Thursday, November 23, 2017

REDJET EXPOSES CARICOM's CLOSED SKY

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The REDjet imbroglio, though staunched, still continues, and it has exposed to us Caribbean residents the gross inconsistencies that underpin Caricom aviation policies. Policies that are supposed to advance the socio-economic interests of all of us.

We have seen that our Caricom leaders eagerly adopt Open Sky policies for international air services but enforce Closed Sky policies for intra-regional air services.

Trinidad & Tobago, Jamaica and Barbados have each signed an Open Sky air service agreement (ASA) with the United States. (Trinidad and Tobago negotiated their Open Sky ASA over a weekend.)

Yet these same fraternal members of Caricom and willing(?) signatories to the Revised Treaty of Chaguaramas, continue to persist in upholding Closed Sky ASAs among themselves.

An Open Sky ASA is characterized by the freedom of airlines to fly and freedom to price services.

A Closed Sky ASA is dominated by bureaucratic and/or political control of routes to be flown, aircraft types to be used and prices to be charged.

Both types of treaties give the same importance to safety and security.

The concept of "predatory pricing", which is difficult to enforce in practice, is given much more weight in Closed Sky ASAs than in Open Sky ones.

However the Open Sky ASA encourages innovation in the provision of air services while the Closed Sky treaty assiduously protects the status quo.

The Government of Trinidad and Tobago has recently stated that the encouragement of innovation is essential for the sustained socio-economic upliftment of residents of the country.

One of the critical governing frameworks of Caricom regional aviation policy is the Caricom Multilateral Air Services Agreement (MASA).

MASA was negotiated in 1996 and came into force in November 1998.

Jamaica has never signed this Agreement and continues to not recognise it.

It was a stance fellow Caricom countries allowed Jamaica to maintain even when its then national carrier, Air Jamaica, flew intra-regional services with full traffic rights.

MASA does incorporate a number of liberal concepts but then completely eroded their impact by a number of its own clauses and by stating that it does not override the Closed Sky ASAs that continue to exist within the region.

For instance MASA adopts the concept of "Community of Interest" which allows greater scope for the designation of airlines domiciled in Caricom.

It also has a slightly more liberal pricing policy than that which exists in Closed Sky ASAs.

However MASA protects the status quo by maintaining that services by new airlines cannot adversely impact the economic interest of incumbent airlines.

In effect its underlying principle is that competition is questionable.

The Caricom Secretariat and Caricom Heads of Government have long known that MASA, and the regional bilateral ASAs were incompatible with the governing principles and objectives of the Revised Treaty of Chaguaramas.

Yet to date nothing has been done to revise MASA or the bilateral ASAs.

Indeed Trinidad and Tobago and Barbados, in the middle of the REDjet impasse, amended their bilateral ASA.

But guess what?..they left the Closed Sky nature of the ASA untouched.

So much for the promotion of the new Caricom mantra of innovation.

Caricom residents have spoken out loudly for innovation in regional air services.

But alas that is not enough.

We now have to hold the feet of Caricom Heads of Government to the fire to ensure that they all implement policies and structures to enhance such innovation.

The outgoing President of Guyana and the newly appointed Minister of Transport of Trinidad and Tobago have both stated a preference for Open Sky aviation policies.

They need to translate such words into immediate action by having Caricom Heads of Government quickly agree to Open Sky replacements of MASA and existing regional bilateral ASAs that put at minimum all Caricom domiciled airlines on an equal footing to fly within the single Caricom air space. This Open Sky MASA should be buttressed by a Caricom aviation regime by a Caricom CAA funded via Caricom administered charges.

Why must we continue to play second fiddle to "foreign"?

A final note. It is interesting that regional Civil Aviation Authorities that once were classified CAT II by the United States FAA and suffered no penalties by aviation jurisdictions other than that of the US, should now appear to penalise their Caricom brothers when they suffer the same fate.

It is equally interesting that the regional Civil Aviation bureaucracies know full well that there are two fundamental criteria for the charge of "predatory pricing".

The competition must complain and the predatory price must be proven to be below the cost of operations of the entity charging the price.

There have been no public complaints by competitors and the adoption of a different business model is not a reason to shout "predatory pricing".

Ian Bertrand is an airline consultant and former chief executive of BWIA.