RESTRICTEDWORLD TRADE
ORGANIZATIONS/C/W/163/Add.6
16 August 2001
(01-4031)
Council for Trade in Services
DEVELOPMENTS IN THE AIR TRANSPORT SECTOR SINCE THE CONCLUSION OF
THE URUGUAY ROUND
PART SEVEN
Background Note by the Secretariat
Addendum
This background note provides additional information about developments in the air transport
sector since the conclusion of the Uruguay Round.  It covers scheduled passenger services, non-
scheduled passenger services, cargo services and multimodal operations (see document
S/C/W/163/Add.2 paragraph 153).S/C/W/163/Add.6
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TABLE OF CONTENTS
I. SCHEDULED PASSENG ER SERVI CES..............................................................................4
A. D EFINITION ............................................................................................................................... ..4
B. E CONOMIC DEVELOPMENTS .......................................................................................................4
II. NON-SCHEDULED PASSE NGER SERVI CES....................................................................8
A. C HARACTERISTICS OF NON-SCHEDULED AIR SERVICES .............................................................8
B. E CONOMIC DEVELOPMENTS OF THE SECTOR ..............................................................................8
C. R EGULATORY DEVELOPMENTS ...................................................................................................9
III. CARGO SE RVICES............................................................................................................. ..10
A. E CONOMIC STRUCTURE AND DEVELOPMENTS ..........................................................................11
B. R EGULATORY STRUCTURE AND DEVELOPMENTS .....................................................................16
1. Routes....................................................................................................................... ................16
2. Designation .................................................................................................................. ............17
3. Capacity ..................................................................................................................... ..............17
4. Tariffs...................................................................................................................... .................17
5. Other elements of bilateral Air Services Agreements impacting on the cargo
sector ......................................................................................................................... ...............18
(a) Change of gauge ............................................................................................................. ..........18
(b) Non-scheduled cargo se rvices................................................................................................ ...18
(c) Ownership................................................................................................................... ..............18
(d) Slots ....................................................................................................................... ...................19
(e) Predatory  pricing........................................................................................................... ............19
(f) Competitio n policy .......................................................................................................... .........19
(g) Deregulation of the cargo sector  (national and in ternational)...................................................19
IV. MULTIMODAL OPERATIONS ..........................................................................................24
1. Multimodal operatio ns for air cargo.....................................................................................24
(a) Air-tru cking ................................................................................................................ ..............24
(b) Air-sea tran sportation ...................................................................................................... .........24
(c) General ob servat ions........................................................................................................ .........24
2. Multimodal operations for passenger traffic........................................................................25S/C/W/163/Add.6
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Abbreviations used in this document
ACMG Air Cargo Management Group
AEI Air Express International
APEC Asia Pacific Economic Cooperation
ASA Air Service AgreementASK Available Seat Kilometres
ATK Available Tonne Kilometres
CH Confoederatio Helvetica (Switzerland)
CAB United States Civil Aeronautics Board
CMR Convention on the Contract for the International Carriage of Goods by Road
CPC Central Product Classification
CRSs Computer Reservation SystemsDOT United States Department of Transport
DSTI Directorate of Science, Technology and Industry (OECD)
EAS Essential Air Service program (US)
EU European Union
FAA United States Federal Aviation AdministrationFTK Freight Tonne Kilometres
GAO United States General Accounting Office
GCR General Commodity Rate
IATA International Air Transport Association
ICAO International Civil Aviation OrganizationICC International Chamber of Commerce
JAL Japan Airlines
KLM Royal Dutch Airlines
OECD Organization for Economic Cooperation and Development
Pax PassengerRPK Revenue Passenger Kilometres
RTK Revenue Tonne Kilometres
SNCF Société nationale de chemins de fer français
TGV Train à Grande Vitesse
THY Türk Hava Yollari (Turkish Airlines)TWA Trans World Airlines
UPU Universal Postal Union
US United States
UPS United Parcel Service
WTO World Trade OrganizationS/C/W/163/Add.6
Page 4
I. SCHEDULED PASSENGER SERVICES
1. This section provides a working definition established by the International Civil Aviation
Organization (ICAO) and addresses the overall changes in Table and Chart format of scheduled
traffic, for both passenger and cargo traffic.  Scheduled services make up the largest segment of
commercial airline operations.  Its growth reflects in large part increased liberalization of the air
transport sector, and expansion of world trade.  Economic cycles or civil disturbances also affectscheduled traffic.  The background economic and regulatory structures of scheduled passenger service
are found in S/C/W/59 paragraphs 96 - 107.
A. D
EFINITION
2. Scheduled international services were defined in 1952 by the Council of ICAO, as series of
flights that possesses all the following characteristics:  "it passes through the air space over the
territory of more than one state;  it is performed by aircraft for the transport of passengers, mail or
cargo for remuneration in such a manner that each flight is open to use by members of the public;  it isoperated so as to serve traffic between the same two points either (i) according to a published
timetable, or (ii) with flights so regular or frequent that they constitute a recognisably systemic
series."
3. "This definition encompasses a service:  (a) which is part of an international network of
services, operating according to a published timetable;  (b) where the on-demand passenger has areasonable chance of securing accommodation;  (c) which normally operates irrespective of short-
term fluctuations in payload;  and (d) where stopover and interlining facilities are offered to the user
with the appropriate ticket or air waybill, subject to the relevant international agreement, if any.  The
individual elements are cumulative in their effect.  If, for a series of flights, any one of the
characteristics (a), (b), or (c) is missing, the series  cannot be classified as a scheduled international air
service."
B. E
CONOMIC DEVELOPMENTS
4. It has been noted that with the recent developments in the airline industry and the introduction
of liberal air policies, "the distinction between scheduled and non-scheduled air services has become
increasingly blurred".  In the case of operations between States within the EU, the "third package" ofair transport liberalization measures, approved in 1992, has effectively eliminated the regulatory
distinction between the two (by allowing non-schedul ed air carriers to operate scheduled service and
sell their product directly to the public)."
1
5. The following Tables and Charts give an overview of scheduled operations in the main
geographical regions in aggregate form, and by airline rankings for both passenger and cargo traffic.Table 1 provides information for the years 1988 to 2002 (forecasted) in individual world regions.  The
common feature that emerges is a strong increase in revenue passenger kilometres (RPKs) for
scheduled traffic.  However, the overall increase masks significant annual variation, as shown in Chart
1.  Charts 2 to 4 trace recent developments from July 1999 to March 2001 for the Asia/Pacific, North
American, and European carriers.  The overall feature, in particular for the Asia/Pacific and North
American carriers is a strong decline in RPKs from March/July 2000.  European figures reveal a high
degree of stability, possibly reflecting the overall economic cycle.
                                                     
1 Policy and Guidance Material on the Regulation of International Air Transport, 1992.S/C/W/163/Add.6
Page 5
Table 1
ICAO Schedule Passenger Traffic Forecast
Ten Year Traffic Growth (RPK) Tra ffic Growth Traffic Growth Forecast
1988
US$
billion1998
US$
billionAverage
annual
growth1999
Preliminary2000
growth2001
growth2002
growth
Africa 38.1 55.7 3.9% 10.8% 5.5% 5.8% 5.7%
Asia-Pacific 309.2 622.7 7.3% 6.9% 7.0% 7.4% 7.2%
Europe 508.2 692.6 3.1% 7.3% 6.8% 5.7% 5.4%
Middle East 45.6 78.4 5.6% 0.9% 5.0% 4.5% 4.6%
North America 725.8 1,042.3 3.7% 6.0% 4.9% 4.1% 4.0%
South America 78.7 136.0 5.6% 0.6% 5.0% 5.9% 6.6%
World 1,705.6 2,627.7 4.4% 6.2% 5.9% 5.5% 5.3%
Source: Airline Business , September 2000.
Table 2
Top 200 Passenger Airline Statistics by Region  1998 -1999
RegionPassenger traffic
(RPK)Load FactorsPassenger
numbersPercentage of Top
200 AirlinesNo. of
airlines
US$
Million
1999Change
98-99%Change
98-99US$
Million
1999Change
89-99RPKs Passenger
Africa 60,537 10.2% 63.4 -0.3 28 7.9% 2.0% 1.8% 15
Asia-
Pacific684,358 5.5% 69.1 2.4 343 4.5% 22.9% 21.4% 40
South
America118,267 -1.1% 61.8 -1.4 74 2.0% 4.0% 4.6% 21
Europe 882,837 6.3% 72.9 -0.7 442 5.1% 29.5% 27.6% 71
Middle
East84,550 6.6% 67.8 -0.5 40 3.1% 2.8% 2.5% 11
North
America1,157,730 5.5% 71.2 0.1 673 5.0% 38.7% 42.1% 42
Total 2,988,278 5.6% 70.5 0.3 1,600 4.7% 100% 100% 200
Source:   Airline Business , September 2000.S/C/W/163/Add.6
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Chart 1
Passenger Load Factor – IATA International Scheduled Services
62646668707274767880
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec1998 1999 2000 2001 Pax Load Factor 
% 
Source:  Peter Morris, Senior Economist,  Aviation Information and Research , IATA,  May 2001.
Chart 2
Asia Pacific Carriers:  4 Month Moving Average
-6-4-202468101214161820
% ChangeRPK FTK ATK
Source:  Peter Morris, Senior Economist,  Aviation Information and Research , IATA,  May 2001.S/C/W/163/Add.6
Page 7
Chart 3
North American Carriers:  4 Month Moving Average
-6-4-202468101214161820
% Change RPK FTK ATK
Source:  Peter Morris, Senior Economist,  Aviation Information and Research , IATA,  May 2001.
Chart 4
European Carriers:  4 Month Moving Average
-6-4-202468101214161820
% Change RPK FTK ATK
Source:  Peter Morris, Senior Economist, Aviation Information and Research , IATA,  May 2001.S/C/W/163/Add.6
Page 8
II. NON-SCHEDULED PASSENGER SERVICES
6. The ICAO defines non-scheduled air services as commercial services performed as anything
other than a scheduled air service.  Charter flights are non-scheduled operations using chartered
aircraft.  Although the terms are used interchang eably, not all commercial non-scheduled operations
are charter flights.  States often consider non-scheduled flights to be supplementary to scheduled
operations.  Non-scheduled services have been instrumental in some regions, notably Europe, in thedevelopment of international mass tourism, and have assumed considerable economic and social
importance for many countries (both developed and developing).
A. C
HARACTERISTICS OF NON-SCHEDULED AIR SERVICES
7. Non-scheduled air services have a number of elements in common that distinguish them from
scheduled services.  Non-scheduled services are usually operated: (i) on a point-to-point and often
plane-load basis "pursuant to a charter contract (several charterers may share the capacity of an
aircraft); (ii) on an ad hoc  or on a regular, but seasonal basis;  (iii) with the financial risk for under-
utilized payload being assumed by the charterer rather than the aircraft operator;  (iv) without the air
carrier maintaining direct control over retail prices (the aircraft capacity is usually sold wholesale by
the carrier to tour operators, freight forwarders or other entities);  and (v) subject to seeking
permission, or giving prior notification, for each flight or series of flights to/from the country of origin
or destination or both".2
B. ECONOMIC DEVELOPMENTS OF THE SECTOR
8. The international non-scheduled passenger market has grown significantly and is in the
process of consolidation.  The sector has now become an integral part of a broader travel and leisure
industry and is often operated within vertically integrated conglomerates, owning a broad spectrum of
companies.3
9. The growth of the European leisure market, which has traditionally been a large and dynamic
sector, is representative of economic and regulatory changes that have been occurring over the past
five years (Table 3).  In 1999 the gross revenue of this market amounted to US$37.2 billion, that was
generated by six multinational travel corporations.
10. Non-scheduled passenger services are treated in the Annex of bilateral air service agreements
and must conform to all Articles in the main body of the agreements, unless specifically excluded.  As
Table 3 indicates, the non-scheduled passenger sector of air transport is often one part of a larger
industry.  Although vertically integrated travel and leisure groups own charter airlines, charter travel
is also an important aspect of scheduled airline operations.  Most scheduled airlines either operate
"charters" themselves, or they sell capacity to independent tour operators.
                                                     
2 ICAO Manual of Regulations, Doc 9626, p.  4.6-1.
3 See document on S/C/W/59 paragraphs 108 - 114 and S/C/W/129, paragraphs 19(e) and 19(d).S/C/W/163/Add.6
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Table 3
European Charter and Travel Industry (2000)
Thomson PreussagPreussag
Thomson1C&N
TouristicThomas
Cook2 AirtoursFirst
ChoiceKuoni
ReisenTotal
Home
CountryUK Germany Germany Germany UK UK CH
Revenue
US$ million4,765 6,971 11,736 4,527 2, 857 2,084 2,235 2,052 37,227
Operating
profit, US$
million85 331 416 121 60 173 80 68 1,334
Companies
worldwide594Operates in
20 countries
worldwide
Employees 80,000 28,000 16,000 7,700
MaintravelagentsLunn Poly;
Callers
Pegasus;
Sibbald
Travel;
Travel
HouseTUI; 1-2
Fly; Arke
Reizen;
Holland
Int'lTerramar;
Air Marin;
Necker-
mann;
Bucher;
Kreutzer;
Fischer;Thomas
Cook;
Orchid
TravelGoing
Places;
Travel
worldTravel-
choice;
Bakers
Dolphin;
Holiday
Hyper-
markets;
Hays
Travel;
Holiday
ExpressKuoni;
Helvetica
Tours
Agencyoutlets1,000 3,000 4,000 1,066 700 2,300 600 ---- 12,666
Airline BritanniaHapag-
LloydCondorAirtours
Inter-
nationalAir 2000Edelweiss
 Air;
Novair
Fleet size 44 62 106 53 28 45 17 6 361
1Preussag acquired Thomson and was renamed Preussag Thomson
2 C&N acquired Thomas Cook, new name to be:  Thomas Cook
Sources:  Airline Business , September 2000; www.preussag.com; www.cn-touristic.de; www.kuoni.com;
www.firstchoice.co.uk; www.airtours.com.
C. REGULATORY DEVELOPMENTS
11. Charter flights are still regulated primarily at the national level as is noted in Article 5 of the
Chicago Convention.4  This Article permits non-scheduled flights to overfly and land without
permission, but allows each Contracting State to determine the conditions under which such flights
may pick up or discharge passengers, cargo and ma il.  The relevant ICAO definition, drawn from the
ICAO Manual on Regulations reads as follows:
"For the guidance of States in their interpretation or application of Articles 5 and 6 of the ChicagoConvention, the Council of ICAO has developed a definition for the term 'scheduled international airservice' which is accompanied by 'Notes on the Appl ication of the Definition and an Analysis of the
Rights Conferred by Article 5 of the Convention' (see Scheduled Services).  Under a unilateral
framework, States of origin and destination regulate independently of each other the non-
scheduled/charter services between their territories.  In this situation the charterer and carrier must
follow rules of both States for the operation to be charter-worthy.  These rules generally appear innational laws, government regulations, policy statements dealing with air transport and authorizing the
                                                     
4 See document S/C/W/59, paragraph 111.S/C/W/163/Add.6
Page 10
regulation of such operations, or in the licence/permit authorizing the non-scheduled flight or flights
(p. 4.6-3)."
III. CARGO SERVICES5
12. The Organization for Economic Cooperation and Development (OECD) notes that, from an
economic perspective, air cargo has contributed to and benefited from the recent rapid growth of theworld economy and the globalization and internationa lization of production.  It offers a fast and
relatively safe mode of transport for low volume, low weight, but high value products.  For the past
decade air cargo transportation has grown faster than air passenger volumes and, according to industry
forecasts, this trend is expected to continue.  It accounts at present for about 2% of all cargoes moved
world wide in terms of tonnage, but for well over one-third of the value of world trade in
merchandise.  It provides an important back-up service in terms of meeting demands for spare parts
and emergency repair equipment, and it often offers the only viable means of freight transport toremote, peripheral regions where high costs of fixed, tracked transport infrastructures and climate
conditions put other modes of transport at a major disadvantage.  In global terms, the dominant cargo
flows are in three markets:  the North Atlantic, Europe/Far East and the Pacific Rim.  Air cargo
transportation is part of the international logistical chain servicing trade and industry worldwide;  it is
a mode of transport in its own right.
13. Chart 5 illustrates current freight flows between major economic regions in 1996.
Chart 5
World Freight Flows
(Billions of RTKs, 1996)
US domesticNorth America
- Europe
12 billion FTKs
13 billion FTKsEurope - Asia
17 billion FTKs
Asia - North America12 billion  FTKsIntra - Asia
5 billion FTKsIntra-Europe
2 billion FTKs
                                                     
5 The content of the following pages is drawn to a very large extent from a 1999 OECD Study
"Regulatory Reform in Air Cargo Transportation".  See also document S/C/W/59, paragraphs 115 - 119, andS/C/W/129, paragraphs 15 - 18, 19(d), and Annex 4.S/C/W/163/Add.6
Page 11
14. From a regulatory point of view the air cargo sector is less affected by national sensitivities,
such as the "nationality" of the carrier, recognition of the brand name and "equal sharing" of
passenger traffic between two countries.
A. ECONOMIC STRUCTURE AND DEVELOPMENTS
15. The sector structure can be outlined as follows:
Chart 6 :Air Cargo Services
Integrators
All-cargo airlines
Shipper Forwarders Forwarders Consignee
Combination carriers
'Air waybill'
market
1997=$50 billion
''Door-to-door' market
1997 = $150 billion
Source   : Airbus / KLM
16. Traditionally, cargo is considered as secondary to passenger services.  The so-called
combination carriers (scheduled passenger/cargo ai rlines) such as Lufthansa, Korean Airlines, Air
France, JAL, United Airlines, et cetera , carry cargo in the belly holds of their passenger aircraft, as
well as on board their dedicated freighters.  All-cargo airlines, such as Cargolux, Arrow Air, Nippon
Cargo, Heavylift, et cetera,  operate freighters on scheduled and non-scheduled (i.e. niche) operations.
Integrated/express carriers, such as FedEx, UPS, DHL , TNT operate their own aircraft on routes they
elect to fly, and hire other carriers' services for other destinations.  The bulk of the world's air cargo
(freight and mail) is carried by combination airlines in scheduled and non-scheduled operations.  They
carried approximately 75% of the world's total air cargo in 1996 in freight tonne kilometres (FTK).6
17. In cargo services, a difference can be made between common carrier operations "hold-out" to
the general public at regular schedules, and charter operations catering to ad hoc  consumer demands
according to their specific time and routing needs.   There are full own-use charters for hire by
individual customers, and shared charters which can consolidate shipments from several customers
and third parties.  Because of the seasonal character of part of the air cargo, charters play a non-
negligible role.  Recently, cargo capacity has also become available in the belly holds of tourist
                                                     
6 Approximately 50% of this total used belly compartments of passenger aircraft, while an additional
25% was carried on freighter aircraft  belonging to combination carriers.  Cargo operations on combination
carriers are predominantly long-haul, assisted by feeder services.  The remaining 25% of the total was carried byspecialized all-cargo airlines and integrated express operators.S/C/W/163/Add.6
Page 12
charters to and from resort destinations.  According to estimations, the majority (80-85%) of air cargo
is currently transported on scheduled flights, and charters account for the remaining 15-20%.
18. Table 4 lists the largest air cargo carriers on scheduled international routes, and their market
shares.  The market structure is relatively concentrated:  the 25 carriers listed performed as much as
75% of total international air cargo traffic in 1996; the first 10 accounted for 50% of total traffic.
Table  4
Major International Air Cargo Carriers
(Tonne-kilometres performed in scheduled international services, 1996)
AirlineInternational Freight
Tonne Kilometres (FTKs)
(billion)World International
Market Share (%)Share of Carrier’s Total
FTKs which are
International (%)
Lufthansa 5.99 7.3 99.6
Korean Airlines 4.74 5.8 98.4
Air France 4.65 5.7 100
Singapore Airlines 4.12 5.0 100
KLM 3.78 4.6 100
Japan Airlines 3.61 4.4 92.7
British Airways 3.44 4.2 98.5
Cathay Pacific 3.18 3.9 100
Federal Express 2.95 3.6 37.7
China Airlines 2.40 2.9 ~90
Cargolux 2.02 2.5 100
EVA Air 1.93 2.3 ~90
United Airlines 1.90 2.3 73.0
Northwest Airlines 1.85 2.2 66.3
American Airlines 1.66 2.0 70.5
Swissair 1.62 2.0 99.6
Nippon Cargo Airlines 1.61 2.0 100
Martinair Holland 1.52 1.8 100
Qantas 1.47 1.8 92.4
Alitalia 1.43 1.7 98.1
Malaysia Airlines 1.36 1.6 95.9
Asiana Airlines 1.32 1.6 ~90
Thai Airways 1.32 1.6 97.6
United Parcel Service 1.18 1.4 21.6
El Al 1.11 1.4 100
Top 25 Scheduled Airlines 62.16 73.4
Other IATA Airlines 22.49 26.6
Total Scheduled International 84.65
Source:  International Air Transport Association, 1997.
19. Among the airlines listed above, express carriers constitute a specific and particularly
dynamic segment (Chart 7 and Table 5).S/C/W/163/Add.6
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Chart 7
International Air Express Market
484 300574 300699 300860 8001 009 3501 168 300
0200 000400 000600 000800 0001 000 0001 200 000
1992 1993 1994 1995 1996 1997D a ily
Shi pm ent
Vo l ume
Average annual  growt h rat e 1992- 1997 :  19. 3%
Source :  Air Cargo Management Group (ACMG), 1997.
Table 5
Concentration in the Inte rnational Express Sector
(Daily shipments volume, 1997)
Company Market share (%) Growth 1996-1997 (%)
DHL 39.9 15.4
TNT 12.0 16.7
Federal Express 21.1 17.8
United Parcel Service (UPS) 14.6 10.0
Airborne Express 1.8 19.5
Other 10.6 20.0
Source:  ACMG, 1997.
20. Freight forwarders play an essential role in the cargo industry.  The freight forwarding
industry handled 60 million shipments worldwide in 1996 and generated combined annual revenues of
around US$45 billion.  The top 20 forwarders, includ ing Air Express International (AEI), Schenker,
Kuehne&Nagel, Panalpina, Airborne Express, and Burlington handle nearly half of total forwarding
traffic.
21. On the regulatory side, the forwarders are seen as agents of the airlines.7  On the operational
side, the situation is becoming more ambiguous.  Through leasing, and sometimes operating aircraft,
the forwarders are acting as virtual air carriers.  To their respective customers, they promote their
"own flights" with their own schedules. Throug h consolidating shipments themselves and offering
these consolidations to carriers, the forwarders appear as shippers on the air waybill.  In the US, the
                                                     
7 See document S/C/W/163, paragraphs 136 to 142.S/C/W/163/Add.6
Page 14
consolidating forwarders are referred to as "indirect air carriers";  they act in competition with the
"direct air carrier".  So-called virtual air carriers are not constrained by traffic rights.8
22. The world air cargo market is forecast to increase three-fold increase over the next fifteen
years.  However, there is a significant degree of variation between regions (Table 6).
Table 6
Projections for Major Regional Markets, 1996-2016
(Combined Boeing, Airbus and McDonn ell Douglas forecasts, in RTKs)
RegionTotal Freight Tonne
Kilometres
(millions of RTKs)
1996Total Freight Tonne
Kilometres
(millions of RTKs)
201620 Year Growth
Forecast (a nnual
growth in %)World Market
Share - 1996
(%)World Market
Share - 2016
(%)
US Domestic 13.06 37.40 5.4 16.8 12.6
Europe-Asia 14.62 64.47 7.7 18.8 21.7
Europe-North 12.31 34.60 5.3 15.8 11.6
America 12.06 62.40 8.6 15.5 21.0
Asia-North America 5.36 34.77 9.8 6.9 11.7
Intra-Asia 20.46 63.96 5.9 26.3 21.5
World Market 77.87 297.60 6.9 100 100
Source:  ACMG, 1997.
23. The maturation of the market went hand-in-hand with the development of three main types of
products:
(a) standard air cargo services:  freight rates are relatively low (typically US$ 5-6 per
kilo on a transatlantic flight) and are tending to diminish, delays are relatively long
(three to six days);
(b) express, time definite services:  freight rates are higher (typically US$ 20-25 per kilo
for a transatlantic flight), delivery time is shorter (a half day or a day for most
destinations) and guaranteed contractually; and
(c) Value adding, logistics services: the logistics chain (the transport mode/storage
point/delivery time/delivery cost selections ) is optimized according to shippers' needs
and market circumstances.  Transportation is an element of a wider service.Providers offer inventory management and handle storage points and buffer stocks on
behalf of shippers.  The logistics industry draws on longer-term contracts between
shippers and carriers.  Here the definition of services and rates is not comparable to
traditional spot markets.  Information on rates for this type of services is not currently
available.
24. International Express Delivery services are expected to grow significantly in the medium
term.  Although accurate data is unavailable, value adding logistic services are likely to follow this
trend, however, from a lower starting-point (Chart 8).
                                                     
8 Such considerations may have influenced Deutsche Post's decision to purchase Air Express
International (an innovator in international freight forwarding) and Danzas.S/C/W/163/Add.6
Page 15
Chart 8
Forecast Growth of International Express Delivery Services
(US domestic and international market, billions of RTKs)
0100200300400
1995 2015International
freight
  and
 mailInternational
express
18% per year growth for
international express
5% share    37%
share 05101520
1977 1995US Domestic
Source:  Boeing, 1997.
25. One of the main reasons for growth and diversification of the air cargo industry is an
expanding clientele.  The industry no longer offers just exclusive/premium services benefitting frompostal system deficiencies and the specific transportation needs of perishable, urgent or precious
goods.  In the late 1990s, the range of air transported products has diversified, reflecting increasingly
liberal and dynamic trading market.  The most important air cargo commodities are measured by
weight:  machinery parts, electronics, high-tech instruments, cut flowers, live trees/plants, fish,
crustaceans, vehicle parts, plastic, consumer durables, apparel, and footwear.
26. The majority of cargo airlines are also involved in mail transportation.  Mail is treated
separately from cargo under the Warsaw Convention.  It  is subject to two sets of rules:  postal and
cargo.  Government authorization is needed to carry ordinary mail in most countries;  the relevant
rules are defined by the Universal Postal Union (UPU).
27. Very few postal operators own or operate their own aircraft.  In Europe, this is found only in
Sweden and France (domestic services only).
28. Mail by air has priority over general cargo and passengers under the established rules of the
UPU Convention.
9  The Convention also established lower priority for second class mail, and
specifies maximum ceilings on tariffs.  This is intend ed to ensure that on low profitability routes, and
city-pairs served by a monopoly, the tariffs charged remain reasonable.  On competitive city-pairs
(e.g. Paris-New York), real tariff tend to be much lower than UPU tariffs.  The International Air
Transport Association (IATA) is reportedly challenging this system of priority allocation and tariffceilings.  The intent is for mail to be included in  the common regime and subject to rates comparable
to those for express delivery cargo.  Discussions are underway between UPU and IATA.
29. There are also certain customs preferences for mail.  For example, business mail is duty
exempt, while printed material and unaddressed direct mail may be excised if they exceed a certain
threshold, which vary between countries.  In comparison, normal cargo uses an air waybill, which is
                                                     
9 This is stipulated in the 1948 Agreement between IATA and the UPU and is reflected in Articles 52
and 53 of the UPU Convention.S/C/W/163/Add.6
Page 16
costly (US$14-70), has to be declared (exempted goods included) and cleared in a customs zone.  The
resulting inter-operability problems are subject to debate within the UPU.
B. REGULATORY STRUCTURE AND DEVELOPMENTS
30. This section describes the specificity of cargo services against the background of traditional
regulatory elements:  routes, tariffs, capacity, designation, charter regime, predatory practices,
competition policy, slots, and ownership.  There is also reference to experience with deregulation.
1. Routes
31. From an operational point of view, a hub-and-spoke system is the most efficient way to run a
network; this includes express cargo services.  However, route development by carriers in scheduled
services is constrained by independently negotiated bilateral agreements.  Thus carriers find it
difficult to adjust to market developments.  There is therefore an incentive to co-operate with third
carriers authorized on a given route.  However, this  is a sub-optimal strategy in terms of costs and
quality control.
32. Obtaining authorization for new routes may require considerable lobbying efforts in certain
countries.  This has caused some carriers to call for a multilateral system subject to reciprocity.  Some
carriers such as FedEx feel comfortable with the current system.  Others, such as UPS do not, and are
pleading for a multilateral system which would open all routes with the only safeguard being mirror
reciprocity.10
33. Nevertheless, the present cargo carrier regime tends to be more liberal than that for passenger
carriers.  Liberalization of cargo, starting with routes, has been used as a test case for a wider bilateral
liberalization, notably by the US.  This distinction between passenger and cargo operations is not,
however, widespread in Air Service Agreements (ASA ).  It is promoted predominantly by countries
having a strong interest in developing the air cargo sector without nationality considerations.   Casesin point are Australia's 'Open Skies' cargo policy,  Canada's 'open airport' policy for cargo at
Montreal’s Mirabel airport,  and liberal cargo policies practiced by Mexico and India.
34. Certain types of routes and Freedoms (notably Fifth and Seventh), while rarely given for
passenger services, have been included in recent open skies agreements for cargo.
11  Seventh Freedom
rights authorize companies to carry freight and pa ssengers between two foreign countries without a
direct link to their home country.  They are particularly important for small country carriers
developing cargo routes outside their home base, and global airlines developing international hub-
and-spoke networks.  In both instances, carriers have to operate services between overseas airports,
without necessarily having departure or arrival links in the home country (in this latter case, they
would need only Fifth Freedoms). Seventh Freedom  rights are seldom granted in ASAs, thereby
obliging many carriers to subcontract operations to local carriers.
35. This liberalization trend is limited by the fact that 60% of cargo remains carried in the belly
hold of passenger aircraft, which are subject to more route restrictions.  These "combi-carriers" have
an incentive to oppose route liberalization for cargo carriers (the former carry higher economic and
political weight than the latter).  The combi-carriers consider that the playing field is level, since they
offer lower prices but less frequencies than all-cargo carriers.
                                                     
10 This point of view has been endorsed by the International Chamber of Commerce (ICC), Document
No.322-3/5 Rev 3, 25 September 1998, "Policy Statement: Air Cargo and the WTO", circulated to the Councilfor Trade in Services as a room document, 18 May 1999.
11 See document S/C/W/163/Add.2, 10 November 2000, Table 23, pages 55-56, available from the
WTO secretariat.  For a description of the Freedoms of the Air, see S/C/W/163/Add.3, Chart 1, paragraph 4.S/C/W/163/Add.6
Page 17
2. Designation
36. To offer services a carrier must be designated under the bilateral agreements.12  W h i l e
multiple-designations offer more flexibility they re main subject to the same bilateral conditions.
Under the bilateral regime, limited multi-designation restricts the number of carriers on a given route,
which as noted above may pose particular difficulties for all-cargo and express companies. 13
3. Capacity
37. Capacity constraints in air services agreements, either ex ante  or ex post , constrain market
based adjustment.  However, not all ASAs are equally restrictive.  In some cases it is possible to
accommodate the competitive performance of carriers.  In recent years, several ASAs incorporated
more flexible capacity regimes, in particular for the cargo sector.  Global incremental capacity
increases are negotiated over multi-year periods, minimum capacity levels are specified with
automatic increases, or increases are linked to ach ieving certain load factors.  However, the limited
number of route designations in certain agreements has remained an important operational limitation.
4. Tariffs
38. Tariffs in cargo services follow, in principle, the same pattern as for passengers.  Thus there
are the following cases:
(i) Total rate freedom:  on certain routes and for certain types of services, carriers are
completely free to set their own rates with little or no government intervention.  Thisis the case, for instance, of express/courier services and of the so-called unilateral
tariffs, which are only valid on routes between two States and for which, in some
cases (such as Germany/United States) no approval but only a publication
requirement exists.  In many instances, the filing of official tariffs is not required, not
even for information purposes.
(ii) Regulatory approval of rates:  most standard cargo rates are nevertheless governed by
regulatory mechanisms, especially outside the US and the EU.  This is common where
bilateral air service agreements include price-setting provisions and where carriers are
free to set their own prices.  In these cases the cargo tariffs are agreed by the
designated airlines, either bilaterally or multilaterally, through the Tariff Conferencesof IATA
14 and filed for approval with governments.  If not disapproved, the filed rates
become applicable to all other carriers.  A few governments do monitor or enforce the
application of these approved tariffs.
(iii) On routes to and from the US and within the EU, government approval for IATA
agreements is usually associated with the re quirement that the tariffs must be in the
form of maximum prices and that every carrier is free to apply lower tariffs.  As a
result, overcharging compared with the published IATA tariffs does not occur.  If a
tariff has to be increased, this is made known by the carrier on a multilateral basis via
IATA.  If no objection is made, the higher tariff is included in the multilateral tariff
agreement upon expiry of a certain period and is applicable to all carriers engaged in
interline operations.
                                                     
12 See document S/C/W/163Add.3, paragraphs 62-67.
13 The designation of UPS in the recent US-China Agreement, despite an application by a major
passenger airline, may be considered an exception.
14 For more information on the IATA tariff conferences, see S/C/W/163/Add.3, Chart 2, paragraphs
104-105.S/C/W/163/Add.6
Page 18
39. An important aspect of rate regulations is "mandatory filing".  Certain governments require
the official disclosure of carriers' tariffs as a measure against preferential or discriminatory pricing.
Other governments do not prohibit rate differentiation, and consider rate-filing as a potential source of
rigidity and collusion in pricing.  They tend to consider companies' marketing documentation as a
sufficient source of rate information.  Large discrepancies have occurred between filed IATA ratesand tariffs actually practiced by air carriers.
40. Market considerations prevail in the setting of air cargo rates.
15  Supply and demand balances
vary by routes and types of services, and market rates reflect these differences.
5. Other elements of bilateral Air Services Agreements impacting on the cargo sector
(a) Change of gauge
41. Some ASAs still contain provisions on change of gauge operations, which refer to aircraft
changes.  Such changes are critical for express carriers implementing hub operations, because they
feed cargo to, or distribute cargo from a hub.  ASAs  generally state that change of gauge "cannot be
construed in such a way as to provide a 'separate' service", i.e. for going beyond the rights exchanged
under these agreements.  These are significant restrictions, which are considered by express carriers as
operational impediments.
(b) Non-scheduled cargo services
42. Concerns about passenger charters undermining scheduled flights also exists on the cargo
side, revolving around split charters (i.e. planes where space can be resold to third-parties).  They are
discouraged by most since they are seen as a competitor to scheduled flights.  Cargo carriage in the
belly holds of tourist charters is also frequently prohibited, generating economic inefficiencies, in
particular on North-South routes.  In contrast "own -charters" (which service one single client), are
considered a different market segment by many governments and treated more liberally.
(c) Ownership
43. Cargo services follow the general ownership rule described above.  Current rules generally
extend from ownership and control of companie s to the ownership and control of the aircraft  they
operate.  In certain instances the nationality of personnel is also specified.  To obtain a licence as an
air carrier, a company  may  need to  "own  and operate"  its own  aircraft,  and employ national citizens as
crew.  This may restrain the use of an important commercial practice: "leasing" and especially "wet
leasing" (hiring with flying personnel) of foreign cargo aircraft.  The practice is an important source
of flexibility in the air transport industry, in responding to seasonal peakloads, and in developing
                                                     
15 The freight rates correspond to a continuum of products with different valuations (notably delivery
times) by consignors and consignees, and different operation costs (notably volume and frequency of shipments)
by carriers.  An example of how the market determines  service/price is the development of consolidation cargo
using the High Weight Breaks of the General Commodity Rate (GCR) on the trans-Pacific routes. Consolidatedcargo has expanded quickly since the 1970s, when ca rriers introduced the Bulk Utilisation Charge, a rate
structure that offered greater profit for large consolidators.  This rate structure created a wider gap between thecontract rate for consolidators and the retail rate that consolidators charge their customers (it is the tariff applied
by the consolidator, not the carrier's tariff, which is the consumer price for cargo services).  Important gaps can
therefore appear between wholesale and retail prices, and between rates available to different customers.  Suchdiscrepancies do not usually exist in express services.  Express rates do differ, but according to weight andspeed requirements (and the market power of carriers on  individual routes), and consumer parcels are handled
under individual air waybills.S/C/W/163/Add.6
Page 19
cargo operations with limited capital.  The regulatory and safety issues potentially involved have been
described elsewhere.16
(d) Slots
44. Airport congestion and night curfews inhibit, passenger, cargo, and combination operations.
Approximately 130 of the world's major airports are officially "congested", which means that access
is difficult to acquire.  Many of the world's major cargo facilities are in this situation today.  Agrowing number of all-cargo and new entrant passenger airlines have thus been developing operations
out of "secondary" uncongested airports.
17  They may thus have a temporary advantage over
established express and combined carriers, which have already structured their networks and
operations around main airports.
(e) Predatory pricing
45. Predatory pricing is considered a significant threat to competition in the air sector, notably
due to opportunities for cross-subsidization between routes and markets.  Moreover, the high share offixed costs in an airlines' cost structure allows for significant departures from sustainable pricing
practices, relying only on marginal cost, with a view to deterring competitors.  However,
distinguishing between such predatory conduct and aggressive pricing remains very difficult.
Predatory pricing may take place in both passenger and cargo markets.  So far, discussion has focused
on passenger ticketing, although freight rates are not immune.
(f) Competition policy
46. Similarly, major competition cases have involved only passenger operators and revolved
around mergers, acquisitions, co-operative alliances, major airport hubs and computer reservation
systems (CRSs).  The impact of distortions on the cargo market seems to have attracted far less
attention.
(g) Deregulation of the cargo sector (national and international)
(i) United States
47. The US deregulation of cargo services pr e-dates the period under review (1993-2000). It
served as a model for passenger deregulation in th e US and has, to some degree, influenced the
internal deregulation of cargo services in  the EU.  The most relevant liberalization measures underthe 1977 Air Cargo Act and the Air Deregulation Act of 1978 for cargo operations include:
The liberalization of licencing:  Both all-cargo and combined passenger-cargo licences are
accessible to all "fit, able and willing" entrants.  Licencing is not subject to market capacity
considerations.  Technical fitness is checked by the Federal Aviation Administration (FAA)
via separate passenger-cargo (FAA 401) and all-cargo (FAA 418) licences.  All-cargolicences are not subject to aircraft type and size limits, hence, wide-bodied jets can be used
for freight transportation.  Financial and managerial fitness is checked by the Department of
Transportation (DOT).  Market entries by indire ct carriers which do not operate their aircraft
(freight forwarders and co-operative shippers which were previously heavily regulated) are
fully liberalized, subject only to adequate private liability insurance.
The opening of routes:  Domestic routes are no longer part of carrier certificates, and licensed
carriers can operate on all US routes.  Access to international routes continues to depend on
                                                     
16 See document S/C/W/163.
17 see document S/C/W/163Add.5, paragraphs 2-6.S/C/W/163/Add.6
Page 20
bilateral ASAs, which are awarded by the DOT according to public benefits.  In case of
conflicting multiple demands on international routes, US public benefits are determined in
public proceedings held before the DOT.  The abandonment (exit) of routes, which previously
needed Civil Aeronautics Board (CAB) authorization establishing that the abandonment was
in public interest, is liberalized.  The only time that a carrier needs to give private notice is if
it plans to discontinue service to an airport served as part of the Essential Air Service program(EAS).
The liberalization of rates:  International tariffs continue to be settled through IATA tariff
conferences, with the exception of fares offered by carriers enjoying US antitrust immunity in
US "open skies" bilateral markets.
The ending of cross-subsidies:  With carriers free to abandon services and unable to cross-
subsidize non-profitable routes with profitable operations, an Essential Air Service Program
was enacted.  The DOT administers the program, determines subsidy levels for public service
obligations, and solicits bids from carriers for these services.
A transition period:  A grace period is awarded to incumbent carriers to adjust to the new
regulatory framework before full exposure to competition.  In air cargo, this transition period
is set at one year and during that year only previously certified direct carriers are allowed to
operate.
48. This regulatory framework has not changed subs tantially.  Its results are well known;  they
favoured the emergence of the express carriers.18
(ii) European Union (EU)
49. The European equivalent to the US Cargo Act, Council Regulation No. 294/91, is commonly
known as "The 1991 Air Cargo Deregulation".  It followed a cargo-specific Commission proposal
submitted to Member States in 1990.  In many respects the Regulation pre-empts the Third Package,for which it has been a test case.
19  Its main provisions are:
Liberalization of ownership rules:  The national  ownership and control requirements as a
condition for access to internal European routes (as previously prescribed in intra-European
air service bilaterals) were removed.  Airlines were provided access to all international routes
as long as their ownership and control remained in Community hands.  Cargo licences grantedin one European country were made valid in other European Community countries.  This was
the first application of the European Communities' carrier  principle, which applies "when a
carrier has, and continues to have, its principle place of business, its majority ownership, and
its effective control in the hands of the nationals of the Community".
An ad hoc  solution was found for the case of non-European cargo carriers established for
several years and which were considered as de facto  European companies.  The European
Council found a solution to this problem by including in the relevant regulation a list of non-European airlines which were granted Community carrier status for the purposes of the
regulation.  The solution was not dissimilar to the ad hoc  "determination" of the US
citizenship of carriers via the interpretative powers of the DOT.
                                                     
18 For more details on the economic result of the US cargo deregulation see OECD document
DSTI/DOT(99)1, "Regulatory reform in international air cargo transportation", 6 April 1999, paragraphs 292-310, pages 81-84.
19 For details of the provisions of these packages see document S/C/W/163/Add.2, 10 November 2000,
table 26, page 65.S/C/W/163/Add.6
Page 21
Opening of routes and traffic rights:  Third, Fourth and Fifth Freedom traffic rights were
provided to all Community cargo carriers on all internal routes.  Seventh and Eighth Freedom
Rights were given later in the Third Package (1993).
Operational flexibility:  Full operational flexibility was guaranteed to carriers in the form of
unlimited frequency of service, adjustment of capacity, type of aircraft, and change of gauge.
The European Parliament added considerations on customs clearances as an important 'doing
business' requirement.  Certain operational restrictions by national regulators were permitted,
airport capacity constraints, slot scarcity, environmental issues and safety objectives.
The Commission began subjecting European carriers to competition policy scrutiny.20
Rate freedom:  The 1991 deregulation provided total rate freedom to European cargo carriers.
The principle rule of the Commission to disapprove fares considered 'excessively high or low'
was waived for cargo rates starting in 1991.  Cargo carriers were left with an obligation to
disclose their standard rates to the general public upon request.  The Commission retained, in
the context of its general competition policy, the right to intervene if market rates were found
to be predatory or anti-competitive.
The block exemption from European competition law that allowed consultation on intra-EU
cargo rates expired in 1997.  IATA has applied, on behalf of its members, for individual
exemptions.
Scheduled vs. non-scheduled services:  The European Council decided to apply the 1991
Cargo Deregulation to both scheduled and non-scheduled services.21  In order to promote a
genuinely European express industry, the Council decided to exclude 'non-scheduled services
chartered by integrated carriers' (they are foreign-owned) from the scope of the new
regulation.
50. This regulatory framework was partially superceded by the more liberal Third Package in
1993.  It has not changed substantially.
51. The results of the European air cargo liberalization have remained limited, relative to the US,
according to OECD.  This may be due to its relatively small size and constraints imposed by heavy
congestion and environmental restrictions.22  No major structural changes have occurred within the
European air cargo sector immediately after deregulation as a result of these factors.  There have been
no new entrants and no major developments or restructuring in traffic and network structures.
However, these reforms helped carriers to adjust to the Third Package of air transport liberalization
several years in advance.
(iii) Open skies policies for cargo
52. The US open skies policy has always included cargo related elements.  For example, Open
Skies agreements had two specific provisions for all-cargo services:  competitive ground support(self-handling, intermodal rights, user charges) and liberal treatment of non-scheduled cargo services.
                                                     
20 A joint cargo agreement between Lufthansa and Aer Lingus needed Commission clearance, as did
the introduction of a joint computer system for cargo logistics (the Global Logistics System) by Air France,Lufthansa, JAL and Cathay Pacific.  The latter carriers were required to operate their joint computer systems insuch a way that would "respect the conditions of the CRS block exemptions applicable in passenger services".
21 Until 1991 the European market was divided into a scheduled sector, which was serviced by
established flag airlines under restrictive ASAs, and a non-scheduled segment (particularly present in the UK
and Belgium), which was more competitive and dynamic.  The non-scheduled segment of the industry formedthe basis of express services in Europe.
22 For example, the share of European freight in the total freight carried by KLM is less than 20%.S/C/W/163/Add.6
Page 22
53. The first Open Skies Agreement, the US-Netherlands Agreement (1992) contained several
innovative elements.   It extended to surface transportation and included multimodal pricing.23  These
provisions are similar to those included for multimodal transport in the maritime model schedule.  A
memorandum in 1996 removed cargo tariff filing requirements.  The anti-trust immunity granted to
the KLM-Northwest alliance in parallel to this agr eement also allowed for the creation of a joint-cargo
service, cargo codesharing, and the coordination of rates.
54. In the case of Germany, an agreement with the US in 1994 on cargo preceded a
comprehensive agreement in 1996.  The 1994 cargo agreement was limited to scheduled cargo
operators and introduced Seventh Freedom rights (provided that bilateral ASAs with third countries
granted the traffic rights).  Intermodal rights of cargo carriers were covered in this Agreement,
"subject to the relevant laws and on the basis of reciprocity".  This allowed for the granting of a
freight forwarding licence to Lufthansa Cargo for US inter-state surface transportation.
55. Similarly, the US-Japan all-cargo Agreement in 1996 preceded a comprehensive bilateral
agreement in 1998.  This was not an Open Skies agreement since it still relied on the pre-determined
capacity.  Nevertheless, it permitted additional Third, Fourth and Fifth Freedom rights.24  A
comprehensive agreement between the US and France grants Fifth Freedom rights to all-cargo
operators.
56. Other countries have also pursued Open Skies policies regarding all-cargo operations.  Cases
in point are agreements between Luxembourg and I ndia, and between the Netherlands and Malaysia.
The latter includes Third, Fourth and Fifth Freedom rights, liberal provisions for 'change of gauge',
pricing, 'doing business' and intermodal provisions.  The recent Asia Pacific Economic Cooperation
(APEC) Agreement (signed 1 May 2001 between five Member States) is more liberal for cargo than
for passengers.  It includes Seventh Freedom rights for cargo for all signatories, and leaves SeventhFreedom rights for passengers as an option.
57. Despite liberalization under Open Skies agreements regarding cargo, a variety of issues
remain to be resolved.  The following Table, prepar ed by the OECD Secretariat, lists constraints and
concerns.
                                                     
23 The relevant provision reads: "airlines may elect  to perform their own surface transportation or to
provide it through arrangements with other surface carriers including surface transportation operated by other
airlines and indirect providers of cargo transportation.   Such intermodal cargo services may be offered at a
single through-price for the air and surface transportation combined provided that shippers are not mislead as to
the facts concerning transportation".
24 For specific details on this agreement details on this agreement see OECD document
DSTI/DOT (99) 1, 6 April 1999, paragraphs 369-377, pages 96-97.S/C/W/163/Add.6
Page 23
Table 7
Remaining Problems in Open Skies Agreements for Cargo
Cargo Issues Status under Open Skies Market and Competition Impacts
Designation of CarriersCarriers nominally designated by their
regulatory authoritiesThis becomes a direct barrier to entry if
market access (designation) is notguaranteed to all certified carriers
Ownership and ControlOpen Skies agreements do not contain
provisions on ownership and controlmattersRestrictions on ownership and control
impair the optimisation of firm boundariesand access to capital
Point-to-point vs.Multiple-point trafficrightsIn the phase-in period of most agreements,
only given (designated) bilateral andbeyond routes are open to competitionAirlines cannot design and optimize their
networks freely, on the basis of unalteredtechnical and economic considerations
Mirroring (ThirdCountry) 5th FreedomRightsOn a stand-alone basis, a bilateral Open
Sky only guarantees 5th Freedom rightsgranted between two partner countriesThese 5th Freedom rights have no practical
value if potential 'beyond' countries do notalso grant mirroring 5th Freedom rights
7th Freedom RightsMost Open Sky agreements do not include
7th Freedom rightsLimitations on traffic between third
countries impairs carriers' networkoptimization
8th Freedom RightsConsecutive cabotage is not included in
Open SkiesOverseas carriers' market access and
network optimization in large domestic and
regional markets is impaired
Non-scheduled servicesUnequal treatment with scheduled  services.
Only the least restrictive of the two
countries' charter regulations applyDifferent treatment distorts competition and
complementarity between two types of
services, and companies (in benefit ofeither)
Airport andInfrastructure AccessAirport infrastructure access is not included
in most Open Skies (concerning neitherpeak combined nor all-cargo curfewperiods)Slot discrimination and scarcity may erode
the granted traffic rights
Multimodal (Surface)LicencingRoad access provisions are negotiated case-
by-case in each agreementRestrictions on surface deliveries may
impair international carriers' market accessand service quality
Customs FacilitationCustoms facilitation is not dealt with in
most Open SkiesDelays and/or discriminations in customs
clearances/preclearances may hampermarket access and competition
Strategic Alliances andCompetition PolicyOpen Skies do not contain competition
policy provisions. International businessalliances are frequently granted antitrust
immunity as compensationThere are no standard competition rules on
international routes. Case-by-case-antitrustimmunities may distort competition
between alliances
58. A further source of information concerning restrictions and impediments faced by cargo
operators is the 1996 survey conducted by the US General Accounting Office (GAO).25  The 22 US
all-cargo airlines that responded to the questionnaire reported problems at 81 foreign airports (Tables
A3-A6).  It could be possible to address some of the concerns raised, in particular those reflected in
Table A6, within the existing GATS framework.
                                                     
25 GAO/RCED 97-13 "Report to Congressional Requesters:  DOT's Efforts to Promote US Air Cargo
Carrier's Interest", October 1996.S/C/W/163/Add.6
Page 24
IV. MULTIMODAL OPERATIONS26
1. Multimodal operations for air cargo
(a) Air-trucking
59. There are two main forms of cargo multimodal operations:  air-trucking and air-sea
movements.  The term air-trucking denotes combination and express carriers making a wider use of
surface trucking for freight transportation.  Air-trucking was intended to overcome restrictions onFifth Freedom operations.  Air-trucking is not only more efficient and cheaper, but it benefits from
additional factors such as:  (i) lack of available airspace on scheduled flights;  (ii) inability of the
aircraft operator to handle some (oversized, heavy etc.) consignments;  (iii) impediments preventing
an operator from achieving carriage within 12 hours of acceptance (this applies mainly to express
services);  (iv) missed connections; and (v) airport congestion.  Air-trucking provides surface
deliveries to gateway airports (a feeder service for air carriers).  In Europe, air-trucking can only be
carried out under an air waybill and the waybill of the Convention on the Contract for theInternational Carriage of Goods by Road (CMR).
60. US air-trucking is estimated to serve approximately 1,000 city-pairs at a frequency of 16,000
per week.  The comparable figures for Europe are 400 and 7,000 respectively.  For example in 1997,
the percentage of air-trucking in total German air cargo volume amounted to about one-quarter, or
767,000 tonnes out of a total of 2.88 million tonnes.  Owing to European geography, and eased by thepermissiveness of regulations, "air-trucking" has developed well in the European market.
27
(b) Air-sea transportation
61. Generally, air-sea transportation is carried out if the carrier has no traffic rights in the country
of origin of the goods.  In these cases the merchandise is shipped to destinations where such rights are
available.  Air-sea transportation is particularly relevant for shipments between Asia/Pacific andEurope, via the Gulf, and on some trans-Pacific routes.
62. Air-sea transportation requires a special licence.  Historically, transport licences were mode
specific and linked to policies restricting access (n otably in air and road transport).  While these
restrictions have largely disappeared, traces of the modal character have remained.  For instance, the
EU licencing policy stipulates that "the air carrier should have as its main activity air transportation,exclusively or in conjunction with a commercial activity which implies the operation, repair or
maintenance of aircraft".  This "air only" tendency in licencing is mirrored by similar rules in other
modes.  In several countries, licences necessary for road and rail haulage are sector specific. Such
exclusive sectoral licencing is costly and poses challenges for multimodal transportation.
(c) General observations
63. The economic impact of restrictions on intermodal licencing was eased in the past by
transporters (express carriers and freight forwarders) contracting out to specialized carriers.  However,
the ensuing costs have tended to increase as multimodal transportation has become more technically
demanding and challenging to manage.  The OECD considers it desirable to make formal licencing
rules clearer, more predictable, a nd fully enabling for multimodal services.
                                                     
26 The following presentation complements the information contained in document S/C/W/129,
paragraph 15(a).
27 According to OECD, European airlines' developing and operating truck transport may conflict,
however, with  Community air carrier licences under present law.S/C/W/163/Add.6
Page 25
64. The OECD's view is largely corroborated by major carriers.  As background information for
the GATS 2000 negotiations, two large integrators have identified obstacles they face in their
activities.  Some of these obstacles could be qualified as multimodal, since they do not relate to air
transport and are closely linked to land transport or to services auxiliary to all modes of transport.28
65. From the GATS perspective, intermodal restrictions could not be dealt with in a way similar
to the treatment of multimodal restrictions in the maritime modal schedules.  In the latter case,
commitments facilitating multimodal operations may take two forms.  First, they could consist of
additional commitments relating to the ability to rent, hire, charter, or otherwise utilize trucks, railway
carriage, barges, and related equipment for the onward forwarding of international cargo.  Such
additional commitments would depend on the inclus ion of maritime transport in the schedule.
Second, an attempt could be made to liberalize modality activities head-on, implying a reference to
maritime transport including multimodal activitie s in the sector column of the schedule. 29  However,
these possibilities do not exist for air transport.
2. Multimodal operations for passenger traffic
66. Multimodal operations for passenger traffic differ from cargo, reflecting the specific
economic and regulatory environment of the sector.  Multimodal activities regarding passengers seem
to have been limited to two types of activities.  First, these are equity and management participation of
airlines in land transport operators serving an airport.  The relevant activities, which fall under CPC71112, CPC 71212, and CPC 71214, would be covered by the GATS.  For example, CPC 71212
includes "scheduled transportation between an urban centre and airports … by motor bus and multi-
passenger airport limousine, with driver", while CPC 71214 covers the same service between one and
another urban centre.  A second case is railway and airline codesharing.  It is a substitute for an air
                                                     
28 For FedEx those obstacles were:  (i) discriminatory or non-transparent approvals of customs
brokerage licences;  (ii) restrictions on the ability of express companies to own and operate their own groundvehicles and trucking operations;  (iii) prohibition of wholly foreign-owned integrated services comprising
freight forwarding, trucking, warehousing and customs brokerage, mandatory joint venture requirements, and
limitations on freedom to contract for services provisions;  (iv) requirement for separate authorization for thevarious services provided (e.g. freight forwarding, cust oms clearance, warehousing, pick up and deliveries, sale
of express services);  (v) prohibition for air carriers from obtaining freight forwarder licences and operating theirown ground vehicles;  (vi) restrictions on the right to provide ground vehicle services to collect international
shipments for another air carrier;  (vii) limitation on the value of shipment that can be transported by express
companies;  and (viii) limitations on access to radio frequencies necessary for tracking and tracing of dispatches
and deliveries.  For UPS, these obstacles were:  (i) th e duplication frequently required to issue a trucking
waybill in addition to the air waybill;  (ii) the prohibition in certain countries to use large feeder vehicles (over
four tonnes for example) which forces the express carrier to use several vans instead, thereby multiplying thecosts and risks;  (iii) restrictions on the right of estab lishment of airfreight firms into related services such as
trucking, ground handling and freight forwarding;  (iv) restrictions imposing that airlines and indirect carriers
can only employ surface transportation in connection wi th an international air transportation;  and (v)
restrictions on the ability to operate surface transportatio n between any points in the territories to the parties of
an air services bilateral agreement or to third countries including restrictions on the kind or type of equipment.
29 There are the following modal schedule:  Mar itime International Freight Transport INCLUDING
multimodal transport services:  transportation of international freight by sea-going vessels from the port of
loading in one country to the port of discharge in another country.  This transportation may be combined with
[Maritime Storage and Warehousing services/Container Station and Depot services/Freight Forwardingservices] and [road/rail/inland waterway] freight services from the point of loading in one country by amultimodal transport operator to the point of delivery in another country under a multimodal contract to providea multimodal transport service.  Multimodal transport services:  The carriage of goods by at least two different
modes of transport by the multimodal transport operator on the basis of a single through multimodal transport
contract from a point of loading in one country to a point of delivery in another country.  Multimodal transport
operator or supplier of international maritime transport services:  Any person who, on his own behalf or through
another person acting on his behalf, executes a single through multimodal transport contract and who acts as
principal, not as an agent or on behalf of the consignor or of the carriers participating in the delivery ofmultimodal transport services, and who assumes responsibility for the performance of the contract.S/C/W/163/Add.6
Page 26
transport operation and submitted to a regulatory regime similar to airlines' codesharing and has so far
been limited mainly to Europe.
67. Initially, airlines viewed high-speed trains as rivals on the short-haul markets.  For example,
the French TGV has captured a significant part of intercity traffic.  Similar developments are
discernable on intra-European routes, such as Paris-London (Eurostar), Paris-Brussels-Amsterdam
(Thalys), and Paris-Cologne.  However, recently airlines have recognized the advantages ofcooperating with rail networks.  Relevant consider ations include growing congestion at airports, the
development of global alliances, hub-and-spoke operations, and convergence of the respective
booking systems.
30  Co-operation agreements may be considered as classical codesharing for selected
destinations.  To date, the railways involved, continue to conclude agreements with various airlines
and alliances.  The SNCF, for example, has agreements with Air France (Skyteam), and United
Airlines and Lufthansa (Star).  However, traffic volumes have remained extremely limited when
compared with total rail traffic.
68. Co-operation may help to reduce congestion and provide space for more profitable long-haul
operations.  This also encourages secondary hub growth.  The French and Belgian railways are
reported to be considering the connection of three major hubs,  Schiphol, Zaventem and Frankfurt.  In
a similar manner, the two rail operators and British Airways jointly manage Eurostar-UK, the British
section of the Eurostar route.  Questions have arisen concerning the regulatory status of intermodalcodesharing.  Reportedly, France and the US are in the process of negotiating clauses covering this
type of codesharing.
                                                     
30 For instance Socrate,  the French railways' booking system, is based on the airlines' CRS.  The
Communities' CRS regulation also covers railways.S/C/W/163/Add.6
Page 27ANNEX
Table A1
Top 50 Airline Ranking by Passenger Traffic (1999)
Ranking:
passenger
trafficRanking:
passenger
numberAirlineFleet
Size31 CountryPassenger Traffic
(RPK32)Seat
Capacity
(ASK33)Load Factor Passenger Number
'99 '98 '99 million change change % change million change
1 1 2 United Airlines 603 USA 201,910 0.7% 1.5% 71.0 -0.6 87.1 0.3%
2 2 3 American Airlines 714 USA 180,144 2.8% 3.8% 69.5 -0.7 84.7 4.1%
3 3 1 Delta Air Lines 600 USA 168,599 1.4% 1.9% 72.4 -0.3 105.5 0.1%
4 5 6 Northwest Airlines 424 USA 119,337 11.1% 8.9% 74.6 1.5 56.1 11.1%
5 4 11 British Airways 268 UK 117,463 -0.7% 0.7% 69.8 -0.9 36.3 -2.0%
6 6 7 Continental 364 USA 96,575 11.3% 9.6% 73.2 1.1 45.5 4.3%
7 8 9 Air France 227 France 85,543 12.1% 11.3% 76.1 0.6 39.8 7.6%
8 7 12 Japan Airlines 135 Japan 84,255 6.1% 3.7% 70.2 1.6 33.0 4.5%
9 9 10 Lufthansa Airlines 233 Germany 81,401 13.2% 13.9% 73.3 -0.4 38.9 7.8%
10 10 4 US Airways 384 USA 66,898 0.5% 4.3% 70.1 -2.6 58.8 1.4%
11 11 27 Singapore Airlines 92 Singapore 65,718 9.0% 5.5% 74.9 2.4 13.8 8.5%
12 12 19 Qantas Airways 104 Australia 59,863 2.1% 0.3% 73.2 1.3 19.2 2.0%
13 13 22 KLM 97 Netherlands 58,903 2.7% 2.6% 77.4 0.1 15.7 4.7%
14 15 5 Southwest Airlines 327 USA 58,695 16.1% 11.2% 69.0 2.9 57.7 9.5%
15 14 8 All Nippon Airways 140 Japan 56,725 4.0% 1.7% 65.1 1.5 42.7 2.2%
16 17 13 TWA34188 USA 41,946 6.5% 3.2% 72.9 2.2 25.8 8.0%
17 16 33 Cathay Pacific 62 China 41,502 2.0% -3.6% 71.4 3.9 10.5 2.1%
18 18 24 Air Canada 158 Canada 39,005 4.4% 3.8% 71.4 0.5 15.2 2.7%
19 20 21 Thai Airways Int'l 77 Thailand 37,642 14.2% 6.7% 72.7 4.8 16.3 7.4%
20 19 14 Alitalia 146 Italy 36,762 3.5% 5.5% 67.5 -1.3 24.1 -0.2%
21 22 18 Korean Air 11 Korea, Rep of 36,662 13.6% 3.3% 74.05 6.7 20.5 4.1%
22 23 23 Malaysia Airlines 93 Malaysia 34,930 14.2% 8.2% 71.3 3.9 15.4 12.1%
23 21 16 Iberia 179 Spain 34,606 6.4% 11.5% 68.9 -2.6 21.9 0.6%
24 24 26 Swissair 74 Switzerland 32,974 15.6% 14.9% 72.7 0.4 13.9 13.6%
25 27 20 America West 132 USA 28,496 8.2% 6.6% 68.4 1.0 18.7 5.1%
26 26 46 Canadian Airlines3580 Canada 26,701 -0.6% 0.5% 71.1 -0.8 7.5 -10.2%
27 32 Virgin Atlantic 28 UK 25,027 21.2% 26.5% 77.0 -3.4 3.6 20.6%
                                                     
31 This includes aircraft for passenger, cargo, and combination.
32 RPK = Revenue Passenger Km
33 ASK = Available Seat Km
34 Trans World Airlines (TWA) was purchased by American Airlines in 2001.
35 Canadian Airlines was acquired by Air Canada and is now fully incorporated into Air Canada.S/C/W/163/Add.6
Page 28Ranking:
passenger
trafficRanking:
passenger
numberAirlineFleet
Size31 CountryPassenger Traffic
(RPK32)Seat
Capacity
(ASK33)Load Factor Passenger Number
'99 '98 '99 million change change % change million change
28 25 35 Varig 89 Brazil 23,624 -12.7% -13.7% 66.6 0.6 10.1 -8.7%
29 30 41 Condor Flugdienst 47 Germany 23,000 10.0% 8.1% 82.4 1.4 8.2 11.7%
30 33 China Airlines 49Chinese
Taipei22,250 9.4% 3.4% 72.0 3.9 7.9 7.5%
31 28 42 Britannia Airways 33 UK 21,747 -6.7% -7.2% 90.1 0.4 8.2 -3.2%
32 31 15 SAS 154 Sweden 21,243 1.7% 4.8% 63.8 -1.9 22.2 2.4%
33 29 LTU Int'l Airways 35 Germany 20,250 -10.2% -7.1% 78.2 -2.7 6.3 -12.2%
34 34 Air New Zealand 37 New Zealand 19,665 0.3% 68.7 0.2 6.5 1.5%
35 35 29 Saudi Arabian Airlines 99 Saudi Arabia 19,619 4.3% 4.5% 63.2 0.2 12.3 4.3%
36 37 28 Alaska Airlines 91 USA 18,949 4.3% 3.2% 67.9 0.8 13.6 4.4%
37 36 25China Southern
Airlines74 China 18,685 2.3% 5.6% 58.7 -1.9 15.1 0.4%
38 38 17 Japan Air System 82 Japan 18,368 7.7% 3.7% 62.3 2.3 20.9 5.7%
39 40 EVA Air 35Chinese
Taipei18,151 8.9% 2.0% 74.6 4.7 4.1 12.8%
40 46 36 Sabena 53 Belgium 17,71 4 15.5% 19.9% 65.6 -2.5 10.0 14.3%
41 44 South African Airways 52 South Africa 17,644 10.6% 15.7% 61.9 -2.8 5.7 11.4%
42 45 American Trans Air 56 USA 16,895 7.9% 3.2% 73.7 3.2 6.8 14.0%
43 41 Aeroflot 110 Russia 16,405 -0.3% -3.6% 59.4 2.0 4.6 3.5%
44 43 Airtours Int'l 31 UK 16,266 0.1% 0.7% 91.6 -0.6 5.5 -0.9%
45 65 Air 2000 27 UK 16,217 54.2% 54.5% 91.4 1.1 6.0 32.7%
46 48 Emirates 32 UAE 16,130 16.0% 20.2% 71.9 -2.6 4.8 12.4%
47 42 30 Ansett Australia 64 Australia 15,822 -3.0% -8.2% 67.9 11.8 -1.3%
48 47 Air China 65 China 15,735 7.8% 4.8% 61.2 1.7 6.7 3.7%
49 49 34 THY Turkish Airlines 75 Turkey 13,903 0.6% 8.2% 60.0 -4.5 10.4 -0.9%
50 57 Asiana Airlines 51 Korea, Rep of 13,674 21.4% 9.7% 75.6 9.3 11.1 26.5%
Source:  Airline Business , September 2000.S/C/W/163/Add.6
Page 29
Table A2
Top 50 Airlines by Cargo Traffic (1999)
Ranking AirlineFleet
SizeCountry Cargo Traffic (RTK) Total Traffic (RTK) Employees
'99 '98 million change million change
1 1 United Airlines 603 USA 4,475 -6.1% 22,648 1.2% 100,001
22American
Airlines714 USA 3,325 4.7% 19,538 3.1% 101,740
3 3 Delta Air Lines 600 USA 2,554 -7.6% 17,727 72,000
45Northwest
Airlines424 USA 3,758 19.5% 14,498 13.2% 52,000
5 4 British Airways 268 UK 4,536 6.1% 16,256 1.1% 65,640
66Continental
Airlines364 USA 1,606 4.7% 10,298 10.3%
7 8 Air France 227 France 5,237 6.9% 12,781 11.2% 59,000
8 7 Japan Airline 135 Japan 4 ,538 11.0% 12,738 7.1% 18,974
99Lufthansa
Airlines233 Germany 7,072 5.6% 8,059 13.2%
10 10 US Airways 384 USA 482 -5.1% 6,503 0.1% 43,028
11 11Singapore
Airlines92 Singapore 5,668 15.2% 12,038 11.8% 27,386
12 12 Qantas Airways 104 Australia 1,783 -2.5% 8,912 0.3% 28,226
13 13KLM Royal
Dutch97 Netherlands 4,149 6.8% 10,070 4.4% 27,302
14 15Southwest
Airlines327 USA 216 -0.1% 5,283 16.1% 27,653
15 14All Nippon
Airways140 Japan 1,510 12.5% 6,615 12.0% 14,639
16 17 TWA36188 USA 834 2.0% 4,609 5.6%
17 16 Cathay Pacific 62 China 3,817 15.8% 7,768 7.7% 13,159
18 18 Air Canada 158 Canada 1,389 3.6% 4,899 4.2%
19 20Thai Airways
Int'l77 Thailand 1,644 6.2% 5,097 11.2%
20 19 Alitalia 146 Italy 1,637 7.6% 5,277 4.7% 20,770
21 22 Korean Air 111 Korea, Rep. of 5,962 14.1% 9,422 14.0% 14,107
22 23Malaysia
Airlines93 Malaysia 1,670 12.9% 4,856 20.5% 21,687
23 21 Iberia 179 Spain 778 -4.3% 3,893 4.1% 26,935
24 24 Swissair 74 Switzerland 1,724 7.5% 4,955 12.6%
25 27 America West 132 USA 138 -7.1% 2,723 8.1% 13,370
26 26Canadian
Airlines Int'l37 80 Canada 744 9.3% 3,131 1.1% 16,807
27 32Virgin Atlantic
Airways28 UK 901 19.8% 3,304 13.3% 6,500
28 25 Varig 89 Brazil 927 -28.2% 3,274 -14.0% 15,605
29 30Condor
Flugdienst47 Germany 2,070 10.0% 2,701
30 33 China Airlines 49Chinese
Taipei3,381 17.8% 5,440 15.7% 8,999
31 28Britannia
Airways33 UK 44 -12.6% 1,850 -6.8%
32 31 SAS 154 Sweden 793 -1.3% 2,835 5.8% 28,863
                                                     
36 TWA has been acquired by American Airlines
37 Canadian Airlines was acquired by Air Canada and is now fully incorporated into Air Canada.S/C/W/163/Add.6
Page 30
Ranking AirlineFleet
SizeCountry Cargo Traffic (RTK) Total Traffic (RTK) Employees
'99 '98 million change million change
33 29LTU Int'l
Airways35 Germany 160 -7.3% 1,982 -10.0% 5,400
34 34Air New
Zealand37 New Zealand 833 -2.1% 2,675 2.4% 9,177
35 35Saudi Arabian
Airlines99 Saudi Arabia 1,017 8.9% 2,783 5.2%
36 37 Alaska Airlines 91 USA 105 -6.3% 1,827 23.7%
37 36China Southern
Airlines74 China 616 10.4% 2,003 4.6%
38 38Japan Air
System82 Japan 193 27.1% 1,244 -6.5% 5,667
39 40 EVA Air 35Chinese
Taipei3,150 23.9% 4,783 18.3%
40 46 Sabena 53 Belgium 1,594 15.5% 12,717
41 44South African
Airways52 South Africa 689 88.8% 2,244 26.9% 9,014
42 45American Trans
Air56 USA 1,533 8.8%
43 41 Aeroflot 110 Russia 584 13.9% 2,061 3.4%
44 43 Airtours Int'l 31 UK 44 -6.2% 1,421 -0.4%
45 65 Air 2000 27 UK 14 880.3% 1,437 44.7% 2,345
46 48 Emirates 32 UAE 1,074 29.4% 2,613 21.1% 4,978
47 42 Ansett Australia 64 Australia 102 -63.7% 1,559 -13.0% 14,876
48 47 Air China 65 China 1,526 42.6% 2,934 23.5% 12,900
49 49THY Turkish
Airlines75 Turkey 313 20.3% 1,578 6.6% 9,527
50 57 Asiana Airlines 51 Korea, Rep. of 2,252 26.7% 14,312 22.1% 5,835
Total 7,481 89,96424.4%
Average309,9508.6%
Average+1 Million38
Source:  Airline Business, September 2000.
                                                     
38 This is an approximation as unknown figures have been estimated.S/C/W/163/Add.6
Page 31
Table A3
Difficulties Associated with Government Regulations at Foreign Airports
(reported by US all-cargo carriers)
Number of Airports
ProblemNo. of airline
respondentsNo. of
Airports
CitedLatin
AmericaEuropeMiddle
East/AfricaAsia/Pacific
RegionCanada
Burdensome legal and
administrative
requirementsa62 5 1 3 0 11 1 0
Denial of traffic rightsb4 1 7 8 10 35
Difficulty obtaining flightauthorization/permits8 1 5 6 21 60
Restricted intermodal
rightsc 3 1 2 3 00 81
Difficulties or delays
clearing cargo throughcustoms5 1 0 6 11 20
Prohibitions against flying
during certain hours7 1 0 2 30 41
Insufficient take-off or
landing slots at congestedairports77 1 1 05 0
Operations restricted to less
desirable airport47 2 1 02 2
Discriminatory taxes 2 5 1 1 0 3 0
Excessive fines for
violations of regulations13 3 0 00 0
Problems converting or
remitting currencyd 23 3 0 00 0
E x c e s s i v e  t a x e s 2 31 00 20
Excessive customs duties 1 1 0 0 0 1 0
Other problemse11 0 0 01 0
Totals3913 50 19 6 3 16 6
Note: This survey defined discriminatory charges as different charges for, or taxes on the same goods or services, and excessiv e
charges as those substantially exceeding the cost of the goods, services, or use of facilities after providing for a reasonable  return on
assets.
a Requirements that place a significant burden on airlines in terms of costs or management oversight.
b Prohibition against operating on routes authorized under bilateral agreements.
c Restrictions on the ability to operate trucks to provide pickup and delivery services.
d Difficulty converting revenue earned in local currency into dollars or sending revenue to the United States.
e Includes fees for operations above specified levels of aircraft noise or emissions.
Source: US all-cargo airlines' responses to GAO's questionnaire, (Page 53, GAO/RCED-97-13 International Aviation)
                                                     
39 For Tables A3-A6 inclusive, the Total indicated at  the bottom of the first column ("No. of airline
respondents") denotes the number of airlines which responded to the survey.  Likewise, the Totals indicated atthe bottom of columns 2-7 (columns from "No. of airports cited", to "Canada") denote the number of individualairports cited in survey responses.  It is for this reas on that the columns do not numerically add up to the Totals
indicated on the bottom row of Tables A3-A6.S/C/W/163/Add.6
Page 32
Table A4
Difficulties Associated with Policies and Services at Foreign Airports,
(reported by US all-cargo carriers)
Number of Airports
ProblemNo. of airline
respondentsNo. of
Airports
CitedLatin
AmericaEuropeMiddle
East/AfricaAsia/
Pacific
RegionCanada
Excessive landing fees 8 15 4 2 0 8 1
Discriminatory landing fees 5 13 5 0 0 8 0
Discriminatory payment
termsa 51 2 5 6 0 1 0
Excessive fuel prices 7 11 7 1 0 3 0
Other problems with user
feesb 39 4 2 0 3 0
Discriminatory fuel prices 4 7 6 0 1 0 0
Problems with maintenanceand technical support
c 36 3 1 0 2 0
Other problems with airport
and aircraft servicesd 25 0 0 0 5 0
Totals 14 48 20 10 1 16 1
Note: This survey defines discriminatory charges as different charges for, or taxes on the same goods or service, and excessive
charges as ones substantially exceeding the cost of the goods, services, or use of facilities after providing for a reasonable return on
assets.a For example, foreign airlines must pay for services in US dollars, while national carriers can pay for services in local curr ency.
b Other problems with user fees cited by respondents included the assessment of charges with little or no associated service pr ovided.
c Inability to secure the maintenance and technical support necessary to operate efficiently or restrictions on an airline's ab ility to
perform its own maintenance and technical support.
d Includes discriminatory value added taxes and enroute fees.
Source: US all-cargo airlines' responses to GAO's questionnaire, (Page 54, GAOIRCED-97-13 International Aviation)
Table A5
Difficulties Associated with Groundhandling at Foreign Airports
(reported by US all-cargo carriers)
Number of airports
ProblemNo. of airline
respondentsNo. of
Airports
CitedLatin
AmericaEuropeMiddle
East/AfricaAsia/Pacific
RegionCanada
Cargo handling restrictions 61 6 4 2 01 0 0
Excessive cargo handling fees 81 4 7 3 0 4 0
Inadequate warehouse
facilities21 2 1 2 0 9 0
Ramp handling restrictions 51 1 3 1 0 7 0
Discriminatory cargo
handling fees4 830 0 50
Excessive ramp handling fees 4 833 0 20
Other problems withgroundhandling
a 2 700 0 43
Discriminatory ramp handling
fees2 720 0 50
Totals 13 31 9 7 0 12 3
Note:  This survey defined discriminatory charges as different charges for, or taxes on the same goods or services, and excessi ve
charges as those substantially exceeding the cost of the goods, services, or use of facilities after providing for a reasonable  return on
assets.
a Other such problems cited by respondents included inadequate cargo apron space.Source: US all-cargo airlines' responses to GAO's questionnaire.S/C/W/163/Add.6
Page 33
Table A6
Significant Problems Associated With Restrict ions on Local Marketing and Distribution at
Foreign Airports, as Reported by US All-Cargo Airlines, by Region
Number of airports
ProblemNo. of airline
respondentsNo. of
Airports
CitedLatin
AmericaEuropeMiddle
East/AfricaAsia/Pacific
RegionCanada
Restrictions of local
distribution networksa 31 2 3 0 0 9 0
Restrictions on number of
sales offices, personnel, and
types of personnel22 1 0 01 0
Restrictions on local
advertising12 0 0 02 0
Totals 41 3 4 0 0 9 0
a Local distribution networks are the methods by which an airline distributes cargo to its final destination after it is
unloaded from the aircraft.
Source: US all-cargo airlines' responses to GAO's questionnaire. (Page 55, GAOIRCED-97-13 International Aviation)
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