The International Framework for Aviation Regulation

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Bilateral agreements

As aviation technology progressed, the need for additional aviation diplomacy became apparent. A bilateral agreement was the first step towards removing air barriers. This type of agreement between two countries permits air services only to those cities specified in the bilateral. Governments of both countries negotiate bilateral air transport agreements to determine items such as international airline routes, frequency and capacity. These agreements established a regulatory mechanism for the performance of commercial air services between the two countries. Bilateral air transport agreements are generally made by executive agreements, treaties, or an exchange of diplomatic notes and are essentially reciprocal exchanges of authorisation to permit international air services between two contracting parties.
For example, Britain and the US in 1946 negotiated a model bilateral air service agreement commonly known as Bermuda I, where by the United States agreed that international tariffs and fares would be set by the International Air Transport Association (IATA). In exchange, Britain allowed US carriers to determine their passenger capacities and frequency of service. Additionally, the agreement provided for liberal fifth-freedom traffic rights for both parties which lasted for the next thirty years, but had to be renegotiated due to disagreements between the two countries as the industry changed over the years. These agreements controlled air traffic flow between the partner countries by means of designation of air carriers that were allowed to serve routes, by controlling market access (which means defining traffic rights as well as landing points), by implementing controls for air services capacity and frequency and by regulating air fares. As long as the system of restrictive bilaterals governed almost all international air transport links worldwide, national governments had almost full control over all air traffic flow, to and from their own countries. They typically used their control measures to support their national airlines on international markets (Wolf, 2001).

Deregulation and “liberalisation”

Deregulation is very much a US term, while in other parts of the world ‘liberalisation’ or ‘regulatory reform’ is the more common jargon. The birth of deregulation resulted from the Airline Deregulation Act (ADA), which was a piece of US legislation, signed into law on October 28th 1978. The main purpose of the act was to remove government control and open the domestic passenger air transport industry to market forces. The intention of the ADA was that with market forces determining the price, quantity and quality of domestic air service there would be a reduction in fares, lower barriers to entry for new airlines and the increased use of different aircraft for different roles (turboprop vs. jet engine). Deregulation therefore allowed for a free and efficient marketplace, which would encourage competition within the market. The act intended for the restrictions to be removed over four years with complete elimination of restrictions on domestic routes and new services by December 31st 1981 and the end of all domestic fare regulation by 1 January 1983 (Edwards, 2002).

African Union (AU)

The Organisation of African Unity (OAU), now known as the African Union (AU), is a body that was set up with the aim of dealing with issues within the African region like conflict resolution, overseeing trade and regional policies with the ultimate aim of uniting the African continent. The YD has been adopted by the AU in such a way that all member states of the AU are automatically supposed to implement the Decision. The date of implementation of the Decision was set at 12 August 2002 following its signing by the President of the 36th Ordinary Session of the AU Heads of State and Governments; thereafter the high-level organs of the AU, the Regional Economic Communities (RECs) and ECA should set in motion initiatives to ensure that States respect their commitments. Accordingly, it is recommended that the future action of ECA, the RECs, the AU and agencies responsible for the development of air transport in Africa especially AFCAC should be focused on the implementation of the YD and organising meetings at the sub-regional and regional levels to provide the necessary technical assistance for capacity building and safety supervision

African Civil Aviation Council (AFCAC)

The African Civil Aviation Council (AFCAC) is a specialised agency of the AU that plays a key role in coordinating and negotiating with ICAO and other regions of the world in order to make sure that African views are taken into account in arriving at world decisions on air transport. At the international conferences on air transport, AFCAC’s role is to defend the African Common Position on the future regulation of air transport in the YD. AFCAC has set up a follow-up committee on the implementation of the YD. This Committee has been very actively sensitising member states and addressing the problems encountered. It has met several times to assess the progress made in the implementation of the Decision and reported thereon to the air transport committee of AFCAC (ECA 2003). It has also assisted the Economic Community of West African States (ECOWAS) to design a multilateral agreement on air transport. It participated in the sub-regional follow-up committee meeting held at Lomé, Togo which Côte d’Ivoire organised as coordinator.

African Airlines Association (AFRAA)

AFRAA is an association of all airlines operating within Africa that are owned by African member States with the objective among others, of harmoniously developing African air services. AFRAA has gathered information on the implementation of the Decision and informed members of its executive committee about the problems encountered and the progress made. It organises sub-regional meetings to which it had been invited by preparing and submitting documents such as the model text relating to the integration of the Decision in national air transport policies. The African Airlines Association (AFRAA) has regularly kept its members informed on the status of implementation of the Decision and in collaboration with COMESA, organised a workshop for air transport companies. AFRAA has conducted studies on the effects of code sharing and franchising, within the context of liberalisation of air transport markets in Africa. AFRAA has also participated in meetings organised at the country and sub-regional levels by States and by RECs, on competition rules and the impact of the Decision.

Southern and Eastern Africa’s regional trade organisations

The Southern African Transport and Telecommunications Commission (SATCC-TU) has regularly brought together directors of civil aviation authorities and airline managing directors to meetings where the implementation of the Decision, the legal mechanisms for strengthening the Decision, amending bilateral agreements and harmonising national laws has been discussed. SATCC-TU was also involved in setting up a follow-up committee for the YD implementation. The Common Market for Eastern and Southern African states (COMESA) has been very instrumental in creating guidelines for member states on the implementation of the liberalisation policies in the air transport sector. It has also arranged for monitoring mechanisms through seminars and workshops for relevant aviation authorities, establishment of the COMESA council on air transport, which will harmonise policies and rules governing civil aviation. The South African Development Community (SADC) in March 2002 organised a ministerial workshop in Mozambique, in which the Decision was strengthened by adopting it to the national laws of member states of the AU. This involved the formulation of articles in the Decision, devising an appropriate mechanism for settlement of disputes, establishment of a joint COMESA-SADC unit to monitor the implementation of the Decision and harmonising actions at the sub-regional level aiming towards uniform implementation in Africa. Eastern Africa has the East African community (EAC), which hand in hand with COMESA and SADC has helped create awareness and has facilitated the formulation of the necessary regulatory instruments for implementation of the Decision. A ministerial workshop was held on 12 August 2002 by COMESA, EAC and SADC, involving the aviation industry stakeholders like civil aviation managers, air transport authorities and lawyers to enhance the understanding of the Decision and recommend the establishment of a joint monitoring body.

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Monitoring Activities

The slow progress of the implementation of the Decision has been integrated into the activities of the AU by forming the regional follow-up organ, which comes under its presidency. The regional follow-up organ for implementation of the Decision was established in accordance with its article 9 and consists of the OAU/AU (President), ECA (Secretariat), AFCAC (Rapporteur), AFRAA and sub-regional organisations, which meet often to consider the questions raised by the various stakeholders and furnish the necessary solutions and clarifications toward facilitating the implementation of the Decision. The AU has also embarked on efforts to create awareness among member states on the implementation of the Decision by transmitting to States, under the signature of the Interim President, the documents on competition in air transport prepared by COMESA, SADC and the EAC. The AU participated in the drafting of the Memorandum of Clarification on the Articles of the YD (ECA, 2003). The continental follow-up organ has adopted programmes and plans to support the implementation of the Decision. These programmes and plans cover, inter alia: 1. Capacity building: (sensitisation on the objectives and implications of the Decision) 2. Legal instruments and institutional dimensions and 3. Technical assistance to be provided to partners at their request. At the request of the follow-up organ and some of the regional economic communities, ECA has, in collaboration with the regional follow-up organ, prepared a document on the legal clarification of questions raised at meetings organised to create awareness and broaden the reach of the Decision among countries. A Memorandum of Clarification prepared by the members of the regional follow-up organ on the basis of the document of clarification was sent to States under the signature of the Interim President of the AU.

TABLE OF CONTENTS :

  • LIST OF FIGURES
  • LIST OF TABLES
  • CHAPTER 1: INTRODUCTION
    • 1.1 Background
    • 1.2 African Aviation Issues
    • 1.2.1 Institutional issues
    • 1.2.2 Technical issues
    • 1.2.3 Operational issues
    • 1.3 Problem Statement
    • 1.4 Purpose of the Research
    • 1.5 Justification
    • 1.6 Contribution to the Field
    • 1.7 Objectives
    • 1.8 Research Methodology
    • 1.9 Organisation of the Thesis
  • CHAPTER 2: DEREGULATING AFRICAN SKIES
    • 2.1 Introduction
    • 2.2 The International Framework for Aviation Regulation
    • 2.2.1 Paris Convention
    • 2.2.2 Chicago Convention on International Civil Aviation
    • 2.3 Air Service Agreements (ASAs)
    • 2.3.1 Bilateral agreements
    • 2.3.2 Deregulation and “liberalisation”
    • 2.3.3 Open Skies Initiative
    • 2.3.4 Airline alliances
    • 2.4 Yamoussoukro Decision
    • 2.4.1 Background
    • 2.4.2 Progress achieved
    • 2.4.3 Hindrances to implementation
    • 2.5 Institutional Frameworks Active in Implementing the Decision within Africa
    • 2.5.1 Economic Commission for Africa (ECA)
    • 2.5.2 International Civil Aviation Organisation (ICAO)
    • 2.5.3 African Union (AU)
    • 2.5.4 African Civil Aviation Council (AFCAC)
    • 2.5.5 African Airlines Association (AFRAA)
    • 2.5.6 Southern and Eastern Africa’s regional trade organisations
    • 2.5.7 Central and West Africa’s regional trade organisations
    • 2.5.8 North Africa’s regional trade organisations
    • 2.6 Summary of Institutions
    • 2.7 Monitoring Activities
    • 2.8 Way Forward
    • 2.8.1 Competition rules
    • 2.8.2 Alliances
    • 2.8.3 Business regulations
    • 2.8.4 Unilateral liberalisation
    • 2.8.5 Low cost airlines strategy
    • 2.8.6 Government involvement
    • 2.8.7 Unification of airlines
  • CHAPTER 3: HUBBING THEORY
    • 3.1 Introduction
    • 3.2 Hub Classification
    • 3.3 Advantages of Hubbing
    • 3.3.1 Economies of traffic density
    • 3.3.2 Quality of service
    • 3.3.3 High average yield
    • 3.3.4 Better capacity allocation
    • 3.3.5 Marketing advantages
    • 3.3.6 Stimulation of job creation
    • 3.4 Disadvantages of Hubbing
    • 3.4.1 Additional running costs
    • 3.4.2 Additional travel time
    • 3.4.3 Unfair monopoly on routes
    • 3.4.4 Congestion at hub airports
    • 3.4.5 Limiting of competition
    • 3.4.6 Environmental costs implication of hub networks
    • 3.5 Airline Hub Network
    • 3.5.1 Effectiveness of hub networks
    • 3.5.2 Hub location
    • 3.5.3 Capacities
    • 3.5.4 Flow thresholds
    • 3.6 ρ-Hub Median Problem
    • 3.6.1 Single Allocation ρ-Hub Median Problem (USAρHMP)
    • 3.6.2 Multiple Allocation ρ-Hub Median Problem (UMAρHMP)
    • 3.6.3 Shortest paths
    • 3.6.4 Clustering heuristics
    • 3.6.5 Direct Vs non-stop services
    • 3.7 Summary
    • 3.7.1 Hub location
    • 3.7.2 Node allocation
    • 3.7.3 Hub–and-spoke network
  • CHAPTER 4: ROUTE COST MODEL
    • 4.1 Introduction
    • 4.1.1 Background
    • 4.1.2 Limitations of the model
    • 4.2 Model Development
    • 4.2.1 Cost structure
    • 4.2.2 Standing costs
    • 4.2.3 Flying costs
    • 4.2.4 Other costs
    • 4.2.5 The input component
    • 4.2.6 The calculation component
    • 4.2.7 The output component
    • 4.2.8 Model description
    • 4.3 Data Collection
    • 4.3.1 Default values for the route cost model
    • 4.3.2 Aircraft type-specific data
    • 4.3.3 Distance matrix
    • 4.3.4 Trip generation
    • 4.3.5 Trip distribution
    • 4.4 Application of the Cost Model
    • 4.4.1 Testing economies of traffic density on a route
    • 4.4.2 Effect of economies of scale on aircraft choice as distances increase
  • CHAPTER 5: HUB NETWORK DESIGN
    • 5.1 Introduction
    • 5.2 Africa Defined as a ‘Sparse’ Network
    • 5.3 Design Approach
    • 5.3.1 Locational analysis
    • 5.3.2 Hub airport location
    • 5.3.3 Node allocation
    • 5.3.4 Network costs
    • 5.3.5 Application of the cost model to design
    • 5.4 Hub-location Strategies
    • 5.4.1 One-hub network method
    • 5.4.2 Clustering method
    • 5.4.3 Node-hub analysis
    • 5.4.4 Geo-political method
  • CHAPTER 6: RESULTS AND ANALYSIS
    • 6.1 Introduction
    • 6.2 One-hub Network Analysis
    • 6.3 Geo-political Method
    • 6.4 Clustered Hub Network Analysis
    • 6.4.1 Optimum number of clusters
    • 6.4.2 Clustering heuristics network
    • 6.5 Node-hub Network Analysis
    • 6.5.1 Cost per passenger demand
    • 6.5.2 Costs of service supply
    • 6.6 Sensitivity Analysis of the Network Design Process
    • 6.6.1 Procedure
    • 6.7 Cost Elasticity with Increasing Passenger Demand
    • 6.8 Summary
    • 6.8.1 Node-hub costs
    • 6.8.2 Hub-hub costs
    • 6.8.3 Hub network design costs
    • 6.9 Sparse markets as hub-and-spoke air transport networks
    • 6.9.1 Definition
    • 6.9.2 Implication of the H&S design for sparse networks
    • 6.9.3 Optimally efficient hub network design for sparse markets
    • 6.9.4 Network changes as sparsity reduces over time
  • CHAPTER 7: EFFECTIVENESS OF HUBBING
    • 7.1 Introduction
    • 7.1.1 Criteria for distinguishing between O-D pairs
    • 7.1.2 Cost and service indicators
    • 7.2 Short-haul Route Analysis
    • 7.3 Medium-haul Route Analysis
    • 7.4 Long-haul Route Analysis
    • 7.5 Summary
  • CHAPTER 8: CONCLUSIONS AND RECOMMENDATIONS
    • 8.1 Conclusions
    • 8.1.1 Opening up the skies
    • 8.1.2 Application of the cost model to hubbing
    • 8.1.3 Network design method
    • 8.1.4 Hub-location strategies
    • 8.1.5 Hub network analysis
    • 8.1.6 Hubbing versus direct flights
    • 8.2 Recommendations
    • LIST OF REFERENCES
    • APPENDICES

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STRATEGIES TO DESIGN A COST-EFFECTIVE HUB NETWORK FOR SPARSE AIR TRAVEL DEMAND IN AFRICA

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