The Evolution of the Airline Industry: Regulation, Events and Influencing Factors

The Evolution of the Airline Industry: Regulation, Events and Influencing Factors

James Patrick Baldwin, J.D. Adjunct Professor, University of Maryland Global Campus Visiting Lecturer, University of Westminster Visiting Lecturer, Emirates Aviation University

The contents of this book regarding the accuracy of events, people and places depicted; permissions to use all previously published materials; and opinions expressed; are the sole responsibility of the author, who assumes all liability for the contents of this book and indemnifies the publisher against any claims stemming from the publication of this book.

Š 2019, 2020 James Patrick Baldwin All rights reserved.

No part of this book shall be reproduced, stored in a retrieval system, or transmitted by any means without the written permission of the author or the publisher.

International Standard Book Number 13: 978-1-68720-752-4 International Standard Book Number 10: 1-68720-752-6 Library of Congress Control Number 2019912294

Kindle Direct Publishing JPB Publications 12 Bellevue Ave Cambridge, MD 21613 www.jpbtransconsulting.com

Cover photos credits: Pan American 707, Emirates A380 (front) and Star Alliance 747 (back) by the Author Pan American Boeing 747 (back) courtesy of Pan Am Historical Foundation ii

PREFACE

Putting together a book such as this first requires inspiration. This came about when I was tasked to put together a presentation on the regulatory framework in aircraft accident investigations. The presentation led to an idea to explore the history of aviation regulation and incorporate what I found into a presentation to be given to graduate students in aviation management at the University of Westminster and Coventry University in the United Kingdom and Emirates Aviation University in Dubai.

The presentation was originally titled “A History of Aviation Regulation” and was typically the first presentation I gave to students just starting their courses in aviation management. However, that title was changed to “The Evolution of the Airline Industry: Regulation, Events and Influencing Factors” largely by necessity due to a requirement to cover influencing factors in a course module on airline operations and my broadening the scope of the presentation that has now grown to a three-hour discussion.

The presentation has now become my “signature” presentation, and because of its comprehensive coverage of what happened in the airline industry since the early 20th Century, I thought it should also be presented in the form of a book. This is the result.

On 24 October 1978, President Jimmy Carter signed into law the Airline Deregulation Act of 1978, ending economic regulation of the airlines of the United States. That date marked an end of an era and brought about a change in the industry so phenomenal, no one at the time would have dreamed it would have happened.

Why is the airline industry what it is today? To answer that question, it would be useful to go back to the industry’s roots and study the international treaties and conventions that brought about a body of regulations that today still govern the industry. It also would be useful to understand how events during the 20th Century, which included two world wars, economic and political crises and other events, shaped the direction and form of the industry.

Starting with the concept of sovereignty over airspace, this book will take the reader through the earliest regulations governing the conduct of flight, including methods of licensing and enforcement, followed by the formation of airlines in different regions of the world, only to be interrupted by World War II. During the war, the industry witnessed unprecedented development of aircraft technology, necessitating the call for a convention to deal with safety and economic issues affecting the world’s airlines.

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That convention, known as the Chicago Convention of 1944, created the standards and framework under which the airline industry today is governed.

Following World War II, the industry witnessed the growth of national airlines and technological advancement of aircraft manufacturing, culminating with the start of the Jet Age and later the era of the wide body (“Jumbo Jet�). However, during this time, the industry was highly regulated and protectionist, and for the most part, government played a dominant role in policy and action.

That all ended with the Airline Deregulation Act, followed by liberalization of the industry worldwide. Economic factors became the driving force within the industry and competition and innovation became the standard.

This has led to an industry that is dominated by strong alliances, a robust Sixth Freedom airline operation and a growing list of low-cost and ultra-low-cost operators worldwide.

I have included many era illustrations and images, including aircraft, timetable pages and route maps. Some timetable pages and maps within the text are too small to read properly and have been reproduced in a larger, readable format in Appendix A. An understanding of how the industry came to be what it is today is important to any airline enthusiast. It is my hope that this book brings it about.

James P (Jamie) Baldwin Cambridge, Maryland

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TABLE OF CONTENTS

Preface

iii

Dedication

ix

Acknowledgements

xi

Part 1 EARLY ISSUES AND CONVENTIONS Sovereignty over Air Space

1

Paris Convention of 1919

2

Havana Convention of 1928

3

Warsaw Convention of 1929

3 Part 2

AIRMAIL CONTRACTS, AVIATION REGULATION, AND THE GROWTH OF COMMERCIAL AVIATION THROUGH THE 1930s US Airmail Contracts

4

US Foreign Airmail Contracts

7

US Regulation of Air Transportation

13

European Aviation

15

Asian Aviation

18

Latin American Aviation

20

African Aviation

21

Part 3 WORLD WAR II, THE CHICAGO CONVENTION AND BEYOND The Situation at the Eve of World War

23

War Looms

27 v

The Road to Chicago

28

The Chicago Convention of 1944

30

The International Civil Aviation Organization (ICAO)

36

The Freedoms of the Air

38

Air Services Agreements (ASA)

39

The International Air Transport Association (IATA)

39

The Bermuda Agreement of 1946

42

The Chosen Instrument

46

Part 4 POST-WAR AND THE REGULATED AND PROTECTIONIST ERA US Commercial Aviation

48

European Aviation

61

Soviet Union Aviation

66

Asian Aviation

67

Latin American Aviation

70

African Aviation

74

Tokyo Convention of 1963

77

Government Role in International Commercial Aviation

78

Part 5 DEREGULATION AND OPEN SKIES The Road to Deregulation

85

The Airline Deregulation Act of 1978

91

Increasing Competition in International Air Transportation

94

International Air Transportation Competition Act of 1979

98

Open Skies Agreements

104 vi

Part 6 DEVELOPMENTS IN INTERNATIONAL COMMERCIAL AVIATION AFTER THE COLD WAR, LIBERALIZATION OF AIR TRANSPORTATION IN EUROPE AND MULTILATERAL AGREEMENTS The Breakup of the Soviet Union

106

Liberalization of International Aviation (EU)

108

ICAO and Liberalization/Open Skies

112

Multilateral Liberalization of Air Transportation

113

Part 7 POST COLD WAR AVIATION – TO THE 21st CENTURY US Aviation

118

European Aviation

122

Russian Aviation

127

The Gulf Middle East

128

Asian Aviation

130

Latin American Aviation

134

African Aviation

135

Growth of Sixth Freedom Air Carriers

137

Alliances

142

Multiple Air Operator Certificates

145

Ultra-Low-Cost and Long-Haul Low-Cost Airlines

147

Adieu, A380

155

Part 8 CONCLUSION Postscript

159

The Grounding of the Boeing 737 MAX

160 vii

The Coronavirus (COVID-19) Pandemic

162

Selected Bibliography

163

Enlargements of Selected Airline Schedules and Route Maps

A-1

viii

Dedication To my wife Lesley, with gratitude for her unwavering support for my efforts in this industry, and to my late parents, H. Gael and Catalina Baldwin, who inspired and encouraged my interest.

ix

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ACKNOWLEDGEMENTS

Over the years, many people had a role in my journey in the airline industry.

First, a class in International Organizations at the University of Southern California started me on that road when I wrote a term paper on the International Civil Aviation Organization (ICAO) followed by a paper on the role of government in international aviation. For this, I thank the faculty of the School of International Relations (SIR) during my time as an undergraduate.

My goal was to be an airline lawyer and work for Pan American World Airways.

While that did not work out, I was involved in the deregulation of the airline industry in Washington, DC. My understanding of the workings of aviation regulation was enhanced during law school as a student and research assistant for Professor Andy Popper at the American University Washington College of Law and through the guidance of the then Aviation Group partners at the law firm Crowell & Moring, R. Bruce Keiner, Esq., Cal Davison, Esq., Dick Mathias, Esq. and the late Jerry Ryan, Esq. With the airlines deregulated, I took a detour from the industry. Although still staying in touch with industry affairs, I spent much of my time travelling overseas on assignments in the US Naval Reserve. After the First Gulf War, I came back to the industry and eventually got involved with a Sixth Freedom operation involving an airline from a former Soviet republic, Tajikistan. My involvement with that operation followed by my involvement in several start-up operations gave me a thorough understanding of airline operations. For this, I thank Ben Daneshmand.

I have had a lifelong interest in Pan American World Airways. Over the years I have collected memorabilia and studied the history of that airline. Without a doubt, Pan American played a major role in how the international airline industry evolved during its early years. Many of Pan American’s initiatives and standards are still alive today, and in fact, Pan American was one of three airlines closely studied by the founders of Emirates Airline (the other two were Lufthansa and Singapore Airlines). I eventually encountered many former Pan Am staff. One, Jeff Kriendler, former Vice President of Corporate Communications, was most helpful in my involvement in three books written about the airline. For that, plus more, I am most grateful.

There are others. First, I would like to thank Michael Dworkin, Esq, for sending me down this road when he asked for that presentation on the regulatory framework for airline accidents. I would also like to thank Dr. Nigel Dennis at the University of Westminster and Nigel Woodhead at Emirates Aviation University for giving me the opportunity as a guest lecturer to make presentations on the evolution of the airline xi

industry and develop it over the years. I would also like to thank Doug Miller of the Pan Am Historical Foundation (PAHF), Barry Humphreys, CBE, Aviation Consultant, formerly Head of Air Services Policy at the UK CAA and formerly Director, External Affairs and Route Development at Virgin Atlantic Airways and Paul Behnke, former US Foreign Service Officer and now Senior Associate-Aviation Strategies International, for their assistance in reviewing my material. I would also like to thank the late Jon Proctor for allowing me to use his massive collection of aircraft photographs as well as the PAHF for access to their extensive library of valuable materials. Finally, I would like to thank Captain Mayed Ahmed Khalil Alshirawi Alharmi, Emirates Airline A380 pilot, for alerting me to the Tokyo Convention of 1963.

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PART ONE EARLY ISSUES AND CONVENTIONS Sovereignty over Airspace Before manned flight, the “Air” was considered “free” and that no individual state had authority over it. However, with no authority, state and national sovereignty, national interests and security were compromised. This was most apparent during World War I with the development of the flying machine as an instrument of war. What was also apparent was that these technological developments opened the door to a commercial application for aviation, as well as a need for international regulation.

Wright Flyer on First Flight, Kitty Hawk, North Carolina (Public Domain)

Royal Aircraft Factory SE-5A and BE-2C (Public Domain)

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On 18 September 1918, the Aero Club of America issued an "aviator pilot" license to W. Heath Proctor. A social club formed in 1905 to promote aviation in the United States (US), it issued the first pilot licenses in the US and was transformed into the National Aeronautic Association in 1923. The association's first certificate was issued to Glenn Curtiss in 1911. Governmentissued licenses were not required until well after World War I.

Courtesy of Jon Proctor

Paris Convention of 1919 The technological developments in aviation arising out of World War I created a completely new situation at the end of hostilities, especially regarding the safe and rapid transport of goods and persons over prolonged distances. However, the war had also shown the ugly potential of aviation; it had, therefore, become much more evident that this new and now greatly advanced means of transport required international attention and an urgent need for international regulation of aviation. Thus, at the Paris Peace Conference (Congrès de la Paix) of 1919, the idea of international collaboration in aviation matters was brought forward, and on 13 October 1919, the Convention Relating to the Regulation of Aerial Navigation was signed by 27 States. The convention also created the International Commission for Air Navigation (ICAN).

The convention recognized a state’s full and absolute sovereignty over its airspace; recognized the desirability of the greatest freedom of international air navigation consistent with state sovereignty and security concerns; and recognized the requirement that every aircraft possess the nationality of the contracting state.

In addition, the convention provided for the safe conduct of air navigation, including provisions for airworthiness certificates, licenses for pilots and international rules for the air, including signals, lights, collision prevention and procedures for landing and moving on the ground.

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Havana Convention of 1928 Because of the failure of the United States to ratify and join the League of Nations, and therefore not joining the convention, the rules and provisions of the Paris Convention did not apply to the Americas. As a result, there was a need for a separate form of international cooperation on a regional American basis.

During the 5th International Conference of the American States in Santiago, Chile in 1923, a resolution was adopted providing for the creation of an Inter-American Commercial Aviation Commission to consider problems related to aviation. The Pan American Convention on Commercial Aviation was finalized in Havana, Cuba on 20 February 1928. The Havana Convention was modeled after the Paris Convention and it applied exclusively to private aircraft (government aircraft were not included) and laid down basic principles and rules for aerial traffic, recognizing that every State had complete and exclusive sovereignty over the airspace above its territory and adjacent territorial waters. The Convention also permitted US-owned airlines to freely operate services between North and South America.

Warsaw Convention of 1929 With the growth of commercial international air transportation in the 1920s, there came a need to protect air carriers (at the time mostly state-owned with the notable exception of the privately-owned air carriers in the US) from open-ended liability in case of damage to or loss of cargo or baggage and injury or death of passengers. And, on the other hand, shippers and passengers needed to be reassured that if something went wrong, they would have an effective remedy against the carrier and be compensated.

Thus, after a series of conferences starting in 1927, the Convention for the Unification of Certain Rules relating to International Carriage by Air was signed in Warsaw in 1929, known as the Warsaw Convention.

The Convention applied to any international transportation of persons, baggage or merchandise by aircraft and provided for airline liability for death or injury to passengers; loss or damage to baggage; and loss resulting from delay in the transportation of passengers, baggage or merchandise. The dollar amount of liability was limited.

The Convention has been amended, most notably by the Hague Protocol of 1955, but will be superseded by the Montreal Convention of 1999 upon full ratification.

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PART TWO AIRMAIL CONTRACTS, AVIATION REGULATION, AND THE GROWTH OF COMMERCIAL AVIATION THROUGH THE 1930s US Airmail Contracts Early US government involvement in aviation dealt with the issuance of airmail contracts. The first act of the US Congress related to this was the Contract Air Mail Act of 1925 (Kelly Act) that authorized the Postmaster General to award contracts to private individuals or companies involved in the air transportation of mail. Routes and tariffs were established, and the airlines were given subsidies that encouraged the introduction of passenger service.

1930s Airmail Aircraft (top) (Smykowski) Curtis Jenny JN-4H (NASM Postal Museum) James Hill taking mail for night flight (Public Domain via NASM)

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The Air Mail Act of 1930 (McNary-Watres Act) changed the way airmail contracts were awarded and eliminated competitive bidding. The Act encouraged companies to buy large aircraft and encouraged the carriers to fill space on the aircraft with passengers. The Act was a product of Postmaster General Walter F. Brown’s request for legislation giving him authority to change postal policy. As a result, the Act gave Brown strong authority over the nationwide air transportation system. There were three main provisions of the Act: The first provision changed the way payments De Haviland DH4 (Public Domain via to airlines were calculated, rating them based on the NASM) volume of mail, rather than weight. It also set a fee on planes of a certain size, whether it was flying mail or not, to discourage the flying of large amounts of junk mail and to encourage the carrying of passengers to increase revenue.

The second provision allowed any airmail carrier with an existing contract of at least two years standing to exchange its contract for a “route certificate” giving it the right to haul mail for an additional ten years. The third and most controversial provision gave Brown authority to "extend or consolidate" routes in effect according to his own judgment.

Soon, at what later became known as the “Spoils Conference” Brown invoked his authority under the third provision to consolidate the airmail routes to only three companies, friends of the administration of President Hoover, forcing out the small competitors. The three were Boeing Air Transport (the northern airmail route), Transcontinental Air Transport, later Transcontinental and Western Air (TWA), (the mid-US route) and Robertson Aircraft Corporation, later American Airways (the southern route).

Brown also extended the southern route to the West Coast of the United States Douglas M-2 (NASM Postal Museum) and awarded bonuses for carrying more passengers and purchasing multi-engine aircraft equipped with radios and navigation aids.

5

Although this led to increased productivity and efficiency in the airline industry, the small airlines complained that they were left out of Brown’s scheme and a Congressional investigation followed. The “spoils” were exposed and as a result, the legality of the contracts awarded under Brown’s leadership was questioned.

As a result of this finding, on 19 Loading mail onto a Ford Tri-Motor (NASM Postal February 1934, President Roosevelt Museum) canceled all existing airmail contracts, and, as a temporary measure, directed Army Air Corps General Benjamin D. Foulois to organize a new airmail operation using military planes and pilots. It did not work.

The airmen were inexperienced in cross-country flying and the aircraft were illequipped. There were numerous crashes and the cost of flying the mail skyrocketed.

By 10 March, 12 pilots had died in 66 crashes or forced landings. Could it be that these problems were a product of those provisions of the Havana Convention of 1928 that excluded government aircraft from its application? On 8 May, Roosevelt and then Postmaster General James Farley returned to issuing airmail contracts to private companies.

Keystone B-6 (Public Domain)

6

This return came in conjunction with the Air Mail Act of 1934 (Black-McKellar Act). Under the Act, no airline that had held a contract before the government takeover could bid for a contract. To circumvent this, however, the airline companies simply changed their names: Boeing Aircraft & Transport Company, later United Aircraft & Transport Corporation, became United Air Lines; T&WA became T&WA Inc., and American Airways became American Airlines. The Act’s main provision, however, was to break up the aviation holding companies, large corporations that owned both aircraft manufacturing companies and airlines. The Act also stated that the government would award airmail contracts, routes and schedules; fix subsidy rates and airmail payments and regulate the airways and license pilots. The Interstate Commerce Commission (ICC) regulated rates and the Secretary of Commerce specified the equipment to be used.

DC-3 (NASM Postal Museum)

US Foreign Air Mail Contracts The airmail legislation described above did not apply to air transportation of foreign mail. Eventually, with the US government strongly supporting mail service between North and South America, the US Congress passed the Foreign Air Mail Act of 1928 to regulate such international service. This, however, was preceded by the formation of Pan American Airways and its inauguration of international airline services between the US and Cuba.

Pan American Airways, Inc. (PAA) was founded on 14 March 1927 by Air Force Majors “Hap” Arnold, Carl Spaatz and John H. Jouett, later joined by John K. Juan Trippe (Pan Am Historical Foundation (PAHF)) Montgomery and Richard B. Bevier, as a counterbalance to German-owned carrier Sociedad Colombo-Alemana de Transportes Aéreos (Colombo-German Aerial Transport Co.)(SCADTA) that had been operating in Colombia since 1920. SCADTA was viewed as a possible German aerial threat to the Panama Canal. Eventually, Montgomery petitioned the US government to call for bids on a US airmail contract between Key West and Havana (FAM 4) and won the contract. However, PAA lacked any aircraft to perform the job and did not have landing rights in Cuba. Under the terms of the contract, PAA had to be flying by 19 October 1927.

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On 2 June 1927, Juan Trippe formed the Aviation Corporation of America (ACA) with financially powerful and politically well-connected backing and raised $300,000.

On 1 July Reed Chambers and financier Richard Hoyt formed Southeastern Airlines. On 8 July Trippe formed Southern Airlines and on 11 October Southeastern was reincorporated as Atlantic, Gulf and Caribbean Airways. Trippe then proposed a merger between these three groups and in doing so played a trump card: He and John A. Hambleton, one of his backers, traveled to Cuba and persuaded the Cuban president to grant landing rights to the Aviation Corporation, making Montgomery's mail contract useless as a bargaining chip. After much wrangling between the groups, including a meeting on Hoyt's yacht during which Assistant Postmaster General Irving Grover threatened that if there was no deal he would not be awarding any contract to anyone, the Aviation Corporation of the Americas was formed, operating as Pan American Airways, headed by Juan Trippe. Later the corporation's name was changed to Pan American Airways.

The deadline of 19 October still loomed, however. A Fokker F-VII aircraft was selected for the operation but could not be used because Meacham's Field in Key West was not completed and could not accommodate the aircraft. What transpired was an eleventh-hour miracle. Pan American's representative in Miami learned that a Fairchild FC-2 monoplane was in Key West, sitting out a hurricane threat. The aircraft was owned by West Indian Aerial Express and a deal was made to charter the aircraft. The pilot was offered $145.50 to carry mail to Havana that had just arrived on the Florida East Coast and Atlantic Coast Line railroads. The hurricane threat disappeared, and the trip was made. The Fairchild FC-2 (PAHF) rest is history.

Above Images (PAHF)

8

On 28 October 1927, the Fokker finally left Key West on Pan American's inaugural scheduled international flight, carrying 772 lb. of mail.

Fokker F-VII (PAHF)

Under the Act, Foreign Airmail contracts (FAMs) were put up for bidding and Pan American was able to win them all, making it the only US-flagged carrier with authority from the US government to carry mail to foreign countries on international routes. Operating authority to these countries, however, needed to be secured and at the time there was no framework within the US government to accomplish it. Pan American's Juan Trippe was able to do it. He carried out then what the US Departments of State and Transportation do today with respect to foreign routes.

Pan Am's First Timetable (Author's Collection)

9

S-38 (PAHF)

Pan American established services first in the Caribbean, then the whole of Latin America and eventually across the Pacific Ocean.

Authority across the Pacific was not Trippe’s original transoceanic ambition. It was the Atlantic. The geopolitical situation coupled with technological limitations made that option impossible. The path to Europe was through Newfoundland. Unfortunately, negotiations between Trippe, Britain, Canada and Newfoundland in 1932 did not provide the access desired, although some understanding was achieved between Pan American and Britain's Imperial Airways about traffic rights. Because Newfoundland appeared to be in doubt, Trippe looked south. Unfortunately, the political situation in Portugal made it difficult for Pan American to negotiate for traffic rights there as well.

An interesting point, with respect to the negotiations over Newfoundland, is that it was not the American government doing Pan American's bidding. It Brochure (Author's Collection) was Juan Trippe.

And it was Trippe who personally dealt with the governments of Britain, Canada and Newfoundland, following a pattern used when he negotiated traffic rights to countries in Latin America.

Any hope for transatlantic operations, S-40 (PAHF) however, was dashed when, in April 1934, the British government demanded reciprocity with the United States over traffic rights. The British government spoke for Imperial and questioned why the US government did not speak for Pan American, as both entities were instruments of national policy. Trippe had overestimated his diplomatic skills and his “go-it-alone diplomacy” was not working. He admitted that he did not see much future for Pan American in the North Atlantic. In addition, the British, in 1934, had nothing like Pan American’s S-42, then the most advanced aircraft in the world. Until Imperial Airways had a similar aircraft that could cross the Atlantic to the United States, Pan American would find itself blocked from operating to Britain.

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S-42 (PAHF)

The focus then switched to the Pacific. After a “great circle� transpacific route through the north was ruled out due to issues between the United States and the Soviet Union, it was decided to take the route that represented the longest distance between the United States and the Orient: the mid-Pacific.

Here, the issue of traffic rights was not a problem for Pan American. The route involved stops at Honolulu, Midway, Wake and Guam, terminating in Manila, all of which were under US jurisdiction. At Guam and the Philippines, the US Navy had established bases on the pretext of a potential confrontation with Japan. Midway was being used by the Navy for war games staged in the area. Wake, a tiny island, discovered by Trippe in the New York Public Library, was an uninhabited coral atoll that was a minor trophy of the Spanish-American War. It was to be a critical point for the transpacific flight. Trippe eventually got permission to use the island as a base.

On 24 October 1935, the US Post Office awarded Trippe the transpacific FAM and on 22 November, the China Clipper inaugurated service from the mainland United States across the Pacific.

Launch of China Clipper (PAHF)

11

Martin M-130 China Clipper (PAHF)

Timetable page (Author’s Collection)

12

US Regulation of Air Transportation The first instance of US regulation of aircraft and airmen was in the Air Commerce Act of 1926. It defined “Air Commerce” as carriage by aircraft of persons or property for hire and the navigation of aircraft in the furtherance of or for the benefit of a business. It established federal regulations regarding aircraft, airmen, navigational facilities and air traffic, including the development and maintenance of airways and aircraft altitude separation. The Act required that aircraft were to be inspected for airworthiness and were required to have markings on the outside for identification. It also provided for the requirement that airmen be tested for aeronautical knowledge and have a physical examination completed to ensure their physical fitness.

The Act also promoted civil aviation to attract capital and provide a legal basis necessary for its development. The Aeronautics Branch of the Department of Commerce was established by an amendment to the Act in 1929 and was responsible for overseeing and implementing the Act. The regulations promulgated would be known as Civil Air Regulations (CARs).

In 1935, the Federal Aviation Commission (FAC), a board created by Congress in 1934 to study airline regulation and recommend policy, called for the creation of a centralized and independent authority to regulate the airline industry. As a result, Congress passed the Civil Aeronautics Act of 1938 that was signed into law by President Roosevelt. The Act established the Civil Aeronautics Authority (CAA) and transferred federal responsibilities for non-military aviation to that new independent agency. The Act also gave the CAA quasi-judicial and legislative functions related to economic and safety regulation. This included regulation of fares and routes the air carriers would serve. The CAA was also responsible for aviation regulations, airways, navigational facilities and air traffic control.

The Act also created a three-member Air Safety Board that investigated accidents and made recommendations to eliminate the causes of accidents, and provided for an Administrator, who performed executive functions related to the development, operation and administration of air navigation, as well as the promotion of aviation. Airmail contracts were replaced by “Certificates of Public Convenience and Necessity”.

13

In 1940, President Roosevelt split the CAA into two agencies, the Civil Aeronautics Administration, which went back to the Department of Commerce, and the Civil Aeronautics Board (CAB). The offshoot of the original CAA retained responsibility for air traffic control, airmen and aircraft certification, safety enforcement and airway development. CAB responsibilities included safety, rulemaking, accident investigation and economic L. Welch Pogue (NASM) regulation of the airlines. The latter included passenger fares, airmail rates, route entry and exit, mergers and acquisitions, and inter-carrier agreements. The routes of the then existing airlines were “grandfathered”, and these airlines became later known as “trunks”, a term borrowed from the trunk railroads of the day. These trunk airlines were certified to operate on medium and long-haul interstate routes under Section 401 of the enabling legislation and were sometimes referred to as “401 carriers”. In 1942, L. Welch Pogue, Esq., was appointed Chairman of the CAB and served until 1946.

American Airlines DC-3 (left) (Bill Proctor); United Airlines Boeing 247 (Public Domain via San Diego Air & Space Museum)

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European Aviation Initial Operations In the United Kingdom, Aircraft Transport and Travel, a fixed-wing airline, operated the first international route in the world between Hounslow Heath outside London and Le Bourget near Paris. The first flight was on 25 August 1919 with one passenger. The airline also won the first British civil airmail contract between Hawkinge and Cologne. The airline operated one year before going bankrupt.

In 1924, with the merger of four airlines, Handley Page, Instone Air, Daimler Airway and British Marine Air Navigation Co., Imperial Airways was formed to compete with French and German carriers. The new airline soon began survey flights to far-flung parts of the British Empire and later ordered the Handley Page W8f City of Washington.

In 1936, British Airways (not the current British Airways) was formed with the merger of Hillman’s Airways, Spartan Air Lines and United Airways.

Aircraft Transport and Travel DH-16 (Public Domain)

Handley Page (Spaarnestad via Nationaal Archief)

In France, Société Générale des Transports Aériens operated flights between Toussus, le Noble and Kenley (near Croydon, outside London), and Compagnie des Messageries Aériennes operated airmail and freight service between Le Bourget and Lille. In 1923, Air Union was formed and later merged with four other airlines to become Air France in 1933.

Farman Goliath (Public Domain)

In Germany, Deutsche Luft Hansa was created in 1926 and became a major investor in airlines outside Europe, particularly in South America. The Germans also manufactured Junkers, Dornier and Fokker aircraft, which were at the time the most advanced in the world.

15

In the Netherlands, KLM made its first flight in 1920 between Croydon Airport, London and Amsterdam.

In Finland, Aero O/Y (now Finnair) started operations in 1924 between Helsinki and Tallinn, Estonia.

In the Soviet Union, the Sovnarkom of the Russian Soviet Federative Socialist Republic published “About Air Transportation” in 1921 that set out the basic regulations on air transport and formed a State Commission for the purpose of civil aviation planning. As a result, the Chief Administration of the Civil Air Fleet was established and began mail and passenger flights on the Moscow-Oryol-KurskKharkov route. This was followed by the formation of a joint venture between the Soviet Union and Germany, which began operations between Königsberg and Moscow.

In 1923 the Sovnarkom approved the formation of Dobrolet, which operated flights between Moscow and Nizhniy Novgorod. During the same period, Dobrolet through a subdivision began operations in Central Asia. The following years saw Dobrolet’s fleet and route network grow substantially and the airline was eventually transformed from a Russian to an all-Union enterprise in 1926.

European Airlines Recognized as Airmail Carriers The period of 1920-1927 was a period of significant development for air transportation but the postal administrations and airlines were in the dark as to future possibilities for international airmail. By 1924, the idea of using aircraft for the transportation of mail began to gain momentum, and in September 1927, at a conference called at the suggestion of the Air Transport Committee of the International Chamber of Commerce held at The Hague, an agreement was reached that established airlines as officially recognized carriers of the mail. The Conference also initiated rules and regulations concerning the acceptance and rapid delivery of airmail, a ratemaking structure, the expeditious handling of airmail by countries without air services, and the basis of accounting procedures for international airmail. Another provision agreed was that the PAR AVION labels should have a blue color and, when the mail did not actually travel by air, such labels or annotations should be crossed out.

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Expansion Following its survey flights, Imperial Airlines extended its operations during the late 1920s and 1930s to the furthest reaches of the British Empire. Destinations included South Africa, Australia, British India, Rangoon, Singapore, Basra, Karachi and Hong Kong, etc. The aircraft, however, were small, with a capacity of fewer than 20 passengers, and the passengers largely consisted of the wealthy or British men doing colonial administration, business or research.

In 1939 Imperial and British Airways were nationalized and British Overseas Airways Corporation (BOAC) was formed.

Air France’s operations linked far-flung colonial possessions with links to points in North Africa and Indochina.

KLM in the Netherlands also depended on links to its far-flung colonies, including the East Indies.

Germany, however, lacked colonies but began expanding services with the airship Graf Zeppelin in regular scheduled passenger service between Germany and South America. Airship Hindenburg entered passenger service and successfully crossed the Atlantic 36 times before crashing at Lake Hurst, New Jersey, in May 1937.

Graf Zeppelin over Rio de Janeiro (left) (Public Domain); Hindenburg Disaster (right) (Public Domain)

In the Soviet Union, responsibility for civil aviation activities came under the control of the Chief Directorate of the Civil Air and in 1932 the name "Aeroflot" was officially adopted for the entire Soviet Civil Air Fleet. The Communist Party of the 17

Soviet Union Congress in 1933 set out development plans for the civil aviation industry for the following five years, which would see air transportation becoming one of the primary means of transportation in the Soviet Union, linking all major cities. The government also implemented plans to expand the Soviet aircraft industry to make it less dependent on foreign built aircraft.

Aeroflot TU ANT 20 (Public Domain)

Asian Aviation In China, during the early decades of the 20th Century, chaos gripped the country. Within, warring factions fought to establish a national government while outside, Imperial Japan was looking for ways to subjugate the country. During this time, Generalissimo Chiang Kai-shek formed the China National Aviation Corporation (CNAC) in partnership with the Curtiss-Wright Corporation. CNAC operated routes between Shanghai and Beijing and along the Yangtze River.

CNAC caught the eyes of Pan American and eventually a partnership was formed, with Pan American buying the shares of Curtiss-Wright. Pan American quickly linked CNAC’s routes with its transpacific routes.

CNAC DC-2s at Shanghai (Tom Moore)

However, with the Japanese attack on China in 1937, CNAC lost Shanghai and was forced to operate out of Hong Kong and interior cities. Japan began to hunt airliners and when a CNAC DC-3 was shot down, the airline turned to operating at night in combat zones. On 8 December 1941 (Pearl Harbor Day in China), the Japanese attacked the entire CNAC air fleet, with just three DC-3s and one DC-2 surviving.

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CNAC’s most notable accomplishment after Pearl Harbor was the establishment of a supply route between India, Burma (now Myanmar) and China.

This operation involved flying over the “Hump”, 15,000 ft – 20,000 ft (4,572m – 6,096m) high mountains that divide Burma from China.

CNAC C-47 Over the Hump (Jim Dalby)

In Japan, the privately held Japan Air Transport Institute pioneered passenger service in November 1922, operating between Sakai, Osaka and Tokushima. In 1929, the Japan Air Transport Corporation (JAT), which was established by the Japanese government on 30 October 1922 as the national flag carrier, absorbed the Japan Air Transport Institute and began scheduled passenger services. However, during the 1931 invasion of Manchuria, the main role of the airline was the support of the military, and later, the airline helped establish Manchukuo National Airways in 1932, Huitong Airways in 1936 and China Airways in 1938. These were joint ventures between JAT and the puppet governments of Manchukuo and the Provisional Government of the Republic of China.

In 1936, JAT shifted its focus to the civilian passenger market using the Douglas DC-2 and in December 1938, the government established a new airline, Imperial Japanese Airways as a monopoly for all civil aviation and merged JAT into the new company.

JAT Luggage label (left)(Public Domain); Nakajima AT-2 (Public Domain)

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Latin American Aviation While many in Brazil believed that national hero Alberto Santos-Dumont was the real inventor of the airplane, his flight in 1901 around the Eiffel Tower in Paris was in a lighter-than-air dirigible rather than a fixed-wing powered aircraft. A few years later, on 12 November 1906, Santos-Dumont did fly a kite-like machine with boxy wings called the 14-Bis some 722 ft (220m) in the outskirts of Paris. It was considered the first public flight in the world, and in Europe he was hailed as the inventor of the airplane. This was after the Wright Brothers first manned powered heavier-than-air flight in 1903.

Because of the terrain in Latin America, flying was a necessary form of transport, and many “firsts” were achieved by Latin American airmen, but with little notice. For example, in December 1918, Daboberto Godoy flew over the Andes from Chile to Argentina.

After World War I, German and Italian interest in the continent began the development of airlines in the region, then a virtually non-existent industry. Germany had a large influence in the commercial sector. One airline of note was Sociedad Colombo-Alemana de Transportes Aéreos (SCADTA), which was formed by a group of Columbian and German businessmen. In Brazil, Condor Syndikat and later its successor Deutsche Luft Hansa explored the Brazilian market by establishing the subsidiary Syndicato Condor, and the Brazilian airline Varig.

Later, between 1927 and 1945, Pan American’s president Juan Trippe acquired interest in numerous Latin American airlines and entities. In January 1929 he concluded a deal with the W.R. Grace Corporation to form the Pan American-Grace Corporation (Panagra), giving Trippe airline routes on the west coast of Latin America.

Panagra Ford Tri-Motor (top left) and DC-3 (panamericangrace.com)

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Avensa Ford Tri-Motor (Worthpoint)

The following year, Trippe acquired the New York, Rio and Buenos Aires Line (NYRBA), that gave him the east coast of Latin America. That acquisition included NYRBA do Brasil that then became Panair do Brasil.

Other airlines acquired or formed by Trippe were Compañía Mexicana de Aviación, Cubana, LACSA (Costa Rica), SAHSA (Honduras), COPA (Panama), LANICA (Nicaragua) and Cubana DC-4 (Source) AVENSA (Venezuela). Trippe SCADTA S-40 (Universidad del Norte) also acquired 84% SCADTA stock in a clandestine deal with the German leader of the airline, Peter Paul von Bauer.

Later, when the President of Columbia learned of the secret agreement between Trippe and von Bauer he nationalized the airline, and merged it with another Colombian airline, SACO, to form AVIANCA. Under the new regime, Pan American retained 64% of the stock.

When the Nazi Party came to power in Germany in 1933, it quickly realized the potential use of German-sponsored airlines scattered in Latin America. The US also became edgy due to the presence of these airlines so near to the Panama Canal and wanted to remove the German presence. Juan Trippe’s buying activities in Latin America were supported by the US government because they helped in the removal of any German presence.

African Aviation During the colonial period on the continent of Africa, Great Britain and the European countries of Belgium, France, Portugal and Spain provided the needed air service to their colonies in Africa. In the British colonies, “joint carriers” were formed, 21

based on regions. These included Central African Airways, East African Airways and West African Airways. This was largely the situation until after World War II.

CAA Vickers Viking (RuthAS)

EAA C-47 (Steve Fitzgerald)

WAA DC-3 (Source Unknown)

In South Africa, Major Allister Miller launched Union Airways in August 1929, with a government mail contract between Cape Town and major centers in South Africa. Passenger services were launched the following month. However, due to crashes and subsequent operating losses, the South African government took over operations and renamed the airline “South African Airways� under the control of South African Railways.

Union Airways Junkers F13 (Benutzer Softeis) During World War II, all civil aircraft were transferred to the military, with foreign airlines providing domestic services within the country.

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PART THREE WORLD WAR II, THE CHICAGO CONVENTION AND BEYOND The Situation at the Eve of World War II By the late 1930s, Pan American had launched transatlantic flights with the Boeing 314 flying boat. The British and French were operating transatlantic flights as well, but only under mail contracts. Pan American was the only airline with the capacity to accommodate passenger traffic.

The maps below illustrate the typical route systems of two key international airlines prior to and during World War II. The US carrier, Pan American, obtained its authority through negotiating for landing rights at overseas destinations. The foreign carrier, Imperial of Great Britain, offered overseas destinations through its colonies.

As previously noted, Pan American’s initial transpacific authority came about by virtue of US control of waypoints between San Francisco and Manila. The authority to Hong Kong came about after Pan American’s Juan Trippe used his previously obtained landing rights in Portuguese Macao to pressure the British to grant him landing rights in Hong Kong. At the time, the China National Aviation Corporation (CNAC) was yet another subsidiary of Pan American.

Maps (Author's Collection)

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One point of interest here is that during this time the state-owned flag carriers of several European nations were establishing “foreign routes� to their own colonies in Asia, Africa and the Indian Sub-Continent, all without the need to obtain traffic rights.

Privately owned Pan American did not have this luxury and was required to obtain traffic rights to operate not only to the European countries but to their colonies as well.

Boeing 314 (PAHF)

Imperial Airways Shorts Empire Flying Boat Challenger (Public Domain)

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Boeing 314 (all)(PAHF)

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Below is Pan American’s timetable from late 1939. Note the extent of its Latin American services.

Timetable pages (Author's Collection)

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War Looms War was looming in Europe and at the same time, Pan American began experiencing problems with its Boeing 314 operation due to bad weather in the winter months. Both these factors prompted a shift to a southern route that nearly doubled the flight time between the European continent and New York. The route departed Lisbon and stopped in Bolama, Belem, Port of Spain and Bermuda before arriving in New York.

Juan Trippe recognized that a shift from flying boats to landplanes on the transatlantic routes was inevitable. The US domestic airlines were already looking at new high-capacity-long range landplanes, the Lockheed Constellation and the Douglas DC-4, and Trippe followed suit, becoming interested in acquiring the pressurized Constellation. However, the war started and both Constellation and DC4 production were shifted to the war effort.

Lockheed Constellation (C-69 military version) (Public Domain)

Douglas DC-4 (C-54 military version) (Public Domain)

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For all intents and purposes, the world’s airlines shifted their operations to wartime, including Pan American and the US domestic airlines. Other than the US regulations that governed the US carriers, international commercial aviation was governed by the provisions of the Paris Convention of 1919 and the Havana Convention of 1928. It would soon become obvious that both were obsolete.

The Road to Chicago Like World War I, aviation technology made monumental gains during World War II and these gains were enjoyed primarily by the United States, particularly in the area of high-capacity and long-range air transport. Why this happened was a result of an agreement between US President Franklin D. Roosevelt and British Prime Minister Winston Churchill: the US would focus on the manufacture of high-capacity-longrange transport aircraft and heavy bombers, and the Allies would focus on the manufacture of fighters and light bombers. As a result, as the war began to wind down, the potential of United States superiority in the manufacture of transport aircraft became inevitable.

By 1944 defeat of Germany was all but certain. And by then, aviation technology had developed to the point that no city in the world was more than forty hours away from any other city by air. However, the round-the-world routes operated by the military air transport would snap apart with the advent of peace and would be closed to commercial planes unless the broadest traffic rights were obtained before the end of the war. Airlines would be limited to flying within their own borders (and to/from colonies) and in the case of the United States, under Pan American’s pre-war trans-oceanic authority, unless the US engaged in nation-by-nation politicking as Juan Trippe had done in South America. In addition, US airlines desiring to fly beyond the coasts of Western Europe would require permission from the host governments of the gateway countries, primarily Great Britain. The flag airlines of the Western European countries did not have such a problem. They simply operated routes through their colonies to Asia and Africa. The British carrier, BOAC, was already operating to areas within the commonwealth where the war had receded.

For the US, a policy needed to be developed as to post-war international aviation and it came in the form of government-to-government negotiations for landing rights. This, in effect, ended Juan Trippe’s term as a “shadow” foreign minister for US aviation. As put forth by President Roosevelt, “Juan Trippe can’t have it all”, and indeed, as a reward for their support during the war effort, domestic airlines such as TWA, American Overseas Airlines (formerly American Export Airlines until American 28

Airlines' merger with owner American Export Lines) and Northwest were granted authority to operate international routes by the CAB. However, what was clear as the end of the war approached, was that the US would have undisputed superiority in air transport to the extent that it was the only country with the capability to operate a worldwide air transportation system. Two other factors contributed: The US had long production lines capable of turning out fourengine, long-range aircraft and the US was also capable of making immediate commercial business, whereas the Allies, specifically Great Britain, were still geared to military production and unable to make a swift change and, along with France, were technologically injured. In addition, the defeated Axis powers were denied the capability to manufacture and produce aircraft. The result was obvious: The US had a virtual monopoly on the manufacture of transport aircraft.

Boeing C-97/Boeing 377 Assembly Line (Public Domain via San Diego Air & Space Museum)

C-54/DC-4 Assembly Line (Tinker History Office)

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This virtual monopoly, of course, did not sit well with the major powers, in particular, Great Britain, and it became clear that an international conference was necessary to resolve the issues of international aviation and more importantly, the issues between the US and Great Britain.

As it was also clear that both the Paris and Havana Conventions were now obsolete, there emerged a need for an international organization to maintain standards of safety, communications, signals and weather reporting, and prevent destructive competition breaking out of tariffs. As a result, with the urging of Great Britain, the US took the initiative and sent out invitations to the Allied Nations and the neutral countries of Europe and Asia to meet in Chicago on 1 November 1944. Fiftyfour countries accepted and sent delegations to the Conference on International Civil Aviation, to be known as the Chicago Convention of 1944.

Chicago (calumet412.com)

The Chicago Convention of 1944 On 1 November 1944, delegates from the fifty-four countries met at the Stevens Hotel in Chicago to commence what was to become the most significant conference on aviation regulation in history. The goal was to promote international traffic and develop an entry procedure that would allow healthy growth in the industry. In addition, issues such as routes, frequencies, pricing and fares, aircraft registration, navigational aids and safety standards were to be discussed.

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At a Convention such as this, those with the greatest bargaining power could afford to make broad and sweeping proposals, usually tailored to their interests. The US had this bargaining power and the feeling was it was going to be used to secure a near monopoly in long-haul air transport. What the US was advocating was access to Stevens Hotel, Chicago Convention Meeting Site (Postal History of international routes, minimal control ICAO) of rates, frequencies and capacity and an international organization with limited political and economic authority. In a sense, an “open skies” regime was being promoted.

While freedom of competition is a noble position to take, it seemed absurd that such a position would be espoused by a competitor who had a commanding lead in an industry that was characterized by considerable restriction to entry. The US position was like the proverbial elephant who, while dancing through the chicken yard, cried, “Everyone for Himself!”

Other countries advanced proposals calling for more control, while the British were calling for an international air authority that would control frequencies and capacities, with rates and routes agreed upon bilaterally or multilaterally between nations. The authority would act with a view to maintaining a broad equilibrium between the world’s air transport capacity and the traffic offering. It would thus eliminate wasteful practices, unfair competition and control subsidies.

Registration Desk (Postal History of ICAO)

The British, while lacking bargaining power in the air transport aspect, did wield considerable power from the political aspect. Through its vast number of overseas colonies and commonwealth connections, Britain had the capability of denying landing rights to, for instance, US carriers. This was a major weakness for the US: the need to obtain landing rights in foreign countries to load and unload passengers and cargo.

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Delegates from other countries also submitted proposals calling for some sort of control, including the possibility of a single international corporation as a World Airline, with every nation participating. These suggestions were all unacceptable to the US. What was emerging during the convention was that the nations in attendance were there to strengthen their weaknesses.

Indeed, the US was present to secure landing rights in foreign countries and that was the goal of calling for the convention in the first place. The US did not bring up issues such as frequencies, traffic or capacity. As the convention progressed, however, it was clear that the US would have to back down from its laissez-faire approach. This occurred when the Canadian delegation proposed the “Four Freedoms of the Air” that would be Meeting Room, Chicago Convention (Postal History of ICAO) universally acceptable:

First Freedom:

The right to fly and carry traffic over the territory of another partner to the agreement without landing.

Second Freedom:

The right to land in those countries for technical reasons such as refueling without boarding or deplaning passengers.

Third Freedom:

The right of an airline from one country to land in a different country and deplane passengers coming from the airline’s own country.

Fourth Freedom:

The right of an airline from one country to land in a different country and board passengers traveling to the airline’s own country.

For the US, these did not meet its requirements for control on international trunk routes. Accordingly, the US added a “Fifth Freedom” to the Canadian proposal.

Fifth Freedom:

The right of an airline from one country to land in a second country, to then pick up passengers and fly on to a third country where the passengers then deplane.

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This proposal was not received well by the other major nations as it made quite clear the US objectives: to dominate and monopolize much of the world’s traffic. As a result, because the US was unable to get enough support from the delegates for Fifth Freedom rights, at the close of the convention, the economic issues such as fares, frequencies and capacities were left unresolved.

The failure to resolve the economic issues left the question as to where an airline could fly dependent on bilateral negotiations. And in these negotiations, the parties would summon whatever power they had to secure the greatest contribution to their national well-being. The convention amplified the importance of bilateral negotiations. The reality was that no strength in technical matters, no amount of operating know-how or superiority in quality can overcome the inability to reach a market. The British may not have been technically superior to the US, but they did have control of one end of many international journeys. This was enough to negate much of the US superiority, and the failure of the British to sign-off on the Fifth Freedom addition was considered the major reason for the inability of the US to secure those rights.

One notable absentee at Chicago was the Soviet Union. While invited and prepared to attend, a last-minute decision was made not to attend. Considerable speculation arose as to why. One reason suggested was a low priority given to international civil aviation. Other reasons, however, were more feasible: First, attendance might have forced the Soviets to grant the right of innocent flyover of its territorial air space. This would have been difficult to refuse since the Yalta and Potsdam Conferences lay ahead. Another was that the Soviets might have been forced into a premature disclosure of its plans for Eastern Europe.

The convention ended, however, with three important accomplishments:

•

Established the International Civil Aviation Organization (ICAO).

•

Produced the Freedoms of the Air.

•

Produced the criteria for Bilateral Agreements (Air Services Agreements – ASAs)

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The Convention on International Civil Aviation was signed at Chicago on 7 December 1944.

Chicago Convention Signing (Max Hymans)

(Postal History of ICAO)

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KEY PROVISIONS Every state has complete and exclusive sovereignty over airspace above its territory.

The aircraft of states, other than scheduled international air services, have the right to make flights across state's territories and to make stops without obtaining prior permission. However, the state may require the aircraft to make a landing.

No scheduled international air service may be operated over or into the territory of a contracting State, except with the special permission or other authorization of that State.

Each state shall keep its own rules of the air as uniform as possible with those established under the convention, the duty to ensure compliance with these rules rests with the contracting state.

Before an international flight, the pilot in command must ensure that the aircraft is airworthy, duly registered and that the relevant certificates are on board the aircraft. The required documents are: Certificate of Registration Certificate of Airworthiness Passenger names, place of boarding and destination Crew licenses Journey Logbook Radio License Cargo manifest The aircraft of a state flying in or over the territory of another state shall only carry radios licensed and used in accordance with the regulations of the state in which the aircraft is registered. The radios may only be used by members of the flight crew suitably licensed by the state in which the aircraft is registered.

The pilot and crew of every aircraft engaged in international aviation must have certificates of competency and licenses issued or validated by the state in which the aircraft is registered.

Recognition of Certificates and Licenses. Certificates of Airworthiness, certificates of competency and licenses issued or validated by the state in which the aircraft is registered, shall be recognized as valid by other states. The requirements for issue of those Certificates or Airworthiness, certificates of competency or licenses must be equal to or above the minimum standards established by the Convention.

No aircraft or personnel with endorsed licenses or certificate will engage in international navigation except with the permission of the state or states whose territory is entered. Any license holder who does not satisfy international standard relating to that license or certificate shall have attached to or endorsed on that license information regarding the particulars in which he does not satisfy those standards.

The Convention is now supported by nineteen annexes containing standards and recommended practices (SARPs). The annexes are amended regularly by ICAO and are as follows: Annex 1 – Personnel Licensing Annex 2 – Rules of the Air Annex 3 – Meteorological Service for International Air Navigation Annex 4 – Aeronautical Charts Annex 5 – Units of Measurement to be used in Air and Ground Operations Annex 6 – Operation of Aircraft Annex 7 – Aircraft Nationality and Registration Marks Annex 8 – Airworthiness of Aircraft Annex 9 – Facilitation Annex 10 – Aeronautical Telecommunications Annex 11 – Air Traffic Services – Air Traffic Control Service, Flight Information Service and Alerting Service Annex 12 – Search and Rescue Annex 13 – Aircraft Accident and Incident Investigation Annex 14 – Aerodromes Annex 15 – Aeronautical Information Services Annex 16 – Environmental Protection Annex 17 – Security: Safeguarding International Civil Aviation against Acts of Unlawful Interference Annex 18 – The Safe Transport of Dangerous Goods by Air Annex 19 – Safety Management (Since 14 November 2013) Units of Measurement to be used in air and ground operations: feet (for vertical distance/altitude), knots (for speed), and nautical miles (for distance).

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The International Civil Aviation Organization (ICAO) ICAO was formed to administer the Convention.

Key areas of interest: •

Establishment of international technical standards and recommended practices in the conduct of international air operations.

•

Standardization of procedures.

•

Air navigation.

•

Communications and air traffic management.

•

Air safety.

•

Development in aircraft design.

•

Growth and development of airways and airports.

•

Cooperation between member nations.

•

Sets industry technical and legal standards for member states’ civil aviation authorities.

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ICAO Headquarters, Montreal (Jeangagnon)

ICAO objectives: •

Insure the safe and orderly growth of international civil aviation throughout the world.

•

Encourage the arts of aircraft design and operation for peaceful purpose.

•

Encourage the development of airways, airports and air navigation facilities for international civil aviation.

•

Meet the needs of the peoples of the world for safe, regular, efficient and economical air transport.

•

Prevent economic waste caused by unreasonable competition.

•

Ensure that the rights of contracting States are fully respected and that every contracting State has a fair opportunity to operate international airlines.

•

Avoid discrimination between contracting States.

•

Promote safety of flight in international air navigation.

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The Freedoms of the Air The First through Fourth Freedoms of the Air were promulgated by the Chicago Convention; the Fifth Freedom by the Bermuda Agreement of 1946 and the remaining (Sixth through Ninth) subsequent to the Convention

First Freedom:

The right to fly and carry traffic over the territory of another partner to the agreement without landing.

Second Freedom:

The right to land in those countries for technical reasons such as refueling without boarding or deplaning passengers.

Third Freedom:

The right of an airline from one country to land in a different country and deplane passengers coming from the airline’s own country.

Fourth Freedom:

The right of an airline from one country to land in a different country and board passengers traveling to the airline’s own country.

Fifth Freedom:

The right of an airline from one country to land in a second country, to then pick up passengers and fly on to a third country where the passengers then deplane.

Sixth Freedom:

The right to carry traffic from one country through the home country of the airline to a third country.

Seventh Freedom:

The right to carry traffic from one country to another country without going through the home country of the airline.

Eighth Freedom:

The right to carry passengers between two or more points in one foreign country with continuing service to or from one’s own country, known as “True Cabotage”.

Ninth Freedom:

The ninth freedom is a variation from the Eighth Freedom in that it is the right to carry passengers within a foreign country without continuing service to or from one's own country, known as “Stand-alone Cabotage” and almost no country permits it.

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Air Services Agreements (ASAs) The criteria produced by the Chicago Convention included the following key provisions:

•

Exchange of air rights.

•

Equality of treatment with respect to airport charges, customs duties and inspection fees.

•

Mutual recognition of airworthiness certificates and personnel.

•

Compliance with laws pertaining to entry, clearance, immigration, passports, customs, etc.

•

Regulations concerning ownership and control.

•

The designated carrier/s (“Chosen Instrument”?), the routes served and tariffs.

The International Air Transport Association Shortly after the Chicago Convention, a call was made for a meeting among airline operators with a proposal to form a non-governmental organization of operators. During this meeting, articles of association were drafted for consideration at a conference to be held in Havana in April 1945. On 19 April, the articles were approved and enacted, forming the International Air Transport Association (IATA).

IATA Headquarters, Montreal (IATA)

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Focusing on economic rather than technical issues, the purpose of IATA initially was to to promote safe, regular and economical air transport for the benefit of the peoples of the world; to foster air commerce and to study the problems connected therewith; to provide the means of collaboration among the air transport enterprises engaged directly or indirectly in international air transport services; and to cooperate with ICAO. Today these functions largely remain the same:

•

Sets economic standards for the orderly flow of air transportation throughout the world.

•

Coordinates fares and rates among member airlines.

•

Provides forum for industry agreements between airlines (interline, alliances).

•

Conducts training for airline personnel.

•

Provides clearing house for collections on interline international tickets.

•

Holds semiannual “Slot Conference”.

As the war wound down, Pan American began its focus on peacetime operations, starting in Latin America.

PAA DC-3 aircraft at Santos Dumont Airport, Brazil (Alvin Lederer)

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1945 Pan Am Timetable (Author's Collection)

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The Bermuda Agreement of 1946 In 1946 a conference, known as the Bermuda Conference, was held between the two airline powers, Britain and the US. There was a feeling of urgency at this conference. Besides the aviation issues to be resolved, Britain was in a severe crisis over its balance of payments and was then negotiating a $3.75 billion loan on easy terms. At the same time, the US was engaged in discussions with Britain and its commonwealth partners over telecommunications rights with the hope that empire preferences discriminatory to the US would be eliminated. It was, however, the principal aim of the conference to reconcile the widely divergent views held by the two nations on the extent to which international air transport should be controlled.

What came out of the conference, the Bermuda Air Agreement, known as the Bermuda Agreement of 1946, was accepted by both nations. The agreement provided criteria regarding Fifth Freedom rights, including consideration of the traffic requirements between the country of origin and the country of destination, the requirements of through airline operation and the traffic requirements of the area through which the airline passes after taking account of local and regional services.

The key provisions included:

•

Provided for Fifth Freedom rights with reciprocity.

•

Provided for extensive routes between the two countries with the requirement for reciprocity.

•

No arbitrary restrictions on capacity or flight frequencies.

•

Procedures for ratemaking and traffic rules assigned to IATA subject to government approval.

•

Disputes referred to the ICAO for advisory opinion.

•

Pan American and BOAC were the designated carriers.

•

Became model for future ASAs.

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This agreement enabled Pan American to pick up passengers at London for passage to points east. As the agreement also applied to commonwealth countries, Pan American benefited from Fifth Freedom rights at points in India and later at Hong Kong. This enabled Pan American to launch its round-the-world services in 1947.

PAA Lockheed L-049 Constellation (PAHF)

BOAC Lockheed L-049 Constellation (RuthAS)

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Below is a view of the scene in New York at the departure of Pan American’s first round-the-world flight and images of pages from a 1948 Pan American timetable showing its round-the-world service.

First Round-the-World Flight (PAHF)

1948 Pan Am Timetable with Round-the-World services (Author's Collection)

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Route map from 1948 Timetable (Author's Collection)

Baggage Tags (Author's Collection)

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The “Chosen Instrument” The concept of the “Chosen Instrument” suggests that the national carriers designated to operate international routes by their owning nations are instruments of those nations’ foreign policy. Indeed, through the Bilateral Agreement system promulgated by the Chicago Convention, that could ring true. However, the term preceded Chicago.

During the early years of Pan American’s growth, the US government looked very favorably at the carrier and viewed it as an “instrument” of foreign policy by using the airline to facilitate business and tourism with Latin America and the Caribbean.

The US government, in fact, awarded Pan American every foreign airmail route for which bids were invited. This was helped by provisions of the Foreign Air Mail Act that provided that only airlines capable of operating on a scale and manner that would project the dignity of the US in Latin America would be granted the right to carry international mail. Secondly, contracts would only be given to companies that had been invited for operations by the host countries. In both cases, Juan Trippe made sure that Pan American had no competition. He aggressively pursued friendly relations with most countries in Latin America and the Caribbean and often personally met with foreign leaders. Trippe was also the kind of entrepreneur who emphasized elegance and grandeur in operating his airline. To enhance the stature of Pan American, Trippe also invited the famous aviator Charles Lindbergh to serve as a technical adviser.

In addition, there was concern over the German presence in South America in the 1930s. The German airline Luft Hansa had established subsidiaries in various countries and the aforementioned SCADTA (pp. 7 and 20), formed by a group of Colombian and German businessmen, posed a threat to the Panama Canal. This meant the presence of German propaganda and espionage. Pan American proceeded to acquire SCADTA and other German subsidiaries to remove the German presence and expand its Latin American route network. In essence, this was carrying out US foreign policy to rid the continent of the German presence.

Up to World War II, because of its leadership and role in international commercial aviation, Pan American was considered the “Chosen Instrument” for the US. While Trippe was largely successful negotiating on behalf of his airline and his government, his stature as the “ad hoc” transport minister would soon come to an end following his efforts to secure transatlantic authority from the British and the US 46

government’s eventual policy of government-to-government negotiations for foreign landing rights. However, although Pan American no longer had a monopoly on international routes, the airline was still considered the principal international carrier, and indeed, the “Chosen Instrument”.

The “Chosen Instrument” survived up through the Cold War largely because of the restrictive nature of the regulated and protectionist airline industry and the resultant barriers to entry. With the advent of “Open Skies” and general liberalization of the industry, this concept has faded away. Under the current regime, there is virtually no airline that can really claim to be an instrument of its country’s foreign policy.

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PART FOUR POST-WAR AND THE REGULATED AND PROTECTIONIST ERA US Commercial Aviation Often referred to as the “glory days of airline travel”, the Post-War and the Regulated and Protectionist Era witnessed the manufacture of large capacity, longhaul, piston-driven aircraft, the introduction of and transition to commercial jet airliners that ushered in the “Jet Age”, and finally the development of high capacity, widebodied aircraft that started the path toward the end to economic regulation of the privately-owned US airlines.

In the US, the trunk carriers began the transition to peace-time operations, enjoying the technology developed during the war. There was a surplus of former military transport and bomber aircraft that were acquired by the trunk airlines and modified for commercial service. These surplus aircraft were also purchased by entrepreneurs who began to transport people and cargo on an ad hoc basis, with no fixed routes or schedules. Thus, emerged a new type air carrier to be known as the non-scheduled or “non-skeds” to the public or as “large irregular carriers” to the CAB, which was powerless to regulate them under the current statutes. This was remedied by an amendment to the Civil Aeronautics Act that created supplemental air carriers and supplemental air transportation requiring these carriers to possess certificates of public convenience and necessity in order to operate as an air carrier.

In addition, the post-war years witnessed the granting of new “feeder” routes by the CAB. Although the trunk carriers claimed a right to these routes under their grandfather rights, the CAB nevertheless granted these new routes to another new class of air carrier known as “Local Service Carriers”, each with a regionally centered route system. Airlines such as Allegheny, Mohawk, Lake Central, Frontier, Bonanza, Ozark and Southern were all certificated during the 1945-1951 period. Because of the thin markets served by these carriers, they were awarded subsidies to keep operating in these markets.

These new air carriers, added to the already existing trunk carriers, meant an overcrowding of American airspace, and the regulation in place for air traffic control was soon considered antiquated.

In 1956, US President Dwight D. Eisenhower appointed Edward Peck Curtis as Special Assistant for Aviation and was named to head a commission to study the 48

dramatic increase in airline traffic and to propose ways to deal with airplane traffic jams at airports. This was followed by an event that shook the very foundation of air traffic control.

On the morning of 30 June 1956, United Airlines flight 718 collided with TWA flight 2 over the Grand Canyon. With 128 fatalities this was at the time the largest loss of life in an aviation accident. This high-profile accident, which took place in uncontrolled airspace, raised public concern for airline safety.

As a result, in 1957, Congress passed the Airways Modernization Act that established the Airways Modernization Board (AMB) headed by General Elwood Quesada. The mandate of the Board was the development and (Mel Hunter) modernization of the national system of navigation and air traffic control facilities to serve the present and future needs of civil and military aviation.

Two subsequent mid-air collisions between military aircraft and commercial airliners, one near Las Vegas, Nevada (United Airlines flight 736) on 21 April 1958, where 49 died, and another involving Capital Airlines over Brunswick, Maryland a month later on 20 May that cost 11 lives, showed further imperfections in the regulation of air traffic, particularly the need for unified control of airspace for civil and military flights.

The day after the Brunswick collision, Senator Mike Monroney and Representative Oren Harris introduced the Federal Aviation Act and two days after Brunswick, a stopgap presidential proclamation was issued that (1) required military jet aircraft to fly by Instrument Flight Rules while in the civil airways below 25,000 ft (7,620m) (later reduced to 20,000 ft (6,096m)) and (2) prohibited jet penetration swoops from high to low altitudes through civil airways.

Citing “recent midair collisions of aircraft occasioning tragic losses of human life,� President Dwight D. Eisenhower announced the White House's support of the

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legislation on 13 June 1958. The Federal Aviation Act of 1958 passed Congress and was signed into law by Eisenhower on 23 August.

Taking a comprehensive approach to the federal role in fostering and regulating civil aeronautics and air commerce, the new law repealed the Air Commerce Act of 1926, the Civil Aeronautics Act of 1938, the Airways Modernization Act of 1957, and those portions of various presidential plans dealing with civil aviation. The legislation assigned the functions exercised under these repealed laws to two independent agencies — a new Federal Aviation Agency (FAA) and the Civil Aeronautics Board (CAB).

FAA supersedes the CAA, 31 December 1958 (FAA History); FAA Headquarters (Matthew G Bisanz)

Provisions of the Act included:

•

Established the Federal Aviation Agency (FAA, later Federal Aviation Administration).

•

Abolished the CAA, and empowered the FAA to oversee and regulate safety in the airline industry and the use of American airspace by both military and civilian aircraft.

•

CAB continued as an independent agency and retained jurisdiction over route allocation, accident investigation and fare applications.

•

International routes subject to bilateral agreements between the US and the country involved and the CAB designated the carrier to operate the route.

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The twenty years following the Federal Aviation Act of 1958 was characterized as an era of strict economic regulation in the US and government protectionism in the rest of the world. The privately-owned US-flagged airlines were restricted by the CAB as to where they could operate and what fares they could charge. Routes were awarded after long and costly proceedings where a carrier was required to prove the market applied for actually needed the service. Fares were also subject to board approval and were calculated using a formula known as the Standard Industry Fare Level (SIFL). A small handful of US carriers operated international routes, most notably Pan American, TWA and Northwest, with Pan American being the dominant carrier and considered the “Chosen Instrument” for the United States.

On 15 October 1966, the United States Department of Transportation (USDOT or DOT) was established as the federal cabinet department of the US government concerned with transportation. It began operation on 1 April 1967 and is headed by the US Secretary of Transportation. Prior to its establishment, the Under Secretary of Commerce for Transportation administered the functions now associated with it. In 1965, Najeeb Halaby, then Administrator of the FAA, suggested to President Lyndon B. Johnson that transportation be elevated to a cabinet-level post and that the FAA be folded into the DOT. DOT’s mission is to serve the US by ensuring a fast, safe, efficient, accessible and convenient transportation system that meets vital national interests and enhances the quality of life of the American people.

CAB Building (top)(Author) and USDOT Building (Aude)

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Provisions related to air transportation include: •

The FAA became an agency within the department.

•

The CAB remained an independent regulatory agency with jurisdiction over economic matters (routes and rates/tariffs).

•

Established the National Transportation Safety Board (NTSB) that took over the CAB’s accident investigatory function. NTSB was severed from DOT by the Independent Safety Board Act of 1974.

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The following pages include images of regulated-era route systems and typical aircraft of the US Trunk carriers American (AA), Pan American (PA), TWA (TW) and United (UA): American Airlines:

AA DC-7 (Jon Proctor)

1954 American Airlines Timetable (Author's Collection)

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AA 707 (Jon Proctor); Timetable pages (Author's Collection)

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Pan American:

Timetable pages and map (above); Tags (below) (Author's Collection)

PA DC-6B (top) (Allen Clarke) and 377 Stratocruiser (PAHF)

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PA DC-7C (top) and 707 (Alan Van Wickler); Timetable pages and tags (Author’s Collection)

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PA DC-8-32 at New York (Jon Proctor); Timetable and tags (Author's Collection)

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TWA:

TW Constellations and 707 (bottom) (Jon Proctor); Timetable pages (Author's Collection)

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United:

UA DC-6B (top) and DC-8 (Jon Proctor); Timetable pages (Author's Collection)

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Below are images of typical aircraft of the Local Service Carriers:

Allegheny Timetable (left) (Author's Collection); CV-580 (Piergiuliano Chesi)

Bonanza DC-3 (Orange County Archives)

Lake Central Nord 262 (RuthAS) Southern DC-9 (RuthAS)

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In the international arena, the foreign-flag airlines in the Post War era were largely state-owned and were controlled by their respective civil aviation authorities.

International routes were governed by bilateral ASAs between the countries involved and fares were agreed to at Traffic Conferences organized by IATA. The airline of the Soviet Union, Aeroflot, and airlines of Eastern European countries were also stateowned.

Foreign-flag carriers operating international routes were generally identified as being the “Chosen Instrument� of their owning countries.

European Aviation In the United Kingdom, the British, represented by the British Overseas Airways Corporation (BOAC) and British European Airways (BEA), dominated European international air traffic after World War II. With the end of hostilities in Europe in 1945, BOAC inherited dozens of key routes across the British Empire. During the late 1940s, the company was unprofitable but was able to gain strength once its military operations were converted to civilian operations in the 1950s. In 1952, BOAC became the first airline to introduce passenger jet service with its De Havilland Comet 1, but the aircraft was grounded due to a structural failure. In the 1950s because of the Comet's failure, BOAC again suffered financial difficulties but bounced back in the BOAC DC-7C (Source Unknown) 1960s.

BEA was established in August 1946 to operate short-haul routes within Europe.

By 1960, the combined BOAC/BEA was the third largest in the world behind the US and the Soviet Union.

In 1974, the two airlines merged to form British Airways. The new company's first BEA at London Heathrow Airport (Ben Brooksbank) major act was to participate jointly with the Anglo-French built Concorde in launching the world's first regularly scheduled supersonic service in January 1976.

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BA Comet 4 (Ralf Manteufel)

BA 377 (Public Domain)

BA 707 (Steve Fitzgerald)

BA Concorde (Plismo)

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In France, its commercial aviation industry, which had been split into separate operators during World War II, was unified at the end of the war under the name Air France and resumed its substantial network of passenger service throughout Europe on 1 January 1946. By 1952, it became the largest non-American and non-Soviet airline in the world, and became an early adherent of jet aviation, using both the British Comet and the French-built Sud SE-210 Caravelle.

While the company was the official state airline, two smaller private airlines were formed, Compagnie de Transports AĂŠriens Intercontinentaux (TAI) and Union AĂŠromaritime de Transport (UAT), operating international routes granted by the government into the 1960s. However, Air France retained its dominant position and by 1992, had acquired all these routes. Air France also launched Supersonic Air Transport in 1976.

AF Viscount (RuthAS) AF Super G Constellation (Ralf Manteufel)

AF 707 (Geoffrey Thomas)

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In West Germany, the wartime German airline Deutsche Luft Hansa (DLF) ceased service at the end of World War II and as a result, there was no commercial airline activity until the early 1950s. As Luft Hansa was prohibited from operating, airline service between West Berlin’s Tempelhof Airport and cities in West Germany was provided by the allies and in 1954 Pan American set up the Internal German Services (IGS), operated under the auspices of the Allied Control Commission.

PA DC-4 at Berlin (PAHF) In January 1953, private investors and the West German government combined to form Luftag, taking the name Deutsche Lufthansa, commonly called Lufthansa, in 1954. First passenger service began in 1955, followed by a rapid expansion of its services and fleet into the 1960s. In 1960, Lufthansa inaugurated jet services with the Boeing 707.

LH Constellation (RuthAS)

LH 707 (Peter W. Black)

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In the Netherlands, KLM continued to link its colonies with the homeland, with Indonesia a key point. However, with Indonesian independence after the war, KLM became deprived of one of its prized assets. Despite this setback, the airline did regroup and opened new routes to Africa and the Middle East. By 1960, KLM ranked only behind Air France and BOAC among Western European carriers. KLM began jet service in 1960 with the Douglas DC-8.

KL Piston Aircraft at Amsterdam (Jan Altevogt)

KL DC-8 (Jon Proctor)

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In Italy, Alitalia - Linee Aeree Italiane S.p.A., was established on 16 September 1946 as Aerolinee Italiane Internazionali (Italian International Airlines). The airline was created by an agreement between the United Kingdom and Italy and was funded by the Italian government and British European Airways (BEA) in a 60/40 share arrangement. Operations commenced on 5 May 1947, with a flight from Turin to Catania and Rome.

Intercontinental flights began the following year between Milan and cities in South America. On 31 October 1957, Alitalia merged with Linee Aeree Italiane and took on the name of Alitalia Linee Aeree Italiane.

In 1960 Alitalia began jet service with the Sud SE-210 Caravelle on European routes and the Douglas DC8 on the long-distance routes. During this time, the company diversified into charter airlines and helicopter services, divested itself of British investment and became a completely Italian-owned company by the end of the decade.

Alitalia was the third largest airline in Europe measured by passenger-miles flown.

AZ Caravelle (George MP Macesich Collection)

AZ DC-8 (Jon Proctor)

Soviet Union Aviation In the Soviet Union, Aeroflot, the Soviet state-owned airline, played a major role in reconstructing the Soviet Union after the war. Through the 1950s, Aeroflot 66

expanded routes that stretched from the capital cities of Eastern Europe to the farthest regions of Eastern Siberia.

Aeroflot was the first airline in the world to introduce regularly scheduled passenger jet service with its Tupolev TU-104 jets. In 1961, Aeroflot introduced the TU-114 high-speed turboprop aircraft on nonstop flights from Moscow to Tokyo and North America. By 1967, the Soviet passenger aviation industry (represented only by Aeroflot) was second only to the US. In 1975, Aeroflot introduced the supersonic TU144 but did not meet with much success.

SU TU-114 (Mel Lawrence)

Asian Aviation In China, following World War II and the Japanese surrender, CNAC never regained its footing and did not survive the transition to the People’s Republic of China.

Air traffic was in chaos, with no scheduled operations and most aircraft and facilities were destroyed. The creation of a Civil Aviation Bureau in 1950 and its replacement by the Civil Aviation Administration of China (CAAC) four years later, consolidating all aspects of air traffic under a single body, only slowly changed this situation. It wasn't until the mid-60s that traffic returned to pre-war levels. However, air travel in Communist China was not for the general public but only for government and Communist Party officials.

During the “Great Leap Forward” (1958-1962) the CAAC was split into six regional bureaus (Beijing, Shenyang, Shanghai, Guangzhou, Chengdu, and Lanzhou) with 22 provincial and municipal authorities beneath them. The Great Leap Forward was not a success and the following Cultural Revolution (1966-1976) was a disaster.

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In parallel, relations with the Soviet Union were worsening and Soviet support dried up. Unsurprisingly this combination of factors saw a major retrenchment of the small gains aviation had made since 1945.

Following Mao's “victory� in the Cultural Revolution more moderate policies saw the country return to a semi-normal state and the end of the enforced isolation pursued up until then. This was partly to counter the Soviet threat and led to a rapprochement with the US and an expansion of international air service with Boeing 707s. Following Mao's death in 1976 attempts to centralize the CAAC were not a success and with continuing economic strife caused by the policies of centralized CA IL-62 (RuthAS) planning, a reformist view became acceptable where elements of a market economy would be introduced. The reforms were gradually rolled out across the economy and by 1985 it was aviation's turn.

CA 707 (boeingdreamscape)

In Japan, at the end of World War II, the Japanese government recognized the need for a reliable air transportation system, and on 1 August 1951 privately-owned Japan Air Lines Co., Ltd. was formed. On 25 October, the airline commenced domestic service with a Martin 2-0-2 aircraft.

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On 1 August 1953, the Diet of Japan passed the Japan Air Lines Company Act, which created a new state-owned Japan Air Lines (JL)(JAL) and acquired all assets and liabilities of its predecessor. The new airline operated domestic flights from Tokyo to Sapporo and Misawa, and from Tokyo to Nagoya, Osaka, Iwakuni and Fukuoka.

In 1954 the airline began international flights between Tokyo and San Francisco with a Douglas DC-6B via

JL DC-6B (jal.com)

Wake Island and Honolulu, and later the airline acquired the Douglas DC-7C that was operated between Seattle and Tokyo.

JL DC-7C (Geoffrey Thomas)

In 1960, the airline took delivery of its first jet, a Douglas DC-8 and operated the aircraft on the Tokyo-Honolulu-San Francisco route. By the end of 1961 JAL was operating transpolar flights from Tokyo to Seattle, Copenhagen, London and Paris via Anchorage, Alaska.

In 1972, the so-called “aviation constitution”, a regulatory scheme, was enacted by the Japanese government, granting JAL flag-carrier “Chosen Instrument” status to operate international routes and a monopoly on international scheduled flights.

JL DC-8 (Jon Proctor)

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In addition to JAL, another private airline formed in late 1952, Nippon Helicopter and Aeroplane, which commenced helicopter and cargo flights in 1953. The next year domestic passenger service began with de Havilland Herons and later DC-3s. In 1957 the company was renamed All Nippon Airways Company (NH)(ANA).

The company grew through expansion and mergers into the 1960s, and by 1974 had Japan’s largest domestic airline network. In 1971, ANA was authorized to operate international charter flights.

NH 737 (S. Fujioka)

Latin American Aviation The period after the war and during the early 1950s, Pan American continued its prominent presence in Latin America. However, going into the 1960s through the 1970s Pan American began selling its stake in Latin American carriers to local interests, and in 1967 sold Panagra to Braniff.

There was also the emergence, and in some cases the re-emergence, of Panagra DC-6B at Limatambo (Terence Wong Lee via panamericangrace.com) national carriers. The most prominent were Aerolineas Argentinas, Viação Aérea Rio-Grandense (Varig) in Brazil, Compañía de Aviación Faucett in Peru, Transportes Aereos del Continente Americano (TACA) in Central America, Aerovías Nacionales de Colombia S.A. (Avianca) in Colombia and Línea Aérea Nacional de Chile (LAN-Chile) in Chile.

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Aerolineas Argentinas, a product of four Argentine airlines that were amalgamated into a single state-owned company that ceased independent operations in December 1949, started operations in December 1950 with a Douglas DC-6 on a weekly route between Buenos Aires and Frankfurt. The airline added Convair 240s, DC3s, DC-4s and additional DC-6s, and expanded the network to 35,000 miles (56,000 km).

AR DC-4 (Edgardo E. Carbajal)

In 1959, the airline ordered and eventually operated the Comet jet aircraft on routes between Buenos Aires and Hatfield (near London, UK), and New York. In the mid-1960s, the airline acquired the Boeing 707 and later, the Boeing 727 and 737.

In 1971, the airline was given a monopoly on all international routes and became the flag airline of Argentina.

AR Comet 4 (Mel Lawrence)

In Brazil, Varig began expanding its fleet in 1946 with DC-3s and Curtiss C-46s and at the same time added numerous cities in the states of Santa Catarina, Paraná, São Paulo, and Rio de Janeiro. In 1955, Varig began services between Rio de Janeiro and New York with Lockheed 1049G Constellations and in 1956, along with Cruzeiro do Sul and VASP (two smaller Brazilian airlines) initiated air shuttle services between Rio de JaneiroSantos Dumont and São PauloCongonhas airports, the first of its kind in the world. The service was eventually operated by Varig’s Lockheed L-188 Varig L-188 (Author) Electra.

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With the demise of Panair do Brasil, another competitor that was originally part of the Pan American Airways system, Varig inherited the former’s European routes as well as two Douglas DC-8-33s.

Panair do Brasil was at one point the only Brazilian carrier with authority to operate to Europe.

Service was first inaugurated between Rio de Janeiro and London’s newly opened Heathrow Airport in 1946 and steadily grew into the 1950s. In 1961, Panair started operating the Douglas DC-8Panair do Brasil Constellation (Jose Silveira) 33 to Europe. However, in spite of its excellent service, Panair faced increasing competition from other foreign state-run airlines. Addressing the situation, Panair formed an operational pool with Aerolíneas Argentinas, Alitalia, and Lufthansa. In 1962, Panair operated the SUD SE-210 Caravelle jet on its main domestic and South American routes.

Panair do Brasil was forced to cease operations abruptly on 10 February 1965, when the Brazilian military government, which seized power the year before, suspended its operational certification and allotted its international routes to Varig and its domestic routes to Cruzeiro do Sul. In Peru, after World War II, Elmer Faucett, the founder of Compañía de Aviación Faucett, bought many aircraft from the US, including DC-3s and DC-4’s. The airline’s network was 3,000 miles long (4,800 km) in 1952 and grew to 6,368 miles (10,248 km) in 1960.

The airline also acquired a DC-6B aircraft from Panagra and commenced freight services with a second DC6B(F) to Miami, Florida in 1964.

Faucett DC-4 (RuthAS)

In Central America, in 1945, Transportes Aereos del Continente Americano (TACA) moved its headquarters to El Salvador where it modernized and expanded.

Going into the 1950s, the company began to acquire DC-3s and DC-4s and later the Vickers Viscount turboprop. The company entered the jet age with a BAC One Eleven.

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5R (TACA) DC-4 (Public Domain); Timetable (Author's Collection)

In Colombia, in 1946, AerovĂ­as Nacionales de Colombia S.A. (Avianca) began flights to Quito, Lima, Panama City, Miami, New York City and Europe, using Douglas DC-4s and C-54 Skymasters. In the early 1950s, the airline added Lockheed Constellations to its fleet, and in 1961, Avianca leased two Boeing 707 and 720 aircraft, to operate its international routes.

AV Constellation (Jon Proctor)

AV 707 (M D West)

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AV 707 aircraft (Clinton Groves)

African Aviation As African countries became independent, they established their own airlines and used these airlines to showcase their independence. Some airlines, such as Air Afrique, were jointly sponsored by multiple governments.

Air Afrique DC-6B (RuthAS)

Air Afrique DC-8 (Eduard Marmet)

The knowledge of aircraft, the airline industry, and financial capital, originating from the Europeans, was used to establish the new African carriers. Once the Europeans left Africa, however, the airlines were turned over to their respective governments, resulting in these airlines being operated by government appointees with no airline experience. Consequently, the airlines were not well managed and suffered losses. In addition, the governments failed to provide enough capital, and whatever profits earned often went into the countries’ treasuries.

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(Author's Collection)

In addition, many of the governments tended to make their airlines centers of employment, resulting in overstaffing and inefficiency. This required the airlines to rely on profitable international routes to subsidize the less profitable domestic routes.

Air Gabon DC-6 (left) (Michael Gilliand); Air Congo DC-4 (RuthAS)

Ghana Airways VC-10 (top) (Ralf Manteufel); Nigeria Airways Boeing 737 (RuthAS)

In South Africa, a private airline, Comair (MN), was formed in 1946 and started operations. However, to protect South African Airways (SAA)(SA) as the flag carrier, the government enacted the International Air Services Act in 1949 requiring that any carrier wishing to compete with SAA must prove that SAA service in a market was not adequate. This requirement was impossible to meet in the presence of the dominant 75

SAA, resulting in a complete monopoly for SAA. This monopoly, however, was not particularly beneficial to SAA because the railways, beneficiaries of favorable treatment from the government, forced SAA to develop domestic services on its own.

Comair continued operating largely as a feeder airline.

The year 1948 saw the beginning of Apartheid in South Africa, and although SAA was protected from competition in domestic markets, in the international markets, the airline experienced cost pressures as airports, airlines and air space became part of a political strategy to cripple governments of the last minority white-ruled states in South Africa. The country became increasingly isolated and due to international condemnation, SAA faced significant hostility. Flights to New York, Perth and Sydney were suspended and SAA was banned from flying over Africa, requiring adjustments to reach European destinations. To reduce the flying hours, SAA formed alliances with European carriers.

MN DC-3 (Thomas Bor)

SA Constellation (RuthAS)

SA 707 (upper left) (Beachwood Photography)

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Tokyo Convention of 1963 The Tokyo Convention of 1963, known as the Convention on Offences and Certain Other Acts Committed on Board Aircraft, was concluded at Tokyo on 14 September 1963 and came effective on 4 December 1969. As of 2015, the Convention has been ratified by 186 countries.

The Convention applies to criminal offenses or acts that jeopardize the safety of persons or property on board civilian aircraft while in-flight and operating on an international route.

Its coverage includes the commission of or the intention to commit such offences on board an aircraft registered in a Contracting State in-flight “over the high seas and any other areas beyond the territory of any State in addition to the airspace belonging to any Contracting State�.

While criminal jurisdiction is generally exercised by the State of Registry, it also may be exercised by Contracting States other than the State of Registry under limited conditions. This exercise of jurisdiction may be required under multilateral international obligations and/or in the interest of national security.

The Convention does not apply to domestic flights.

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Government Role in International Commercial Aviation One very important factor during this era was the government role in international civil aviation, best illustrated by how governments dealt with aviation issues in three main areas: ICAO, IATA and bilateral ASAs. This era was dominated by the Cold War, and the international airline industry was in many respects, though not obviously, a pawn in the struggle between the superpowers at the time.

Political considerations became apparent early, when, in 1947, ICAO became an agency of the United Nations. In one case, as a condition of acceptance of ICAO into the UN, the Soviet Union demanded the expulsion of Spain from ICAO. Spain was then considered a key terminal and a source or destination for a substantial amount of traffic, and its expulsion hampered the development of air facilities and aids to navigation that were essential to orderly air transport. In another case involving South Africa, thirty-one African nations demanded the expulsion of that country because of its apartheid policy. The attempt failed because of failure to meet the required advance notice.

IB Constellation (Ralf Manteufel)

Government involvement in IATA activities, although a non-governmental organization, was also prevalent. Under its Articles of Association, traffic or rate conferences were called whenever necessary. Each member had one vote, and each member had veto rights. These conferences made a variety of decisions, but only those that were unanimously agreed on and expressed in the form of a resolution were binding. However, because most international airlines at the time were state-owned, these resolutions would not be binding on the international airline until its government approved. Further, a member would not be bound if it certified the resolution was not coincident with the laws or official policy of its government. Despite these restrictions, 78

however, government approval of IATA resolutions during this period was overwhelming. This can be attributed to the fact that most international airlines received instructions prior to attending the conferences and in some cases, airline representatives were actually state, or government employees disguised as officials of the state-owned airline.

The government role in the industry, however, was most intense and interesting at the bilateral level. This was particularly true during the Cold War and the role of government was interpreted in terms of foreign policy. The international airline could either be an instrument of foreign policy or it could reflect or parallel the foreign policy of a country. A country may also use its international airline to gain political favors from other countries. Here, the key to successful negotiations was bargaining power, or the ability to influence other countries in a way that would contribute to the economic success of the home country’s airline. It was also entirely possible that an airline’s profitability could be damaged because something of value to a national airline could be traded away by the government to meet a governmental objective.

For the most part, the governments of the countries on behalf of their international airlines exchanged routes on a reciprocal basis and when both had equal bargaining power. A country with greater power, however, could demand more for its routes. In a 1957 case, KLM Royal Dutch Airlines applied for additional routes in the US. The US government was not prepared to grant these additional KL DC-7C (Jon Proctor) routes because the Netherlands had nothing to offer in return. To the Dutch, KLM was one of the Netherlands’ biggest industries that was a symbol of Dutch internationalism and initiative. Thus, to obtain the desired routes, the Dutch offered a continuing cooperation with the North Atlantic Treaty Organization (NATO). This was acceptable to the US and the routes were granted. The granting of airline rights to foreign governments in exchange for political support, military bases or troop contributions to

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NATO were regular bargaining tools of the US in order to maintain its military superiority over the Soviet Union.

ASAs can also be subject to disputes between the parties and at times an injured party might resort to countermeasures to protect its interests. This was illustrated in a case between Pan American and Air France in connection with the bilateral ASA between the US and France. Under that agreement, Pan American was authorized a scheduled service between Paris and London and at the time was operating a Boeing 747. However, because of the aggressive subsidies being provided by the French government to Air France, Pan American decided to substitute a smaller, more economical aircraft for the 747. The French government refused on the basis ranging from assertions of national honor (Pan American flying anything smaller than a 747 into Paris would be an affront) to the more PA 747 (Bob Proctor) pragmatic reason that Air France would enjoy the prospect of forcing its competitor to run a grossly unprofitable route (with the 747). Finally, the French compelled Pan American to cease its flights to Paris from London. The US government proposed arbitration to resolve the dispute, but for two years the French refused. The US eventually made a reprisal by suspending Air France’s Paris-Los Angeles route, long-established under the ASA. This got the French government’s attention and France agreed to arbitration.

The issues were (1) whether Pan American could change gauge and (2) whether the US could unilaterally suspend Air France’s route to Los Angeles. The first issue was resolved in favor of Pan American. In the case of the second issue, the French argued that as the ASA provided for arbitration, it was impermissible for the US to engage in unilateral self-help measures. The arbitrator ruled, however, that it was France that had been setting up barriers by not agreeing to arbitration and that it was only AF 727 (Jon Proctor Collection) 80

the US’s retaliatory move terminating the Los Angeles route that brought France to the table. In short, the arbitrator ruled that countermeasures were a necessary part of the punch and counterpunch often needed to get parties to submit their disputes to arbitration or another method of binding settlement.

One point made in this case was that in any use of countermeasures, there could always be a risk of escalation. France could have cut off Pan American’s New York-Paris route and then the US could have retaliated by economic sanctions outside the air transport sector, and so on. The point here is that although the underlying reasons for the dispute were aviation related, there could have been other nonaviation factors driving the actions of the French government.

Beyond the government role in ASAs, and as alluded to above, an international airline during this era could be a reflection or parallel the foreign policy of its country.

A good example of this is Aeroflot, then the only international airline of the Soviet Union. As previously mentioned, the Soviet Union did not attend the Chicago Convention. The Soviet policy at the time was that of isolationism and civil aviation was kept at a low priority. This changed in the 1950s when the Soviet government switched to a more internationalist policy in relation to the Eastern Bloc countries, and it was reflected in Aeroflot’s opening of new routes to capitals in Eastern Europe. The 1960s also witnessed some dramatic changes after the switch from the Khrushchev regime to the Brezhnev-Kosygin regime. Here the policy changed to greater flexibility toward the Western powers, and Aeroflot began operating to countries outside the Soviet bloc and by 1967 to almost all Western European capitals. In 1968, after several years of negotiations, service was inaugurated between the US and the Soviet Union. The agreement best illustrates the concepts of political considerations in bilateral negotiations and the notion of the “Chosen Instrument”. The airlines involved were Pan American and Aeroflot.

If there was any route in Pan American's history that could be designated as a "Chosen Instrument" route, the US-USSR could be that route. Pan American was the selected airline because it was recognized as the primary US-flag carrier as manifested by the Soviet Union’s aviation officials making the initial contact directly with Juan Trippe. After reporting the contact to the US State Department and the Civil Aeronautics Board, Trippe was authorized to negotiate with the Soviets on key issues for an ASA between the two countries. However, given the political climate, it can be reasonably inferred that political considerations played a role in the formulation of the final agreement between the two countries and both Pan American and Aeroflot were instruments of those considerations, and therefore instruments of both countries' foreign policy, hence, "Chosen Instruments".

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For Pan American, a private enterprise as opposed to the state-owned Aeroflot, the operation was a money loser and the competition was not on a level playing field.

Quite simply, Pan American could not sell tickets in the Soviet Union and was at a tremendous economic disadvantage. Unfortunately, there was no provision for a subsidy to a US flag carrier operating at an economic disadvantage in an international market at the government's bidding. Pan American eventually suspended the losing operation but did so when US-Soviet relations were souring.

PA 707 Arrival at Moscow 16 July 1968 (Source Unknown)

One of PA negotiators George Hambleton (Courtesy of George Hambleton)

It was not until relations began to improve between the two countries in the mid to late 1980s did the service resume, in 1986, later crowned with the 747 non-stop services in 1988.

From the late 1960s through the early 1970s, Aeroflot grew rapidly and by 1973, had set a record for route expansion, operating under sixty-five bilateral agreements with other countries.

These changes from isolation to a worldwide presence could be considered a reflection of the Soviet Union’s SU IL-62 (Ralf Manteufel) foreign policy at the time, or it could have been viewed as a challenge to the US superiority in air transport.

Whatever the case, the Soviet policy of dĂŠtente was based on political and economic weakness. There were three basic reasons for this: (1) the Sino-Soviet Conflict, in which China had survived the Cultural Revolution and gained strength in the international arena; (2) the avoidance of Western European unity, which could be a 82

strategic threat and a threat in itself to Eastern Europe and the Soviet control of Eastern Europe; and (3) the weakened Soviet economy, which had found the Soviets lagging behind the US, especially in consumer goods. The policy was designed to effect technological cooperation with the West, avoid a political struggle on two fronts (China at one end, the West at the other) and increase political influence in Europe.

In 1973, Aeroflot concluded a Trans-Siberian route exchange (connecting Europe and Japan through Moscow, thereby saving time and mileage) with Japan Airlines, British Airways, Lufthansa and Air France.

The Trans-Siberian route was considered important because it impacted the bargaining power of both the US, where travel between Japan and Europe was through Anchorage, Alaska, and the Middle East, which had bargaining power with Fifth Freedom rights. By granting this route to Japan Airlines and the European airlines, the Soviet Union effectively diminished the US and Middle East bargaining power in this market.

In addition, this Soviet move made possible increased influence in both Japan and SU IL-62 (Source) Western Europe.

SU/JL IL-62 (Malcolm Nason)

Whether the Soviet activities at the time were a threat to US leadership is questionable. First, the Soviet aircraft were well behind those of the US technologically and were more expensive to operate; secondly, the airline service offered was not consumer-oriented and was reputed to be deplorable; and third, Aeroflot was then not a member of IATA. However, the view at the time was that the rapid Soviet growth was a bid to engage in a contest for national prestige and political influence, by using aviation as a means to an end.

One other event during this era, which occurred on board the fishing boat Wild Goose in the Puget Sound, would set in motion a series of events that would rock the very foundation of the industry: As legend has it, Pan American’s Juan Trippe asked, “Would you build it if I bought it?” to which Bill Allen of Boeing responded, “Would you buy it if I built it?”

What was it?

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The Boeing 747

Bill Allen (left) and Juan Trippe (PAHF)

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PART FIVE DEREGULATION AND OPEN SKIES The Road to Deregulation In the United States, during the decades after World War II, the airline industry experienced a veritable explosion of technological advances, growth and service improvement. And in 1969, there emerged one aircraft that could be credited for setting in motion moves to dramatically change the economic structure and rock the foundation of the industry. That aircraft would be the Boeing 747. With its introduction, capacity tripled on the routes on which it operated. Originally deployed on Pan American’s principal international routes, it was soon seen on the routes of the major US domestic airlines (the “Trunk” carriers) and on key international routes of foreign-flag carriers. Soon thereafter, the McDonnell Douglas DC-10 and Lockheed L-1011 wide-body aircraft were pressed into service. This increase of capacity created a need to “fill the seats” both Boeing 747 Roll-Out (Public Domain) domestically and internationally. On the domestic side, it was increasingly obvious that the CAB’s regulatory functions were seriously challenged due to the expanding scale of aviation markets. Pricing policies were viewed as insufficient, resulting in high costs for the passenger. The focus began shifting toward the consumer.

PA 747 and 707 Roll-out (panam-world.org)

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PA Timetable and map (Author's Collection); PA 747s at Boeing (David D. Hill)

However, adversity struck when this new capacity coincided with a serious economic recession in 1970. What resulted was widely criticized CAB regulatory policies, including a four-year moratorium on all new route cases and approval of a series of agreements among airlines to limit capacity over certain major routes. On top of that, the CAB pricing policies were increasingly viewed as fostering inefficiency, higher costs and higher prices. It was pointed out that the intrastate airlines in California (Pacific Southwest Airlines (OH)) and Texas (Southwest (WN)), free from CAB regulation, were charging lower per-mile fares than those CAB regulated airlines and were operating profitably.

OH (PSA) Boeing 727 (Ted Quackenbush); WN Boeing 737 (Eduard Marmet)

This situation was exacerbated in 1973 with the Arab oil embargo and the ensuing massive increase in oil costs. This prompted a series of fare increases, but 86

with cost increases exceeding increases in yields, another period of poor airline earnings followed.

In this atmosphere, two reports were released: The first, from within the CAB, concluded that protective entry and exit control and public utility-type price regulation were not justified by the underlying costs and demand characteristics of commercial air transportation and that they should be eliminated by statutory amendment.

UA DC-10 (left); Continental DC-10 (Both Jon Proctor)

The second report, from the Subcommittee on Administrative Practice and Procedure of the US Senate Judiciary Committee, headed by Senator Edward Kennedy, suggested that prices should and would be lower with a more competitive system and that the CAB had not been effective in maintaining low prices. The report further stated that it was economically and technically possible to provide air service at significantly lower prices, bringing air travel within reach of the average American citizen.

This sudden growth of anti-regulation sentiment resulted in the introduction of the first deregulation bills. This started the legislation that culminated in the Airline Deregulation Act of 1978.

Eastern Air Lines DC-9 (left) and 727 (Both Jon Proctor)

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However, even before the Act’s passage, the CAB began its own steps toward deregulation, when Chairman John Robson, who took office in 1975, began relaxing the scheduled service route moratorium. Also, the airlines were given greater flexibility to reduce fares. With the appointment of Alfred Kahn as Chairman by President Jimmy Carter in 1977, the policies of relaxation escalated. Applications for new authority were processed and approved, in particular those applications that promised lower fares. At the same time, the Carter Administration was seeking agreements with foreign governments to permit Alfred Kahn (CC License) more international competition and stood ready to authorize as much international service by US airlines as foreign governments would accept. There was also far greater receptivity to fare reductions.

TWA Timetable pages (Author's Collection); TW L-1011 (top) and 747 (Jon Proctor)

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To kick it off, American Airlines introduced the Advance Purchase Excursion fare (APEX), called the “Supersaver”, which offered deep discounts on regular coach fares with restrictions.

AA DC-10 and 747 (left) (Lone Pine Jim); Lockheed Electra (Jon Proctor)

The move to deregulation had begun, however, with reservations. There was opposition from most airlines, as well as labor unions and financial institutions with investment in the industry. The arguments in opposition covered a broad range of concerns: •

Deterioration of the industry’s excellent safety record;

•

Probable concentration of service in high density markets with a consequent deterioration of service in others, and in particular, those serving small communities;

•

Impairment of the air transportation “system”, with its conveniences of through baggage handling, interline ticketing, etc.;

•

Destructive and predatory price competition, resulting in earnings deterioration and, ultimately, industry concentration;

•

Reduced ability to re-equip and to finance other available technological advances; and

•

Adverse impact on airline employees.

These arguments failed to halt the move to deregulation, and in fact, in 1977, with little or no fanfare, the domestic all-cargo service was deregulated. It simply provided that any airline operating under authority or exemption that had provided any scheduled domestic all-cargo service could apply for any or all domestic all-cargo routes and the CAB would grant the application unless the applicant was found not “fit, willing and able” to provide such service.

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The Airline Deregulation Act of 1978 On 6 February 1978, Senator Howard Cannon of Nevada introduced Senate Bill S. 2493. The bill passed both the Senate and the House of Representatives and was signed into law by President Jimmy Carter on 24 October 1978. It became known as the Airline Deregulation Act of 1978 (ADA).

The Act dealt primarily with US domestic air transportation, recognizing that no one government could by itself deregulate international service.

The theme of the Act was that maximum reliance on competition would bring about the objectives of efficiency, innovation, low prices and price/service options while still President Carter signing the ADA into Law (Public Domain) providing the needed air transportation system. At the same time, the Act recognized the needs of the small communities and isolated areas in the US and provided for direct federal assistance through the “Essential Air Service” provision. Restrictions on domestic service entry were gradually lifted and the standard for granting route applications was changed from the pre-existing requirement that the proposed transportation was “required by the public convenience and necessity” to a finding that it was “consistent with public convenience and necessity”. In addition, it was the burden of opponents to prove lack of such consistency. The CAB, however, was still required to determine that the applicant was “fit, willing and able” to provide the service. By the end of 1981, for all intents and purposes, all airlines (and would-be airlines) were free to serve, or cease serving, any and all domestic routes and cities. This led to a flurry of start-up airlines, with few successes but many failures.

Midway Airlines 737 (Torsten Maiwald); New York Air DC-9 (Eduard Marmet)

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People Express 747 (Eduard Marmet)

In the area of pricing, pending complete deregulation at the end of 1982, the “standard industry fare levels” were retained and the CAB consideration in exercising its rate regulation functions was amended to give more weight to the desirability of low fares and increased pricing and service options. In the area of antitrust, certain types of inter-airline agreements, actions and relationships were removed from CAB jurisdiction and thus left to general antitrust laws. In addition, the automatic “antitrust immunity” for any CAB approved agreement or transaction was repealed. Other provisions included the ending of the Mutual Aid Pact (an agreement between airlines to provide economic assistance to any airline against whom a labor strike was called) and provisions for the protection of employees adversely affected by the Act. The Act (along with the Warsaw/Montreal Convention with regard to international flights) also had the effect of preempting state law with regard to claims against airlines for delays, discrimination, consumer protection violations and other allegations of passenger mistreatment. Safety and technical matters remained with the FAA. The most important of the Act’s provisions, however, was the “sunset” of the CAB. On 1 January 1985, the CAB closed its doors and what remaining functions it had were transferred to the Department of Transportation. These included international routes, certification of new carriers, consumer protection and jurisdiction over airline mergers and agreements.

A major product of deregulation was the development – and perfection – of the “Hub-and-Spoke” route system. This transformed the domestic airline system from a linear route system and resulted in greater efficiencies by feeding traffic to and from strategically located hubs. A byproduct was the emergence of the fortress hub, where an airline established such dominance that entry by new competitors was compromised. The airlines that survived the early years of deregulation were those that were successful in establishing viable hubs.

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Below is a post-deregulation route map of United Airlines with its several hubs.

Compare to its route maps during the regulated era on page 59.

UA Domestic routes (Author's Collection)

Another important result of deregulation was the birth of the Low-Cost Carrier (LCC) in the form of Southwest Airlines (WN), a former intrastate carrier based in Texas. This new business model took the industry by storm, offering extremely low fares in a point-to-point operation, which maximized flying time and minimized ground turnaround time. There were no interline agreements with other carriers, and tickets were purchased from machines. Plastic boarding passes were used instead of paper, allowing reuse. Finally, no meals were offered, just Peanuts. This was a major feature of Southwest’s advertising campaign: “Peanuts Fares”. In addition, rather than compete with the scheduled carriers, Southwest stimulated their markets by attracting passengers from other forms of transportation.

WN 737 (Eddie Maloney)

WN Timetable (Author's Collection)

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Increasing Competition in International Air Transportation As previously noted, it was beyond the power of any one government to deregulate international air transportation. Therefore, the policy of the US government was focused on increased competition.

As background, as far back as the early 1960s, the US had a decided advantage over the European (and other) airlines. Although these airlines were able to catch up at one point, it was hardly at the expense of the US airlines. The lack of capacity controls, coupled with the introduction of bigger and better aircraft, forced a downward pressure on fares to fill these aircraft. However, in the spring of 1963, IATA, backed by the European governments, increased fares when the CAB thought fares should remain stable. IATA stood by its position and won the fight, but at a heavy cost.

The CAB’s response was to boost the supplemental carriers, the “non-skeds”, giving them permanent certificates so that they could purchase jet aircraft. The CAB also authorized split charters and inclusive-tour charters, enabling vacation travel to the public at bargain prices. Because of this, the scheduled airlines’ traffic in international markets declined although the overall market share stayed high as the supplemental carriers were predominantly US. The Europeans initially resisted the supplemental airlines because they were not provided for in the post-war ASAs. But because the Europeans were not united, only those countries that could count on a separate and distinct market, such as Israel, were able to avoid the charter problem. Travel to Europe, at least in the tourist market, was not necessarily point-to-point. Rather it was more regional. It did not matter what the port of entry was. Depending on the fare, a tourist could arrive in Amsterdam, travel around the continent, and leave from Paris.

The response of the scheduled airlines in the late 1960s and early 1970s was to develop a schedule of fares that were so complicated, hardly anyone could keep up. Excursion fares, inclusive tour fares, advance purchase fares, off-peak fares and others were all introduced. In a sense, this was the beginning of price competition in international aviation. However, under IATA rules, it was not possible for any single carrier or group of carriers to experiment with a promotional fare to see if it would create new traffic. Thus, if one carrier could offer a special fare, all could, and unless all would do it, none could. And, by the time IATA was ready to invite the supplemental carriers to join, both Pan American and TWA had started charter services in the North Atlantic.

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PA 707 cabin (Author's Collection); PA and TW 707s (Author)

For the scheduled airlines, load factors continued to fall with a resultant loss of profits. The introduction of the wide-body aircraft increased capacity but did not produce the traffic increases that were predicted. And in the face of this, no one airline was prepared to curtail or reduce services for fear that its competitors would capture a greater share of the traffic. The CAB did approve capacity-restraint agreements, whereby Pan American would give up its Paris authority in exchange for TWA giving up its Frankfurt authority. This was done with the express hope that the over-capacity would come to pass. The prevailing view in Washington was to adhere to the Bermuda Agreement with no predetermination or no interference by governments in matters of capacity.

In 1974, Pan American lost $80 million, its sixth straight year of massive financial setbacks. Meanwhile, fares that had gone down during the 1960s and 70s began to rise, and in 1974, up to 30% on some routes. The foreign-flag carriers also felt the pinch and like Pan American and TWA, began a retreat from some of their hard-earned routes to the US, particularly to the west coast. It was during this time the non-communist world felt the effects of inflation and recession, fuel shortages, price increases and unemployment all impacting in the worst way, discretionary travel.

In this setting, in 1975, President Ford called for a study on the possibility of regulatory reform in international aviation. And while this study was being conducted, in mid-1976, the British announced their intent to terminate the Bermuda Agreement.

The British were strongly committed to the protection of its own airlines (particularly government-owned British Airways) and believed the agreement was inadequate to prevent operation of excess capacity and that the agreement was also unbalanced in favor of the US airlines. In particular, the British wished to reduce the authority of US airlines to carry Fifth Freedom traffic. There were other issues, including the manner in which the CAB exercised authority over rates, and, although not made explicit, a high degree of British irritation at US public resistance to the introduction of supersonic Concorde service.

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Negotiations on a new agreement were difficult and were exacerbated by a change in presidential administrations (from Ford to Carter) halfway through the 12month negotiating period. The British held firm and it was not until the last moment when a new, more restrictive agreement was achieved, signed on 23 July 1977 and referred to as Bermuda II. Among other things, it limited the number of scheduled carriers operating at London Heathrow Airport to two from each side, enabled greater government control over capacity, required government review of proposed fares and routes after review by IATA, required government approval on pricing, reduced Fifth Freedom rights to US carriers, granted additional US gateways, allowed new carriers to operate at London’s Gatwick Airport and permitted Laker Airways to enter the North Atlantic market.

Laker Airways DC-10 (Steve Fitzgerald)

In 1978, as domestic deregulation was progressing, the administration of President Jimmy Carter began examination of the Bermuda II agreement with Great Britain. The finding was that it was overly protectionist and gave an unfair advantage to the British carriers. Encouraged by the CAB’s deregulation of the domestic airline industry and the success of Laker’s “Skytrain”, the Carter administration began to push a policy of free-market competition in the international arena. In a policy statement issued in 1978, the administration pledged to work to achieve a system of international air transportation that places its principal reliance on actual and potential competition to determine the variety, quality and price of air service. The statement also stated that the means for carrying out its policy will be by allowing greater competitive opportunities for US and foreign airlines and by promoting new low-cost transportation options for travelers and shippers.

PA and TW aircraft parked at London Heathrow (Author)

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VS 747 (Steve Fitzgerald)

BA 747 (Eduard Marmet)

As a result of this, the US government began considering a way to seek more liberal, pro-competitive agreements with other governments.

These included: •

Unrestricted entry by an unlimited number of carriers;

•

Unlimited authority to carry Fifth Freedom traffic;

•

No government constraints on capacity;

•

Carrier freedom on pricing, unless both governments disapproved; and

•

Foreign government acceptance of US charter regulations.

The US government saw these agreements as a means to put pressure on “recalcitrant” governments in the same general geographic area through an “encirclement” theory. Thus, the United Kingdom would be pressured by expansion of

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air service to and via Belgium and The Netherlands, and Japan would be pressured by a similar agreement with South Korea.

It should be noted that the ability to achieve these agreements was by giving greater access to US cities and the resultant economic benefit derived therefrom.

Swissair DC-8 (Jon Proctor)

Sabena A310 (Michael Gilliland)

International Air Transportation Act of 1979 Although there was opposition to this policy, liberal bilateral agreements were achieved with several countries, and in 1980, the International Air Transportation Act of 1979 was enacted by Congress. Although the Act was an international counterpart to the domestic Airline Deregulation Act, it did implement US policy on international aviation.

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Major provisions included: •

Strengthen the competitive position of US carriers to at least ensure equality with foreign carriers;

•

Freedom to offer consumer-oriented fares and rates;

•

Eliminate marketing and operational restrictions, including capacity, routes and operating rights for scheduled carriers;

•

Eliminate discrimination and unfair marketing practices;

•

Provide additional US gateways to foreign carriers; and

•

Designation of additional US carriers in international markets.

In the early 1980s, a recession, rising oil prices and an air traffic controllers strike disrupted the domestic market and the airline industry fell into a period of financial losses. In addition was the first “casualty” of deregulation, the bankruptcy and shut down of Braniff Airways. As a result, the pursuit of a pro-competitive international policy came to a temporary end, but there continued a view that this policy would prevail over time.

The mid-1980s saw an economic turnaround and the US carriers began to experience a recovery, particularly in the international markets. It was also becoming evident that greater growth was being realized in the liberal markets, those with a liberal ASA, than the more restricted markets. Although the liberal markets were not large, trading open access in a foreign country for expanded access to the US appeared to benefit the traveling public. As the economy strengthened into the late 1980s, the US looked to aggressively pursue liberal ASAs, and eventually implemented a policy of negotiating “Open Skies” agreements with foreign governments.

In effect, deregulation took the political sphere out of the airline industry and replaced it with a liberalized economic and market sphere. The economic liberalization of air travel was part of a series of “deregulation” moves based on the growing realization that a politically controlled economy served no continuing public interest.

This also put to an end the notion that airlines were an extension of national policy.

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SAS DC-10 (Jon Proctor); Timetable and map (Author's Collection)

AY DC-10 (top) and AZ 747 (Jon Proctor)

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BA 747 (Author)

BA Concorde (Eduard Marmet)

BA Timetable pages (Author’s Collection)

Timetable (Author’s Collection); EI 737 (Ardfern)

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AF 747 (Michael Gilliland)

AF Concorde (Phillipe Noret); Timetable pages (Author's Collection)

LH DC-10 Vertical Stabilizers; and 747 (Author)

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OA 747(top left) (Eduard Marmet); OS MD-80 (top right) (Steve Fitzgerald); TP L-1011 (above left) (Felix Goetting); IB 727 (above right) (Steve Fitzgerald)

VO DC-10 (top left); VO Timetable; AR 747 (Author)

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Open Skies Agreements By 1982 the US had signed twenty-three liberal ASAs world-wide, mainly with smaller nations. In the 1990s, similar agreements were achieved with individual European states. A breakthrough, however, was achieved in 1992, when the Netherlands signed the first Open Skies agreement with the US, despite objections

by European Union authorities. The US subsequently granted antitrust immunity to a codeshare alliance between Northwest Airlines (later merged with Delta) and KLM Royal Dutch Airlines, which had started in 1989 (when Northwest and KLM agreed to codeshare on a large scale). This would be a first step toward the forming of the large airline alliances in later years.

The key provisions of Open Skies agreements include: •

Free market competition;

•

No restrictions on international route rights, number of designated airlines, capacity, frequencies, and types of aircraft;

•

Pricing determined by market forces - “double disapproval” authorized;

•

Designated carriers are free to provide their own ground-handling services;

•

User charges are non-discriminatory and based on costs;

•

Computer reservation system displays are transparent and non-discriminatory;

•

Cooperative marketing arrangements;

•

Designated airlines may enter into code-sharing or leasing arrangements, subject to usual regulations;

•

Code-sharing between airlines and surface transportation companies authorized;

•

Provisions for dispute settlement and consultation;

•

Liberal charter arrangements;

•

Each government agrees to observe high standards of aviation safety and security, and to render assistance to the other in certain circumstances; and

•

Seventh Freedom all-cargo rights.

•

However: o o

No Cabotage; and Restrictions on Ownership and Control.

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As of 9 July 2019, the United States has Open Skies agreements with 135 nations and cargo-only Open Skies agreements with Argentina and Vietnam.

Below is a map of United Airlines international routes. Compare to Pan American’s world routes on page 57. United acquired Pan American’s Pacific routes in 1985, its London Heathrow route in 1990 and the remainder of its Latin America routes when Pan American ceased operations on 4 December 1991.

UA International routes (Author’s Collection)

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PART SIX DEVELOPMENTS IN INTERNATIONAL COMMERCIAL AVIATION AFTER THE COLD WAR, LIBERALIZATION OF AIR TRANSPORTATION IN EUROPE AND MULTILATERAL AGREEMENTS The Breakup of the Soviet Union With the breakup of the Soviet Union during 1990-1991, a flock of new airline entrants emerged from the former Soviet Republics. For the most part, these were created by the breakup of Aeroflot, which gave these former republics aircraft and a basic infrastructure to establish a national carrier. Some were successful, others were not. Some remained state-owned while others were replaced by more efficient, privately-owned enterprises. Aeroflot Russian International Airlines (ARIA) was established in 1992, operating flights in and out of Russia.

In Central Asia, airlines were formed in Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan. Many of these airlines operated on “shoe-string” budgets and failed to comply with ICAO standards. These were “banned” from operating in Europe. Others left a string of debts when forced to cease operations for failure to meet financial obligations. When left to their own devices and without the support from Moscow, these airlines suffered. In addition, these airlines met competition from established European airlines who saw a ripe market for exploitation, particularly in oil-rich Kazakhstan.

One operation that proved to be successful for Central Asian carriers was Sixth Freedom. This allowed these carriers to enter the European market and take advantage of the large traffic demand in the Indian Sub-Continent markets and overcome a weak origin-and-destination (O&D) market in their home countries. An example of this type of operation involved Tajik Air, the national carrier of the Republic of Tajikistan. Operating from its home base in Dushanbe, the carrier operated Sixth Freedom flights between London and Delhi, India and Karachi, Pakistan. Using a Boeing 747SP leased from United Airlines, the carrier picked up Fourth Freedom Tajik Air 747SP (Gunilla Crawford) traffic in London bound for 106

Dushanbe for a short stop that then became Third Freedom traffic to Delhi or Karachi with a change of flight number. As the O&D traffic in the London-Dushanbe market amounted to about six passengers a rotation, the Indian and Pakistan traffic filled the seats of the Boeing. Unfortunately, this operation was short-lived, due to some poor decision making by management, but it certainly proved to be a viable way to generate traffic. This type of operation enjoyed success in Turkmenistan, Uzbekistan and Kazakhstan.

Tajik Air Inflight Magazine, Aircraft image and Timetable pages (Author's Collection)

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Liberalization of Air Transportation in Europe The foundation for European airline deregulation was the 1957 Treaty of Rome that gave the European Union (EU), then the European Community, the authority to create the framework for a common transport policy. Although the policy at the time was limited to rail, road, and inland waterway transport, it was stipulated that the Council of Europe could extend the transport policy to maritime and aviation by unanimous vote.

The passage of the Single European Act (SEA) in 1987 was instrumental for European airline deregulation. The stated goal of the SEA was to create a common market across the EU, by lifting all barriers to trade across the Member States. To this end, the SEA amended the Treaty of Rome in order to strengthen the EU's ability to direct common policies, including a common transport policy, for the EU at large.

However, the most significant change to the Treaty was the Council's decisionmaking process, which was altered from a unanimous voting system to a qualified majority voting system. This removed the veto power of individual Member States, enabling the Council to adopt more stringent regulations against the Member States and forcibly deregulate the EU internal market, including the aviation sector.

The approach toward liberalization in the EU was different from the US, which was essentially bilateral, in that the development of a single open aviation market was achieved through a comprehensive multilateral agreement among its member states.

This was driven by two complementary lines of approach. Starting during 1975, the first driver, Directorate-General for Transport, promoted liberalization through proposals through the Council of Ministers. The second driver, the DirectorateGeneral for Competition, began taking steps to eliminate anti-competitive practices by government and industry. These two objectives of air transport liberalization and fair and open competition were achieved in three stages or “packages”.

Although there was some liberalization already taking place, such as the UK/Netherlands Agreement of 1984 and other limited community-wide agreements, it was not until December of 1987 that the first important breakthrough came through with the “December 1987 Package” of measures agreed by the Council of Ministers.

This “First Package” provided for wider Third and Fourth Freedom route access; a more liberal fares regime; abandonment of the equal sharing of capacity on routes served by airlines of the two states at either end of such routes; free entry of new carriers into the market, but not yet an automatic licensing system; and more Fifth

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Freedom traffic on scheduled intra-EU air services between hubs and regional airports.

In June 1990, a “Second Package” was agreed by the Council of Ministers, further loosening constraints on pricing, capacity restrictions and market access. It also allowed multiple designations of airlines on routes above a certain traffic density and further opened up Third, Fourth and Fifth Freedom rights.

Formal EU airline liberalization occurred, however, in 1993, when the remaining barriers of aviation measures to a free aviation market were removed. It came through the “Third Package” of aviation measures approved by the European Commission, acting through the Council of Ministers. The Third Package provided for unlimited 3rd, 4th, 5th, 6th and 7th Freedom rights, and, as from 1 April 1997, also 8th and 9th (cabotage) Freedom rights, thereby creating the second-largest aviation area after the US. This liberalization coincided with the creation of the single European market, which also included the end of immigration and customs controls. Thus, for all intents and purposes, the EU became a single “domestic” market for the free movement of goods, services and people.

The Third Package also allowed cross-border majority ownership. It gave the right of EU nationals or companies from any member state to set up and operate an airline in any other EU member state. For example, British Airways owns and manages Deutsche BA in Germany. There is a restriction on this right-ofestablishment, in that while such cross-border owned airlines can operate freely within the EU, they are restricted from operating internationally due to traditional ownership and control restrictions in international bilateral ASAs. However, there are exceptions.

FR 737s (left) (Ryanair.com): U2 737 (Torsten Maiwald)

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With liberalization, the European airlines, specifically the low cost or low fare carriers, have practically unlimited freedom to choose routes, capacity, schedules and fares with minimal interference of national governments. Commercial considerations are the primary incentive for airline decisions.

W6 A320 (emerging-europe.com)

LS 737 (Aldo Bidini)

PC 737 (Alf van Beem)

DY 737 (Rene Diobo)

BT A220 (Anna Zvereva)

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The full access to the EU aviation market also gave low-cost carriers the opportunity to fully penetrate the European market, including the member states’ domestic markets. The carriers took advantage of the opportunity to establish an everincreasing number of bases throughout Europe, whereas the flag carriers remained at their national home bases largely because of nationally restricted traffic rights with regard to intercontinental routes. This also resulted in a declining number of intraEuropean routes operated by these flag carriers. The low-cost carriers also benefitted with the introduction of direct Internet booking platforms, which enabled them to gain market share quickly. In addition, these carriers did not create route density through complex hub-and-spoke operations, but by serving an extended catchment area by generating new market demand and serving routes at a lower frequency than the fullservice carriers. Thus, the growth of the low-cost carrier segment took place by means of quick expansion of the number of routes but at relatively low average frequencies.

For the established flag carriers, this period was difficult, having lived with a highly regulated market with strong government protectionism for decades. To overcome declining growth, these carriers began rationalizing their networks in response to increasing competition from the low-cost carriers. Some airline bases have been de-hubbed or have been drastically downsized. In addition, route frequencies have been stabilized, which also might have indicated a saturation of the continental market.

In sum, the quickly growing low-cost carrier segment in combination with a decline of flag full-service carrier share resulted in further growth of the intra-EU route network but also in stagnating frequency growth and declining average route frequencies.

In 2002, the European Aviation Safety Agency (EASA) was established and is the EU authority for aviation safety.

Its principal activities include strategy and safety management, the certification of aviation products and oversight of approved aviation organizations and EU member states.

Headquartered in Cologne, its staff is composed of over 700 experts and administrators from the EU Member States.

There are representative offices in Brussels, Washington, DC, Montreal and Beijing.

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EASA enjoys technical, financial and legal autonomy and ensures the highest common level of safety protection for EU citizens, the highest common level of environmental protection, avoids duplication in the regulatory and certification processes among the Member States and facilitates the creation of an internal EU aviation market.

Enforcement is left to the member states.

EASA also plays a leading role within the EU External Aviation Policy: the Agency is a strong counterpart of other aviation authorities outside the EU and a major contributor to the export of EU aviation standards worldwide, promoting the free movement of EU aviation products, professionals and services throughout the world.

ICAO and Liberalization/Open Skies ICAO historically favored liberalization but could not drive the agenda, largely because many of the member states sought to protect their flag carriers by avoiding competition. This was reinforced by the application of traditional ASAs for traffic rights.

Further, developing nations, the largest voting bloc in ICAO wanted “safeguards” that liberalization would be phased in slowly.

Before liberalization, the EU struggled with a true single market and member states were still clinging to national sovereignty, particularly over aviation. One consequence was that the EU-US Open Skies Agreement took years to negotiate.

Besides Europe, other developed countries were opposed to liberalization.

ICAO’s 2003 Air Transport Conference focused on this issue, calling it the “Challenges and Opportunities of Liberalization”. Eight hundred delegates from 145 states endorsed liberalization but with many caveats. However, by 2003, the fact was that the Open Skies “train” had already left the station. The US already had 59 Open Skies agreements in place and introduced a model Open Skies template at the conference. Liberalization in Europe was already underway, and India had initiated Open Skies for air cargo in 1990, with very favorable results.

It was clear that ICAO would not drive the agenda.

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Multilateral Liberalization of Air Transportation The US has also been involved in air transport liberalization on a multilateral basis and in 2001 signed the Multilateral Agreement on the Liberalization of International Air Transportation (MALIAT).

This involvement had its genesis in the 1990s when there was a move toward acknowledgement of the need for a regime that might move air travel beyond bilateral agreements and toward a multilateral approach. In 1995 a US Department of Transportation policy statement spoke of the possibility of such an approach, which led to the 2001 signing. Other parties to the agreement were Brunei, Chile, New Zealand, and Singapore. Since then, the Cook Islands, Mongolia (cargo only), Samoa and Tonga have joined. MALIAT was launched with much fanfare, but all its signatories were members of Asia-Pacific Economic Co-operation and already had Open Skies with each other. MALIAT remains open for others to join.

One of the keys to a successful multilateral approach is finding the common denominator and keep it from being too little. Thus, multilateral efforts seem more likely to succeed among regional groups that share common geography and views.

The European Community is the poster child of such groups, even though it is the product of economic and political integration that did not start with aviation. Multilateral aviation in Europe stems from the November 2002 European Court of Justice ruling that brought an end to third-country bilateral agreements with individual European states.

US-EU Air Transport Agreement Over the years, the US had enjoyed a powerful negotiating position vis-Ă -vis Europe. However, with the liberalization of European air transportation and the emergence of the single European market, it became clear that the bilateral ASAs between the US and the individual Member States, albeit for the most part Open Skies, were becoming obsolete. In addition, there was the highly restrictive Bermuda II agreement between the US and the United Kingdom. This led to negotiations between the European Commission and the US government on a community ASA. These negotiations led to the text of an agreement being initialed on 2 March 2007 and later signed as the First Stage of a comprehensive agreement on 30 April 2007. It was provisionally applied from 30 March 2008 for all EU Member States and Amended by a Protocol, signed as the Second Stage and provisionally applied on 24 June 2010.

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Norway’s and Iceland’s accession to the ASA as amended by Protocol is provisionally applied from 21 June 2011.

This agreement is the US-EU Open Skies Agreement, which is one of the most significant Open Skies agreements concluded in recent years, applying to civil aviation traffic between two of the world's three largest markets, the US and the EU (the third market, Asia, will be discussed below). The agreement authorizes every US carrier and every EU carrier to:

• • • • •

• • •

Fly between every city in the EU and every city in the US; Operate without restriction on the number of flights, aircraft, and routes; Set fares according to market demand; Enter into cooperative arrangements, including codesharing, franchising, and leasing; The Agreement fosters enhanced regulatory cooperation in areas as diverse as competition law, government subsidies, the environment, consumer protection, and security; The Agreement establishes a consultative Joint Committee through which the US and the EU can resolve questions and further develop areas of cooperation; Eliminated restrictions at London Heathrow.

Restrictions: o No cabotage; o Ownership and control.

Under the agreement, London Heathrow Airport was opened to full competition and ended the restrictions in Bermuda II limiting the authority to fly transatlantic services out of Heathrow to two US airlines and two UK airlines.

Third-country carriers with UA 777 (Author) incumbent Fifth Freedom rights to carry passengers between London Heathrow and the US continued under the agreement.

These rights are exercised by Air New Zealand (between Los Angeles-London Heathrow), Air India (between New York-London Heathrow), and Kuwait Airways (also between New York and London Heathrow). El Al also has such rights but has chosen not to use them, and Iran Air technically has similar rights but is prohibited from flying to the US due to US government economic sanctions against Iran.

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While the ultimate objective of the EU was to create a Transatlantic Open Aviation Area encompassing a single air transport market between the EU and the US, with free flows of investment and no restrictions on air services, including access to the domestic markets of both, this agreement does represent important steps towards some sort of normalization of the international aviation industry in the US and EU markets.

BA 777 (Author)

Other regional groups have taken more modest steps. These include the Andean Pact (Open Skies among Colombia, Ecuador, Peru, and Bolivia), Mercosur's Fortaleza accord (Open Skies among secondary cities in Argentina, Bolivia, Brazil, Chile, Paraguay and Uruguay), the Yamoussukro Decision in Africa, the Single Aviation Market (reciprocal cabotage between Australia and New Zealand), and Southeast Asia's Open Skies agreement amongst members of the Association of Southeast Asian Nations (ASEAN).

The ASEAN Single Aviation Market (ASEAN-SAM) The ASEAN Single Aviation Market (ASEAN-SAM) aims to develop a unified aviation market among the nations that make up the ASEAN membership, which includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar (Burma), the Philippines, Singapore, Thailand, and Vietnam. This involves the liberalization of flight restrictions on carriers, allowing airlines from the 10 member states to fly freely from their home country to any city within the association.

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The ASEAN-SAM was initiated by the Multilateral Agreement on Air Services, along with the Multilateral Agreement on the Full Liberalization of Air Freight Services and the Multilateral Agreement on the Full Liberalization of Air Passenger Services that were simultaneously approved on 20 May 2009 in Manila, Philippines. These multilateral agreements, which took effect 1 January 2010, called for calibrated and gradual implementation in each contracting state, allowing countries with a less developed airline industry to maintain pace with more developed ones.

This was part of the broader ASEAN Air Transport Integration and Liberalization Plan to be implemented by 2015 espousing an Open Skies regime.

Full implementation of the Open Skies policy, however, has been delayed because three of the association’s 10 member nations have not yet ratified the arrangement. Plans had called for Open Skies to be implemented by the end of 2015, but Indonesia, Laos and the Philippines have yet to approve the scheme. So far, Indonesia has removed restrictions on carriers only at Jakarta, the country’s capital.

Laos has yet to free up Luang Prabang and the national capital Vientiane. And the Philippines is yet to remove restrictions at Manila, its capital. Indonesia and the Philippines are the largest nations, by population, in ASEAN. Open Skies is a key component of the ASEAN Economic Community (AEC), which came into effect on 1 January 2016. The AEC is intended to transform ASEAN into a region characterized by the free movement of goods, services, labor and investment capital, thus providing a boost to economic growth. Open Skies is critical to the long-term economic development of the region because it removes restrictions on the ability of airlines to operate from one ASEAN country to another. It will also result in increased competition among airlines in the region, thus providing passengers and air cargo customers with a wider range of transport options and lower prices.

Flight frequencies will increase, and connectivity between the region’s aviation markets will be enhanced. This will provide a boost to tourism as well as better economic integration among the ASEAN nations.

ASEAN and the European Union have been discussing a bloc-to-bloc Open Skies agreement, which would be the world’s first-ever such agreement. However, ASEAN’s own Open Skies arrangement will likely have to achieve full implementation before an ASEAN-EU deal can come into effect.

Important as it is, ASEAN Open Skies may ultimately prove to be just the initial step in the effort to develop the full potential of the region’s air travel market. Future actions could involve the further removal of operating restrictions on carriers, changes

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in airline ownership policies, the formation of a region-wide regulatory agency (similar to EASA), and establishment of an integrated air traffic management system.

Although Indonesia, Laos and the Philippine’s actions could be viewed as a setback, the view is that ASEAN is moving in the right direction. Third and Fourth Freedom between the capital cities (except possibly Manila) are now in effect. It also should be noted that ASEAN is quite diverse, and given the diversity, it has moved as fast as it can. In addition, because of this diversity, ASEAN does not have the supporting features of an economic union such as the EU nor the level of sophisticated development of the US. Further, ASEAN lacks authority to negotiate as a block or bind its members.

However, even if ASEAN cannot bind its members, it is still the only regional group besides the EU to look outward. The rest focus solely on-air rights among themselves. ASEAN is no longer just a Southeast Asian organization. The rest of Asia realizes the value of engaging with ASEAN as a group.

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PART SEVEN POST COLD WAR AVIATION – TO THE 21ST CENTURY US Aviation The decade of the 1990s saw the final demise of Pan American World Airways.

The once-powerful airline, an icon to millions of travelers for decades, ceased operations on 4 December 1991. The airline struggled financially during the last quarter of the 20th Century, a victim of poor management decisions, terrorist acts, culminating with the bombing of Pan Am flight 103 over Lockerbie, Scotland, and the drop in transatlantic air travel as a result of the First Gulf War in 1990-1991. In order to stay afloat, the airline sold almost all of its valuable assets including much of its international network, starting with its Pacific routes in 1985 and its London Heathrow routes in 1990 to United, its Internal German Service routes to Lufthansa in 1990 and its remaining European routes, Frankfurt hub and Shuttle to Delta in 1991. In addition, the Pan Am Building in New York and the InterContinental Hotel brand were sold to raise cash. After the airline shut down, its remaining routes in Latin America went to United.

Pan Am Timetable covers and maps (Author's Collection)

Clipper Juan T Trippe leaving New York Kennedy Airport for the last time (via Russ Annabel)

Besides Pan American, among the better-known airlines, the end of the 20th Century also saw the demise of Braniff, Eastern Air Lines and Trans World Airlines.

Eastern ceased operations and TWA was acquired by American.

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The first years of the 21st Century witnessed a tragic terrorist attack on the World Trade Center in New York City (9/11/2001) that resulted in significantly tightened security procedures at US airports as well as airports around the world. Later was the consolidation of the network carriers with three mergers, resulting in three major domestic/international network carriers. United merged with Continental; American merged with US Airways and Delta, who had previously acquired Western, merged with Northwest.

UA A320, 757, 777 and 787 (Author)

AA Airbuses at Phoenix (top left) (Quintin Soloviev); AA A321 (top right) (Eric Salard); DL A350 (above left) (A. Doumelenjou via news.delta.com); DL 767 (Arcturus)

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This period also witnessed the continued growth of strong LCCs, led by Southwest (WN), Jet Blue (W8) and Alaska Airways (AS) (who acquired a successful Virgin America).

WN 737s (top left) (Bill Poturica); B8 A320 (top right) (Quintin Soloviev); VX A320 (Johnnyw3); AS A320 (Air Colbert)

This was followed by a variation of the LCC, known as the “Ultra Low-Cost Carrier” (ULCC). The service offered entails the sale of a seat for transportation.

Passengers paying for the lowest-priced ticket are only entitled to a seat and generally one carry-on bag. In some cases, the bag must be placed underneath the seat in front of the passenger and not in the overhead. Seat selection is not available, and no food is provided. These passengers generally are the last to board. Passengers desiring these “extra” services can purchase them while making the initial booking. Allegiant (G4), Frontier (F9) and Spirit (NK) are the three main carriers providing this type of service.

To compete with these airlines, the three network carriers, American, Delta and United, are offering a “Basic” economy fare with similar restrictions. In addition, passengers using this fare do not earn frequent flier miles.

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NK DC-9 (top) (Anthony92931) and G4 MD-83 (Eddie Maloney)

As the network carriers grew and developed their hubs, they engaged the services of what are known as regional airlines, who enter into contracts with the network airlines to provide feeder services operating under the brand of the mainline carrier. These airlines operate regional aircraft manufactured by the likes of Embraer in Brazil and Bombardier in Canada. Included are Horizon (QX), Republic (YX), PSA (OH), SkyWest (OO), American Eagle (AA), Mesa (YV) and Compass (CP). The fleet size can number 300-800 aircraft.

(Top to Bottom) American Eagle Embraer 175 (Ken Iwelumo); Delta Connection Embraer 175 (Author)

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European Aviation In the United Kingdom, British Airways (BA) privatized in 1987 and later merged with British Caledonian Airways. After several attempts, a codeshare agreement was approved between BA and American Airlines that paved the way for the Oneworld Alliance in 2010.

Virgin Atlantic Airways (VS) was formed in 1984 and in 2012 entered into a joint venture agreement with Delta. VS, however, has opted not to ally itself with any of the three alliances.

UK charter companies, who formerly operated non-scheduled holiday charter flights are now scheduled leisure airlines, focusing on the sale of package tours for holidaymakers.

What could be considered the first low-cost carrier in Europe, easyJet (U2) was founded in March 1995 and began operations at London’s Luton Airport.

BA 747 and VS 787 (Author); U2 A320 (Markus Eigenheer); Timetable covers (Author's Collection)

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In France, Air France (AF) became a founding member of the Sky Team Alliance and on 5 May 2004, merged with KLM forming a Franco-Dutch holding company, Air France-KLM. The French government's share of Air France was reduced from 54.4% (of the former Air France) to 44% (of the combined airline) and was subsequently reduced to 17.6% The company attempted to take over alliance partner Alitalia in 2007 but this was abandoned in 2008. In 2009 Air France-KLM bought a 25% share of Compagnia Aerea Italiana (CAI) who had acquired the Alitalia brand, but that joint venture was terminated when Etihad acquired 49% of CAI. With the growth of the low-cost model in Europe, several new airlines have formed to compete in that market. In addition, an all-business-class airline, La Compagnie (B0) was founded as Dreamjet in 2013. It currently operates between Paris Orly Airport and Newark in the US using a Boeing 757 and an Airbus A321 neo.

AF 777 (top) (Mathieu Marquer); AF 787 (Anna Zvereva); B0 A321 (bottom) (Adam Moreira)

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In Germany, with the fall of the Berlin Wall, Lufthansa (LH), part of Deutsche Lufthansa AG, resumed services to Berlin in 1990 after acquiring Pan American’s authority in those markets and has grown to be one of the largest airlines in the world and the largest in Europe. A founding member of the Star Alliance, the airline was privatized in 1990.

The airline owns several subsidiaries, including Austrian Airlines (OS), Swiss International Air Lines (LX), Brussels Airlines (SN), and the low-cost carrier Eurowings (EW). Deutsche Lufthansa AG also owns several aviation-related companies, including Lufthansa Technik and LSG Sky Chefs.

LH 747 (top) (Jon Proctor); LH A380 and 747 (Kiefer); LX A330s (Author)

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In the Netherlands, KLM (KL) acquired 25% of Kenya Airways in 1996, and the following year signed a historic codeshare agreement with Northwest Airlines followed by a similar agreement with Alitalia in 1998. In 2019, the airline celebrated 100-years of operations and identified itself as the oldest continuously operating airline still in existence.

As described above, KLM merged with Air France to form the Air France-KLM Group. The carrier is a member of the SkyTeam Alliance. KLM wholly owns and operates several subsidiaries, including Transavia (HV), a low-cost airline, and KLM Cityhopper (WA), a regional airline.

KL 777 (top) (Arjun Sarup); WA E-175 (bottom) (Juke Schweizer)

In Italy, the flag carrier Alitalia (AZ) was hit hard by deregulation and experienced some serious losses. An attempted merger with Air France-KLM was abandoned in 2008, and later that year, Alitalia went bankrupt. Compagnia Aerea Italiana (CAI) bought the Alitalia brand and operations were recommenced in January 2009 as Alitalia-CAI. CAI later sold 25% of company shares to Air France-KLM, but that relationship was terminated when Etihad of Abu Dhabi acquired 49% of CAI and formed Alitalia-SAI, taking over operations from CAI. 125

In 2017 Alitalia began the process of filing for bankruptcy with the appointment of an administrator, however, the government opted not to nationalize the airline, thus putting it on the auction block. Etihad also ceased its investment in the airline. This sparked some interest with Ryanair in purchasing the airline, but later dropped its bid.

In 2018, Delta Air Lines, easyJet and the Italian railway company Ferrovie dello Stato Italiane formally expressed interest in acquiring Alitalia, and talks began among the parties in February 2019. However, in March, easyJet withdrew. In July, Alitalia was made a state-owned company with Delta holding 10%, Ferrovie dello Stato Italiane 35% and the Ministry of Economy 15%. Investors are being sought for the remaining 40% stake. As of May 2020, the government has taken over the airline and is downsizing its operations.

Alitalia is a member of the SkyTeam Alliance.

In February 2018, privately-owned Air Italy (IG) was formed and commenced operations on 1 March the same year only to cease operations and enter liquidation in February 2020. The company was a subsidiary of AQA Holding, owned by Alisarda (51%) and Qatar Airways (49%), and operated a fleet of Boeing 737 and Airbus A330 aircraft to European and intercontinental destinations from its main hub at Milan Malpensa Airport. When operating, the company grew to become the second largest airline in Italy and the 38th largest in Europe. A perceived lack of direction in the management of the company coupled with a changing competitive environment and difficult market conditions led to the airline’s demise.

AZ A330 (top)(Eric Salard); IG A330 (bottom)(Adam Moreira)

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Russian Aviation In Russia during the 1990s, Aeroflot (SU) continued its focus on operations to international destinations, however, by the end of the decade, the company began to expand its operations in the domestic market, which had been largely supported by a number of regional airlines that had broken off from the original Aeroflot. Along these lines, Aeroflot rebranded itself as Aeroflot – Russian Airlines from the previous Aeroflot – Russian International Airlines. In 1994 the airline was registered as a joint-stock company and the government sold off 49% of its stake to Aeroflot employees.

Over the past few years, several regional airlines have been consolidated and brought under the Aeroflot umbrella, and the airline is currently in the process of populating its fleet with Western-built aircraft, with a mixture of Airbus and Boeing models.

Aeroflot joined the SkyTeam Alliance in 2006 and was the first airline from the former Soviet Union to do so. Aeroflot is now 51% owned by the government.

SU IL-86 (top)(Aldo Bidini); Sukhoi 100 (Dmitry Zherdin; 777 (Sergey Kustov)

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The Gulf Middle East Up through the mid-1990s, air transportation in the Gulf Middle East, comprising the Gulf Cooperation Council (GCC) states of Kuwait, Saudi Arabia, Qatar, Bahrain, the United Arab Emirates (UAE) and Oman, was dominated by Gulf Air (GF), owned by the States of Bahrain, Abu Dhabi, Qatar and Oman. Kuwait Airways (KU) and Saudi Arabian Airlines (SV) also operated international flights, but none in the GCC. The airports of Bahrain and Dubai were important waypoints for flights between the Far East/Australia and Europe and provided for crew changes and GF 767 (Frank Shafer) embarkation/debarkation of 5th Freedom traffic.

In 1986 the UAE and Germany agreed to a liberal ASA providing for multiple designations, a lifting of limits on frequencies and capacity, freedom on aircraft type and scheduling, and unlimited Fifth Freedom rights. The only limitation was the number of German points that could be served by UAE carriers.

GF L-1011 (Author)

In 1998, Britain and the UAE also agreed to a liberal ASA, replacing a restrictive bilateral. This was a result of a policy decision in Britain to liberalize its bilateral arrangements. The new agreement removed all restrictions on flight frequencies, capacity and fares, and Fifth Freedom rights were available to other Gulf points and Saudi Arabia, but not between Britain and North America (where competition was substantially more aggressive) nor from the UAE eastwards. In 1985, Emirates Airline (EK) began operations with a WET-leased Boeing 727 and by 1998 was well into accelerating its expansion.

The major impact of liberalizing the two ASAs resulted in the expansion of Emirates and the development of Dubai as a hub for traffic between Europe on one hand and the Far East and Australasia on the other. In addition, the rise of

EK 727-200 (emirates.com)

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Dubai as a financial, trading and tourist center was an important factor that sustained the rapid growth of Emirates as a 6th Freedom operator, later joined by Qatar Airways (QR) operating from Doha and Etihad (EY) from Abu Dhabi.

EK A380 (top) and 777; EK Timetable pages (Author); QR A350 (Gerard ven der Schaaf); GF A320 (Konstantin Von Wedelstaedt); EY 777 (Paul Spijkers)

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Asian Aviation In China, the CAAC was split so that it would continue to exist as an administrative body, but no longer have control over direct airline operations. Its airline component was split into multiple separate carriers based on the existing administrative regions. Additionally, other government departments, local authorities and businesses were able to start their own airlines, and airports were gradually transferred to local authorities.

In 1984 prior to CAAC's breakup, trials with the Xiamen special economic zone had already created Xiamen Airlines and in 1985 China Xinjiang was created as a 50:50 joint venture with the regional government of the Xinjiang Province. Also, in 1985 the Shanghai city government and local businesses created its own CA 747 (Julian Herzog) airline, Shanghai Airlines.

The six airlines created from the CAAC were named after the geographic region of their main operating areas: Air China (CA), based in Beijing, inherited the IATA and ICAO code of CAAC China Southwest Airlines, based in Chengdu (merged into Air China in 2002) China Eastern Airlines (MU), based in Shanghai China Northwest Airlines, based in Xi'an (merged into China Eastern in 2002) China Southern Airlines (CZ), based in Guangzhou China Northern Airlines, based in Shenyang (merged into China Southern in 2003) Additionally, other government departments, local authorities and businesses were able to start their own airlines.

However, by 1994 over 40 airlines were in existence and the CAAC stopped issuing licenses due to issues with infrastructure and safety. As a result, there was a period of consolidation allowing airlines to expand their influence by taking over others in fast-growing regions. This resulted in the formation of three major airline groups in 2002, the “Big Three�. Initially, this saw a decrease in the number of airlines as China

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Southern absorbed China Northern and China Xinjiang, China Eastern absorbed China Northwest and China Yunnan, and Air China took over China Southwest.

Later the Big Three consolidated their positions by establishing subsidiaries through purchasing existing airlines that retained their separate identities. For example, China Eastern bought Shanghai Airlines; and China Southern and Air China own a majority in Xiamen Airlines and Shenzhen Airlines respectively.

In addition, a private entity, the Hainan Group (HNA Group) is led by Hainan Airlines (HU), the largest privately-owned airline in China. The group has either started up or taken over several small airlines, operating under their own brand.

Recently there has been interest in the LCC model, but penetration has been limited partly because of bureaucracies and partly because the Big Three groups have looked at changing full-service airlines to LCCs. The HNA Group, however, has converted two of its airlines into LCCs.

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CZ 757 (top)(phys.org); HU A330 (Skift); MU A330 (bottom) (South China Morning Post)

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In Japan, airline deregulation came into consideration in the late 1970s, and by 1987 Japan Airlines (JL)(JAL) was completely privatized. Later, two other airlines in Japan, All Nippon Airways (NH)(ANA) and Japan Air System (JAS), were permitted to compete with JAL on domestic and international routes. In October 1990, Japan Air Charter was established.

Following years of profit, JAL began to post operating losses in 1992. Costcutting, including the formation of the low-cost JAL Express domestic subsidiary and the transfer of tourist operations to JALways (the successor to Japan Air Charter), helped return the airline to profitability in 1999. During this time an agreement with The Walt Disney Company made Japan Airlines the official airline of Tokyo Disneyland.

In addition, during the 1990s, JAL was one of eight airlines participating in the Boeing 777 design process, shaping the design to their specifications.

In 2001, Japan Air System and Japan Airlines merged, forming a new holding company, Japan Airlines System.

Following the merger, the two companies operated under a single brand: Japan Airlines International, and in 2005 JAL joined the Oneworld Alliance.

Following the end of JAL’s monopoly on international scheduled operations, ANA began international scheduled operations in 1986. Its international route system has grown substantially since then. In addition, the carrier formed a low-cost subsidiary, AirAsia Japan, which was subsequently rebranded Vanilla Air which was later integrated with ANA’s other low-cost subsidiary Peach Aviation, retaining the Peach name. ANA is a member of the Star Alliance.

JL 787 (top)(Masakatsu Ukon); NH 777 (Author)

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Latin American Aviation In Latin America, the aviation industry saw consolidation among the full-service carriers and the emergence of new low-cost and ultra-low-cost airlines. The larger fullservice carriers include Avianca, Copa, the LATAM Airlines Group and Aerolíneas Argentinas.

Avianca (AV) operates from three hubs, Bogotá, Colombia, San Salvador, El Salvador and Lima, Peru. Its focus cities are Medellín, Cali, Cartagena and Barranquilla in Colombia, San José, Costa Rica, Quito, Ecuador and Miami, where AV is the largest foreign carrier by number of passengers. The airline covers 187 destinations in 27 countries and is a member of the Star Alliance.

Copa (CM) is the flag carrier of Panama operating to 80 destinations in 33 countries in North America, Central America, South America and the Caribbean. The airline is a member of the Star Alliance.

LATAM Airlines (LA), formerly LAN Airlines S.A. and Lan Chile, is based in Santiago, Chile, and is a founder of the LATAM Airlines Group. The main hub is Santiago, Chile, with secondary hubs in Bogotá, Colombia, Lima, Peru, Guayaquil and Quito, Ecuador and Buenos Aires, Argentina.

LA is the predominant airline in Chile and Peru, and the second-largest carrier in Argentina, Colombia and Ecuador.

The airline’s route system includes North America, AV A330 (top) (Pablo Chavez); CM 737 (Alan Wilson); LA A321 (bottom) (Sky Kore SCL)

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the Caribbean, Oceania, and Europe. LA is a member of the Oneworld Alliance.

However, the airline recently entered into a major codeshare agreement with Delta and as a result, terminated its codeshare with American and will leave the Oneworld Alliance in the fall of 2020.

Of note is its Santiago-Melbourne route, a 15-hour (westbound) and 6,100-mile (11,300 km) flight that is the southernmost commercial point-to-point flight in the world.

The flight's great circle passes just south of the Antarctic Circle.

AerolĂ­neas Argentinas is Argentina's largest airline and flag carrier. Following a period of financial difficulties that almost closed the airline, a consortium led by Iberia Airlines took control of the airline in 1990, and Grupo Marsans acquired the company and its subsidiaries in 2001. Since 2008, however, the company has been run by the Argentine government when the country regained control of the airline from the Spanish owners. As of December 2014, the airline is state-owned and is headquartered in Buenos Aires. It is a member of the SkyTeam Alliance.

AR MD-88 (Gary Watt)

African Aviation Going into the 1990s safety continued to be a problem in Africa, and in 1998, ICAO ranked Africa as the world region with the least safe air transportation networks.

The continent suffered from an undercapitalized infrastructure and a lack of air traffic.

In addition, security continues to be a problem although it is now being addressed.

By 2005, 25% of aircraft crashes were in Africa. The major problems in Africa include antiquated planes, crumbling airports, broken equipment and poorly trained pilots. In addition, there is a lack of enforcement of even minimal safety standards.

However, work is underway to improve.

In 1999, the Yamoussoukro Decision was signed and was aimed to open the door to Open Skies Agreements. Unfortunately, in the beginning, implementation was difficult, largely because of a restrictive visa regime, high fares, poor connectivity and substandard infrastructure.

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However, in 2015 11 African nations formed the Single African Air Transport market (SAATM) that made Yamoussoukro a reality. An additional six nations joined, and in January 2018, SAATM was launched.

There are a good number of successful carriers on the African continent, including Ethiopian (ET), Kenya Airways (KQ), EgyptAir (MS), Royal Air Maroc (AT), Air Algérie (AH) and Air Mauritius (MK).

KQ 787 (left)(Author); ET 767 (Konstantin von Wedelstaedt)

In South Africa as the Apartheid Era continued, economic sanctions caused fare rises and SAA needed a strategy to produce immediate financial results. The airline engaged in several marketing initiatives including discount fares, better scheduling, business-class services, and a frequent flyer program.

In 1987, a white paper advocated air travel to be deregulated based on the American experience and in 1991, South Africa’s domestic aviation market was deregulated, with free entry into markets, promotion of choice and competition. New entrants came and went, however government-owned SAA was protected from the effects of deregulation. Eventually, SAA control of the air transport infrastructure and related facilities was found to be anti-competitive and control of major airports was taken from SAA pursuant to the 1993 Airports Company Act. In 1994 airline sanctions eased when the country’s last minority government abolished statutory apartheid. With bans and sanctions being withdrawn, SAA began to reemerge during a period of deregulation, privatization, mergers, alliances, technological shifts and route reconfiguration.

In 1996, despite SAA objection, Comair (MN) signed a franchise agreement with British Airways (BA) giving Comair access to international routes and BA access to the domestic market. Despite these challenges, SAA unveiled a new corporate identity and continues its dominance despite challenges from MN’s alliance with BA.

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Going into the 21st century, deregulation of the South African airline industry paved the way for the entry of several low-cost carriers, many of which are successful.

SAA has suffered some recent financial difficulties but has largely overcome them.

SAA is a member of the Star Alliance.

SA 747 (Public Domain)

(Author's Collection)

Growth of 6th Freedom Air Carriers Sixth Freedom is the right of an airline to transport, via the airline’s home country, traffic moving between two other countries. For example, hub carriers in Europe often carry traffic from points in the Middle East or the Gulf States to a hub in Europe for the sole purpose of moving that traffic from its origin to another destination in Europe or North America. The practice is common, often creates contentiousness and is not covered by bilateral ASAs.

In the diagram above, two bilateral ASAs are involved with respect to country A. Traffic traveling from B to A is Fourth Freedom traffic authorized by an ASA between A and B. Traffic traveling from A to C is Third Freedom traffic authorized by an ASA between A and C. These types of operations would be very difficult to restrict in an ASA between any two countries. A traveler going from B to C (or vice-versa) would 137

travel through A and change planes (or stay on the same plane but with a change in flight numbers).

Sixth Freedom has existed if a country and its airline had Third and Fourth Freedom rights.

Pan American, for example, could carry traffic between Europe and Latin America or Europe and Asia with a change of plane in the US. In fact, such service was listed in its timetables as far back as April 1965.

Any European carrier, such as British Airways, Air France, Lufthansa, etc., similarly had the ability to carry passengers originating in the United States to points in their systems in Africa, Europe, Asia and the Middle East and vice-versa.

Timetable page (Author's Collection)

However, for the most part, passengers were loyal to their nation’s flag airlines and would use them where possible on these routes.

From the US perspective, Pan American and TWA were the principal US-flag international carriers with destinations around the world. Because of the geography and economic considerations, travel to overseas destinations beyond the gateway cities required Fifth Freedom traffic rights. Otherwise, from an economic standpoint, the carrier would not be fiscally able to carry traffic beyond those gateway cities. For example, travel to a destination such as Istanbul on Pan American operating a Boeing 707 required additional stops beyond a gateway city such as London. Fifth Freedom rights gave Pan American the ability to fill the seats emptied in London with revenue passengers for points beyond London. Thus, these Fifth Freedom rights were critical to both Pan American and TWA in their overseas operations.

However, with deregulation and liberalization, and the resultant increased demand in overseas travel, plus the development of long-range high capacity aircraft, such as the Boeing 747-400, 777 and 787, and the Airbus A330, A350 and A380, the focus moved toward non-stop point-to-point flights between international destinations.

Thus, a trip to Istanbul from a point in the United States is now nonstop on any number of air carriers rather than the previous multi-stop trip. In addition, passenger allegiance is no longer tied to their country’s flag airline, but to factors such as price and service offerings. And, with “metal neutrality” associated with alliances, passengers booking

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flights through their national carriers often end up traveling on a flight of a foreign carrier-member of an alliance or codeshare with that national carrier.

A comparison of Pan American’s route map and timetable page from the 707 era, illustrated below, with a recent route map of United on page 105 highlights these changes. Note the reliance of Pan American on Fifth Freedom authority to complete its round-the-world flight as well as flights deep into the European continent and beyond into Asia.

PA Timetable pages (Author's Collection)

PA 707 (Author)

Also, with these changes, the concept of Sixth Freedom operations as the mainstay of an airline company began to emerge. The genesis of extensive Sixth Freedom operations could very well have been the original codeshare agreement between Northwest and KLM, where Amsterdam served as a hub connecting passengers and flights between Northwest’s US origins and KLM’s intercontinental destinations in the Middle East, Asia and Africa. In addition, Singapore Airlines began operating Sixth Freedom flights between London and Sidney through Singapore.

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However, what gave the biggest boost to Sixth Freedom operations was the ability of airlines in nations with relatively small Origin-and-Destination traffic to offer intercontinental flights through their home bases.

Previously mentioned was the Sixth Freedom operation of Tajik Air between London and Delhi/Karachi through Dushanbe, Tajikistan.

Currently, Turkmenistan Airlines operates a similar operation from its home base in Ashgabat as illustrated in its route map.

The biggest and “loudest” of the Sixth Freedom operators are what is known as the “ME-3”, Emirates (EK), Etihad (EY) and Qatar Airways (QR). The former two are based in Dubai and Abu Dhabi in the United Arab Emirates respectively and the latter in Doha, Qatar. The growth of these airlines has been no less than phenomenal.

In addition, Turkish Airlines (TK) has made a significant impact on the competition for Sixth Freedom traffic as well.

The Fourth Freedom capacity into the Middle East “hubs” and the Third Freedom capacity out of these hubs is massive in comparison to the actual origin-anddestination traffic (those traveling to Dubai on EK or Doha on QR, for example). These hubs are, for all intents and purposes, twenty-four-hour operations. And traffic continues to grow. For TK, Sixth Freedom operations through Istanbul represents 25% of its traffic flow, and 12% of its revenues are generated by its US flights. For the ME3, US traffic alone has grown most significantly since 2005:

(CAPA)

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The growth of these airlines is a relatively new phenomenon. In the middle of the 1990s, the principal airline in the Gulf Middle East was Gulf Air (GF), jointly owned

by Bahrain, Qatar, Abu Dhabi and Oman. The “hub” was Bahrain and the route system focused heavily on points in the Far East, the Indian Sub-Continent and Europe, with London being the primary destination. EK, QR and Oman Air (WY) were relatively small, regional airlines and EY did not exist. By the middle of the 1990s, however, EK began to grow, and although in 1994 the fleet consisted of sixteen aircraft, it was widely perceived that it was sixty. With its aggressive marketing campaign, coupled with significant sponsorship of major sporting events, as well as promotion of its Dubai hub Duty-Free stores, the airline grew and kept growing. The focus was on Sixth Freedom. Not long after, QR followed suit in Doha along with the establishment of EY in Abu Dhabi. TK joined the Star Alliance and by the early part of the 21st Century, its Istanbul base had grown from a minor regional hub to a major intercontinental hub.

The airline recently moved its operations to a new airport in Istanbul, called the “Istanbul New Airport”.

What makes this all possible is the geography. Given current aircraft capabilities, the geographic location of these hubs literally puts them in the center of the globe as a connecting point between the continents.

The growth of these Sixth Freedom operators is undisputed and has brought international commercial aviation to levels never anticipated. A niche has been created through clever use of the Third and Fourth Freedoms to establish a system resembling the domestic hub-and-spoke systems in the US, on a global scale.

Because of the geographic advantage of these international hubs, the traditional national carriers may consider themselves at a disadvantage competitively and may be faced with a need to consider ways to remain competitive without the need to compete head-to-head with these carriers. One phenomenon that is developing is the ultra-long-haul flight, which bypasses Sixth Freedom hubs.

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Alliances Airline alliances go back as far as the 1930s when Pan American World Airways and Panair do Brasil agreed to exchange routes in South America. Since then other types of alliances followed, such as the aircraft interchange, which was standard from the post-war up to deregulation and the codeshare, now the most common.

The aircraft interchange involved the same aircraft operated by crews from different airlines. For example, Pan American-Grace Airways (PG)(Panagra) flight 701, a Panagra DC-7B between New York and Buenos Aires, Argentina, was operated by National Airlines from New York to Miami, by Pan American between Miami and Panama, and by Panagra from Panama onwards to Panagra DC-7B (Mel Lawrence via George Hamlin) Buenos Aires. Probably the most famous aircraft interchange, however, was the Braniff-British Airways/Air France with the Concorde. British Airways or Air France flew the supersonic transatlantic sector to Washington Dulles Airport where Braniff took over and flew the aircraft, subsonic, to Dallas. It was intended to paint the aircraft with Braniff livery, but the operation was suspended after about 17 months due to high costs and low load factors.

(Author)

The codeshare is basically an arrangement where two or more airlines share the same flight. One airline operates the flight as the “administrating carrier” and the others can sell seats on that flight using their IATA designators. For example, United Airlines flight 8826 from Washington Dulles to Frankfurt is a codeshare with Lufthansa’s flight 419, a Boeing 747-8 operated by Lufthansa.

Codeshares were primarily bilateral alliances, and the first successful bilateral liaison was the Northwest-KLM codeshare. Each had behind-gateway operations that made their respective networks almost wholly complementary. That partnership eventually led to what is now the SkyTeam Alliance.

Today, there are three major airline alliances: The Star Alliance, with 27 full airline members, SkyTeam, with 19 full airline members and Oneworld, with 13.

These alliances are more than simple marketing extensions complemented by bilateral airline arrangements. The alliances are effectively a close substitute to a 142

merger because the alliance typically involves full coordination of the major airline functions on the affected routes, including scheduling, pricing, revenue management, marketing and sales.

Because of the impact on competition and the coordinated activity of the member airlines, the regulatory authorities have required “metal neutral” antitrust immunity (ATI). The regulator’s goal, therefore, is to create a “neutral” situation where no airline in the alliance gains anything by keeping passengers on its own flight – as opposed to losing them to its alliance partners. This level of immunity comes with both privileges and obligations. The airlines so immunized are not only permitted to cooperate extensively as metal neutral, but they must do so. That is because consumers will not otherwise be able to benefit from the combining of fares and routings, a key component of the metal neutral concept.

There is no doubt the alliances have made a significant impact on international commercial aviation. Offering seamless operations and a network to the traveler, particularly the business traveler with high demands, the alliances themselves can meet such demands that no individual carrier in most cases can achieve.

(Top to Bottom) Star Alliance 747 (Author); Sky Team 737 (Eduard Heisterkamp); Oneworld 777 (N509FZ)

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The global reach of the three major airline alliances.

Star

SkyTeam

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Oneworld

Multiple Air Operator’s Certificates (AOC) Over the past two decades, there has been significant industry consolidation resulting in the formation of airline groups, such as the International Airlines Group (IAG), the Lufthansa Group and the AirAsia Group. As a result, many of these groups, along with single air carriers, are operating on a platform of multiple AOCs. What this does is allows the groups and individual carriers, according to Lars-Michael Wendel and Arvind Chandrasekhar in their article “The AOC Balance” in the February 2020 Air Transport World magazine, to position different production platforms resulting in, for example, optimization of labor regulations and collective bargaining agreements, fleet ownership structures, operational procedures and commercial considerations. In addition, there are legal and regulatory concerns that can drive a decision to operate under multiple AOCs. AOC’s within a single airline involve different countries but still allows the airline to operate as a single carrier.

There are also strategic reasons to operate with multiple AOCs. For example, in preparation for the UK’s exit from the European Union (“Brexit”), UK-based easyJet (U2) applied for an Austrian AOC in order to have a legal presence in Europe postBrexit. Norwegian (DY) obtained an Irish AOC in order to avoid the high corporate taxes and stringent labor laws of its home base, Norway. This move was viewed as controversial and prompted claims by US labor unions of operating under a “flag of convenience”, a tactic used by steamship companies to avoid taxes and stringent labor laws.

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Wendel and Chandraeskhar identify four key dimensions that airline managers should consider when operating with multiple AOCs. First is the strategic and corporate structure, which relates to (1) market dynamics, regulatory requirements and operational considerations; (2) the number of AOCs and place of jurisdiction; (3) the definition of the mid to long term growth and investment plan for each AOC and (4) the relationship between the AOCs and the corporate structure of the group or airline.

Second is brand and product, which relates to the brand strategy as it is related to the dynamics of the market. Third is steering and performance management. This involves (1) the effective steering of multiple AOCs, especially if under a single brand; (2) optimal centralization vs. devolution of decision making and (3) metrics and a basis to track AOC performance.

Finally, operations and people. This entails (1) consistent delivery of the product and customer experience across AOCs; (2) focus on lean harmonization of operations and (3) create an appropriate model for employee engagement and communication, across cultures and operating models.

Use of multiple AOCs will continue to grow, and their financial success will be in their management by the groups and airlines. This will require the best possible productivity, flexibility and efficiency across the board.

U2 A321 NEO (Alan Wilson (top); DY 787 (Alec Wilson)

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Ultra-Low-Cost and Long-Haul Low-Cost Carriers Ultra-Low Cost-Carriers (ULCC) Since its inception in the 1980s, the LCC has been such a successful business model that it has spread throughout the world. Likewise, has the ULCC. Both models focus on low unit costs and low revenue. The ULCC’s ultra-low fares basically covers the cost of the seat, or basic transportation (“bare bones”).

As one would expect, these fares come with numerous restrictions. The paying passenger can only travel with “carry-on” baggage and in most cases only baggage that will fit under the seat. Generally, no overhead compartment storage is permitted.

The size of the carry-on is strictly observed. Checked baggage, if available, is charged a fee.

Passengers are not allowed to pre-select their seats and are generally the last to board. Those wishing seat selection and/or early boarding are required to pay a fee. Similarly, there are no drinks or snacks on offer, although those can be purchased.

The ULCC focuses on thin routes and secondary airports and stimulates the market as opposed to capturing traffic from the competition. The aim is to attract the discretionary passenger, generally the leisure traveler, and youth (“backpackers”).

The ULCC took off in the US with Allegiant (G4) and Spirit (NK), followed by Frontier (F9). A new ULCC, Breeze Airways (formerly “Moxy”), being founded by David Neeleman who was the founder of Jet Blue, is planned to start in 2021. He recently signed a Memorandum of Agreement with Airbus for 60 A220 aircraft.

G4 A319 (Alan Wilson)

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G4 A319 (Source)

NK A321 (Adam Moreira)

NK A321 (Adam Moreira)

F9 A321 (Raymond Wambsgans)

In Canada, are Swoop (WO) and Flair (F8).

WO 737 (top)(flyswoop.com); F8 737 (flyflair.com)

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In Europe, there are several ULCCs. Most notable are Ryanair (FR), Eurowings (EW), Norwegian Shuttle (DY) and Vueling (VY).

(Top to Bottom) FR 737 (Public Domain); EW A320 (Adrian Pingstone); VY A321 (Pedro Aragao)

In Latin America, ULCCs include Easyfly (VE) and VivaAir (VV). The ULCC sector is seeing significant growth in this region, attracting over half of the domestic market in Brazil and Mexico.

(Top) BAE Jetstream (Pablo Andres Ortega Chavez); VV A320 (Santiago Narayana)

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ULCCs in Asia includes Peach (MM), Air Asia (D7) and NOK Air (DD).

(Top to Bottom) MM A220 (Laurent Errera); D7 A320 (Aaron Willis); DD 737 (Z3144228 via WiKi)

In India IndiGo (6E) and SpiceJet (SG) are two of the major ULCCs in that region.

6E A320 (top)(BriYYZ); SG 737 (Nisarg Vyas)

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In Africa, notable ULCCs include Mango (JE), Kulula (MN) and Jambojet (JM).

(Top to Bottom) JE 737 (Montague Smith): MN 737 (southafrica.to); JM 737 (bandabarn)

A key factor in the rapid growth and, for the most part, the success of the ULCC model is the introduction of the so-called Next Generation Aircraft (NextGen). These aircraft offer significantly lower operating costs largely due to increased fuel efficiency and lower weight. They are also environmentally friendly airplanes, which leave a significantly smaller carbon footprint, making them attractive to environmentally conscious travelers, including the “Millennials�.

The current ULCC operators are a mix of independent operators and subsidiaries of full-service carriers. The question arises as to whether the independents can survive any recession or downward trend in the economy. The question is unanswered, although it is notable that growth of the middle class, particularly in Asia and India, can play a part in making these operators recessionproof.

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The full-service carriers are not idly standing by. In response, these carriers have begun offering the “Basic Economy” fare, with similar restrictions. Available on the airlines’ website, users are warned of the extreme restrictions entailed in using that fare.

Long-Haul Low-Cost (LHLC) The Long-Haul Low Cost (LHLC) model has only recently become “mainstream” despite numerous attempts that go back decades. During the 1960s and 70s, there were two major attempts. In 1964, an Icelandic carrier, Loftleiðir, known as the “Hippie” airline, offered cheap transatlantic flights through Iceland.

In 1974, the first “no-frills” transatlantic service was offered by Laker Airways.

Known as the “Skytrain”, the airline, established by Sir Freddie Laker, operated DC10 aircraft between London and New York. The service received a lot of press and was initially very popular. However, the scheduled and supplemental carriers responded, and the service was eventually shut down.

Laker DC-10 (Eduard Marmet)

There were no further serious attempts at this model until the 2000s when in 2002 Canadian carrier Zoom Airlines was founded offering low fare transatlantic services catering to the tourism market. The carrier operated Boeing 757s and 767s to destinations in Europe, North America, the Caribbean, South America and Asia.

However, financial difficulties resulted in impoundment of aircraft and eventual shutdown of operations in 2008.

In 2005 Oasis Hong Kong Airlines inaugurated Hong Kong-London (Gatwick) flights with Boeing 747-400 aircraft, offering low fares but faced stiff competition from established carriers. Operating to/from Gatwick was also a major disadvantage. The low fares offered eventually proved unsustainable, resulting in losses and eventual demise of the airline in 2008.

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Oasis 747 (Mark Tang)

During this time, however, two LHLC carriers were enjoying success. In Australia, Jetstar Airways (3K) was founded as a low-cost subsidiary of Qantas (QF), and in Malaysia, AirAsia X (D7) was established as the medium and long-haul operator of the AirAsia brand, the largest low-cost operator in Asia. Both these operations proved to be a success and by 2012 and onwards the number of LHLC carriers grew and by 2017 the LHLC model finally was considered mainstream.

3K A320 (YSSY Guy)

D7 A330 (ICN.GBNZ)

Some of the current LHLC operators include Cebu Pacific (5J), Norwegian (DY), Scoot (TR) and Level (LV). There are current plans to launch a US LHLC carrier, World Airways.

5J A320 (Mark Tang)

DY 787 (Anna Zvereva)

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TR 787 (Benny Zang)

LV A330 (Daniel Luis Gomez Alenis)

The Next Gen aircraft, particularly the Boeing and Airbus narrow bodies including the Boeing 737 MAX and the Airbus A320/321 neo have played a significant role in the success of the LHLCs. These aircraft have been identified as “Game Changers” and are playing a growing role in many airlines’ fleet planning.

737 MAX (left) (Steve Lynes); A320neo (Gyrostat)

What makes these aircraft “game changers” is the distances they can fly. What used to be the province of the wide-bodied aircraft is now open to these narrow bodies.

They can be used effectively on both short and long-haul routes and, in the case of the latter, giving the LHLC carriers access to thin long-haul markets and secondary airports. While there is still widespread use of widebody aircraft on these routes particularly in Asia, with the A330 neo and the Boeing 787, the availability of these narrow body aircraft to operate these routes during off-peak periods when traffic is low is an added plus for the LHLC operators.

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Hubs are not essential for the LHLC operators, although it is recognized that there should be some feed at key cities of the carrier’s network. A possible solution would be to team up with a ULCC or LCC and coordinate operations at such cities.

Like the ULCC model, the LHLC focuses on the discretionary traveler, particularly the leisure market and young travelers, such as the Millennials, who are mobile and curious about the world around them. They have no hesitation to travel, and no problem just carrying a backpack that can be stuffed under the seat in front of them. In addition, the expanding middle class in both Asia and India is providing a growing market to these carriers. Here, the best course of action is market stimulation, much like the ULCC operators.

One thing that is worth considering is the fact that while the LHLC can offer very low fares in its markets, the resulting margins can be fragile given the low unit costs and low revenue. It would, therefore, be a good idea that the LHLC consider offering a premium service, such as a small business class section as well as earning ancillary revenue through the sale of early boarding, checked baggage and meals for the economy passengers. The LHLC operator can also offer cargo services, using the belly space available in its passenger aircraft.

While the LHLC model is believed to have become mainstream, the jury is still out. Can this model be sustained? Can it survive an economic downturn? The marketing and operating strategy must take this into account. During periods of recession, the immediate need is to reduce costs. This may or may not be painful to the LHLC, as its costs are already at a bare minimum. It can be painful if the carrier is financially fragile or if it is needed to compete, particularly with the full-service carriers.

The cost of fuel will also play a role. However, the LHLC has the potential advantage of attracting business travelers whose companies might be cutting back on travel expenses. This has potential if the full-service carriers are unable to reduce costs sufficiently to offer attractive fares to this market. Although, under these circumstances, the LHLC must be careful not to focus on capturing a market at the expense of stimulating the market.

Conversely, in the good times, it is important that LHLC operators be cautious in another area: Overly ambitious expansion. This can stretch resources to a point where financial difficulties will follow, particularly if tied in with large aircraft orders.

This is an undeniable fact and it happened recently to two Europe-based LHLCs. Both were making a huge splash in the news, could apparently do no wrong, but jumped on the expansion bandwagon on the strength of this only to drop back into reality when traffic levels fell. Both were victims of their own success.

In the first case, it was Norwegian. Dominating the ULCC sector in Europe, Norwegian rapidly grew its network and fleet (massive 222 aircraft order) and pivoted away from its profitable Nordic core to operate as a LHLC. Its long-haul routes covered all parts of the globe. The carrier made news and was the talk of the town. It operated 155

long haul flights in thin markets with narrow-body aircraft and rapidly opened new routes. The company set up subsidiaries (with their own AOCs) to operate these routes at the lowest costs possible.

The setting up of these subsidiaries in one case presented a significant and costly problem: The carrier’s registration as an Irish airline. While Ireland is in full compliance with EU regulations in the area of labor law and aviation, what Norwegian was attempting was the avoidance of the high corporate taxes and very strict labor laws of Norway. This resulted in a regulatory and legal battle when the carrier applied to operate additional routes between the US and Europe using the Irish subsidiary. This raised claims that the carrier was engaged in using a “flag of convenience� to avoid its obligations to its home country. The costly legal process did not help Norwegian, although permission was eventually granted to operate the routes.

The sum of this is that the company suffered financial losses in 2017 and 2018. Now the company (Author's Collection) is restructuring and plans to grow about 20% in 2019.

Norwegian faces large capital expenditures related to aircraft orders but is adjusting these to bring in fresh liquidity. Some routes have been cancelled; however, new routes have also been added.

The second case was WOW. Like Norwegian, this LHLC operator made a big splash and was the talk of the town. It relentlessly entered new long-haul markets and added A330 wide-body jets to their narrow body A320/321 fleet. Traffic levels grew significantly during the 2015-2017 timeframe and the airline continued steep expansion. Then reality set in when the airline overly stretched its resources and could not sustain its operations.

WW A320 (BriYZZ)

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WOW returned its widebody and other aircraft, suspended some routes and reduced staff, and appeared to be returning to its roots as a ULCC. However, merger discussions with Icelandair fell apart, and that was followed by the failure of talks with Indigo Partners, an equity fund specializing in turnkey ULCC operations, to progress.

Finally, after a second attempt at talks with Icelandair failed to produce anything, WOW ceased operations on 28 March 2019.

What is of note is that both Norwegian and WOW were victims of their own initial success. Both were the “talk of the town” and made headlines, leading to the view that the LHLC model is finally mainstream. But is it?

In Asia, it seems to be thriving. This may be because of the strong and growing middle class who are targets of market stimulation. Europe is another story, and it will be interesting if the LHLC attempt with World Airways makes any splash in the US. The bottom line is that for the LHLC to survive, the model needs a premium cabin, feed and cargo.

Adieu, A380 In 2007, Singapore Airlines launched the A380 to much fanfare within the airline industry. During its development, the aircraft was the talk of the industry, promising to be a “cruise ship” in the air. There was talk of gyms, showers, lounges and casinos onboard. The aircraft was also designed to relieve the slot congestion at slotcoordinated airports. Unfortunately, none of this came to pass.

Since the first delivery, only 234 aircraft have followed and two of Singapore’s A380s have been retired. Other A380 operators are following suit.

What happened? The view is that Airbus made a massive overestimate of the market size for a very large aircraft. The fact that the company bet it could sell 1,500 models was an expensive misreading of where the market was going. To add to that, the cost of the program reached over $25 billion.

The inevitable occurred when Emirates Airline, the A380’s largest customer, announced the reduction of its last major order from 53 to 14 aircraft. Thus, Airbus has deemed the program no longer sustainable and will end deliveries in 2021, although it is likely that passengers will be flying on the airliner into the 2030s.

The idea that the 525-plus seat aircraft could boost airlines’ ability to maximize slot-constrained hubs never came to fruition. While air traffic demand did grow, airlines added frequencies and added city-pair routes that linked places with non-stop service for the first time. These so-called “thin” point-to-point markets were not suited for the A380 but are well suited for the likes of the Boeing 787 and A350.

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The bottom line is that the numbers tell the story: Since 2007, the A380 has just 313 orders from 16 customers and its success really lies with one customer, Emirates Airline, which has 162 delivered or on order. As a comparison, the A350 has 900 orders from 50 customers since 2015 and the Boeing 787 has 1,400 orders from 75 customers since 2011.

While the A380 set new standards for customer comfort, and indeed it is a passenger favorite, both the A350 and 787 incorporate technologies that make them at least as quiet and comfortable.

In the Air Transport World magazine, Editor-in-Chief Karen Walker noted that for some the A380 was a game-changer; but for others, it was too much of a good thing.

A380 aircraft and interiors (Author)

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PART EIGHT CONCLUSION Postscript This writing has covered nearly a century of airline regulation, starting in Paris in 1919, followed by airmail contracts, economic regulation, government ownership, a period of protectionism and finally deregulation and liberalization.

From the days of regulation and protection, the airline industry has grown into a robust and dynamic industry, responsive in large part to the traveling needs of the public. What has emerged are three distinct models: The Alliances, the Sixth Freedom operators and the low-cost sector.

The alliances clearly cater to the premium sector of the market, who are frequent travelers who maximize productive time and minimize wasted time. These travelers rely on a network to get from origin to destination as seamlessly and conveniently as possible and appreciate the availability of airline lounges to enhance their productive time or time of relaxation. These travelers, because they are frequent, also enjoy the perks offered by the frequent flyer programs, all designed with the premium passenger in mind and with the intent to earn the loyalty of these travelers.

The discretionary travelers do not need the perks offered by the alliances. They may travel only a few times a year usually for leisure and where time is not a major issue.

There is no need for lounge access and earning perks in a frequent flyer program would be largely out of reach.

The Sixth Freedom airline is unique. Its network normally consists of a single hub and it offers nearly all the perks as those of an alliance airline. While largely independent operators, these carriers do have codeshare arrangements with other airlines to enhance their reach. The Sixth Freedom airline, however, has something for everybody and does not focus exclusively on a single class of passenger. Both premium and discretionary passengers are their customer base. What drives a Sixth Freedom operator is geography. If it is right, the operator will succeed.

The low-cost sector is still largely focused on the discretionary traveler, who looks for the bargain fares for their holidays. They are typically not concerned with frequency and are mainly concerned with “getting there�. Usually, a family is involved.

Many of the low-cost carriers do focus on holiday destinations and stimulate the market to those destinations by taking families out of their cars or other forms of 159

transportation. The low-cost sector, however, recognizes the importance of the business traveler and has made inroads in that market, by offering preferential or business class seating and other perks. Almost all low-cost operators offer some type of frequent flyer program.

The volume of passengers since the industry was deregulated in 1978 in the US is unprecedented. Never have there been so many air travelers from all walks of life. Juan Trippe, the founder of Pan American World Airways was intent on bringing air travel to the masses, first with the DC-6B and finally with the Boeing 747. He viewed air transportation as a means toward understanding among the peoples of the world when he said: “Mass travel by air may prove to be more significant to world destiny than the atom bomb. For there can be no atom bomb potentially more powerful than the air tourist, charged with curiosity, enthusiasm and good will, who can roam the four corners of the world, meeting in friendship and understanding the people of other nations and races. The tourist plane and the bomber for years have been racing each other toward a photo finish. In my opinion, however, the tourist plane, if allowed to move unshackled by political and economic restrictions, will win this race between education and catastrophe.�

While the focus of this book has been on economic regulation and the political, economic and other forces driving the aviation industry, technology in many ways has played a pivotal role in its development. The aircraft produced over the past two decades have revolutionized the industry, creating what we have today.

One thing, however, has always remained the primary concern of the regulators: Safety. Concern for safety got its start with the Paris Convention in 1919 and became a matter of universal interest with the formation of the ICAO during the Chicago Convention of 1944. Safety is paramount and there is no compromise. This is why air travel, compared with the different modes of transportation available to the public, is the safest and undeniably the most secure means of travel.

While at the beginning of the year 2020 one could say the future holds much to be excited about, two ongoing events has challenged the industry: (1) the grounding of the Boeing 737 MAX and the Covid-19 Pandemic.

The Grounding of the Boeing 737 MAX In March 2019 aviation authorities grounded the Boeing 737 MAX after two crashes within five months of each other: Lion Air in October 2018 and Ethiopian in 160

March 2019. After the Lion Air crash investigators determined the Maneuvering Characteristics Augmentation System (MCAS) automatically forced the aircraft to nosedive. It was also found MCAS was omitted from flight manuals and crew training.

As a result, Boeing and the FAA sent urgent messages to emphasize a flight recovery procedure and Boeing started to redesign MCAS. Both the FAA and Boeing privately concluded that MCAS posed an unacceptable safety risk.

After the Ethiopian crash, regulators in quick succession began to ground the MAX, and by 10 March, all 387 aircraft were grounded, disrupting 8,600 flights by 59 airlines. In addition, the US Congress, federal agencies and ad hoc panels began investigation of FAA certification and examined the FAA’s delegation of self-approval authority to Boeing. It was found that Boeing did not adequately analyze the safety of MCAS or inform the FAA of late design changes and in April 2019 Boeing admitted that MCAS played a role in both accidents.

In October 2019 the Indonesian National Transportation Safety Committee (NTSC) concluded that problems with airplane design, certification, maintenance and flight crew actions contributed to the Lion Air accident. In November 2019, the FAA revoked Boeing's authority to issue airworthiness certificates for individual MAX airplanes, and in December 2019, the US House of Representatives criticized the FAA and Boeing for their inaction despite known risks. Due to increased regulatory scrutiny plus newly discovered problems, the grounding has become the longest ever for a US airliner and airlines canceled 183 orders for the MAX in 2019.

In December 2019 Boeing ousted CEO Dennis Muilenburg and detailed a serious mismanagement of the crisis. It was revealed that derogatory messages between Boeing employees were sent during certification about the MAX design, FAA regulation, and Lion Air's request for flight simulator training.

In 2020 Boeing has suspended production until regulators clear the airliner to fly again. However, the FAA is unlikely to approve the return until March 2020 or later.

The consequences of this situation are far reaching. Boeing now recommends simulator training for MAX pilots. The company also estimates the grounding and production suspension will result in $18.4 billion in total future losses, however, the suspended production will allow Boeing to conserve cash and prioritize stored aircraft delivery. The last pre-suspension fuselages entered final assembly in early January 2020. In June, according to Geoffrey Thomas in Airline Ratings, Boeing resumed production, but at a low rate as the company implements more than a dozen initiatives focused on enhancing workplace safety and product quality. The company said that during the temporary suspension of production, mechanics and engineers collaborated to refine and standardize work packages in each position of the factory.

Production will gradually ramp up this year. Currently, the focus is on software validation and technical documentation required for a certification flight.

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The Coronavirus (COVID-19) Pandemic In December 2019, a pneumonia outbreak was reported in Wuhan, China that was traced on 31 December to a strain of coronavirus now known as COVID-19. On 11 March 2020, the World Health Organization (WHO) declared the outbreak as a Pandemic.

By the end of May 2020 there have been over 376,000 confirmed deaths and more than 1.86 million confirmed cases. The pandemic has seriously impacted both domestic and international travel.

The airlines have been particularly hit hard by for two major reasons: First, governments have imposed strict travel restrictions on their citizens, and secondly, as a result of uncertainty in relation to the pandemic, the stock markets have taken a deep dive, although there has been some recent recovery.

The airlines almost universally have drastically reduced operations and are preparing for significant operating losses as a result. This has prompted requests for “bailout money” from their respective governments. Nevertheless, the airlines are taking whatever steps are necessary to ride out the crisis and safely resume operations upon the return of normality. These steps include cutting back services in many markets, parking aircraft as required and in some cases retiring under-used or obsolete aircraft and reassuring their customers. In addition, the airlines are making conscious efforts to prevent exposure to the virus by their employees and passengers.

Starting in May, countries have begun lifting restrictions within their borders, although there has not been any significant impact on international air travel. In addition, ICAO has recently approved “Takeoff: Guidance for Air Travel through the COVID-19 Public Health Crisis,” which is an authoritative and comprehensive framework of risk-based temporary measures for air transport operations during the COVID-19 crisis. The measures provide for a phased approach to restarting aviation and identifies a set of generally applicable risk-based measures. In line with recommendations and guidance from public health authorities, these will mitigate the risk of transmission of the Covid-19 virus during the travel process.

The airlines are rapidly and aggressively implementing programs within and beyond the ICAO guidance and are promoting these as part of their sales and marketing schemes.

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Selected Bibliography Alford, Eugene and Champley, Richard. The Impact of the 2007 US-EU Open Skies Air Transport Agreement. ITA Occasional Paper no. 07-001. International Trade Administration. 2007 Baldwin, James Patrick. Pan American World Airways – Images of a Great Airline.

St. Augustine, Florida: BlueWaterPress. 2011 ___________________ . The International Airline Industry: Its Role in International Politics. Unpublished. 1974 ___________________. The Role of International Organizations in the Control of International Civil Aviation. Unpublished. 1973 Baldwin, James Patrick and Jeff Kriendler. Pan American World Airways – Aviation History through the Words of its People. St. Augustine, Florida: BlueWaterPress.

2011 _________________________________. Pan Am – Personal Tributes to a Global Aviation Pioneer. San Francisco, California: Pan Am Historical Foundation. 2017 Bender, Marylin and Altschul, Selig. The Chosen Instrument. New York: Simon and Schuster. 1982 Burghouwt, Guillaume, Mendes de Leon, Pablo and De Wit, Jap. EU Air Transport Liberalisation: Process, Impacts and Future Considerations. International Transport Forum Discussion Paper No. 2015-04. 2015 Chua, Jiakai Jeremy and Ramsey, Matthew. The Heavens Were Not Free: Towards Airline Deregulation & Multilateral Open Skies in the US, EU, & ASEAN Cases.

Columbia University Journal of Politics and Society. 2014 Chuang, Richard Y. The International Air Transport Association. Leiden. 1972 Corbett, Davis. Politics and the Airlines. London. 1965 Daley, Robert. An American Saga: Juan Trippe and His Pan Am Empire. New York: Random House. 1980 163

Davies, R.E.G. Pan Am – An Airline and Its Aircraft. New York: Orion Books. 1987 Daniel Friedenzohn. Equality of Opportunity (Not Benefits) for Airlines Operating in an Open Skies Environment. Lecture. Aviation Law Conference, American University Washington College of Law. 2015 Gandt, Robert. China Clipper. Annapolis, Maryland: Naval Institute Press. 1991 ___________ . Skygods – The Fall of Pan Am. McLean, Virginia: Paladwr Press.

1999 Haanappel, P.P. Bilateral Air Transport Agreements - 1913-1980. University of Maryland School of Law Journal of International Law. 1980 Heffernan, David. Unmanned Aircraft Systems: The Evolving Regulatory Framework and Privacy Issues. Lecture. Aviation Law Conference, American University Washington College of Law. 2015 Hoffman, Erik P. and Fleron, Jr., Frederic J., eds. The Conduct of Soviet Foreign Policy. New York. 1971 Humphreys, Barry. The Row About the Gulf Carriers: Real Risk or Pantomime?

Airline Economics. 2015 Jaworowski, Ray. ASEAN Open Skies Delayed. Forecast International. 2016 Jenkins, Darryl. Fundamental Laws of Commercial Drone Economics: Adopt or Die. Lecture. Aviation Law Conference, American University Washington College of Law. 2015 Keohane, Robert and Nye, Jr., Joseph S., eds. Transnational Relations and World Politics. Cambridge. 1971 Marshall, John. Turning Finals – A Reminiscence. Unpublished. 2001 Mendelsohn, Allan I. Response to the Request of the U.S. Government for Public Comment on the Issue of Foreign Government Subsidies to Foreign Air Carriers. 2015.

Mendelsohn, Allan I. Unravelling Open Skies. Occasional Paper Series No. I. McGill Centre for Research in Air and Space Law. 2015 164

Straszheim, Mahlon R. The International Airline Industry. Washington, DC. 1969 Thayer, Frederick C. Air Transport Policy and National Security. Chapel Hill. 1965 Thornton, Robert L. International Airlines and Politics. Ann Arbor. 1970 Additional sources included Air Transport World, Airways Magazine, CAPA Centre for Aviation, Aviation Week Network, Routesonline, anna.aero, and airwaysmag.com

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Pan American Latin America Services 1939

A-1

Pan American Transpacific Services 1940

A-2

Pan American Latin America Services 1945

A-3

Pan American Round-the-World Services 1948

A-4

Pan American Round-the-World Services 1959

A-5

Pan American “Sixth Freedom” 1965

A-6

Pan American Round-the-World Services 1969

A-7

Pan American Route Map Latin America Services 1939

A-8

Pan American Route Maps 1948 and 1956

A-9

Pan American Route Maps 1966 and 1971

A-10

Pan American Route Maps 1977, 1986 and 1991 (Last)

A-11

American Airlines Schedules 1954

A-12

American Airlines Route Maps 1936 and 1954

A-13

American Airlines Route Map 1976

A-14

TWA Schedules 1953

A-15

TWA Schedules 1974

A-16

TWA Route Map 1953

A-17

TWA Route Map 1974

United Airlines Map 1948

A-18

United Route Map 1969

A-19

United Airlines Domestic Route Map ca. 2014

A-20

United Airlines International Route Map ca 2014

A-21

Imperial Airways Route Map 1935

A-22

British Airways Schedules 1977

A-23

Air France Schedules 1980

A-24

SAS Route Map

A-25

Tajik Air Schedules

A-26

Mesa Airlines Route Map 2019

A-27

Emirates Schedules 2011

A-28

Emirates Map 2011

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A-30

A-31