Abstract
To try and control international civil aviation on the basis of a State’s own traffic and a system of an exchange of rights determined by reciprocity and a balance of benefits offers no guarantees of adequate service and a sound airline industry.
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References
Cf. CAB Reports, Cumulative Index-Digest 1955–60, page 278, and page 407.
Cf. Part 291, Sec. 1, ER CAB. Sec 101.33, 200.8 and 401(d) (3). Note that supplementals require a certificate under Sec. 401(d) (3), as distinct from exemption authority. Scheduled air carriers require a certificate of public convenience and necessity under Sec. 401(d) (1) and (2) of the Federal Aviation Act of 1958, as amended.
Cf. also Paul W. Cherington in a speech before the International Aviation Club in Washington, May 1969, where he advocates “multiple designation” because “… additional competition may do a great deal of good in the way of putting our existing international carriers on their mettle”; and in the Edwards Report, British Air Transport in the Seventies, H.M.S.O. May 1969: “We believe that double designation is desirable on the London-New York route, given a competitor who is fully equipped to hold his own in the `big league’.” (BUA and Caledonian next to BOAC?)
Cf. also “Civil Aviation Policy”, UK Board of Trade, November 1969, para’s 10, 125 and 36: “The main scheduled carriers will engage increasingly in charter operation, either directly or through subsidiaries. Conversely, the scope for specialist non-scheduled carriers will increase through changes in pricing policies and in the character of services needed on particular routes.”
Cf. e.g. CAB Docket 20384, served March 7, 1969. Aerotransportes entre Rios S.R.L. (Argentine), Opinion p. 2, Note 1: “To delineate the bounds of the non-scheduled air transportation authority being granted, the definition of `scheduled international air service’ made by the Council of ICAO for the purpose of clarifying articles 5 and 6 of the Convention is considered applicable.”
We will revert to this problem later. The US Government in 1969 initiated discussions on the conclusion of special bilateral arrangements concerning the operations of charter carriers, in order to give the US supplementals a more stable basis for their international operations.
Cf. “British Air Transport in the Seventies”, May 1969, page 57 ff.
Idem the Director-General of IATA, Mr. Knut Hammerskj ild in his address at the Opening Session of the 25th Annual General Meeting at Amsterdam, October, 1969.
By `collective’ here we mean, not that it is required by everyone at the same time, but that a significant proportion of the community could be expected to take the view that it should be available if they wish to use it.“ Edwards Report p. 57.
Cf. US Treaties and other International Acts Series 5624. Compromise signed at Rome, June 30, 1964, and Advisory Opinion of the Arbitral Tribunal, Geneva, July 17, 1965, giving an affirmative reply to the question.
Cf. Also ITA Bulletin No. 18, May 1, 1967 and ITA study, “Traffic rights and Air Freight growth,” 1967, No. 67/3-E. The Tribunal did in fact conclude with the statement that: “It is not for the tribunal to pronounce on the question of whether the disputed agreement and the other agreements based on the Bermuda agreement still constitute an appropriate, fair and equitable solution, in view of the development of civil aviation and the growing importance of all-cargo services. This question has not been submitted to the tribunal; it is a question for governments.”
Cf. e.g. Agreement between the USA and Denmark, effected by Exchange of Notes at Washington D.C. on June 7, 1966, Annex A. Cf. also US-Japan Agreement, 1965 and 1969.
The necessity for freighter capacity is clearly shown on the North Atlantic where, in 1958, 33% of total air cargo traffic was carried by freighter aircraft. This share grew in the summer of 1966 to 50%. In 1968 the percentage rose to 58.2%. (175,100 tons) The Edwards Report gives a less optimistic forecast for the further development of all-cargo operations (at least for UK airlines): “… despite a very substantial growth in the volume of freight moving by air, the scope for operations with all-cargo aircraft will continue to be relatively small in the next decade.” (p. 113) We believe that all-cargo aircraft operations will continue to grow, certainly after 1973, when the impact of the introduction of the wide-bodied aircraft will have been neutralized by traffic growth.
N.B. The implementation of the Bermuda capacity provisions is based on statistics giving the origin and destination of the traffic. The initial and ultimate destinations of cargo traffic as a rule are not readily available and normally on-line origin and destination statistics constitute the basis for determining the capacity of the all-cargo services which the designated airlines will be entitled to operate under the Bermuda provisions. E1 Cf. also e.g. Canada ATC Rule No. 1969-A-4, eff. Aug. 31, 1969, art. 1 (g): “An air carrier is not eligible to act directly or indirectly as a tour operator.”
Inclusive tour means a circle or round-trip tour which combines air transportation and a land arrangement (accommodation and surface transportation) subject to conditions. For affinity, see IATA Res. 045, para 4 (b). See also Appendix II.
Cf. Südflug, Order E-24697, Jan. 31, 1967: “… as a matter of policy the Board has decided not to exercise jurisdiction over foreign tour operators to the extent they organize IT’s abroad for transportation to the US.”
Cf. also Docket 20618, NACA Motion, Dec. 27, 1968; the (NACA) supplementals argued that the foreign route carriers needed special authority to conduct on-route IT charter flights, (Part 378 not being applicable to foreign route carriers, see further) and held that the CAB waiver of jurisdiction could only apply to foreign charter carriers.
Cf. also Rec. No. 7 and 8 concerning ITC operations and Rec. No. 9 concerning affinity charters on the North Atlantic. ECAC 1968-’69, Doc 8841, INT. S/1 and 8842, INT. S/2.
The International Chamber of Commerce, with Headquarters in Paris, which is the international voice of the users of air transportation, in its Brochure published in 1962 under the title, “International Tourism and Economic Development,” advocated inclusive tours as a way to promote tourism. At its bi-annual Congress, held at Montreal in May 1967, the ICC dealt with the protection of the public by including in the “International Code of Standards of Advertising Practice” provisions on IT travel advertising. As to the safety aspects of charter carrier operations, cf. also the Netherlands’ R.T.L. (Air Navigation Orders) as amended on May 7, 1968 (Statute Book 240) instituting the requirement of an operational permit for air carriers. (art. 104).
EB Cf. JALC Winter 1967, pp. 179 ff. Eugene G. Sayre on “Statutory interpretation, inclusive tours”.
Cf. Part 378 of the Board’s Special Regulations, “Inclusive tours by supplemental air carriers, certain foreign air carriers and tour operators”. While Part 295 covers transatlantic supplemental air transportation in general, Part 378 governs inclusive tour operations by US supplemental carriers and US tour operators and certain foreign air carriers for all markets throughout the world, giving at the same time safeguards against diversion.
Cf. Docket 11908 et al. reopened Transatlantic Charter Investigation (all-expense tour phase), decided March 11, 1966, served Sept. 30, 1966, p. 7. The inclusive tour authority was given by Orders Nos. E-24237/8/9/40/1/2, served Sept. 1966. The Order E-24240 of Sept. 30, 1966 applied to the transatlantic market.
While the District of Columbia Circuit Court of Appeals ruled in July 1966 that the term “charter trips” has no fixed meaning and that it is left to the CAB to “evolve a definition to conform to the changing needs of the aircraft industry,” the Court of Appeals for the Second Circuit in July 1967 decided that the notion of “charter” excludes solicitation and the sale of individual tickets, whether or not such selling is done through the medium of a traval agent who has first chartered the aircraft. The first decision applied to IT charters in domestic service, the second to IT charters in international service. The Supreme Court Ruling did not affect the decision with regard to IT charter authority in domestic service.
Cf. also a Press Release of the IATA Dublin Group, April 21, 1969, concerning US supplementals: “At a time when the scheduled airlines are directing their financial, technological and planning resources to move in the phase of mass transportation and will have adequate capacity to meet anticipated traffic demands [a changed pattern in the present system regulating North Atlantic air commerce] would not only imperil the orderly economic development of the airlines, but the interests of the European public economy as a whole.”
Cf. Bill S.3566, enacted as Public Law 90–514, September 1968. It may be noted that the Supreme Court was equally divided, thereby affirming the Second Circuit Court’s decision. Apart from solving the question of the Board’s statutory authority, an important consequence of this Law is the possibility for supplemental carriers to carry individually ticketed members of the general public in competition with scheduled operators.
Cf. the IATA Conference held at Rome, December 1966, where (proposed by PANAM) new Inclusive Tour Group fares (GIT’s) for groups of 15 persons or more with no affinity, and new affinity group travel discount fares (GTD’s) were agreed upon, both categories of fares having come into effect on the first of April 1967, and intended to take the wind out of the sails of the supplemental carriers.
For the GIT’s, the basing fare, which is the fare the travel agent organizing the tour, or the tour operator, pays per passenger to the carrier, and the minimum selling fare, which is the lowest fare the passenger must pay for the transportation plus land arrangements, were set at $ 250 and $ 320 (off-season) and $ 300 and $ 370 (peak-season). These lower fares proved to have a substantial negative effect on the average revenue per ton kilometer sold on the North Atlantic routes of the regular carriers, although overall traffic volumes did increase.
Sec. 401 (d) (3) prohibits the issuance of a certificate for supplemental air transportation to the holder of a regular certificate of public convenience and necessity. This presumably precludes the acquisition by a route carrier of a supplemental carrier under Sec. 408 of the Federal Aviation Act as amended.
Cf. Part 378.2 (b) (5) of the Ec. Reg. of the CAB, which requires a minimum of 40 participants if more than one group is carried, with a maximum of 3 groups on one charter with one tour operator. N.B. Part 295 (2) (b) (2) permits split-charters, so that the carrier can combine two different groups from different charterers on one aircraft.
Cf. Memorandum of Charles S. Murphy, then Chairman of the USCAB, reproduced in ECAC/NSIT/ICIT/2-DP/1, 10/3/67, p. 6. The European Civil Aviation Conference, (its study group for non-scheduled and IT services, under chairmanship of the Portuguese Director-General of Civil Aviation Mr. Veres) had asked CAB to clarify its new regulation for intercontinental IT’s of US supplementals and Mr. Murphy complied with this request.
N.B. The individually-ticketed IT charter passenger is subject to separate conditions to prevent undue undercutting of the fares of regular services. The minimum price for ITC passengers has been established by the CAB at 110% of any available individual scheduled fare or at 130% of any CBIT fare charged by a scheduled carrier for the route in question. Cf. Reg. SPR-33, Amendment No. 4 to Part 378, effective November 14, 1969, 378.2 (b) (4).
N.B. These fares are not public fares but only transportation prices. The bulk fare concept is a kind of partial IT charter on line services. (cf. Res. 079a)
Note the bankruptcies of such charter carriers as British Eagle, Trans Globe and InterNord, which hurt the international airline industry.
The organization of the supplemental carriers in the US, NACA, protested the bulk fares which the IATA carriers according to the NACA intended to subsidize by eliminating the 5% round trip discount on basic North Atlantic economy and first class fares, which decision was taken in Dallas at the same time. IATA agreed on further reductions coming into effect on March 1, 1970 (Caracas, November 1969) as the Dallas package was not accepted by Alitalia with the result of an “open-rate” situation on the North Atlantic as from November 1, 1969.
The IT authority to US supplementals could not be exercised pending the outcome of court action, and the full impact of the IT facility cannot be expected before 1970. Cf. ECAC/ECO-II/2-WP/3 of September 1969.
Cf. Transatlantic Charter Investigation, Order E-20530/1, February 24, 1964, and Order E-20776, April 30, 1964.
Cf. Part 208, and Order E-23350, March 11, 1966, and E-24237/9, September 30, 1966, Supplemental Air Service Proceeding. N.B. On November 28, 1967 the CAB proposed to amend Parts 214 and 295 to bring them in line with Part 208. These amendments were adopted, Docket 19309, Proposed Rulemaking EDR-129 and Regulation No. ER-531 (Part 295.2.b.2.) and ER-532 (Part 214.2.b.2.) March 26, 1968.
In July 1969 the NACA proposed to lift the limit of three groups per aircraft as long as groups of at least 40 seats are booked. See further under V.
Cf. Martin’s Application for amendment of permit, Brief of the Bureau of Operating Rights of the CAB to Examiner E. Robert Seaver, March 28, 1968. The Examiner recommended the grant of authority for Netherlands-originating open-jaw circle tour charters limited to flights serving only Canada and the US, and the denial of US-originated open-jaw charter authority, and the Board followed this recommendation (Dockets 19570 and 19745, served December 24, 1968 ).
Part 212 does not refer to the homeland of the carrier as the terminal point via which the flight should be operated to make it an on-route charter flight. The Board, however, will not permit a foreign carrier to circumvent Part 212 by transferring traffic at some intermediate point on its route to another of its own flights for onward carriage to an off-route destination.
Cf. e.g. Lufthansa amendment to foreign air carrier permit, Docket 17782, Order E-24685, approved January 25, 1967: “The holder hereof shall be authorized to engage in charter trips in foreign air transportation, subject to the terms, conditions and limitations prescribed by Part 212.” (off-route charter authority)
A proposal to that effect engendered such serious opposition by foreign air carriers and governments and by the State Department, that it was dropped. (Cf. PSDR-13a, December 3, 1965). Part 207 intended to offer protection to US supplemental carriers. In 1967, by Amendment 4, effective January 18, Regulation 482, the CAB, however, argued that reasons justifying a liberalization of the restrictions at issue outweigh the economic necessity of protecting the supplementals to the extent currently afforded by Part 207, at least for the short-term future (the Vietnam situation provides the supplementals with a substantial source of revenue). Exemption was granted to PANAM, TWA and NorthWest to promote maximum use of US carriers in air transportation to and from the US.
Cf. Regulation No. ER-519 effective January 1968, Reporting Data pertaining to Civil Aircraft Charters Performed by Foreign air carriers. Part 217 of the CAB Economic Regulations.
See also Rule No. 1969-A-3, amending App. C. to Rule No. 1969-A-1, dated June 17, 1969.
Cf. “Are I.T.C. scheduled or non-scheduled services?” in The Freedom of the Air, edited by Edward McWhinney and Martin A. Bradley. 1968 A. W. Sijthoff, Leyden. pp. 114 ff.
Cf. the US regulatory problem of the air freight forwarder (consolidator), which is considered to be an indirect air carrier and as such requires a special licence under the Federal Aviation Act of 1958.
Compare for instance, the international air freight forwarder who in the US is recognized by the Act as air carrier (indirect air carrier). Cf. Ec. Reg. 297.22. Cf. also CAB Order 69–4–138, April 30, 1969, stating that the tour operator under the IATA CBIT Resolution is an indirect air carrier. Also, Part 378 grants indirect air carrier authority to tour operators.
Cf. Austrian Rule, Febr. 1, 1970 (North Atlantic charter flights): “(g) one-way tickets must not be issued, passengers must be transported both ways within the same group.”
Public solicitation with a view to forming groups should not be permitted as this would make it impossible to identify a group as such. Cf. also Order 69–5–124, May 27, 1969 p. 4; “Charters may not be formed as a result of solicitation to the general public.” N.B. Charter transportation is group travel. There must be a community of interest among the group beyond the transportation itself. To identify groups from the general public the affinity concept is used. (Cf. Res. 045, IATA). Cf. also ECAC Recommendation No. 9, para 6: “that States use the most appropriate method to exercise control over the means employed by charterers to make up the load of affinity charter flights in the case of groups either national or foreign.”
Cf. also Canadian Rule 1969-A-1 and Amendment 1969-A-3, June 17, 1969 on entity and pro rata charters, which permit no more than three groups of at least 40 persons on one and the same pro rata charter; and Rule 1969-A-4, August 31, 1969, on IT’s with chartered aircraft, allowing no more than three IT groups on one charter flight of one and the same tour operator.
Cf. Docket 21255, Supplemental Answer of Certain Trunkline Carriers to a Joint Petition of Certain Supplemental Air Carriers for Institution of Rulemaking Proceeding, November 3, 1969, p. 44. For IT groups, see however, SPDR-18, 30/3/70.
Cf. ECAC Recommendations No 7, (1) and Rec. No 8, (3) and Rec. No 9, (3), 1969. Doc. 8841, INT. S/1 and 8842, INT. S/2.
Cf. Frank Loy in a speech before the International Aviation Club in Washington DC. April 24, 1969.
Cf. Memorandum, reproduced in ECAC/NSIT/ICIT/2-DP/1 of 10–3-’67 and Report of 17–3-’67. See further the answer to a request by the ECAC for clarification received from the Chairman of the CAB, dated 6 July, 1967, EC/9/21–0118 of 11/ 7/’67 and Doc. 8841, ECAC/INT. S/1, App. 2, 1968.
Cf. the “basic entitlement” of the Canadian Rule 1969, A-1 of Febr. 1, 1969: Third freedom [off-route] charter flights operated from its own country to Canada in the preceding operating year, […] will establish the basic entitlement for fourth freedom charter flights for the next calendar year from [off-route] points in Canada, in the ratio of five fourth freedom charter flights for every four third freedom charter flights.
Cf. Transavia, N.V. Docket 18588, Order E-26136, served Dec. 19, 1967; Caledonian Airways, Docket 16372, Order E-25017, served April 21, 1967; Martin’s, Docket 18016, served Dec. 21, 1967. In the case of Martin’s the CAB granted planeload cargo charter authority limited to ten one-way flights in any calender year.
Cf. Caledonian Airways Ltd., CAB Press Release December 21, 1967, CAB 67–171. p. 2 and Martin’s Permit, Dockets 19570 and 19745, Served Dec. 24, 1968, condition (2), (u)•
Cf. Canada Rule No. 30/67, May 19, 1967, para 10, c. and Rule 1969-A-1 of February 1, 1969.
Cf. the NATCAPIT group of experts of the ECAC, Report of 21/2/69, and ECAC/ITCR-Report of 22/5/69. In the latter Report a limitation to a proportion of transatlantic flights is recommended so that the volume of this charter traffic (by both US and European charter carriers) does not impair the services provided by scheduled carriers. The limitation suggested in the Report is 1% of the transatlantic flights performed to the State concerned in the previous year, to be calculated per month, or 60 such charter flights. With regard to a fare limitation for North Atlantic IT charter flights, the IATA bulk fare would seem to be the appropriate yardstick. Note that Japan imposed a limitation on the number of charter flights by US supplemental carriers (46 in 1968 to be increased in subsequent years).
Cf. Part 212 of the CAB Regulations concerning off-route charter operations. This Part was amended in 1969 (ER-570) by adding a requirement that records of names and addresses of passengers on pro rata charter flights in foreign air transportation, both on-route and off-route, should be maintained to prevent individually-ticketed services in the guise of charter services.
N.B. IATA does not allow IT charter flights over the North Atlantic, but instead adopted the bulk-fare concept as a part-IT charter possibility on the North Atlantic as from November 1, 1969. In September, however, Alitalia broke the agreement, contending that the bulk-fare did not go far enough to meet the supplementals’ competition. Alitalia wanted an individual fare sufficiently low to compete with the charter flights of the US supplementals.
Cf. Part 378.18. After January 1, 1969, the Statement of Authorization prior to solicitation was no longer required.
Cf. ICAO Assembly, Buenos Aires 1968, DGCA Report re-amendment of the Federal Aviation Act confirming the ITC authority granted to the US supplementals; 5/9/68.
Cf. the two reports, one of the CAB in ECAC/NATCAPIT/1-WP/1 of 7/2/69 and the other of ECAC in NATCAPIT/1-Report 21/2/69. The US report emphasized the public and economic benefits to be realized from the development of IT charters, while the ECAC report feared a considerably diversionary impact of an uncontrolled opening of the ITC market to the supplementals.
Cf. also ITA Bulletin No. 46, December 11, 1967, pp. 1429 ff.: “The IT is not a mere transport operation like the regular service and a (group) charter, but the group IT and the charter flight have in common the maximum utilization of the aircraft used.”
Cf. Docket 16372, Order E-25017, April 19, 1967, which provides that ITC flights originating in the US should be governed by Part 378.
Of late the CAB has had reservations about the on-route charter authority of foreign regular air carriers, until now included in Section 402 permits; the Board has decided to re-examine its policy on this matter. Cf. e.g. CAB Order No. E-24295 (amending the routes of JAL), Docket 17106, September 22, 1966, Opinion p. 2; and CAB Order E-24571, approved December 23, 1966, Olympic Airways.
N.B. While on-route charter flights by regular carriers come under Sec. 402 permits, off-route charter authority of foreign route carriers is included in Sec. 402 permits (and governed) by Part 212 of the Board’s Economic Regulations; charter transportation, including IT transportation, by foreign air carriers engaged in charter transportation only (foreign non-scheduled, irregular or charter carriers) are governed by Parts 214, 203 and 211 of the Board’s Economic Regulations. Part 214 is the complement of Part 295 governing transatlantic passenger charters by US supplemental air carriers (as distinct from route carriers).
Cf. Orders E-26146, Docket 17233 and E-26147, Docket 18016, served December 21, 1967.
The policy of the Federal Aviation Act would prohibit such relationships of ownership and control between US scheduled and supplemental carriers (Sec. 401 (d) (3) and Sec. 408). Such limitations derive from US anti-trust laws. The Act does not extend this policy to foreign carriers.
N.B. Considerations of reciprocity weighed heavily in favor of CAB’s taking such an attitude! Neither Western Germany nor the Netherlands limit US operations to their countries unduly. Cf. Order E-26146, Opinion p. 5.
Cf. a recent CAB case, CMA SA, Docket 209200, served August 29, 1969, when CMA proposed that the Mexican government grant authorizations to US supplementals for charter flights, and PANAM stated that US traffic rights for foreign scheduled services should not be traded for foreign landing rights for US supplementals. The Board, however, argued that CMA’s permit permits unlimited on-route charters, and therefore landing rights for US supplementals were particularly relevant to the Board’s grant of on-route charter rights.
Cf. Docket 21080, EDR 166, Juni 12, 1969. (Proposed new Part 218 of the Board’s Economic Regulations)
Multilateral Agreement on Commercial Rights in Non-Scheduled International Air Services within Europe,“ April 30, 1965.
These limitations are embodied in Sec. 399.82 of the CAB’s Economic Regulations re “passing off of carrier identity by affiliation between carriers” (added by Amendment No. 8, effective November 29, 1965).
A foreign air carrier permit “should not be regarded as a `rentable asset’, enabling the holder rather than the CAB to determine who shall operate air services to the US.” (Cf. PANAM, Brief to Examiner in ALM Application, March 25, 1968, pp. 51/2. Docket 18595).
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© 1970 Martinus Nijhoff, The Hague, Netherlands
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Wassenbergh, H.A. (1970). Chapter Three. In: Aspects of Air Law and Civil Air Policy in the Seventies. Springer, Dordrecht. https://doi.org/10.1007/978-94-011-8852-4_3
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