Los manuales escolares y la enseñanza de los marcadores del

An extensive literature exists on the policy reforms related to the aviation industry, as discussed below. The complexity of the aviation industry in terms of the various service elements required and their inter-link to produce international air services for exports has also been reflected in the types of reforms undertaken. These reforms include the pro- competitive measures of airline and airport privatization and the liberalization of air services through open sky agreements.

In the case of the pro-competitive reforms, the earlier periods before the mid-eighties had seen the dominance of various governments in the ownership and management of the national airlines and public airport infrastructure. The role of governments in airport and air service functions diminished when England privatized the national airline British Airways and the British Airports Authority in 1986 and 1987, respectively (Graham, 2001). Since then, there has been considerable privatization activity in the aviation sectors of developing, developed and more intensely in the Asian transition economies, where greater involvement by the private sector occurred in the management and operations of national carriers and airport infrastructure (Forsyth, 1997b).

There are several reasons for the reduced role of the state in the aviation sector. Forsyth (1997b) explains three key factors that were responsible for the first airport and airline reforms undertaken by the British government. This includes the revenue argument where the government views the sale of state owned enterprises as attractive for government budgets. Second, the move to privatize was based on the government desire to alter the balance between labour union and other interests in the economy. Thirdly and most importantly was the efficiency argument where government had the belief that the private sector will operate an airline or airport more efficiently. Overall, there was also the desire for small government where privatization was seen as a way of lessening government participation in sectors which could be best left to the private sector (Graham, 2001).

In the case of Fiji, the restructure of the government’s Civil Aviation Authority of Fiji into Airports Fiji Limited for the airport management function and the Civil Aviation Authority of the Fiji Islands (CAAFI) for the aviation regulation and safety oversight role was mainly based on improving efficiency and providing better aviation services (Ministry of Commerce, Industry, Cooperatives and Public Enterprises, 1998). Similarly, the reduction of the Fiji government shares in the national airline Air Pacific Limited was undertaken with the view to introduce foreign management and technical expertise to improve efficiency in the operation of the national airline (Hicks, 1998; McMaster 2001).

While the neoclassical paradigm promotes the reforms in terms of efficiency of free markets and private producers, there is a large amount of debate on whether privatization in aviation and in other sectors has led to efficiency improvements (Forsyth, 1997b). This debate explains the mixed outcomes from the implementation of privatization undertaken in most countries. However, a large amount of evidence exists in support of the reform- efficiency hypothesis postulated by the neoclassical school of thought particularly in the case of airline privatization (For example see Findlay and Forsyth, 1984; Oum 1995; and Oum and Yu 1995). This suggests the importance of pro-competitive reforms for economic efficiency and improvement in air services export performance.

The second major reform activity undertaken in the aviation sector relates to the trade liberalization of air services. The existing literature notes that international air transport is one of the most regulated industries (Lehner, 1995; Forsyth, 1997a; Doove, Gabbitas, Nguyen-Hong and Owen, 2001: Intervistasga2, 2005; and Button, 2006). The regulation of

air services operates through a system of bilateral Air Service Agreements (ASAs) among countries which, due to its bilateral nature, limits the amount of air services produced and traded in the international market, as opposed to a multilateral open sky policy that provides an extreme case similar to that of a free trade area. Hutcheson (1996, p. 11-13) highlights Article 6 of the 1944 Chicago Convention as the original basis for which bilateral ASAs are agreed upon for the exchange of air service between states. Article 6 states that:

‘No scheduled international air service may be operated over or into the territory of a contracting State except without the permission or other authorization of that State and in accordance with the terms of such permission or authorization.

In the lead up to this final resolution, the five freedom rights given to airlines to operate air services have been under extensive deliberation and debate among countries. These rights known as the freedoms of the air outlined in the Table 2.3 below was difficult to evenly distribute at a multilateral level. Therefore, the Chicago conference through Article 6 produced the standard form of Bilateral Agreements for provisional air routes.

Table 2.3 The Five Freedoms of the Air Freedom

Type

Description

First Freedom A civil aircraft has the right to fly over the territory of another country without landing, provided the overflown country is notified in advance and approval is given (the right of innocent passage).

Second Freedom

A civil aircraft of one country has the right to land in another country for technical reasons, such as refueling or maintenance, without offering any commercial service to or from that point (a technical stop).

Third Freedom

An airline has the right to carry traffic from its country of registry to another country.

Fourth Freedom

An airline has the right to carry traffic from another country to its own country of registry.

Fifth Freedom An airline has the right to carry traffic between two countries outside its own country of registry as long as the flight originates or terminates in its own country of registry (beyond rights)

Source: Hutcheson (1996).

According to Hutcheson (1996), bilateral ASAs are similar to trade agreements between two governments, where each party seeks to secure the best possible benefit for its designated carrier(s). Bilateral ASAs are therefore contracts between two countries which

allow their airlines to operate according to agreed conditions such as frequency, capacity and pricing of air services on defined routes. In this way, the framework limits the production of air services produced and traded between countries. Competition is ruled out between carriers in terms of prices and rates because the tariffs are approved by the worldwide international Air Transport Association (IATA) before governments subsequently ratify them (Hutcheson, 1996).

In recent years, several developed countries have largely freed up air service arrangements, for e.g. the Transatlantic aviation market between the cities in the United States (US) and the countries in the European Union (EU), the Trans-Tasman aviation between cities in Australia and New Zealand, and the Intra EU liberalization of air services for countries within the EU. In other developing regions, proposals to free up trade in air services have been incorporated into various trade agreements such as the Asia Pacific Economic Cooperation (APEC) and the Association of East Asian Nations (ASEAN), while others have continued a phased liberalized approach through signing additional bilateral ASAs. Button (2006) provides a theoretical explanation of the overall economic gains from freer trade in air transport services. Figure 2.1 indicates that free trade in any activity including air transport give consumers more choice and ensures that the most efficient producers deliver goods and services.

Figure 2.1 The Benefits of Freer International Services

Source: Button, (2006). A

B

Domestic producer cost

International cost Deadweight cost of tariff

Demand C+T C Output 0 Qe Qt Price

Suppose C represents the world market price of air transport services under a perfectly competitive regime. With the additional costs imposed by the limitations of the restrictive bilateral ASAs framework, regulation over foreign ownership and the lack of cabotage rights (Eighth freedom), the total cost of buying the air service rises to C+T for domestic consumers.4 At this price, fewer air services are consumed as air services produced decline from Qe to Qt. This results in an overall loss to society equal to the triangular area B in Figure 2.1. The rectangle A represents a loss in benefits to consumers transferred to the airlines as they pay higher air fares under the restrictive regime. The low level of efficiency of the protected airlines may also reflect in the higher cost of air transport. The removal of the trade barriers through an open sky policy would result in increased competition as more efficient producers of air transport enter the market previously serviced solely by the designated airline. As a result, air service liberalization creates new and better services that would increase the flow of air services traffic, thus producing economic growth and rise in employment (Intervistas-ga2, 2005).