Air Transport in the Asian–Pacific Region

Air transport in the Asian–Pacific region is growing faster than anywhere else. Asian airlines (other than Japanese) are the lowest cost operators in the world. But like all airlines, they operate in a tightly regulated framework. Some 2000 bilateral air service agreements among 160 countries specify which airline flies on a route, what capacity it offers and how much capacity third–country airlines are allowed. The regulatory system is now coming under various pressures: from the growth of a tourist industry demanding lower fares, from increased competition with the emergence of a new generation of low–cost airlines, and from the US ‘mega carriers’ and their alliances. The airlines of the region have the opportunity to benefit from these changes in the regulatory environment. But this will require a more trade–oriented approach to aviation than some countries of the region now have. A number of guiding principles for civil aviation policy in the 1990s suggest themselves • More liberal arrangements for the allocation of traffic rights would benefit the regional economies • Such liberalization is possible within the current bilateral system, but faster progress would be achieved through regional negotiations • Such regional negotiations are likely to make greater progress if conducted jointly with other trade issues • There remains a role for GATS (General Agreement on Trade in Services) type arrangements, especially in relation to so–called ‘soft rights’, and in laying down ground rules for regional negotiations.