International air transport policy of New Zealand

Maurice Williamson Transport

Introduction

Efficient international air services are vitally important to New Zealand.
By providing links with the rest of the world, they facilitate business and
leisure travel, as well as trade, investment and technology transfer.
Accordingly, and in line with the Government's broader economic and trade policy
objectives, New Zealand seeks to conclude with other countries the most liberal
and flexible air services arrangements possible, providing for freer access for
international airlines and thereby for increased competition among them.

New Zealand's external aviation policy was last promulgated in 1985. Since
then there have been major developments in the airline industry. These include
the globalisation of the industry, evident in the increasing importance of
commercial alliances and third-country code-sharing arrangements. Changes have
also taken place in the policy environment, with the advent of open skies air
services arrangements, and comprehensive free trade agreements that have
potentially significant implications for aviation policy. As a result of these
changes a re-statement of New Zealand's international air transport policy is
warranted at this time.

Background

Despite the numerous changes in international air transport in the last
fifty years, its basic ground rules established in the Chicago Convention of
1944 have remained intact. The principle of national sovereignty over each
country's airspace is still firmly entrenched and, except in a few common market
situations, international aviation relations continue to be regulated by a
system of bilateral government-to-government agreements for the exchange of
traffic rights, or market access, based on the principle of reciprocity. This
bilateral framework is unlikely to change in the foreseeable future.

Since 1985 New Zealand has pursued a policy of maximising the benefit to the
economy from international air services, through reducing barriers to trade in
air services on a reciprocal basis. New Zealand now has 32 Air Service
Agreements, up from 12 in 1985, with 29 airlines using the opportunities created
by those Agreements. Total visitor arrivals have increased by 150% while the
number of New Zealanders travelling overseas has increased by 170%. Alongside
these benefits, New Zealand now has a very competitive, well-reputed, and
profitable international airline industry.

For many foreign airlines, the characteristics of the New Zealand market are
not as attractive as those of countries closer to their base and which have
greater populations. Consequently, the New Zealand airline industry has played a
major part in promoting New Zealand, consistently accounting for about 45% of
the international passenger traffic to and from this country since 1985.
However, in the interests of improved service and efficiency, the Government has
promoted an open international air transport policy environment to facilitate
competition from foreign airlines and potential New Zealand controlled airline
ventures.

An increased commercial emphasis within the airline industry, driven by a
trend around the world to privatisation of airlines, has led to increased
globalisation of the industry. Code-sharing arrangements and more comprehensive
alliances have in turn impacted on the nature and extent of airline operations
as airlines pursue strategies to improve competitiveness and profitability.

Policy Objectives

The overall and determining objective of New Zealand's international air
transport policy is to maximise economic benefits to New Zealand, including
trade and tourism, consistent with foreign policy and strategic considerations.
New Zealand therefore seeks to conclude with other countries the most liberal
and flexible air services arrangements possible, as a means to securing enhanced
quantity, quality and breadth in our international civil aviation links.

International air transport policy has a key role to play in supporting the
Government's broader strategy of strengthening external linkages, strong
economic growth, and encouraging enterprise and innovation, leading to an open,
dynamic and internationally integrated economy.

We believe that the best way to achieve our objectives is to encourage
bilateral partners towards mutual liberalisation of air services arrangements,
with the aim of facilitating access to existing and potential air markets of
interest to New Zealand. Such an environment maximises opportunities for
market-place competition. This is more conducive to achieving a mix of prices
and services that can give New Zealand consumers and business a better deal.

The Government will, in the interests of consumers and to maintain a
competitive industry, continue to ensure that adequate safeguards are in place
to counter anti-competitive or predatory behaviour by airlines.

The Government believes that while it is in the country's best interests to
have a well-performed international airline headquartered in New Zealand, the
interests of New Zealand airlines should not be permitted to override the
country's broader interests.

Implementation of Policy

In implementing our international air transport policy, tourism, trade, and
aviation interests along with foreign policy will continue to be taken into
account.

Pursuit of the liberalisation of international air transport services is an
integral part of, and consistent with, the Government's overall trade policy
strategy whereby it seeks to achieve the best outcomes for New Zealand through
bilateral, regional and multilateral tracks. At present the bilateral and
regional tracks offer the best opportunities to secure the Government's
objectives in international air transport.

Increased access for foreign airlines to the New Zealand market will continue
to be balanced with a fair opportunity for New Zealand airlines to compete.

The Government clarified in the context of the 1997 Budget that it would
pursue open skies agreements as a matter of priority, with the focus being
particularly on APEC economies. We will continue to pursue opportunities to
reduce barriers to trade in air services by seeking open skies agreements, to
complement those negotiated already with the United States of America,
Singapore, Malaysia, and the United Arab Emirates.

Our key objectives in negotiating such agreements are to achieve
comprehensive, reciprocal liberalisation in terms of:

  • no route restrictions, including by way of code-sharing, rights of
    establishment in other countries and cabotage;
  • unlimited capacity, through no constraints on the number of flights or types
    of aircraft;
  • open investment in airlines; and
  • the ability for airlines to charge whatever prices they wish without having
    to file such prices for notification or approval with any authorities.

Also of significance are the objectives of securing multiple designation of
airlines, and of ensuring there are as few restrictions as possible on
non-scheduled services.

The achievement of an internal Single Aviation Market with Australia has been
an important accomplishment in recent years, complementing the comprehensive
liberalisation of trans-Tasman trade in goods and services accomplished under
the Closer Economic Relations Trade Agreement. However, dual-destination tourism
and airline strategies point to the growing integration of the Australian and
New Zealand markets. The development of an environment where our airlines have a
fair opportunity to compete remains critical to the competitiveness of the
industry, and the best deal for consumers. Consequently, achieving a greater
exchange of beyond rights remains a key objective for the Government.

The development of robust aviation relationships with countries in Europe
will continue to be an important factor in our international air transport
links. The growth in visitor movements from these countries must be matched by
increasing opportunities for airlines to serve the markets, with as few
restrictions on their ability to do so as is possible.

Within the Pacific, the New Zealand Government is very much aware of the
particular air transport needs of the Forum Island Countries, and will maintain
a flexible and positive attitude in the negotiation and implementation of air
services arrangements with them.

On the regional track, APEC's role in the liberalisation of air services
arrangements is potentially very significant. APEC Leaders, in the 1994 Bogor
Declaration, made a commitment to achieving free and open trade and investment
for industrialised economies by 2010, and for developing economies by 2020. Air
services are an important part of trade in services and, in New Zealand's view,
are included in this commitment. Consequently, we will continue to encourage our
APEC bilateral partners towards the early application of APEC's Bogor principles
in air services agreements. An important aspect in this regard is to make
provision, ahead of the APEC 2010 timeframe, for open investment in airlines.

In the meantime, almost all of New Zealand's bilateral agreements provide for
a State to withhold operating authorisation from an airline designated by the
other State if it is not satisfied that the airline is substantially owned and
effectively controlled by nationals of the designating State. Until such time as
the Government can be confident that an airline it designates would not be
denied access to traffic rights with other bilateral partners, designated New
Zealand international airlines will continue to be required to be substantially
owned and effectively controlled by New Zealand nationals.

We will continue also to pursue liberalisation through other multilateral
avenues, in particular through the International Civil Aviation Organization,
the World Trade Organisation, and the OECD. The mandated review of the General
Agreement on Trade in Services (GATS) scheduled to begin in 2000 will be a good
opportunity for New Zealand to advocate a broadening of GATS' application to air
services.

Conclusion

New Zealand's position as a successful trading nation is reliant on ensuring
that service sectors such as international aviation have the opportunity to
offer the most efficient service possible. Pursuit of the liberalisation of
international air services will continue to be an integral part of Government
policy, whereby it seeks to maximise the benefits to New Zealanders of
international air services. The Government will continue to work towards
providing a framework and environment conducive to achieving this goal.

Hon. Maurice Williamson
MINISTER OF TRANSPORT

February
1998