INTRODUCTION
In 1944, ICAO set the standards by which international air services between countries
operates. Bilateral air services agreements (ASAs) have since largely governed the air transport relations between individual States. These agreements have been traditionally restrictive in terms of possible routes, the maximum number of allowable flights, and the air carriers permitted to operate under the respective ASAs. Air transport has been considered to be a strategic sector with countries often aiming for equal sharing of the market between the designated air carriers of both parties, typically government owned flag carriers.
During the last three decades, there has been a growing trend towards liberalization of the
international air market. In the context of a globalized economy, more and more governments have
acknowledged the benefits of allowing market forces to determine and improve the development of air
services. Since 1992, the US has successfully pursued so-called “Open Skies” bilateral ASAs under which carriers can operate any route without significant restrictions on capacity, frequency or price. In Europe, the creation of the EU single aviation market in the 1990s put an end to the system of ASAs between EU Member States and profoundly changed the economic and regulatory landscape of air transport in Europe. Progressively, the EU has also developed a coordinated EU external aviation policy and concluded liberal comprehensive EU-level air transport agreements with a number of third countries. This “ambitious external aviation policy […] with a focus on growth markets” is also a key pillar of the Aviation Strategy for Europe (European Commission, 2015).
THE EFFECTS OF LIBERALIZATION
Some countries, such as the Netherlands and Singapore, achieved rapid economic development by leveraging their liberalized air transport systems. Compared to its European neighbors France and Germany, the domestic market of the Netherlands is relatively small. However, the country has been a first mover in liberalizing its ASAs: In 1992 it signed the first “Open Skies” agreement in the world with the US, which effectively promoted Amsterdam’s Schiphol airport as a major gateway for trans-Atlantic traffic, while facilitating its flag carrier, KLM, to further expand its network coverage in Europe and North America (Oum et al). As Pieter Elbers, President and CEO of KLM said: “For KLM, operating out of the Netherlands, being a small country, access to international markets has been crucial throughout our history. Many historic moments in the development of KLM have been linked to liberalization of the airline industry. KLM benefitted from the ‘Open Skies’ agreement with the US to develop both its own network and its partnerships. Not only did KLM benefit, but we have also seen massive development of Amsterdam Schiphol airport and the country in general resulting in economic benefits and employment” (ATN, 2016).
