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Cabotage For UK Carriers... Your Thoughts?

Mon Oct 29, 2001 9:35 am

It seems to be widely accepted that the primary sticking point between US-UK Open Skies is Cabotage for UK Carriers in the US, or the right for UK carriers to operate domestic services within the United States.

I'm curious to see what everybody's thoughts are on this issue. Do you think it will happen anytime soon?

The idea seems intriguing, but with the current overall cuts in domestic capacity, I have to wonder whether or not there would be room for new entrants.

No nationalistic flame wars, please. Educated and thoughtful answers only.
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RE: Cabotage For UK Carriers... Your Thoughts?

Mon Oct 29, 2001 9:35 am


RE: Cabotage For UK Carriers... Your Thoughts?

Mon Oct 29, 2001 9:38 am

Well although never hearing the term "cabotage" before, I don't think open skies will occur anytime soon, if ever.

If the attacks never happenes, it might have happened in perhaps a decade's time. But now, with all the security, fears, and struggling economy, that has become a near impossibility.  Sad

Maybe in 50 years then...

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RE: Cabotage For UK Carriers... Your Thoughts?

Mon Oct 29, 2001 10:12 am

I don't think cabotage is in any of our previous agreements with other countries but I haven't read all of the agreements either. I think it should be reciprocal. If UK airlines can fly domestic US, US should be able to fly domestic UK. Launch Southwest for the shorthaul LHRMAN route  Smile
Actually I always thought open skies opened the door to unlimited access to any airport and any route between the two countries, but I don't believe cabotage rights should be such a sticking point. Really, how lucrative is it really for BA to fly domestically. They can let AA do their thing in the US and with an open skies bi-lateral agreement they would be able to gain anti-trust immunity. They wouldn't have to devote aircraft to what would undoubtedly be limited US operations. I guess I really don't see the point.
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RE: Cabotage For UK Carriers... Your Thoughts?

Mon Oct 29, 2001 10:38 am

Cabotage will not be discussed in any air services agreement negotiations any time soon because the current laws would not allow it. Period.

Nowadays, with all the airline alliances, non-US airlines can reach to more US destinations via codeshares which would be a lot more efficient than operating in between US destinations by themselves even if they are given cabotage rights.

Ten or fifteen years earlier, a couple of US airlines had extensive fifth freedom rights from London and Frankfurt serving a handful European cities from these two cities. Now, these fifth freedom rights are pracitcally unused because US airlines use codeshares as a more efficient way of serving secondary European destinations.

Tokyo is the only major exception. NW and UA still have extensive network out of NRT using fifth freedom traffic. Well, I digress.
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RE: Cabotage For UK Carriers... Your Thoughts?

Mon Oct 29, 2001 11:11 am

UK airlines are not interested in operating stand-alone US domestic flights. The stumbling block is when British Airways operate a route like LGW-PHX-SAN, they are unable to pick up any passengers for the domestic US leg, making the service less viable.

Yes, US carriers can get passengers to onward destinations more efficiently once they get off a Trans-Atlantic flight. UK airlines are not planning to operate all their own US connections, why bother being in oneworld or Star if they do that? They only want the rights to carry passengers on the very small number of services which serve more than one US city. We're not looking at the situation in the 1980s when Pan Am/TWA had large European based B727/737 and A300 fleets operating an extensive short-haul network out of Heathrow, Frankfurt and Paris.

So, to go back to the hypothetical example, BA don't want to base British registered A320s in Phoenix and fly 10 times daily to San Diego carrying US citizens. What they do want to be allowed to do is offer any spare seats left by passengers who have left the London-originated B747 in Phoenix, to local travellers. Hardly much of a threat to the US airline industry...especially since they'd probably codeshare it with a US carrier anyway.

The rights appear to be more symbolic than anything, I can only think of a very small number of cities where UK airlines would want to use their cabotage rights, most Trans-Atlantic destinations can support their own flights.

British Airways have offered US domestic flights as recently as 1995. That Summer they still flew Glasgow-New York with B757s, and due to poor loads the flight was extended to Boston to boost loads. No US domestic passengers could use the JFK-BOS leg, but British Airways marketed the flight for passengers flying MAN-JFK to change aircraft in New York and continue onto Boston in the B757, the service was only available to passengers connecting off a Trans-Atlantic flight. The fact that the service only lasted 6 months should indicate the reality of how much UK carriers would use any Cabotage rights....

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RE: Cabotage For UK Carriers... Your Thoughts?

Mon Oct 29, 2001 12:06 pm

Now with all this talk of Cabotage and 5th and 7th freedom rights, I am reminded of Iberia's Central American flights out of MIA (I belive that AF had a similar service to several French speaking Caribbean islands) I suppose these would be considered 5th or 7th freedom rights flights.

Now I have 2 questions;

First, are these IB flights still operating ? Second what is the diffrence between 5th and 7th freedom rights ?

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RE: Cabotage For UK Carriers... Your Thoughts?

Mon Oct 29, 2001 12:16 pm

For those of you wandering about what all those 'x'th freedom rights mean:

The Chicago Convention defined only five freedoms of the air1:

1st The right to overfly foreign territory for example en-route from one country to another.

2nd The right to make a non-traffic stop in another country, for example to refuel

3rd The right to carry passengers from the home country to another country.

4th The right to carry passengers to the home country from another country

5th The right to carry passengers between two countries by an airline of a third country, with the route beginning or ending in the home country.

The ICAO identified three supplementary freedoms but which not officially recognized2:

6th The right to carry passengers between two foreign countries by stopping or connecting in the home country

7th The right to carry revenue traffic between two countries without extending the route to the home country.

8th The right to carry passengers between two domestic points within a foreign nation. This is also known as cabotage
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RE: Cabotage For UK Carriers... Your Thoughts?

Mon Oct 29, 2001 2:14 pm

I am of the opinion that this will not happen. Regardless of how important open-skies is to the US government and how important LHR access is to DL, CO, US, and NW, I simply do not see the US selling the farm, so to speak. I cannot fathom that, if UK carriers are allowed cabotage rights, other countries with whom we have signed open-skies agreements will not cry foul and demand that they too be given access to the US domestic market. At this point it becomes a question of where does one draw the line. Furthermore, the UK is now faced with the fact that if it does not sign an open-skies agreement with the US soon, the EU may do this for it. This agreement would, of course, be on the EUs terms and not the UKs. Hence, the UK may be more willing to make concessions now than it was in the past. Thus, I simply cannot see the government granting UK carriers access to the domestic US market anytime soon.
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RE: Cabotage For UK Carriers... Your Thoughts?

Mon Oct 29, 2001 4:29 pm

For someone who often accuses others of not knowing what they are talking about, you would think that DeltaSFO would check his facts before claiming that cabotage is the primary sticking point in the upcoming UK-US bilateral negotiations.

Just prior to the last round of talks, which never came to fruition because of BA's failed strategy to buy KLM and the resulting confusion, the British government at the behest of BA was already planning to drop their request for cabotage. This was widely reported in every industry report that I read.

Until then, cabotage had served the British as a kind of decoy. They really didn't want cabotage, but they knew it was something the US Dot could never offer in negotiations. Hence, they could always back out of any agreement by claiming that the US wasn't willing to institute a true open skies regime. It is their fault, not ours.

Just prior to the last round of preliminary talks, BA and the British Transport Authority had dropped this demand in a proposal they exchanged with their US counterparts. Under BA's directions, the British transport authority now wanted to reach an agreement because it thought there was a greater chance of doing so in view of the code-share agreement that had been reached between BMI and United.

That last round of talks never happened because BA's transatlantic strategy was thrown into doubt after its failed merger attempt with KLM. Since then, BA has made up with AA and the two have refiled their anti-trust immunity application with the US DOT and the EU.

That brings us back to where we were just prior to the last round of talks. Under BA's and BMI's direction, the British Transport authority is likely to agree to an open skies regime on the condition that BA's alliance with AA and BMI's alliance with United is approved. That will probably be its only condition. Cabotage will be a non-issue. BA never wanted to run intra-US routes; they simply wanted transfer traffic from AA. Increasing the limits on foreign ownership of a US airline will also be a non-issue. The British Transport Authority has clearly decided to advance the interests of BA and BMI at the expense of Virgin.

The only sticking point may be the number of slots that both BA and BMI have to give up at Heathrow. But, I think a pro-AA administration, and a pro-British sentiment in the upper echelons of the US government, because of their assistance in the war on terror, will save BA and BMI from having to do that. Instead, I think what we will see is a deal very similar to the one reached with the Japanese about five years ago.

Heathrow will be opened up to two non-incumbent US carriers (e.g., CO and Delta). A third carrier will be allowed to code-share with one of these carriers in order to gain direct access itself to Heathrow (e.g., Northwest). The British Transport authority itself will make available a number of slots to those carriers so that they can initiate weekly service from at least one of their hubs. It will agree as part of the open skies agreement to build another runway at Heathrow and to make a number of the new slots created by the new runway available to non-incumbent US carriers. The British Transport Authority will sanction the purchase and transfer of slots from existing carriers at Heathrow to their US counterparts. Incumbent carriers will be allowed to initiate service from any city in the US to Heathrow. All carriers will be allowed to do third-party codesharing through London. I imagine that will mean Delta/AirFrance/Alitalia/SAA codesharing through Heathrow, Continental/KLM, AA/CrossAir/Iberia/Finnair/AerLingus/JAL/Cathay/Qantas, and UA/SAS/Lufthansa/Austrian/ANA.

That's it folks. Being patient will have paid off for both AA and BA.


RE: Cabotage For UK Carriers... Your Thoughts?

Mon Oct 29, 2001 6:26 pm

Nice to see some informative, non-flammatory, non-nationalistic posts here! Just objective & fair analysis of the situation.

The UK will come under ever-increasing pressure to strike a deal wit the US in my opinion; if it doesn't, it risks having the EU interpret "Open Skies" for it, and BA losing out in a very dangerous way by not allying with American, in a way that AF/DL have been able to.

Open Skies is not a completely liberal agreement, there are still some restrictions which I think could be lifted. Although a lot of people have poo-pooed cabotage as unecessary & symbolic, I still think it should be granted, if what we want to do, is fully liberalise the "air" market for the benefit of the consumer (that's the aim isn't it?).

Seventh-freedoms should also be granted; the UK in practise only secured a few such freedoms from the US.

The "substantially owned and effectively controlled" clause should also be removed. Any airline, regardless of who owns it, should be allowed to operate any service to the US, from any origin, to any ultimate destination country.

Some may regard the above as unecessary, but I beleive we should aim to remove ALL and I mean ALL barriers to promote true competition; and who is to say a future or present airline won't use cabotage or seventh-freedoms?

And there are also a few other niggly issues which I have already mentioned (re:Atlas Air and leasing of American crews to other operators-not reciprocal), personnel on US Gov't contracts obliged to "fly American" etc., but I think these should really be left alone, in the interests of the greater national good that Open Skies will bring to the UK (and the US).

And obviously the Americans have much more to gain out of this than the Brits, but it's not exactly their fault that their geographic market is so large.

And lastly, as someone has already mentioned, the UK and the US are presently on "best buddy" terms, so this is the perfect time for a bit of arm-twisting & ankle squeezing (if y'all see what I man by that) Big grin

Open Skies is possible, if both parties are prepared to make a little compromise (if it is neceessary).

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RE: Cabotage For UK Carriers... Your Thoughts?

Tue Oct 30, 2001 2:32 am

One of the major sticking points is access to LHR. It is currently restricted to 2 UK carriers flying to the US, and 2 US carriers. These are represented by BA, VS, UA, AA. BMI, DL, NW, CO, US would all like to fly US-UK services from LHR. The UK govt is balking at increasing access to LHR.

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RE: Cabotage For UK Carriers... Your Thoughts?

Tue Oct 30, 2001 3:30 am

Access to LHR is limited mainly by the number of slots, as LHR is already running at over 100% of capacity. Hence, even if other airlines had theoretical permission to fly there, they wouldn't stand a big chance of getting any slots until new runways and terminals are built anyway.

I was surprised no one mentioned Virgin's interest in founding an American airline (although that plan is pretty much cancelled forever, now that the industry is in a crisis, and Jetblue already exists as a powerful brand-intensive cost-efficient newcomer)

As far as I'm concerned, I don't see what the big deal is. I would not mind seeing 8th freedom rights for any airline of any nation in any other nation. Why not? The only exception would have to be government-owned or -subsidized airlines that could use such freedoms for dumping, but other than that, let the free market economy regulate itself. What sensible reason is there not to apply such a transport policy? Protectionism? Hardly sensible. Safety? As long as the airlines conform to local safety standards, no prob. I can't think of any reason not to permit it...

So well, I agree 100% with Capt Picard...



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