Uplink ALPA - The Voice of Aviation

The New Zealand Air Line Pilots' Association Newsletter.

How blue will New Zealand’s horizon be?

In the January/February issue of Uplink, NZALPA President Tim Robinson identified one of the major issues for 2017 as New Zealand’s position amid the ‘Open Skies’ debate. As more countries liberalise their airspace, embrace ‘flags of convenience’ practices, and decide whether to implement the draft International Civil Aviation Organisation’s (ICAO) Working Group Global Multi-lateral Air Services (‘Open Skies’) Agreement, how will New Zealand vote?

For passengers, Open Skies agreements seem like a great move for increasing consumer choice.  A freer market for the airline industry has already led to cheaper international travel deals, with a growing number of international, not just national, carriers able to enter additional geographical markets where airlines and their shareholders identify potential financial benefit.

And so here’s the rub. Will cheaper travel and more consumer choice ultimately be at the expense of aviation workers and those who ensure that air travel is safe? For staff and the industry itself, will more Open Skies and the related flags of convenience (see box) really lead to barely-there regulations and greater risk? Is this a downward spiral that will emulate the basic wages and compromised safety experienced in the global shipping industry, in which such schemes are now commonplace?

Since the inception of commercial international flights, New Zealand’s most popular routes have been trans-Tasman. Understandably, for many years both national carriers and other Australasian airlines flew without wider competition. The most obvious change came with the introduction of flights to Dubai via Sydney with Emirates, which began in 2003 and were permissible under New Zealand aviation law.   

As well as attracting a number of New Zealand and Australian-trained pilots to its ranks, Emirates entered a market where it too could offer alternative and competitively-priced deals for the trans-Tasman traveller, despite its head office being based more than 14,000 kilometres away.

As aviation writer Grant Bradley recently reported in an interview in Sydney with Emirates’ President Sir Tim Clark, now the airline is itself facing growing competition from Middle Eastern carriers Etihad and Qatar, and also from the large Chinese operators.

The drop in fuel prices have also been reflected in lower costs of flying and been a boost to the travelling public, “…but (it’s) a double-edged sword for Emirates, in an industry that was notorious for racing to the bottom,” Clark said.

“Opponents ‘threw bricks’ at Emirates in the early days …and said we were cheating, saying we had free oil, government money, because they couldn't understand how this could happen and for us to still make money and quite good money,” Clark added.

Bradley reported that Emirates had spent years pushing back on the high government subsidy claims, and others about paying low wages, especially from opponents in the United States where the big three carriers have fought hard against Emirates entering that market.

With the election of Donald Trump as US President, the Canada and United States’ Air Line Pilots’ Association, ALPA-I, recently orchestrated a campaign against what they saw as breaches of US Open Skies agreements, showing their members’ distaste for flag of convenience strategies.      

Those big three, Delta , American Airlines and United Airlines, have accused both Emirates and Etihad Airways of getting more than $40 billion of subsidies from their government owners, providing the Gulf airlines with what the US companies view as an unfair advantage as the Middle Eastern carriers expand flights to the US.

“It seems that they are hoping the more trade isolationist and ‘America First’ policies of the Trump administration will also protect the American aviation industry from such global competition,” said Tim Robinson, NZALPA President, who regularly flies the popular New Zealand-US routes. 

Earlier this year, many US pilots rallied in opposition to Norwegian Air International (NAI) who’ve developed a flag of convenience model that it believes will undercut US airlines by being able to obtain an Air Operator Certificate (AOC) and lower cost contracted labour in countries to which it doesn’t fly. 

The ALPA-I maintains that NAI’s business plan would violate Article 17 of the local Open Skies Agreement and take advantage of comparatively ‘relaxed’ employment laws to hire foreign-domiciled workers “at wage and benefit levels substantially lower than if operated as a Norwegian airline headquartered in Norway,” ALPA-I said recently. 

Meanwhile, looking to meet the needs of the ‘Greek diaspora’, Emirates plans to start a second fifth-freedom service to the US this month, every day between Dubai and New York via Athens.  As was recently reported in Air Transport World, Emirates’ Dubai to New York route, which uses fifth-freedom rights contained in the US-UAE Open Skies Agreement, is regarded by many in the industry as what prompted the US majors to start a campaign against Gulf carrier expansion.

In New Zealand, NZALPA president Tim Robinson said the issue is being echoed here with concerns about the Gulf carriers in particular. 

“In theory, pilots benefit from increased competition as it provides more jobs for our members as well as more choice for the travelling public. But again we’re concerned about unfair competition from heavily subsidised Gulf airlines and flags of convenience where such liberalisation might come at the expense of fair wages and working conditions, and impact on safety regulations for air crew and passengers.” 

WHAT ARE ‘OPEN SKIES’?

Open Skies is an international policy concept that calls for the liberalisation of the rules and regulations of the international aviation industry – especially commercial aviation – in order to create a free-market environment for the airline industry.

Its primary objectives are:

  • To liberalise the rules for international aviation markets and minimise government intervention as it applies to passenger, all-cargo, and combination air transportation as well as scheduled and charter services; and
  • To adjust the regime under which military and other state-based flights may be permitted.

For Open Skies to become effective, a bilateral (and sometimes multilateral) Air Transport Agreement must be concluded between two or more nations.

The New Zealand Government, through Ministry of Transport communication, has been clear that the objective of this country’s international air transport policy is to:

 “…help grow the economy and deliver greater prosperity, security and opportunities for New Zealanders. This will be achieved by seeking opportunities for New Zealand-based and foreign airlines to provide their customers with improved connectivity to the rest of the world, and to facilitate increased trade in goods and services (including tourism).”

This was underscored late last year when Transport Minister Hon Simon Bridges signed a number of Open Skies Agreements with various countries that officials had negotiated at a recent global air services conference.

Minister Bridges maintained that the Government’s International Air Transport Policy was bringing many benefits to New Zealand.

“Since the policy was implemented in 2012 more than 50 new or amended air agreements have been negotiated, bringing the total to 78. Most of the major airlines in the world are now able to operate services to New Zealand without restriction, with 19 new air routes announced in the past year alone.

“We’ll continue our efforts to grow and enhance these connections, making it easier for New Zealanders to travel and trade internationally,” Bridges said. 

FLAGS OF CONVENIENCE AND FIFTH-FREEDOM FLIGHTS

Flag of Convenience (FOC) is traditionally a business practice whereby a merchant ship is registered in a country other than that of the ship's owners, and the ship flies that country's civil ensign. Owners may register the ship under a flag of convenience to reduce operating costs or avoid the regulations of the owner's country.

Norwegian Air Shuttle’s Irish subsidiary, Norwegian Airline International (NAI), exists because Ireland tried to maximise its growth by minimising trade rules, claims conservative media site Breitbart. The FOC permit was granted under the Obama administration and the NAI’s US operation was due to begin from 29 January 2017. 

A fifth-freedom flight is one where an airline from one country has the right to fly between two different countries, usually under an Open Skies Agreement. An example of this is India’s Jet Airways, which operates fifth-freedom flights between Toronto and Brussels. This is different to second-freedom flights, which allow an airline the right to stop for maintenance or fuel without disembarking passengers or cargo.

But Tim Robinson says NZALPA has in turn been clear with the Government about the perhaps ‘unintended consequences’ that come with supporting liberalisation of its own airspace and the draft ICAO Multi-lateral Air Services Agreement.

“We play an active role in a dedicated International Federation of Air Line Pilots’ Associations’ (IFALPA) Professional and Government Affairs committee that is considering the implications of the Multi-Lateral Air Services Agreement and will clearly convey its findings to the ICAO Working Group,” said Robinson.

“This includes building a robust, but constructive, relationship with the International Air Transport Association (IATA) and its representation of airline interests, as many of their members pursue their goal of widening Open Skies policies further.”

Robinson is concerned about major airline blocs that have formed and how liberalisation,  coupled with heavy airline subsidisation,  can also potentially lead to domination from major airlines, such as those based in the Gulf - particularly when cities such as Dubai have made clear their goal is to be the premium global destination and transport hub. 

“These national airlines have access to massive subsidisation and behind them enormous resources to lobby both government and commercial interests, even while they continue to operate at a loss.  There is also no unionism in the Gulf so staff employment terms and conditions are at the mercy of airlines and market forces,” he said

Robinson also draws comparisons with what could be the opening of a ‘Pandora’s Box’ if the aviation industry follows the lead of the shipping industry’s flags of convenience model. 

“This is already occurring in Europe, for example, where low-cost airlines have introduced cheaper consumer travel and more destination choices, but at the cost of markedly downgraded working conditions for staff and significantly lower safety regulation,” Robinson said.    

NZALPA representatives believe that a more balanced approach is the answer. 

“While we join other nations in recognising that growth is essential to the industry, it needs to be sustainably managed and fair,” Robinson said. 

“We don’t want to see a duopoly or a few large airline players dominating the market. 

“We need to make our own lawmakers aware of this and continue to be a strong voice in IFALPA – together we have the collective knowledge and experience of likely outcomes and must protect the pilot profession, ensure a level industry playing field, and that the safety of crew and the flying public is not compromised.”


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