POSTSCRIPT / May 13, 1999 / Thursday

By FEDERICO D. PASCUAL JR.

Philippine STAR Columnist

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Alien airlines enjoy edge over PAL in its own base

IT’S useless putting together a rehabilitation program for Philippine Airlines or pumping in more millions if the plans do not include cutting back the generous traffic rights farmed out by the past administration to foreign competitors of the flag carrier.

There are just too many foreign airlines flying through Manila with their high-capacity jets and cut-throat rates, grabbing passengers and cargo most of which would normally go to Filipino airlines.

Fortunately, the Estrada administration seems determined to save the flag carrier and rationalize the airline industry. It has announced intentions to renegotiate lopsided air agreements with Taiwan, Korea and Hong Kong.

We’re also waiting for it to phase out temporary operating permits given by the Civil Aeronautics Board to Saudi Arabian Airlines, Emirates, Gulf Air and Air Nauru in preparation for Filipino airlines aggressively competing on international routes.

Playing Santa Claus to foreign interests, the past administration glossed over the fact that traffic rights are sovereign resources of immense value that are to be exchanged only for rights of comparable worth.

* * *

IN the midst of a $4-billion refleeting that should make it globally competitive by 1999, PAL had to cut back when the economic crisis hit the region.

Smelling blood, some foreign airlines enjoying unusual access to Manila went for the kill to wipe out PAL in its own home ground. While PAL was reeling from the crisis, and even before the ruinous pilot strike in 1998:

  • Korean Air and Asiana Airlines of Korea maintained their 13 weekly flights and used their higher-capacity Boeing 747-400 although the market of Korean tourists had dwindled and the number of Manila-Seoul passengers dropped. The Korean airlines concentrated on cornering the Philippine-North American (US and Canada) traffic through Seoul. Even now they are asking for more RP-Korea frequencies despite the sluggish RP-Korea market.
  • Cathay Pacific Airways of Hong Kong has taken advantage of the RP-HK air agreement to increase flights to/from Manila and Cebu. Despite the slowdown in Hong Kong travel, Cathay flew more planes between Hong Kong and the US connecting with their Manila flights. It is campaigning to grab Manila-US traffic by luring passengers to fly via Hong Kong. Under the RP-HK agreement, Cathay can still add more capacity.
  • China Airlines and EVA Airways of Taiwan have taken advantage of the generous agreement forged in 1996 to schedule more flights to Manila and attract US-bound passengers with cut-throat fares. They did the same in Hong Kong. They have succeeded in getting US-bound passengers to fly budget with them through Taipei or Hong Kong, and back.
  • Singapore Airlines maintained its flights to Manila using high-capacity B747-400 and B777 jets. With Singapore as a hub, it collected Manila passengers bound for the Middle East, Europe and other Southeast Asian capitals. Lately it has been also wooing Manila traffic to/from the US West Coast via Singapore.

* * *

BY sucking through-traffic to their home bases using favorable bilateral agreements, these airlines are able to develop their bases as Asia-Pacific hubs. This has deprived Manila a fair chance to realize its objective of becoming the hub of air traffic in the region.

From 1993 to 1998, our own government granted an 87-percent increase in passenger capacity rights to favored foreign airlines. This translated to 2.1 million new airline seats per year for flights between the Philippines and the countries of the foreign airlines.

This increased capacity includes a jump of 605 percent for airlines of Korea, 147 percent for Singapore, 49 percent for Taiwan, 132 percent for Hong Kong (with provisions of perpetual increases twice a year), 333 percent for Bahrain, Qatar and Oman, 300 percent for Kuwait, and 100 percent for the Netherlands.

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OVER the same six-year period, the government granted foreign cargo airlines a 2,647-percent increase in cargo capacity rights. This is equivalent to 100,000 additional tons per year.

In addition, the government also granted:

  • A 300-percent increase in the number of US cargo airlines that can avail of the Open Skies rights between the Philippines and the US.
  • The right for four US cargo airlines to establish their main Asia/Pacific cargo bases in the Philippines, a right formerly reserved exclusively for Philippine flag carriers.

During the same period, airlines of nine countries received over 560,000 seats per year in Fifth freedom passenger traffic rights. These are the airlines of Singapore, Indonesia, Korea and the Gulf states of Oman, Bahrain and Qatar.

* * *

FIFTH freedom is the privilege to carry passengers (from an airline’s national territory) through another country and on to another. In the case of the countries cited, their designated airlines were allowed to bring passengers from their home countries to the Philippines and onward to another country.

A sovereign nation has the right to ban all foreign aircraft, but in the interest of global amity and commerce, nations selectively allow certain commercials flights. When they do this, it is generally in the paramount national interest. Granting transit/transport rights usually requires a reciprocal granting of some equivalent right by the other country.

It is unusual, and often raises not only objections but also suspicion, when these valuable traffic rights are showered on favored foreign carriers. More so when the indiscriminate grants prejudice the local flag carrier.

* * *

AFTER Postscript mentioned Fifth freedom in last Sunday’s issue, some readers asked about these Freedoms that they read about every now and then.

These “Freedoms of the Air” were agreed upon in the Chicago Convention on International Civil Aviation of 1944. The First and Second freedoms are technical privileges, while the Third, Fourth and Fifth freedoms concern commercial traffic rights. Here are brief descriptions:

  1. First freedom — A transit privilege to fly over a treaty partner’s territory without landing. Many foreign aircraft fly over our air space every day with prior clearance. A problem arises when a country, like the Philippines, has inadequate equipment to monitor all aircraft and to challenge those entering our skies without prior approval.
  2. Second freedom — A transit privilege to make a technical landing in a treaty partner’s territory without picking up or letting off revenue traffic. Technical stops are usually for emergencies, repairs, refueling, or taking in provisions, but not to take in or let off passengers. If allowed to disembark, passengers are confined to the airport and board again to resume the journey.
  3. Third freedom — The privilege to carry revenue traffic from an airline’s national territory to a treaty partner’s territory. When PAL carries passengers from Manila to Hong Kong, where they must disembark, that is under Third freedom. If a passenger wants to fly on to some other country on the same PAL plane, that’s another story involving another freedom.
  4. Fourth freedom — This is the reverse of Third freedom wherein the carrier takes paying passengers from another country to its own national territory. When PAL takes passengers from Hong Kong to unload them in Manila its home base, that involves Fourth freedom.
  5. Fifth freedom — The privilege to carry passengers between two or more foreign countries on flights operating out of or into a carrier’s national territory. In the example given of PAL flying Manila passengers to Hong Kong (under Third freedom), if the passengers fly PAL to another country after Hong Kong, that is covered by Fifth freedom.

(We have been using Hong Kong as an example of a foreign country just for convenience. One-China advocates would insist that Hong Kong is not a country but just a part of China.)

* * *

IN addition to these five Freedoms, the industry has developed so-called Sixth, Seventh and Eighth freedoms, which are variations of the first five Freedoms. Brief descriptions:

  1. Sixth freedom — The privilege to carry passengers between two countries passing through the carrier’s national territory. In our previous illustration of Fourth freedom where PAL takes passengers in Hong Kong and flies them to Manila, if the passengers do not disembark in Manila but fly on to another foreign port, say, Sydney, that is an exercise of Sixth freedom. Sixth freedom is then a combination of Fourth freedom (Hong Kong to Manila) and Third freedom (from Manila on to Sydney)
  2. Seventh freedom — The privilege to carry passengers between two countries by a carrier operating outside its national base. In our example, if PAL carries passengers from Sydney to still another country, say, the US, then PAL would be transporting passengers under the Seventh freedom.
  3. Eighth freedom — But if from Sydney, PAL flies passengers to another city within Australia, say, Canberra, that involves Eighth freedom. This is an unusual arrangement, sometimes called cabotage, that is generally not allowed as it is reserved for domestic airlines.
* * *

(First published in the Philippine STAR of May 13, 1999)

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