Essential Services
Introduction
Direct financial support of the airline industry has existed since the beginning of commercial aviation. Most States have at some point granted subsidies or State aid to their airline industry, at least during its establishment phase. However, the continuation of such generic support is not compatible with a liberalized environment and the air transport sector today is operating in an increasingly open and competitive marketplace. Yet that liberalizing marketplace may not deliver all the services considered necessary by governments for achieving their economic or social development goals. Nor may it provide that assurance of service which is considered indispensable by some States in a globalized economy.
At ICAO's fifth Worldwide Air Transport Conference in 2003, several aspects of the financial support issue were discussed. The Conference supported the idea of applying in the international context the essential air services concept, which presently exists in only a few liberalized jurisdictions. The Conference separately also supported a suggestion for ICAO, in collaboration with the World Tourism Organization (WTO-OMT), to study financial support for essential tourism development routes.
Study on the Essential Services and Tourism Development Route Scheme
The attached study, prepared by the ICAO Secretariat in collaboration with the WTO-OMT, addresses these two concepts and develops a single regulatory scheme for their use, either separately or together. The study specifically examines whether, and if so how, States can provide financial support to airlines for certain international route development and assurance of service purposes. The grant of financial aid or regulatory support on a route-by-route basis (in contrast to direct airline subsidies or State aid) would enable States to take a more effective and efficient approach to airline support issues. The study offers a practical approach to instituting "Essential Service and Tourism Development Routes". However, of necessity its implementation, where applicable, is left entirely in the hands of States. Implementation will require coordination between authorities if used bilaterally or multilaterally, elaboration of the objectives, criteria and procedures which would be needed, and a willingness at a policy level to take up a concept internationally, which, to date, has primarily been confined to domestic situations. The study simply gives regulators the reasoning, guidance and the regulatory tools for setting up a scheme. |
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Concerns about continued participation and assurance of service in international air transport may be a factor in the reluctance of some States to embrace the liberalization process. The scheme developed by this study may help to alleviate those concerns and could, potentially, act as an incentive in the negotiation of liberalized air services agreements. But it should be noted here that the scheme does not have general applicability - it is limited to eligible essential services routes in a liberalizing environment and tourism development routes involving Least Developed States (LDCs). Nor is the study intended to contradict the objectives of liberalization, but it is rather aimed at complementing them. Moreover, it is intended to provide a means for poor countries and the development community to optimize the benefits of air services for economic and social transformation, where such services simply would not be supported by market forces alone. Both ICAO and the WTO-OMT are publishing and promoting the ideas in this study.
For ICAO the study is another regulatory tool developed by the Organization to assist States in the liberalization process. The study has been approved by ICAO's Secretary General and is published under his authority.
For the WTO-OMT the study is a fundamental component of its "liberalization with a human face" strategy and "Sustainable Tourism - Eliminating Poverty" (ST-EP) program, designed to support the world's poorest countries in meeting the globally-shared challenge of poverty alleviation.
