RESTRICTED  WORLD TRADE  
ORGANIZATION  S/C/M/84 
27 September 2006 
 
 (06-4615) 
Council for Trade in Services  
  
 
 
REPORT OF THE FIRST SESSION OF THE REVIEW MANDATED 
UNDER PARAGRAPH 5 OF THE ANNEX ON AIR TRANSPORT SERVICES 
HELD ON 12 SEPTEMBER 2006 
 
Note by the Secretariat
1 
  
1. On 12 September 2006, the Council for Trade in Se rvices held the first meeting devoted to the 
second Review of Air Transport Services pursuan t to paragraph 5 of the GATS Annex on Air 
Transport Services.  The agenda is contained in document WTO/AIR/2882.   
2. The Chairman
, Ambassador Major of Hungary, recalled that at the meeting of the Council for 
Trade in Services held in February 2006, Members had agreed that the Review would be organised 
broadly along the structure laid out in document Job No. 2451, dated 19 April 2000.  The agenda for 
the meeting, which had been circulated earlier as a dr aft, reflected that decision.  With regard to 
agenda item B, he indicated that some delegations had requested that its cons ideration be postponed to 
the following meeting, since the documentation to be  provided by the Secretariat for the Review was 
not yet available in full.  While he believed that  the suggestion should not raise particular problems, 
he nevertheless intended to provide an opportunity to any delegation who had a submission to table 
under item B to introduce it briefly.  The discussion of such submissions would be postponed to the 
following meeting.  As no items were raised unde r Other Business, he proposed that the Council 
adopt the agenda as circulated. 
3. The Council so agreed . 
4. Before moving to the first item of the agenda, the Chairman  offered the floor to any 
delegation wishing to make statements of a gene ral nature on the second Review of Air Transport 
Services. 
5. The representative of Australia  welcomed the opportunity to review again the Annex to the 
GATS on Air Transport Services and thanked the Secr etariat for the comprehensive background paper 
on "Developments in the Air Transport Sector si nce the Last Review" contained in document 
S/C/W/270, as well as the Chairman and his predecesso rs for getting Member to this first dedicated 
meeting.  His delegation wished to make some ge neral points before presenting its own approach to 
the Review.  Firstly, Australia considered it impor tant that Members assess the developments in the 
air transport sector as a whole and therefore looke d forward to the second part of the Secretariat 
paper.  Secondly, his delegation considered that  the Review was timely, as there had been many 
developments since the end of first one, which incl uded the volatility of the global market and the 
increasing variety of business models used by ai rlines and other industry participants.  These 
developments had all occurred against a backdr op of continuing liberalisation and increasing 
competition. 
                                                      
1 This document has been prepared under the Secret ariat's own responsibility and without prejudice to 
the positions of Members and to their rights and obligations under the WTO. S/C/M/84 
Page 2  
 
  6. Turning to Australia's objectives for the Review, his delegation wished to ensure that the 
second Review led to concrete outco mes and opportunities for Members, if they so desired, to make 
commitments on ancillary air transport services in the GATS.  The Review implied assessing developments in the aviation sector, while also pr oviding an opportunity for Members to clarify the 
Annex.  It was not about negotiating or making new commitments on air transport services.  
Moreover, Australia continued to believe that the reciprocity-based system captured in bilateral Air 
Service Agreements and the MFN system could co-exi st for different elements of the aviation sector.  
While his delegation would make some specific comments on the Secretariat paper, it might seek to return to some issues at subsequent meetings of the Review. 
7. As for the issues under discussion at that meeting, he noted that the Secretariat background 
paper supported Australia's view that considerable  changes had taken place in ancillary services since 
the previous Review.  On mainte nance and repair, according to IA TA, there had been considerable 
progress over the previous five years in harmonizing  maintenance standards worldwide.  On selling 
and marketing of air transport services, the Secret ariat paper indicated that the increasing share of 
direct sales by airlines and their distribution mix had been confirmed and amplified during the period 
under review, as had the channels for direct sales.  Total turnover of online travel agencies had been 
estimated at US$55 billion in 2004, up from US$35 billion in 2002.  These developments presented 
both opportunities and challenges to service providers.   
8. Australia also remained committed to the cons ideration of ground handling matters in the 
GATS.  While Members were familiar with the appr oach Australia and othe rs had taken to ground 
handling during the first Review, hi s delegation did not intend to return to the definitional issue of 
whether or not ground-handling was addressed in the GATS, even if it had not resiled from its earlier 
position, but would rather look at options which pr ovided certainty for Members rather than legal 
debate.  He felt that the Annex Review was the correct  place for this to occur.  To this end, Australia 
and a number of co-sponsors would submit later in  the day a Job document under agenda item B.  
They were not proposing substantive discussion of the paper at that meeting, as this would be 
premature;  rather, the paper was being tabled to  enable Members to consult with capitals and 
facilitate informed debate at the following meeti ng of the Review, as the issue was important and 
required measured consideration.   
9. He added that many important issues awaite d the second meeting of the Review and the 
second part of the Secretariat paper.  Australia hope d that this second meeting could take place before 
the end of the year, possibly in mid December. 
10. The representative of the European Communities
 welcomed the start of the Review and noted 
its timeliness given developments in the sector.  His delegation was very committed to the Review 
process and would try to ensure that it was conducte d in the best possible way through an in-depth 
and fruitful discussion.  He noted that, in today's globalised world, no-one questioned the economic importance of the air transport sector, both in itself and as a facilitator for the provision of a range of 
other services.  Such economic importance was con tinuously growing and the activities performed, as 
well as the service providers involved, had become more and more diversified and sophisticated.  
Against this background, Members' collective duty was to carefully monitor developments in the 
sector in order to:  first, assess if the regulatory fra mework currently applying to air transport services 
was the most suitable one vis-à-vis today's business models to accompany and encourage the progressive and necessary liberalisation process that was occurring in more and more Members;  and, 
second, determine the impact of these developments in terms of the GATS coverage of the sector. 
11. In his delegation's opinion, the Review need ed to be both comprehensive and forward-
looking.  Comprehensive, as the air transport Annex le ft no issue outside the scope of the Review and 
therefore all aspects of the sector had to be subjected to it, and forward-looking, given the rapid  S/C/M/84 
 Page 3 
 
 
  evolution and innovation in the sector.  The Review needed to be, and remain, a dynamic and flexible 
tool to allow Members to adapt to circumstances at any time. 
12. He thanked the Secretariat for all its efforts and for the high quality note it had produced in 
document S/C/W/270.  He looked forward to receivi ng the additional work that he understood the 
Secretariat was undertaking on the issue of traffic ri ghts.  Once his delegation had seen and examined 
the complete set of Secretariat documentation, the EC and its Member States would prepare a 
submission stating in detail their position on the different aspects of the air transport services sector.  Pending the circulation of this submission, his dele gation would actively participate to the discussion 
on individual aspects, such as on ground handling and airport operation services. 
13. The representative of New Zealand
 recalled the essential role played by the air transport 
sector for a geographically isolated economy like New Zealand and for its tourism industry.  She 
shared the views expressed by the representativ es of Australia and the European Communities 
regarding the Review, and noted how the objective of  this process was that Members had a full review 
of developments in the sector as well as of the operation of the Annex, in particular to clarify its scope 
for ancillary services.  She said that the note by the Secretariat, contained in document S/C/W/270, 
represented an excellent summary of recent devel opments in aspects of air transport services, and 
welcomed the way in which the Secretariat had made use of ICAO's database of bilateral air services 
agreements.  In this regard, however, she noted th at a number of gaps had emerged in the database 
and stressed the importance of Members registering th eir bilateral agreements with ICAO.  She also 
welcomed the compilation of the documentation the Secretariat had produced for the first Review. 
14. Thanking the Secretariat for its note in document S/C/W/270, the representative of 
Switzerland , said that it provided an excellent basis for discussion and was another high-quality 
document for which he commended the Secretariat.  He also welcomed the compilation of the documentation produced for the first Review, addi ng that these two documents would facilitate the 
Council's task, as stated in paragraph 5 of the Air Transport Annex, of reviewing periodically 
developments in the air transport sector.  Thanks to this mandate in the Annex, the aviation sector was 
probably one of the best researched and documen ted sectors among the many services sectors.  His 
delegation was still analyzing the Secretariat pape r and might revert to it at a later stage. 
15. By way of general remarks, he said that the Secretariat note described the aviation sector's 
significant economic weight and strategic relevance.  2.4 per cent of world GDP was generated by the 
sector, almost 30 million jobs depended on it, 2 billi on passengers were transported annually, 40 per 
cent of international tourists travelled by air and 40 per cent of intercontinental exports of goods by 
value were dependent on air transport.  Manufactur ing and tourism – two sectors highly relevant for 
developing and developed countri es alike – were directly dependent on air transport services.  
Generally speaking, the development of any intern ational business location or of a tourism industry 
was directly dependent on access to air transport services.  All of these figures provided good reasons why the Council should pay outmost attention to th e Review.  As far as Switzerland was concerned, 
the Swiss economy was a global cons umer and provider of air transport services, especially in the 
areas of ground handling and airport operation services, aircraft repair and maintenance services and 
more.   
16. He added that his delegation looked forward to seeing the second part of the Secretariat 
documentation, which would deal with "hard rights", and invited Members to make the best use of the 
documentation, thus laying the ground for successf ully accomplishing the second part of the mandate 
in paragraph 5 of the Annex, i.e. to "consider the further possible further application of the Agreement 
in this sector".  He reiterated that the Review w as the appropriate place to discuss questions relating to 
the scope of the Air Transport Annex.  S/C/M/84 
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  17. The representative of China
 thanked the Secretariat for its note, contained in document 
S/C/W/270, and added that it laid a good founda tion for the commencement of the substantive 
discussion of the second Review.  Document S/C/W/270 provided not only information about the economic and regulatory developments  in aircraft repair and maintenance, CRS, and the selling and 
marketing of air transport services, sub-sectors whic h were explicitly covered by the Air Transport 
Annex, but also covered the sub-sectors of franchisi ng, services auxiliary to all modes delivered in the 
context of air transport, leasing, catering, fuelli ng, ground handling,  airport management services and 
air traffic control services.  Members were thus ab le to review developments in the air transport 
services sector substantively. 
18. He then commented on the statistical aspects of document S/C/W/270.  He noted that there 
were currently two main issues concerning data in the air transport sector, as well as in other services 
sectors.  First, there existed some obvious differenc es between the statistics standards employed in the 
IMF Balance of Payment Statistics Yearbook and the definition of international trade in services 
contained in the GATS.  Second, there was the issue of data availability.  This concerned not only the 
items currently present in the Balance of Payments under the air transport title (i.e. passenger, freight 
and other), for which no data were available for a number of Members, but also the data for sub-
sectors such as ground handling or airport management  services, which were also lacking.  This 
resulted in an incomplete picture of the air trans port sector around the world.  Whereas the first issue 
was being solved through coordination between the WTO and relevant interna tional organizations, the 
second one, which was vital to the comprehensive and exact understanding of the relevant sub-
sectors, required that Members cooperate with the Secretariat. 
19. He noted that the Secretariat had had to turn to  some publicly available sources to gather the 
data necessary to produce documen t S/C/W/270 and that it was unavoidable that some of information 
contained in such sources be inaccurate at times.  It  was therefore critical to locate the right sources to 
provide the right data.  His delegation believed that Members’ cooperation with the Secretariat in this 
regard could be very important and useful, and, for its part, hi s own delegation would direct the 
Secretariat to the relevant information sources for China's air service sector.  His delegation was also 
interested in the suggestion, put forward by the S ecretariat in the box below paragraph 9 on page 2 of 
document S/C/W/270, about a more systematic data collection process based on a questionnaire 
addressed to each Member, as had been done for tel ecommunications and maritime transport services. 
20. He then corrected a piece of information cont ained in paragraph 483, where it was mentioned 
that in 2004 Airways New Zealand began to provide navigation services in China.  This was incorrect, 
as no foreign air traffic control services provider ha d provided navigation services in China up to that 
moment.  He also said that the "Note" below Table 4 on page 11, which stated that "the names of the countries/territories have been drawn directly fro m the respective websites of FAA and EASA, they 
have no legal implications for WTO purposes", was misleading and essentially deviated from the standard practice of the WTO.  He therefore said that it should be deleted. 
21. The representative of the United States
 expressed her delegations' appreciation for the efforts 
of the Secretariat.  She said that the Secretaria t's detailed study of recent trends, developments, and 
issues in several air transport service sectors provide d ample material for the initial discussions in the 
Review.  The Secretariat had compiled and made sense of an enormous amount of technical and timely material, some of which might simply not be available anywhere else or in any kind of 
consolidated fashion. 
22. As had happened during the first Review, she i ndicated that the United States intended to 
participate fully in the discussions and looked forwar d to a fruitful exchange of information and views 
with other Members.  She also shared her dele gation's firm conviction that the Review should 
commence, as set forth in the mandate, with a thorough discussion of developments in the air 
transport services sector, based on the Secretariat's materials and information submitted by Members.  S/C/M/84 
 Page 5 
 
 
  23. In terms of organizing the work, the United States believed that the Council should review 
developments in the air transport sector and the operation of the Annex before turning to 
consideration of any possible further application of  the GATS to this sector.  While she noted that 
some Members had indicated that they would be submitting proposals on amending the Annex, she 
agreed that it would be premature to consider such proposals at that stage of the Review process.  The 
rationale, if any, for changes to the scope of the Annex's negotiated exclusions needed come out of a 
full and objective review of underlying developments and associated issues.  Her delegation intended 
to reserve its positions on any such proposal s until the appropriate stage of the review. 
24. As for developments in the sector, at the commencement of the first Review, her delegation 
had stated without reservation that the five year period prior to that moment had witnessed greater 
liberalization than any comparable period in the hist ory of air transport.  During that time-frame, from 
1993 to 1998, "Open Skies'" agr eements had become the model instrument utilized by the United 
States for the exchange of international tra ffic rights, both scheduled and non-scheduled, for 
passenger and cargo services, and these agreements ha d also set a new standard for advancing pro-
competitive market disciplines into ancillary aspects of air transpor t such as selling and marketing, 
ground handling, inter-modal transportation and Co mputer Reservation Systems services.  Open 
routes and entry for international services and liber al code-sharing provisions , including third-country 
code sharing, had dramatically opened the envi ronment for airlines to transform their service 
networks.  Hence in many markets, particularly  on transatlantic routes, new forms of alliance 
competition had emerged, with a dramatic increase in traffic and city-pairs served and significant 
decreases in the average fares. 
25. For the United States, the subsequent period ha d been quite as transformative and nearly as 
productive.  The United States currently had 78 open- skies partners, including agreements with very 
significant trading partners such as Canada, India an d, most recently, Kuwait.  The representative also 
noted the continuing establishment of open-skies agreements not involving the United States, a 
development which had been observed in the firs t Review and that seemed to be more firmly 
established now.  She further indicated that ma ny of the US bilateral open-skies partners, 
encompassing nearly every geographic region and st age of economic development, had subsequently 
proclaimed open-skies policies in all of their intern ational air transport relations.  She hoped that those 
Members would share their outlook and expe riences during the course of the Review. 
26. Despite these continuing achievements on a bilate ral basis, her delegation also remain focused 
on what could be achieved by extending open-skies pr inciples on a plurilateral or multilateral basis.  
The most significant agreement for the US in that  regard remained the Multilateral Agreement on the 
Liberalization of International Air Transportation (MALIAT), which had been concluded in 2000 and 
had, since the first review, seen the addition of th ree new signatories and an all-cargo protocol that 
provided non-signatories the opportunity to accede to the MALIAT on a cargo-only basis.  For the future, the US primary focus had for some time been on the negotiation and conclusion of a first-
phase air services agreement with th e European Union.  As had been widely reported, the United 
States and the EU and its Member States had reached agreement on a draft text in November of 2005.  
The US remained committed to the implementation of the first-phase agreement with the EU by the 
end of 2006.   
27. Her delegation continued to believe that the al most total exclusion of air transport services 
from the scope of coverage under the GATS had been  farsighted and had contributed to the ongoing 
liberalization of air transport agreements through air services-specific agreements and the facilitating 
activities of ICAO and numerous regional fora.  This was equally true for traffic rights and ancillary 
air services in support of traffic rights.  Her delegation looked forward to discussing recent developments with a view to whether and to wh at extent that assessment remained valid and was 
shared by other Members. S/C/M/84 
Page 6  
 
  28. The representative of Cuba
 indicated that her delegation woul d revert to the Secretariat note 
contained in document S/C/W/270, which her author ities were still examining.  She agreed that 
discussion of agenda item B be postponed until a ll of the Secretariat documentation was ready and 
stressed that this should be made available in a ti mely manner in all there official languages, in order 
to facilitate discussion and expert participation. 
29. The representative of Norway  said that the Secretariat paper in document S/C//W/270 
represented a very robust basis to conduct the Revi ew.  He stressed the importance of air transport 
services for his country, a remote economy geographically placed on the outskirts of Europe, and of the Review process, and called upon Members to make  good use of the mandate contained in the Air 
Transport Annex to undertake a comprehensive review, in order to be able to increase the clarity of 
the Annex and adapt it to the changing circumstan ces of the sector.  He su pported the proposal by 
Australia that the next session for the Review be held in mid-December. 
30. The representative of Korea
 thanked the Secretariat for its high-quality note and looked 
forward to receiving the full documentation as early as possible.  Korea was of the view that the primary purpose of the second Review was to ha ve a clear understanding on the definition and 
coverage of the GATS Annex on Air Transport Servi ces, in particular as concerned the coverage of 
aircraft repair and maintenance, selling and ma rketing and CRS services, in light of the rapid 
technological developments and changes in business environment having taken place in those sectors.  
However, his delegation remained ca utious with regard to the expans ion of the coverage of the Annex 
to some contentious sectors such as ground handlin g services, airport management services and air 
traffic control services.  He stressed that any ch ange or expansion of the Annex required the 
consensus of all Members. 
31. The representative of Japan
 thanked the Secretariat for its note in document S/C/W/270 and 
said that he looked forward to receiving the second part  of the note.  He indicated that the Review had 
to be conducted on the basis of thorough and objectiv e information, such as that contained in the 
Secretariat paper, and without prejudging its out come.  He added that, in this sense, document 
S/C/W/270 provided a solid basis for productive discussion.  His delegation was also of the view that 
the current international regime in the air trans port sector, based on bilateral air services agreements, 
had been functioning quite well and that in conducting the Review this point c ould be highly relevant 
in terms of substantive and constructive discussion.  He added that Japan was fully committed to the 
Review process. 
32. The Chairman  said that the Council would take note of the statements made. 
A. DEVELOPMENTS IN THE SECTOR  
33. The Chairman  indicated that, to assist Members with this agenda item of the Review, the 
Secretariat had produced a background note, cont ained in document S/C/W/270, Corrigendum 1 (in 
English only), and Corrigendum 2.  Moreover, as agreed at the Council meeting of September 2005, 
the Secretariat had also re-issued the backgrou nd documentation produced for the first Review, 
contained in document S/C/W/163 and its addenda, in the form of a blue booklet.  This documentation 
still retained a high degree of relevance for th e second Review, and document S/C/W/270 contained a 
number of cross-references to the relevant parts of  the booklet.  He then asked a representative of the 
Secretariat to briefly introduce the documentation. 
34. By way of introduction to document S/C/W/270, a representative of the Secretariat  said that, 
while the structure of the note was self-explanatory, he wished to put it into the proper perspective.  
The Secretariat had attempted to provide Members with background information on the sector which 
was as comprehensive as possible by having recourse to sources of a different nature, which included 
other international organisations, the specialised press, professional associations as well as operators.   S/C/M/84 
 Page 7 
 
 
  The advantage of such an approach had been th e depiction of a very thorough picture;  the 
disadvantage, however, had been the impossibility of  checking whether such information was always 
accurate and complete and the need to rely, in so me instances, on terminology which was inconsistent 
with the standard WTO one.  Since a great deal of th e information that the Secretariat had not been in 
a position to check for accuracy rela ted to Members and their operat ors, he called upon delegations 
who had noticed any factual errors in document S/C/ W/270 to convey them orally and possibly also in 
writing to the Secretariat, so as to issue at the e nd of the Review a fully revised document that would 
serve for future reference. 
1. Aircraft Repair and Maintenance 
35. The Chairman  opened the discussion of the individual sub-sectors with aircraft repair and 
maintenance.  He indicated that the corr esponding paragraphs in document S/C/W/270 were 
paragraphs 16 to 71. 
36. The representative of the United States  noted that, on page 11 of document S/C/W/270, the 
Secretariat had suggested that the main rationale for the exclusion of line maintenance from the scope 
of the GATS seemed to have been the fact that lin e maintenance was typically done in-house, whereas 
now it was increasingly provided on an independent, third-party basis.  He inquired whether the 
Secretariat had any supporting documentation for th is assertion.  The United States were researching 
the question themselves and would welcome the views of other Members in this regard. 
37. He then remarked that, on page 18, there w as an assertion that IATA self-regulating safety 
activities might not be covered by the GATS b ecause they were undertaken without formal 
government mandates.  He wished to urge cau tion in ascribing GATS coverage of any activities 
related to safety regulation in the air transport sector, given the clear exceptions contained in GATS 
Article XIV, and the critical impor tance of rigorous safety practices and government regulation in this 
area.  He also stressed that the preponderance of  the IATA safety audit programme activities further 
described in the section had no tangible connection to  offline maintenance and repair services, further 
causing question as to why the possibility of GATS coverage of these activities would be implied. 
38. The representative of Canada , noting the reference, in paragraph 7 of document of 
S/C/W/270, to the Secretariat's willingness to produ ce more specific documents for any subject of 
interest to Members, requested more informati on on maintenance services delivered through mode 1, 
as a number of such services, such as tele-d iagnosis, had now become technically feasible. 
39. The representative of Australia  indicated that his authorities were still examining the possible 
issue for discussion raised by the Secretariat in  the box under paragraph 36, which suggested that 
Members re-examine the exclusion of line maintena nce from the scope of the Annex in view of the 
emergence of a third-party line maintenance market.  He added that it would be premature to discuss 
such issues under agenda item A.  He then noted that considerable efficiency gains for the air 
transport industry had been generated by interna tional competition in the field of maintenance and 
repair services, and that competiti on had also pushed airlines to improve the efficiency of their in-
house maintenance services.  These efficiency gains had translated into reduced costs, which had been 
passed on to large extent to consumers in the form of  reduced prices.  He noted that the mention of a 
"drastic" reduction of in-house maintenance capacity  for Qantas was probably excessive and indicated 
that he would provide the Secretariat with more accurate information in that regard. 
40. The representative of Costa Rica  observed that, although document S/C/W/270 provided 
information on recent developments in the repair and maintenance sector, it would have also been 
interesting to delve into the obstacles that prevailed in this sector.  Costa Rica had identified some of 
these obstacles, which appeared to still be prevalent.   These included:  limitations on temporary entry 
and departure of specialized technical personnel;  au thorisations to operate as a foreign maintenance S/C/M/84 
Page 8  
 
  organization subject to economic needs tests;  me asures mandating the existence of contracts with 
local firms as a prerequisite for doing business fro m abroad;  disproportionate administrative costs 
charged for obtaining the certifications required to provide services in the territories of certain 
Members;  and discriminatory measures affecting fo reign service providers seeking to offer repair 
services for aircraft flying under the national flag.  His delegation was of the view that it would be 
interesting to have more information from the Secr etariat on such obstacles, which prevented growth 
in the sector and the participation of suppliers of  many Members, including Costa Rica, in the market.  
He also supported the suggestion by Canada that more information be provided on mode 1, which 
Costa Rica had identified as a source of new commercial opportunities.  
41. The representative of New Zealand
 noted that maintenance reve nues for Air New Zealand had 
effectively decreased, as stated by the Secretariat in paragraph 27.  Air New Zealand nevertheless 
retained an export interest in the sector, in spite  of the high value of the New Zealand dollar and 
increased competition.  The renewal of Air New Zeal and's fleet had also contributed to lowering its 
maintenance needs. 
42. Responding to the remark made by the delegation of Australia on the possible issue for 
discussion raised after paragraph 36, the representative of the United States  concurred that it would be 
preferable to address the issue at a later stage a nd indicated that his delegation would research the 
reasons for the exclusion of line maintenance fro m the coverage of the GATS and revert to the 
question.  
43. The representative of Switzerland  said that document S/C/W/270 offered valuable 
demonstration and examples of trade in the air transport services sector, and in particular in aircraft 
repair and maintenance services, taking place thro ugh various modes of supply, including through 
mode 1. 
44. The Chairman  said that the Council would take note of the statements made. 
2. Computer Reservation System (CRS) Services 
45. The Chairman  recalled that the relevant elements for this sub-sector were contained in 
paragraphs 72 to 180 of document S/C/W/270.  
46. The representative of the United States  indicated that he would add two details to the 
description provided by the Secretariat of the dere gulation of CRS services which had taken place in 
the United States in 2004.  First, in allowing the CRS rules to expire, the United States had taken 
acknowledgment of the numerous bilate ral air services agreements that contained CRS Annexes.  As a 
result, the new US policy in this regard was to no longer include CRS Annexes in bilateral 
agreements, and to propose to delete them from  the agreements where they were still included. 
47. Second, he felt it useful to describe why the ac tivities of CRSs had been regulated in the first 
instance, as this had a bearing on the classification -related issues raised in document S/C/W/270.  
When CRS rules were originally put in place, one or more airlines or airline affiliates owned or 
controlled each system, airlines depended heavily on tr avel agencies for distribu tion, travel agencies 
used a system to research airline service options  and to make bookings, and each travel agency 
predominantly relied on one system to perform these tasks.  Systems, therefore, did not need to 
compete for airline participants.  The airlines that  controlled the systems had the incentive and ability 
to use them to prejudice the competitive position on non-owner airlines and to provide information on 
airline services through the systems to travel agen ts that gave an undue preference to the services 
offered by the owner airlines.  Competitive market forces did not discipline the prices and terms for 
the services offered by systems to participati ng airlines.  The US rules had been thoroughly 
documented in document S/C/W/270.  It was worth adding, however, that the US Department of  S/C/M/84 
 Page 9 
 
 
  Transportation (DOT) had adopted most of the rules under its own authority to prevent unfair methods 
of competition in the sale of airline transportation,  an authority that empowered the DOT to prohibit 
practices that violated the antitrust laws or antitrus t principles, but, in ad opting the rules prohibiting 
display bias, the DOT had additionally relied on its authority to prevent unfair and deceptive practices 
in the marketing of airline transportation.  While  the DOT had allowed rules on CRS to expire, it had 
retained these authorities to addr ess anticompetitive and unfair practices  in the sale and marketing of 
airline transportation.   
48. Turning to classification issues, it was the US vi ew that CRS services, even as defined in the 
GATS context, properly referred only to what the Secretariat had elsewhere termed "classical CRS".  This limited-scope coverage was the intent of th e drafters during Uruguay Round negotiations.  This 
was an important distinction, also in light of the fact that CRS services were regulated in many 
markets, as they used to be in the United States, in contrast to the unregulated market environment 
within which travel agencies and IT firms involve d in airline ticket distribution typically operated 
now.   
49. At the time of the Uruguay Round negotiati ons, as presently, it was well-known that CRS 
referred to a very limited number of  global vendors – four, in fact  – and a few regional vendors.  
These had been exhaustively listed in the background materials provided for both Reviews by the 
Secretariat.  It was worth noting in this context th at, in the full time period during which CRS services 
were regulated in the United States, from 1984 to 2004, no new CRS vendor entered the U.S. market.  CRSs had had their origin in the internal reservati on systems of airlines, having been subsequently 
spun off into separate business units and eventually, in most instan ces, divested of ownership by 
parent and participating carriers.  It was the ma rket power they could have established, as entities 
fully-owned and controlled by parent  and participating carriers, whic h had given rise to the conditions 
leading to the regulation of their activities by the DOT and other aeronautical authorities.  Those conditions were not demonstrab ly present among the Global New Entrants or other business-to-
consumer and business-to-business firms that were em erging to serve the travel distribution market, 
nor were the services provided by these entities func tionally equivalent to the service provided by 
CRSs.    
50. The representative of Norway
 pointed to an omission in paragraph 111 of the Secretariat note.  
He indicated that Norway, and possibly also Iceland, were missing from the list of countries having adopted the ICAO CRS code of conduct or havi ng a national regulation which conformed to that 
code.  Norway had in fact adopted the EU c ode of conduct on CRS through the European Economic 
Area. 
51. Regarding the possible issues for discussion cont ained after paragraph 177, and notably with 
regard to the second alternative proposed therein that  online providers be classified as an electronic 
form of travel agencies, the representative of Korea
 asked if what was intended there were travel 
agencies as part of the tourism sector and supply ing services under mode 1.  He noted that most of 
these online providers were not limiting their activities to air transport but were also covering hotels, 
car rentals and other modes of transportation.  He therefore wondered how those activities would be 
treated classification-wise. 
52. The representative of the European Communities  noted that the EC developments were 
described accurately in paragraphs 140-146, and that  the situation was very similar to that of the 
United States.  CRS codes of conduct had been a dopted in the EU for the same reasons as described 
by the United States representative, but changes in the market, notably the development of direct sales 
by airlines, and in particular by low-cost carri ers, had meant that the significance of the rules 
regulating CRS had been considerably reduced. S/C/M/84 
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  53. Regarding the possible coverage of the cargo area  by CRS as alluded to in paragraphs 78 and 
178, the representative of Canada
 noted that, while the definition of CRS was flexible, it was not so 
vast as to cover cargo because the "fares and fares ru les" mentioned in the definition referred to those 
aspects of a tariff that applied to people, and not to things.  People were carried at a "fare" along with 
the concomitant "fare rules", whereas things were ca rried at "rate" expressed in terms of divisible 
units, such as weight or volume.  With respect to  the issues for discussion after paragraph 177, the 
representative of Canada supported the second option, i. e. that new online providers be considered as 
an electronic form of travel agencies, notably  because of the importance of the technological 
neutrality concept. 
54. A representative of the Secretariat  briefly explained that the aim of document S/C/W/270 was 
to describe the considerable evolution that had take n place over the previous five years in the airline 
ticket distribution sector, and that it was naturally up to Members to decide if this evolution warranted 
a re-examination of the classification in the Annex.  As to the Korean question on the classification of 
non-air transport activities of online providers, he noted that the "classical CRSs" were also 
increasingly selling non-air transport types of trav el, which raised another classification question. 
55. By way of additional comment on the issues for discussion after paragraph 177, the 
representative of Korea  expressed the concern that any expansi on of the definition of CRS could mean 
an expansion of the scope of the MFN exemptions undertaken under this heading.  Therefore Korea 
was not certain that this question could be dealt with  through technical rectifications and thought that 
compensations might well be needed. 
56. The representative of the United States  noted that recent developments in the sector had 
mostly consisted in the involvement of new provi ders in various value-added aspects outside the 
scope of what had traditionally been regulated by aeronautical authorities as CRSs.  The emergence of 
these various providers might raise classification issues but those issues might not be air transport classification issues per se , as these providers might be new forms of travel agencies or of computer 
related services.  He supported the statement by Canada on travel agencies and technological 
neutrality.  He also noted that, while the US had not undertaken commitments on CRS during the 
Uruguay Round because at the time it was negotiati ng Annexes on CRS in its bilateral air services 
agreement, it was clear that Members undertaki ng commitments and listing MFN exemptions on CRS 
were doing it on the basis of the narrow view of cla ssical CRS, rather than envisaging a broader range 
of services.  The absence of a reference to travel  agents in the GATS definition of CRS was not 
necessarily indicative of a classification problem, as th e plain language of the Annex, both with its 
"CRS" heeding and its definition, made it clear that only classical CRSs were covered.  The new 
entities described by the Secretariat were not necessarily engaging in the provision of an air service.  
The United States aeronautical authorities had examined  this question in depth at the occasion of their 
last Rule Making and had come to the conclusion that , even if they had decided to retain CRS rules, 
there would have been no reason to expand those ru les to online travel agencies.  Furthermore, as 
aeronautical authorities, the DOT had no authority to regulate the non-air transport activities of 
classical CRS providers.  Those activities were theref ore not covered by an air transport definition. 
57. The Chairman
 said that the Council would take note of the statements made. 
3. Selling and Marketing of Air Transport Services 
58. The Chairman  recalled that the paragraphs dealing wi th selling and marketing of air transport 
services in document S/C/W/270 were 182 to 226.  
59. The representative of the United States  considered that, as with CRS, the Annex definition of 
selling and marketing encompassed a more limited set of activities than was implied in the Review documentation.  Specifically, the Annex definition w as intended to track closely with the selling and  S/C/M/84 
 Page 11 
 
 
  marketing provisions typically fo und in standard air services agreements.  These provisions, as was 
made clear in the Annex definition, provided rights for air carriers to sell and market their own air 
transport services.  In practical terms, this en tailed the right to open and maintain representative 
offices, engage in marketing and promotional activ ities and sell tickets to the public.  The United 
States did not necessarily believe that the ongoing de velopments described in the documentation did 
not raise any pressing classification issues.  Selling and marketing as defined in the Annex and in air 
services agreements focused on the broad right of a carrier to sell and market its own transportation.  They did not, nor did they need to, spell out th e precise means utilized, whether through a carrier's 
own representative offices and counters or those of it s alliance partners, throug h general sales agents, 
call centres or over the internet.  Conversely, re lated activities involved in the actual production and 
distribution of tickets and the publication of schedules might not properly be considered as air 
services at all.  For example, settlement and cleari ng services, to the extent they were provided on a 
commercial basis, might be more properly classifi ed as generic information or computer related 
services, or possibly as financial services, but they were not subject to any specific regulation by 
aeronautical authorities as air services.   
60. The Chairman
 said that the Council would take note of the statement made. 
4. Franchising 
61. The Chairman  recalled that the relevant elements for this item were contained in paragraphs 
249 to 269 of document S/C/W/270. 
62. The representative of Australia  sought, first, clarifications  from the Secretariat about its 
description, in paragraph 262, of the situation of re gional airlines and low-cost carriers with regard to 
airports taxes.  Second, while recognizing that there was no internationally agreed definition of 
franchising, he drew Members' attention to some recent developments that might not all fall within 
franchising but that were linked to it because of the use of a brand.  In particular, he noted the 
emerging tendency of large airlines to develop sep arate business units for different aspects of their 
operations, such as a separate regional airline or a low-cost unit within the same group.  Other 
examples related to large airlines using their fre quent flyer programmes or marketing activities to 
benefit other airlines within the same group while no t being franchisors in the truer sense.  Another 
interesting development was that of airlines based in  different countries but using a similar branding, 
such as the Virgin brand, or which might even have different owners.  Jetstar was one such example:  
it was 100 % Australian-owned when operating domes tically and majority-owned and controlled by 
Singaporeans when operating internationally.  AirAsi a and LAN were other cases in point.  A last 
interesting development was the use a non-aeronau tical brand by newly-established airlines for 
marketing purposes:  Kingfisher Airlines in India was one such example. 
63. The representative of the United States  indicated that franchising was not regulated as an air 
service in its own right.  In any such commercial arrangement between carriers, both carriers would be required to operate under their own Aircraft Operating Certificates and secure any additional 
permission necessary, including authorization to hold out services on the relevant routes.  There might 
be particular concerns with cross-border investment  in a franchising/affiliate relationship, which could 
involve ownership and control issu es under relevant air services agre ements.  In fact, there could 
potentially be control issues with franchise relati onships even in the absence of cross-border 
investment, and the US Department of Transport ha d, in some instances, placed conditions on grants 
of antitrust immunity where common branding was in place.  At any rate, it was not clear to his 
delegation that franchising per se  generated any particular cla ssification or economic regulation 
issues. 
64. A representative of the Secretariat
 answered the question by Australia on the respective 
position of low-cost and regional carriers with regard  to airport taxes by indicating that, while in S/C/M/84 
Page 12  
 
  paragraph 262 the use of the term "charges", rather  than "taxes", would have been more appropriate, 
what was referred to here were the rebates given by secondary airports and the subsidies granted by 
local authorities to low-cost carriers, which regional carriers would not have obtained to the same degree because of lack of negotiating power. 
65. The Chairman
 said that the Council would take note of the statements made. 
5. Services Auxiliary to All Mo des of Transport when Delivered in an Air Transport 
Context 
66. The Chairman  recalled that the relevant elements for this item were contained in paragraphs 
263 to 269 of document S/C/W/270. 
67. The representative of the United States  noted that, in paragraph 263, the Secretariat asserted 
that freight forwarding and warehousing had remained  activities that were not specifically linked to a 
mode of transport.  While this might be tr ue from a certain business standpoint, this was not 
necessarily true from a regulatory standpoint.  At least  in the US experience, separate air, maritime 
and surface regulatory regimes were often involved in  freight movements, and air freight forwarding 
specifically was regulated under aeronautical codes as i ndirect air transportation.  This did suggest the 
importance of designing effective inter-modal polic y regimes, to ensure that freight could move 
between modes as seamlessly as possible.   
68. The Chairman  said that the Council would take note of the statement made. 
6. Rental and Leasing 
69. The Chairman  recalled that the relevant elements for this item were contained in paragraphs 
270 to 290 of document S/C/W/270. 
70. The representative of Australia  noted that, in paragraph 288, the number of bilateral 
agreements containing a leasing clause was probabl y significantly underestimated because of gaps in 
notifications to ICAO.  For instance, Australia ha d negotiated leasing clauses in many, if not most, of 
its bilateral agreements.  Those clauses were cont ained in a more general article regarding business 
opportunities, which included also provisions on selli ng and marketing, ground handling, code-share, 
slots and currency conversion.  This made the id entification of these leasing clauses more difficult.  
Australia had a liberal policy regarding wet an dr y leasing, and, as a standard approach, sought to 
allow the airlines of each party to conduct air tr ansport including with leased aircraft, provided 
appropriate safety and security requirements were abided by. 
71. The Chairman  said that the Council would take note of the statement made. 
7. 8. and 9. Catering, Refuelling and Ground Handling 
72. The Chairman  indicated that he would take up these three sub-sectors jointly, as the 
Secretariat documentation addressed them together, and recalled that the relevant elements were contained in paragraphs 291 to  375 of document S/C/W/270. 
73. The representative of the European Communities
 noted that also in European legislation these 
three sub-sectors were regrouped under a common h eading.  He also underlined the growth of 
independent providers in the market and th e overall movement towards liberalization. 
74. The Chairman  said that the Council would take note of the statement made.  S/C/M/84 
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  10. Airport Management Services Including Charging Systems 
75. The Chairman  recalled that the relevant elements for this item were contained in paragraphs 
376 to 446 of document S/C/W/270.  
76. No statements  were made under this item. 
11. Air Traffic Control Services Including Charging Systems 
77. The Chairman  recalled that the relevant elements for this item were contained in paragraphs 
447 to 518 of document S/C/W/270.   
78. No statements  were made under this item. 
79. Concluding the discussion under this agenda item and noting that some of the comments 
made were of a preliminary nature, the Chairman  suggested that a point covering the eleven sub-items 
discussed at the meeting be inscribed to the agenda of the next dedicated meeting of the Review, so as 
to allow delegations to revert to them. 
80. The representative of Brazil  said that it appeared clearly fro m the debates that classification 
was a cross-cutting issue for the sub-sectors listed, in particular in view of the evolution of business practices since the negotiation of the Annex.  There was a significant lack of clarity in that regard.  He 
was not sure that the thesis accord ing to which the commitments of a Member should be governed by 
the interpretation that the Member had as to what was included under the respective definitions at the 
time it undertook the commitments would withstand scru tiny if taken before the Dispute Settlement 
Body.  More generally, this lack of clarity or cer tainty regarding the futu re evolution of business 
realities was precisely one of the reasons why Memb ers were hesitant in undertaking commitments 
under the GATS.  He also questioned whether the Re view included a mandate to clarify classification 
issues raised by the Annex, given that such clarifi cations were not expressly mentioned in the Annex.   
81. The representative of the United States
 said that she had no objection to the suggestion that a 
point covering the eleven sub-sectors discussed at that  meeting be included in the agenda of the next 
meeting, but noted that the statements her delegati on had made were not of a preliminary nature.  She 
further stressed that the remarks made by her de legation with regard to classification were purely 
circumscribed to air transport and to the present Review. 
82. The representative of the International Civil Aviation Organization  (ICAO) recalled the 
constitutional responsibilities on civil aviation matters  devolved to ICAO by the Chicago Convention 
on International Civil Aviation of 1944.  ICAO was a member of the United Nations system and was 
recognized as the specialized agency  in civil aviation with a full mandate in civil aviation matters.  
ICAO's constitutional role and its in stitutional framework were geared towards "safe, regular, efficient 
and economical international air transport".  As recognized by the Fifth Air Transport Conference 
held in 2003, liberalization was the cornerstone upon which to build the future growth of the air 
transport industry.  It was recognized that this process was well underway.  ICAO's leadership role in 
international air transport had been reaffirmed by  the Declaration of the Global Principles adopted 
unanimously by its Contracting States at the end of the Conference.  This l eadership role was also 
reaffirmed in an Assembly Resolution adopted dur ing the 35th Session of the ICAO Assembly held in 
2004, where the ICAO Council was requested to continue to exert a global leadership role in facilitating and coordinating the pr ocess of economic liberalization, while ensuring safety, security 
and environmental protection in international air transport. 
83. ICAO was pursuing developments in trade in ser vices that might impinge on international air 
transport in a proactive manner.  As with the first Review of the Air Transport Annex, ICAO was very S/C/M/84 
Page 14  
 
  much interested in developments taking place at the WTO.  The ICAO Secretariat had worked very 
closely with the WTO Secretariat for the current  second Review.  In April 2006, the President 
Emeritus of the Council of ICAO had met with the Director General of the WTO.  They had discussed the working arrangements between ICAO and the WT O and had sought to ensure coordination and 
cooperation between the two Organi zations regarding the air transport sector.  The representative 
announced that ICAO was about to hold a global semi nar on liberalization in Dubai.  She also noted 
that the work of ICAO had been accurately refl ected in the WTO Secretariat documentation and 
welcomed the intention expressed by some Members during the meeting to improve their notification 
record with ICAO. 
84. The Chairman
 said that the Council would take note of the statements made. 
B. OPERATION OF THE ANNEX  
85. The Chairman  recalled that it was understood that the documentation produced by the 
Secretariat would not touch upon the question of the operations of the Annex, and that the debate on 
this issue would take place only on the basis of Members' contributions and comments.  He opened 
the floor for any comments that delegations might ha ve at that stage of the discussion, indicating that 
the Council would be reverting to this item at its next dedicated meeting. 
86. The representative of Australia  indicated that his delegation would circulate shortly a 
proposal in the form of a Job document (later circulated as JOB(06)/237), cosponsored by the 
European Communities, New Zealand, Switzerland and Norway.  He recalled that the Australian 
position on ground handling and airport services expressed during the last Review was well known, but that Australia and its co-sponsors wanted the de bate to move on.  The question was not whether 
ground handling and airports services were included in the GATS but whether they should be.  The 
Review process could help Members determine this .  Those two sectors continued to grow and to 
develop and it was therefore important that Members and the industry gain certainty in the coverage 
of the sector.  Australia was not seeking a substantive debate during that meeting, but had simply tabled the proposal to enable detailed discussions at  future meetings and to  allow delegations to 
consult their authorities. 
87. The Chairman
 recalled that Members had agreed to postpone substantive discussion of this 
item to the following dedicated meeting and said th at the Council would take note of the statement 
made. 
C. POSSIBLE FURTHER STEPS FOR THE REVIEW  
88. The Chairman  recalled that Members had agreed in J une that he would hold further informal 
consultations on the organization of the Review on ce the Secretariat had produced the rest of the 
documentation.  He understood that the Secretariat was working actively on a substantial document on 
hard rights, which should be ready in the course of October.   
89. A representative of the Secretariat  recalled that in June the Secretariat had made a 
demonstration of the prototype of the analytical to ol and visualization software for hard rights it was 
developing.  He indicated that this project had suffere d delays due, in particular, to the late availability 
of the underlying data and the difficulties met in  developing the software.  Nevertheless, the 
documentation should be availabl e by the end of October. 
90. The Chairman  suggested that the next dedicated meet ing be scheduled in mid-December.    S/C/M/84 
 Page 15 
 
 
  91. The representative of the United States  said that her delegation could agree to the Chairman's 
proposal, on condition that the Secretariat documen tation would become available along the lines 
indicated;  in case of further delays, the date of the meeting should be reconsidered.   
92. The Chairman  replied that, should such an eventuality occur, he would hold informal 
consultations.  He concluded the m eeting by saying that the Council w ould take note of the statements 
made.   
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