SERVICES: SECTOR BY SECTOR

Air transport services

Air transport services is the only service sector to which the General Agreement on Trade in Services (GATS) does not essentially apply. The annex excludes from the scope of the GATS the core of the air transport services: traffic rights and services directly related to the exercise of traffic rights. Nevertheless, the GATS applies to three air transport subsectors.

The GATS covers explicitly three air transport subsectors: computer reservation system (CRS) services, selling and marketing of air transport services, and aircraft repair and maintenance. Access opportunities in these subsectors have changed significantly in recent years.

In the CRS market, airlines are no longer majority shareholders. The number of players has shrunk to a handful of suppliers, which have expanded activities to other travel and leisure services. Airlines' direct selling and marketing services have also evolved, with the Internet increasingly becoming the main distribution channel. Repair and maintenance services have been progressively outsourced to other airlines, equipment manufacturers or independent operators.

Background

The Chicago Convention of 1947 lays out the economic regulation of the air transport services sector. The convention stipulates states' exclusive sovereignty over their airspace, thereby prohibiting any air service not explicitly permitted. While this did not preclude the multilateral organization of air traffic, national security considerations prevalent at the end of World War II led governments to regulate the sector on a bilateral, reciprocal basis. This is fundamentally at odds with the equality of treatment enshrined in the most-favoured nation obligation of the WTO, and helps explain the exclusion of traffic rights and services directly related to the exercise of traffic rights from the scope of the GATS.

In view of the limited application of the GATS to air transport services, the sector in its entirety is subject to a regular review by the Council for Trade in Services.  

WTO review of the sector

Air transport services are subject to a specific review process. Paragraph 5 of the Air Transport Annex states that “the Council for Trade in Services shall review periodically, and at least every five years, developments in the air transport sector and the operation of the annex with a view to considering the further application of the Agreement to the sector”.

A first review took place in 2000-2003.  "Air Transport and the GATS: 1995-2000" gathers the background documentation produced by the Secretariat on developments in the sector for the period 1995-2000.

The second review was opened in September 2005.  In preparation for this review, the WTO Secretariat developed a methodology to assess the degree of liberalization of the sector (the Quantitative Air Services Agreements Review, or QUASAR. Drawing on this information, it produced the Air Service Agreements Projector (ASAP), an analytical tool that illustrates an economy's network of bilateral Air Services Agreements and correlated traffic flows.  The second review is formally still in progress.

From traffic rights granted ...

... to traffic rights exercised

Air Services Agreements Projector (ASAP) 2011

The Air Services Agreements Projector (ASAP) is an analytical tool that provides information on an economy's network of bilateral Air Services Agreements (ASAs) and associated passenger traffic flows.  It is based on the Quantitative Air Services Agreements Review (QUASAR) approach developed by the WTO Secretariat.

Contact: asap.contact@wto.org

Animation: Air traffic video
View of the total air traffic worldwide over a 24 hour period, projected onto a world map and reduced to 1 minute. Each yellow point represents a plane.

Current commitments and most-favoured-nation (MFN) exemptions

Access conditions in the three subsectors covered by the GATS, i.e. computer reservation system (CRS) services, selling and marketing of air transport services and aircraft repair and maintenance, are fairly open.  Nonetheless, GATS commitments have been undertaken by only around two-fifths of WTO members and accompanied, in the case of CRS and selling and marketing services, by a relatively sizeable number of exemptions to the MFN obligation.

Treatment of the sector in negotiations

Air transport services were part of the services negotiations that began in 2000.

Five submissions were tabled in the first years of negotiations. Following the exchange of bilateral requests for market access, offers of improved commitments were exchanged among members. However, the quality of the improvements proposed for the sector was, overall, rather disappointing.

The services talks were given fresh impetus by the Hong Kong Ministerial Conference of December 2005. Following the Conference, the sector, like several others, was the focus of a plurilateral request, whereby a group of members communicated to another group, of about 20 members, the types of improvements in commitments they were seeking in the negotiations.

Extensive commitments were sought in five subsectors (aircraft repair and maintenance, selling and marketing, computer reservation services, as well as ground handling services and airport operation services). Full commitments were requested for mode 1 (services supplied from one country to another) and mode 2 (consumers consuming services in another country) and the elimination of certain restrictions for mode 3 (setting up a commercial presence in another country to supply services).

The request also sought the removal or reduction of MFN exemptions.

Information on sectoral and modal negotiating objectives expressed by members is contained in reports from the Chair of the Special Session of the Council for Trade in Services issued in 2005. For an assessment of the plurilateral negotiations in different sectors and areas, consult the Report by the Chair in 2011.

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