Sixth freedom: flying under the regulatory radar?
Key words: air service agreements, competition, air transport, freedoms of the air, sixth freedom services, liberalisation
For the last 70 years, the right of an airline to carry passengers or cargo from one state to the other has been regulated by air service agreements (hereinafter: ASA’s) between the two respective countries. As the air transport progressed into big and powerful industry with considerable market share, the ASA’s followed – from restrictive agreements limited strictly to transport between the signatory states, they developed into bilateral and multilateral agreements providing underlying traffic rights for the consummation of various commercial arrangements between air carriers. In the context of freedoms of the air, ASA’s did not only allow third and fourth freedom (the right to carry traffic from home state of the operator to another state, and vice versa) but started granting the fifth freedom as well (the right granted by one state to another to carry traffic destined to or originating from the third state).
Freedoms beyond the fifth were almost never subject of ASA’s. In the world of state owned carriers and highly regulated airline activities, it was not very lightly that any of them would be granted traffic rights between two foreign countries (foreign meaning that none of them is the home state of the carrier). Seventh, eighth and ninth freedoms (which include rights to carry passengers or cargo between two foreign countries without any link to home state of the carrier, and the right to operate within a foreign country) were granted to foreign carriers extremely rarely and for justified reasons (e.g. tourism or sports events). As for the sixth freedom, which is usually defined as the right to carry traffic between two other states via home state of the carrier, there was rarely any need to regulate it. The definition of sixth freedom, as explained above, was the basis for some theories that a sixth freedom is nothing more than a combination of third and fourth freedom. This view is understandable if taken into account that for decades passengers had to buy separate tickets and collect their baggage after each flight and there was a lot less knowledge or visibility of passenger’s final destination, if any.
Further development of air transport led to emergence of interline and code share agreements, airline alliances and electronic ticketing. For a passenger, this means that not only does he not have to have a paper ticket anymore or collect his baggage at every stop, but it also means he doesn’t have to buy separate tickets for flights operated by different airlines. A service could be provided on a single contract of carriage consisting of two or more flights, i.e. legs of the journey. In terms of traffic rights, what was once a clear picture started to be a blurry one. With commercial and technical possibilities of providing services between two foreign countries, and with a deficient regulatory framework which was drafted decades ago, more and more carriers use this situation to effectively exercise more rights then originally planned by the regulators. This practice is also heavily supported by airports of the home state which enjoy increased passenger numbers and expansion of their business.
In this paper I will examine the types of traffic rights granted by international agreements and their evolution as the airline business changes. Furthermore, I will analize recent trends in airline practices and its consequences on the competition. Finally, I will give my reasons for believing that the sixth freedom is far more than a simple combination of third and forth freedom and should therefore be an unavoidable part of any future air services agreement.
