The liberalization of air services: prospects and challenges for the Indian economy
| Date | 16 March 2015 |
| Published date | 16 March 2015 |
| DOI | https://doi.org/10.1108/JITLP-04-2014-0007 |
| Pages | 49-66 |
| Author | Amade Roberts Amana |
| Subject Matter | Strategy,International business,International business law |
The liberalization of air services:
prospects and challenges for the
Indian economy
Amade Roberts Amana
Department of Public and International Law,
Joseph Ayo Babalola University, Ikeji-Arakeji, Nigeria
Abstract
Purpose – The purpose of this paper is to examine, with a specic reference to the Indian
economy, the interface between the World Trade Organization (WTO)/General Agreement on
Trade in Services (GATS) disciplines and aviation services; the challenges to the incorporation of
air services regimes into the world trade treaty; and the alternative routes for the liberalization of
air services markets.
Design/methodology/approach – The paper adopts the doctrinal approach to legal research in
analyzing literature on the integration of air services into the multi-lateral trading system. The paper
takes a critical look at the current state of the aviation industry, the rationales and routes for
liberalization, as well as the challenges facing it.
Findings – The paper reveals the state of the Indian aviation market and its preparedness for
integration into the global market system. The merit of a gradual approach is examined.
Research limitations/implications – The WTO framework offers the traditional route for the
liberalization of trade. However, since the inception of air travel, air trafc rights have been traded
between countries on a bilateral basis, involving concepts of sovereignty over national airspace. The
paper offers some ideas on how the two can be integrated.
Originality/value – The research draws on recent events in the Indian aviation sector. It is of
importance, especially to other emerging economies with similar social-economic indicators. It
objectively questions the rationales for liberalization or globalization and its merits.
Keywords GATS, Bilateral air services, India, WTO, Liberalization, Open skies
Paper type Research paper
1. Introduction
The World Trade Organization (WTO) is considered as the major driver of a globalized
economy based on openness to trade and foreign investments. Although trade in
services has existed for centuries in the form of trade in travel, transport and tourism
services: as well as the transboundary movement of work force, it was with the turn of
the nineteenth century that the location and performance of economies within the global
trade context began to be vigorously asserted. The popular wisdom is that countries
operating in competitive environments have improved growth indices, reduce poverty
headcounts faster and possess an enhanced capability for integrating into the global
economy. This has led to a shift away from trade protectionism to the liberalization of
This present work beneted greatly from comments made by the anonymous reviewer(s).
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1477-0024.htm
Liberalization
of air services
49
Received 22 April 2014
Revised 18 December 2014
18 February 2015
Accepted 1 March 2015
Journalof International Trade Law
andPolicy
Vol.14 No. 1, 2015
pp.49-66
©Emerald Group Publishing Limited
1477-0024
DOI 10.1108/JITLP-04-2014-0007
market opportunities through, for instance, the elimination of tariff walls, non-tariff
barriers and quantitative controls. These trading practices are considered unfair
because they distort free market economy principles. Compared with trade in
merchandize, the extension of WTO systems to services trade has been snail-paced,
despite the fact that services sector growth has been universally unprecedented.
However, Mehta and Hassan (2011) have found that virtually all developing countries
undertook market-oriented reforms over the past three decades, integrating themselves
more closely with the global economy.
Air services constitute the fastest means of conveyance, providing a critical channel
for development. Aside from their contribution to the gross domestic product (GDP), the
industry provides employment and facilitates domestic and foreign trade (Agarwal,
2012). Air transport services are either scheduled or non-scheduled. Regular ights,
including all passenger and cargo transport, operated in accordance with a timetable,
are scheduled air services. On the other hand, irregular charter operations are classied
as non-scheduled air transport. It is reasoned that the liberalization of market access in
air transport services will provide more investment opportunities for the sector and
enhance competition for the supply of goods and services. This will create more jobs and
promote industry growth for the benet of service users (ATCONF, 2013). For much of
its history, air transport has been characterized by bilateral trade in trafc rights. The
trend consisted of the institution of restrictive investment rules toward the entry of
foreign airlines into national airspace. Beginning from the Paris Convention of 1919, the
dening legal standard for air transport has been expressed through the complete and
exclusive sovereignty of states in the airspace above their territories
(Diederiks-Verschoor, 1993). The broad institutional framework for the organization of
international civil air transportation is the Chicago Convention of 1944. However,
because it plays a signicant role in perpetuating the air market anachronism, the
adoption of bilateral arrangements has become widespread in the post-world war years.
Bilateral air service agreements are market access restrictions to cross-border trade in
services. Airlines have substantial shares of government investments, and as
competition became more intense, protectionism developed. Air services agreements are
based on parity of treatment and the mutual exchange of trafc rights by the
participating states. Each contracting state has to grant to the designated airlines of
the other the same trading rights and privileges accorded its own airlines. An acceptable
balance of trafc rights is enforced through limitations on the number of airlines to be
designated and on capacity provided on a ight or seat basis (Blackshaw, 1992).
Generally, an air service agreement covers matters such as the routes that may be own,
allocation of arrival or departure slots, the capacity, frequency and types of operational
aircraft, as well as the regulation of tariffs.
This article is organized into six sections. Section 1 is, of course, introductory. In
Section 2, the article explores the Indian air services market. Section 3 is a synopsis
of the WTO-General Agreement on Trade in Services (GATS) system. In Section 4,
the article discourses the exclusion of air services from GATS and the
jurisprudence of the reception of WTO law into the country. The next section treats
some of the problems associated with the globalization of air services. Section 6
examines other possible scenarios for liberalization. Section 7 is the concluding part
of the study.
JITLP
14,1
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