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PACIFIC AVIATION FEATURE 01/06PIASA: ON THE WING OF REGIONAL COOPERATION August 2006 The forecasts have been varied for Pacific aviation industry in recent times - turbulent for some; hopeful for others; but volatile for most, to say the very least. Confronted by ever-rising fuel costs, the region's aviation sector and relatively small market economies are struggling with the realities of vast distances between island nations, expensive air travel costs and - in the greater scheme of things worldwide liberalisation of markets. With some 67 operational bilateral air services agreements, Forum Island Countries are exploring, more seriously than ever before, a regional effort to help solve their collective predicament. 'This approach is not new,' says Pacific Islands Forum Secretariat Deputy Secretary General, Mr Peter Forau. 'The turning point was marked almost a decade ago, in 1998, when Forum Aviation Ministers first met to discuss improving regional aviation policy.' At this meeting, Ministers identified the logistical shortcomings of the numerous existing bilateral agreements, along with the changing global market, as key obstacles to the Pacific aviation industry's progress. 'Since then, Forum Island Countries (FICs) have been looking at the possibility of embracing a regional agreement that would provide a multi-lateral basis for liberalising air services between them.' This joint resolve gave birth to the Pacific Islands Air Services Agreement (PIASA), endorsed by FIC representatives in Tonga in 2002, and signed consecutively by a number of Pacific Island Forum members at their 2003, 2004 and 2005 Heads of Government meetings. 'PIASA was, and still is, driven by the need to allow countries' air services to fully develop and become more efficient,' says Mr Forau. 'It was the result of a regional effort to create a regional solution to existing problems. 'It does not, by any means, seek to provide the complete answer to air transport problems in the Pacific. Rather, it is a means of complementing other strategies, at national and regional levels, such as those addressing broad infrastructure constraints.' Since its conceptual beginnings, PIASA has undergone extensive drafting, re-drafting and negotiation on its text and terms. 'The PIASA negotiation sessions, attended by all senior civil aviation officials from Forum member governments, involved extensive negotiation rounds to debate and discuss the agreement's terms and conditions.' The Forum Secretariat has provided technical assistance as a facilitator for these negotiations. PIASA was finally agreed upon at the Forum Aviation Policy Ministerial Meeting of 2003. To date, two countries have officially ratified the agreement Samoa and the Cook Islands. The agreement will come into force when six countries in total have officially endorsed it. 'The Cook Islands never wavered in its position since it committed to signing and ratifying PIASA in 2002,' says Cook Islands Secretary for Transport, Mr Aukino Tairea. 'We viewed it as an opportunity to enhance regularity of air services and attract other airlines to fly to the Cook Islands.' These sentiments are shared by Samoa's Ministry of Works, Transport and Infrastructure Chief Executive Officer/Secretary for Transport, Mr. Vaaelua Nofo Vaaelua. 'Samoa supported the concept right from the beginning, in good faith, with full acceptance of a single aviation market approach for our region,' he says. 'We saw PIASA as a step beyond the time-consuming standard bilateral approach.' Says Forum Secretariat Transport Sector Adviser, Seiuli Alvin Tuala: 'PIASA surfaced at a time when aviation sectors were being liberalised worldwide. In some respects, the aviation sector in the Pacific was already benefiting from these global developments. But in most, it lagged behind. 'The proliferation of bilateral air service agreements means that winning multiple international route approvals in the Pacific region is difficult and time-consuming, creating barriers for multi-destination tourism, investment and industry development. 'This has impelled our leaders to look to a regional solution.' Mr Tuala says that by creating a single aviation market in the region, PIASA can help countries strengthen and develop. He stresses the way it is implemented will be critical. 'The three stages of liberalisation under PIASA intend to help governments and airlines gradually adapt, by encouraging FIC airlines to build their capacity within the region first, so they can eventually survive in an international market with larger carriers at the end of the adjustment phase.' Mr Tuala explains that PIASA does not apply to services between FIC and non-FIC countries, where bilateral agreements will continue to be put into effect. 'PIASA's central intention is to give Pacific airlines a basis from which to grow and expand. Pacific carriers can then increase their sphere of activities to take advantage of the benefits of regional alliances and cooperation.' By endorsing PIASA, and through its further endorsement under the Pacific Plan, Aviation Ministers and Forum Leaders see this agreement as making business and economic sense for the viability of air services development in the region. 'A recent study on international aviation liberalisation trends concluded that millions of jobs have been created in the process, contributing billions of dollars to national and regional economies,' Mr Tuala says. This study, released in May 2006 and sponsored by the likes of the Pacific Asia Travel Association (PATA) and the International Air Travel Association (IATA), reports that liberalising 320 of the world's 2000 highly restricted air routes could generate full-time employment for about 24 million people, and boost the global economy by some US$490 billion. 'Of course, the Pacific region is unique in its circumstances and our air services development draws on a number of complex issues,' Mr Tuala says. 'Nevertheless, there is clearly vast economic growth potential to tap into should we choose the avenue of regional cooperation.' The economic impact study also states that there are still a number of countries that place priority on protecting their flag carriers or national airlines, rather than enhancing the overall welfare of the broader public interest. 'This is also a significant impediment in our region,' says Mr Tuala. 'Implementation of PIASA will have wide positive repercussions, and should be incorporated in broader growth strategies, such as tourism infrastructure development and trade liberalisation, to ensure that potential benefits are genuinely achievable.' According to Mr Giovanni Bisignani, Chief Executive of IATA, progressive liberalisation is needed for governments to set a level playing field. 'The need for structural change is critical if we are to be a viable and sustainable industry,' he says. 'Airlines compete in a global market, but without basic commercial freedoms that other industries take for granted.' 'This is one of the key issues PIASA seeks to address,' Mr Tuala says. 'The alternative to liberalisation is likely to prove much more costly to both a national carrier and the economy in the medium-term, with the probability of increasing need for public subsidy to the carrier.' Mr Tuala points out there have been some reservations regarding the roles of countries such as Australia and New Zealand in PIASA. As Forum Members, they are eligible to become parties to the agreement 30 months after it comes into force. 'Extensive consultation with representative Governments from the Pacific would be required before taking any action to become party to PIASA," he says. 'Australia has affirmed that it supports the agreement because it creates a more flexible regional regulatory environment which can position airlines to take advantage of the changes occurring in aviation markets, and believes that PIASA offers Pacific island airlines improved market access and better capital opportunities.' Says Mr John Macilree, Principal Adviser for the Air Services Team at New Zealand's Ministry of Transport: 'Widespread adoption of the PIASA would also create new opportunities for Forum Island Country airlines. This would reduce the blockages caused by restrictive air services arrangements that prevent airlines from creating viable networks. 'From New Zealand's perspective, supporting PIASA is not about benefiting Air New Zealand - it already has access in the region through existing bilateral and multilateral air services agreements. We do, however, see the PIASA benefiting our Pacific partners." The results of a PIASA impact study are expected to be released shortly according to Mr Tuala. 'Initial findings indicate that liberalisation could provide Forum Island Countries benefits worth millions of dollars, across many sectors.' He says if the region doesn't at least explore the option of PIASA, an important opportunity will pass by, with substantial consequences on the Pacific for years to come. 'PIASA tests the very will of Pacific regional cooperation. This is not about a bigger slice of the cake for some. Integration of the regional market will create a bigger cake for all.' (Ends) |
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