at the ‘very serious economic problems being faced by the international air transport industry. … It is necessary to set long-term objectives on the basis of a considered approach by governments and airlines, and for ICAO to play a more effective and continuous part in this work by providing guidance for governments and promoting the exchange of ideas and experience related to possible remedies and solutions at both the regional and worldwide level’.Google Scholar

For this purpose, the Assembly directed the convening of a Special Air Transport Conference in 1977. In the meantime, a small panel of experts (the ‘Fares and Rates Panel’) was established to make ‘objective studies … of the international fares and rates situation’, and to make recommendations ‘concerning possible improvements’.Google Scholar

39. The Council of ICAO will undertake studies aimed at developing a co-ordinated regulatory regime for scheduled and non-scheduled operations, and in the interim, States have been urged to take all possible action to ensure co-ordination through national policies. The Council of ICAO will also undertake studies to establish capacity regulation criteria for both scheduled and charter services, and to develop a model clause or guidelines for predetermination of capacity. The ICAO Council is pursuing the implementation of 15 recom mendations made to improve the machinery for tariff negotiation, to provide greater co-ordination between the various machineries, and to facilitate carrier /government interface on tariff matters. With regards to tariff enforcement, the Council of ICAO will now study ap propriate measures with a view to developing agreed principles and practices covering tariff filing, enforcement and penalty. The studies will take into account the need to provide an effective interface with existing industry self-policing machineryGoogle Scholar

40. How long the ‘new’ concept will be retained is a matter of conjecture. Ironically, Laker has recently requested and received approval for a reservations system for Skytrain—essentially, to provide a more effective service to consumers. He has also introduced commissions for travel agents and moved the operation from Stansted to Gatwick.Google Scholar

41. One clear indication of their attitudes can be found in the governmental reaction to the CAB Show Cause Order (Docket 32851) which has tentatively found that anti-trust immunity should be withdrawn from the IATA multilateral carrier mechanism. Some 60 governments have indicated their belief in the multilateral principles embodied in the Chicago/Bermuda framework.Google Scholar

42. This latter point was adverted to by one of the British delegation in the Bermuda 2 talks: ‘By the late 1960s, however, there were few bilateral air agreements involving countries other than the USA which did not in some way control capacity. Despite the almost invariable Bermuda facade, the effect of attaching confidential understandings between governments to the published Bermuda text was to control capacity in one way or another’. Jack, Peter, ‘Bermuda 2—A discussion of its implications: A British Airways view’, The Aeronautical Journal, p 55, February 1978.Google Scholar

43. There were 54 governments at the Chicago Conference; today there are 143 adherents to the Chicago Convention.Google Scholar

44. Straszheim, Mahlon. The International Airline Industry, Brookings Institution, Washington DC, p 202 (1969).Google Scholar

45. Quoted in Friedman, A New Air Transport Policy for The North Atlantic, p 18 (1976).Google Scholar

46. AFCAC—African Civil Aviation Conference; ACAC— Arab Civil Aviation Conference; LACAC—Latin American Civil Aviation Conference; ECAC—European Civil Aviation Conference.Google Scholar

47. Keyes, L. B. ‘The Making Of International Air Fares And The Prospects For Their Control’, Journal of Air Law and Commerce, Vol 30, p 173 at p 174 (1964).Google Scholar