US Open Skies, Boon or Bane

It's all Economics!

April 28, 2013

THIS year marks the 10th anniversary of the country’s open-skies agreement with the United States, but it remains to be seen whether the pact has resulted in increased numbers of tourists entering the country, as its proponents have argued, or had a negligible effect on tourist arrivals.

Among the various entitlements under the agreement, few have been followed, according to Southeast Asian Airlines (Seair) President Avelino L. Zapanta. He said the Federal Aviation Administration (FAA) downgraded the country’s aviation to Category 2, preventing any of the country’s air carriers from expanding any of their routes to the US.

“Naisahan tayo sa Category 2.  That’s the way of the Americans, to put one over us to prevent us from benefiting  [from the] open-skies facility,” Zapanta said.

Asked to comment on Zapanta’s observation during a separate interview, Civil Aviation Authority of the Philippines (Caap) Director General William K. Hotchkiss III gave a knowing smile: “It’s all economics. I can talk only about technical matters.”

Zapanta said that at present, the United States is not using its entitlement of 36 flights per week.

For his part, Civil Aeronautics Board (CAB) Executive Director Carmelo L. Arcilla, when asked to comment about the successes/failures of the open-skies agreement, said:

“Each country adopts its own pace in liberalizing, uso ’yan ngayon [that’s the trend today], not open skies but liberalization.” Even  the Philippines is pursuing liberalization, he added.

Asked whether the US took advantage of our open-skies policy so that US carriers could fly outside of Manila, Arcilla categorically said no. “The level of operation has been static; in fact, it has been lessened at some point but recently it has been static, and the reason for this is open skies is not a silver bullet,” he added.

The CAB chief said open skies is not a panacea where one invites the other participants to an agreement and expects that the services would increase and the tourists would come in droves.

“It’s all economics" DG Hotchkiss remarks on US Open Skies

“It’s a market-driven industry. So, it’s about infrastructure, marketing and peace-and-order perception.” 

He added that open skies could be an element or a support system that could bring about these goals.

Asked whether Philippine Airlines (PAL) was right all along when it claimed that open skies would not spur air-traffic growth or uplift local aviation industries, Arcilla had a ready reply: “We could not because we were downgraded to Category 2. We could have, because the market is growing.”
 

View from Brussels

The CAB chief recently flew to Brussels, accompanied by executives from PAL and Cebu Pacific to see Matthew Baldwin, currently director for Air Aviation and International Transport Policy at the European Commission.

Hotchkiss said Baldwin wanted to see the safety oversight system of the Philippines in accordance with international standards set by the International Civil Aviation Authority (Icao).

“I made a presentation…they knew already that as far as Icao is concerned, there were no longer SSC or significant safety concerns [in Philippine aviation]. And we also told them what we have done so far after that lifting of SSC, to address whatever safety concerns the EU has.”

Because of this, Hotchkiss said European Commission’s Directorate General for Mobility and Transport is sending a team to Manila the first week of June “to see whether what we told them is really there, the procedures prescribed by ICAO, hindi ’yung puro bibig lang tayo.”

In 2010 the 27-member European Commission imposed a ban on Philippine carriers, including PAL and Cebu Air Inc. (Cebu Pacific) from European airspace for the failure of the Caap to reform the country’s civil-aviation system. The EU followed the conclusions of the Icao as basis to ban Philippine carriers from operating over European skies.

Both decisions made by the European Commission and the FAA prevented airlines from the Philippines to mount additional flights to the US and Europe. But following the February 18 to 22 audit, the ICAO lifted the SSCs on the Philippines.

Hotchkiss received a copy of a letter of Raymond Benjamin, secretary-general of Icao, endorsing the Caap efforts toward aviation safety oversight.

Following the European Safety Council’s visit in June, Hotchkiss said he was “hopeful for the Filipino people, not just for Caap, that the EU would lift its ban before the end of the semester and hopefully, PAL and Cebu Pacific will fly to Europe and the European airlines as well.”

He added that the European and American investors appear in a hurry to have their respective countries resume flights to the Philippines in the wake of announcements by the Asian Development Bank and Moody’s Investors about the country’s robust economy.

John Bargallo and the FAA

Hotchkiss said John Bargallo, FAA manager for international programs and policies, can’t come to review the CAAP’s new status so he is sending somebody else on May 2 or 3 for a “check-in” visit.

“So it’s just a matter of communications and face-to-face visits and just to again affirm that what we are saying we have done has actually been done, insofar as standards and recommended practices are concerned.”

Asked how soon could the Philippines get back the Category 1 rating, Hotchkiss said: “I cannot tell that at the moment, but we’re also positive, maybe, the end of this year.…”