Promoting trade in airline services

With recent developments in the airline industry, trade concepts (e.g. the nationality of the airline) are becoming increasingly difficult to define. However, definitions are needed primarily when trade is to be restricted, and the appropriate definition depends on the objectives of the aviation policy. Trade generally enhances overall welfare, though individual countries can lose out from it. Current arrangements considerably restrict other than bilateral trade in airline services — this suggests that there may be significant gains from more open trade. Aviation policies, like other trade policies, reflect a balance between consumer, tourism, airline company and employee interests. This balance is changing in a number of countries, with the move towards open skies bilateral agreements and domestic deregulation reflecting a greater weight being put on consumer interests. Notwithstanding this, most countries are still hesitant about moves towards freer trade. They support trade when it involves greater market access for their own carriers, but oppose it when it involves their carriers losing market share. In this respect, aviation policies are similar to policies towards other sectors. The bilateral system of agreements is consistent with greater freedom of trade, though it makes some aspects of trade liberalisation difficult to achieve. Some regional agreements, especially that in Europe, have been successful in achieving trade liberalisation. Significantly, these have included airline services with other sectors, enabling trade offs between sectors.