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Transcript of Liberalization in Aviation Policy Presented to the Confederation of Mozambican Business Associations...
Liberalization in Aviation PolicyPresented to the Confederation of Mozambican Business Associations (CTA)
Trade and Investment Project
Andy RicoverDecember 15,2005
2
Formal policyInstitutional framework
Effective policy
Current effective policy
Function of two factors
3
Current effective policy (continued)
• Function of two factors―There is written policy―But the institutional arrangement can
condition the real applicable policy
4
Current formal policy—Legal framework
• Resolution 40/2002, May 14th - replacing 5/96 April 2nd―Does not deal with access to market (5/96 did) ―Domestic market: to “adjust number of operators to
demand”
• Regulamento 39/98, August 26th―Defines access to market:
Regular international (intercontinental and regional) Regular domestic Nonregular
―Route allocation to new operator after “listen” to incumbent
5
Current formal policy—Regular-Int’l operations
• Access to market―Designated in the BASA (bilateral air services
agreement)―Selected by tender
• Regime―Exclusive rights for 10 years (renewable by tender)―Intercontinental: single designation―Regional: one operator per route―Provision for multiple designation, subject to public
interest
6
Current formal policy—Regular-domestic operations
• Access to market―Concession
• Regime―By route―By tender―5 year periods (renewable)―Subject to public interest: exclusive rights
7
Current formal policy—Nonregular operations
• Access to market―By obtaining a licence compatible with
service
• Regime―By tender―In addition to regular services
8
IACM IACM ADM ADM LAM et al IACM
Ministry of Transport & Communic.
Accidents investigation
RegulationPolicymaking Operation
ATC Airports Airlines
Current institutional framework—Bodies and functions
9
Institutional framework—Competences of IACM
• According to Decree 41/2001―Concentration of functions
Regulate procedures of policy application and legal framework (Art. 6: 1.a & n)
Technical regulation (Art. 6) Accidents investigation (Art. 6, g)
―Creates conflict of interest―Allows policymaking through regulation
10
Civil Aviation Board
autonomous bodies(arm’s length from the government)
IACM ADM ADM AirlinesAccidents
Investigation Board
ParliamentMinistry of
Transport & Communic.
Accidents investigation
RegulationPolicymaking Operation
ATC Airports Airlines
Proposed institutional framework—Bodies and functions
11
Current effective policy
• Consequence of formal policy and institutional framework―Formally protective of LAM, considered of “national
interest” Restrictive access to international markets Semi-restrictive for domestic markets
―Informal protection Difficulties in obtaining nonregular/special permits Price control Scheduling regulations (SAA should depart 90’ away from
LAM)
12
Seven operators
LAM
Air Corridor
MEX
STA
SAA
TAP
Pelikan Air
Intl Intl RegReg DomDom
√ √ √
√
√
√
√
√
√
Current situation—Operators
13
Current situation—Airport infrastructure
• 3 international airports―Maputo, Beira, Nampula
• 6 main airports―Inhambane, Quilimane, Tete, Lichinga,
Pemba & Vilanculus (by traffic)
• 10 secondary airports• 6 military• Plus almost 300 landing strips
14
Current situation—Airport infrastructure (continued)
• Operated by ADM• No prospects of private sector participation
(PSP)―Failed ACSA deal for MPM―Doubtful financial feasibility for whole group
• However―No capacity/operational constraints―Market is NOT a function of infrastructure
15
Policy background—Freedoms of the air
• 1st—The right to fly over another country without landing
• 2nd—The right to make a landing for technical reasons in another country without picking up/setting down revenue traffic
• 3rd—The right to carry revenue traffic from your own country A to the country B of your treaty partner
16
Policy background—Freedoms of the air (continued)
• 4th—The right to carry traffic from country B back to your own country A
• 5th—The right of an airline from country A to carry revenue traffic between country B and other countries, such as C or D.
• 6th—The use by an airline of country A of two sets of 3rd and 4th rights to carry traffic between two other countries but using its base A as a transit point
17
Current situation—Int’l carriers
• LAM―LIS: code share with TAP
• TAP―LIS: x 2 via JNB – without traffic rights (no
5th freedom)
• Poor offer
• Little competition
18
Current situation—France
• BASA from 1991: 2x PAR-MPM―No interest―Presence of AF in TNR and Reunion―AF/KLM through Kenya Airways―7 freqs a JNB―Camores
19
Current situation—Portugal
• BASA from 1977 with modifications―Single designation: designed for TAP―TAP: largest European presence―3 freqs a LIS (2 via JNB on one way only)―Interest in 5th freedoms in the region (not
allowed today)
20
Current situation—South Africa
• BASA from 2003―Single designation: for LAM & SAA―Price control―Points in MOZ to CT, Durban, JNB, Nelspruit and
Lanseria―Points in RSA to Beira, MPM, Nampula, Pemba,
Vilanculos
• Effective―11 frequencies MPM-JNB (now requesting to 14)―3 freqs to JNB-Nampula―MPM - Vilanculos
21
Current situation—Tour operators/special
• Policy―Limited entry points
• Technical―Delays in issuing permits―No reliability in response time―Often not granted without explanation
23
JNB
VNX
MPM
LHR
LIS
HRELAD
NBO
DAR
POL
BEW
LLW / BLZ
Liberalized situation—Improved int’l connectivity
24
Liberalized situation—Int’l carriers
• LAM―LIS with JNB and LAD (Luanda) by use of 5th
freedoms―HRE (Harare), DAR (Dar es Salaam) and
NRO (Nairobi) with 5th freedoms―And same with LHR (Heathrow) and LIS, 5th
freedoms
• TAP―LIS with JNB by use of 5th freedoms―LAD with 5th freedoms granted
25
Liberalized situation—Int’l carriers (continued)
• BA―LHR/LGW – MPM – JNB (with Comair)―and LUN (Lusaka)
• Virgin―LHR – MPM – JNB (with SAA)―and LUN
26
Current situation—Regional carriers
• LAM: JNB• MEX: DAR• SAA: JNB• KIA: HRE NBO• Pelikan: VNX• Air Corridor: BLW?• Poor offer• Little competition
27
Liberalized situation—Regional carriers
• LAM: JNB & others, HRE, DAR & NRE with 5th freedoms
• SAA: JNB• Pelikan: VNX• Air Corridor: BLW?• Kulula: JNB & others• 1Time: JNB & others• Air Corridor: JNB & others• Comair: JNB & others
29
Liberalized situation—Improved int’l connectivity
• Will open alternatives entry points/routes
• Increasing competition
• Improving quality of service
• Facilitating entry for new services (LCC)
• Reducing prices
32
Excursion and LCC return fares, cents of US$ / mile
Domestic fares Air Corridorfrom MPM Y class RT excursion RT miles $/mls (Y) $/mls (exc) AirlinesBeira 322 252 528 0.61 0.48Quelimane 410 321 830 0.49 0.39Nampula 504 412 800 0.63 0.52Pemba 555 438 975 0.57 0.45from Beira Y class RT excursion RT miles $/mls (Y) $/mls (exc) AirlinesQuelimane 220 172 170 1.29 1.01Nampula 322 252 410 0.79 0.61Pemba 403 318 580 0.69 0.55Maputo 322 252 528 0.61 0.48
LCC fares in RSAfrom JNB RT miles $/mls AirlinesEast London 127 597 0.21 KululaEast London 125 597 0.21 1 TimeCape Town 325 874 0.37 KululaDurban 98 352 0.28 KululaPorth Elizabeth 153 658 0.23 Kulula
Lowest available domestic fares in two markets
33
Excursion and LCC return fares, cents of US$ / mile
Lowest available domestic fares in two markets (continued)
34
Traffic drivers—Domestic market
• Foreign traffic―Reliability―Offer―Tourism infrastructure―price
• Local traffic―Price―Price―Price
35
Traffic drivers—Int’l market
• Foreign traffic―Offer―Development of the domestic market―Price
• Local traffic―Price as a fx(offer)
36
Domestic market is not self sustained: local population can hardly
support the system
Domestic market depends on the
international inflow
International inflow is restricted to protect
LAM
LAM fails to exploit the opportunity & no other carriers can try
International market remains undeveloped
Domestic market does not get international
inflow
A vicious cycle
37
Trigger: liberalization policy develops the international market
Increases inflow of passengers into
the domestic network
Efficiency and low prices drives
tourism & investment
Increase of foreign traffic into domestic market
Gained support on the domestic market
Increases international traffic
The virtuous cycle
38
Needed reforms
• Liberalization of the international traffic―Boost offer―Lowering prices―Increase inflow into domestic market
• Ease technical barriers in the local market―Increase providers / offer―Promote investment in tourism―Generate more demand―Which brings more international pax
39
Needed reforms (continued)
• LAM Competitiveness Program―Restructuring reform
Adapt to the new challenges: business plan Reallocation of resources Capacity building program
―Management options Change in ownership structure (PSP) Management contract