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Policy & Regulations

By the end of 1944 advances in the aviation technology, spurred also by the military experiences in World War II, highlighted the intercontinental capacity of aircraft. In response, a conference was held in Chicago focusing on civil air transport. The United States favored an unregulated environment in terms of routes and pricing, whereas France and England favored the creation of an international institution with the development of route quotas for each country. Today, we again see both approaches in use, with a largely deregulated environment in the domestic markets of the U.S., yet many countries approaching routes and landing rights among themselves through bilateral agreements.

The Role of the International Civil Aviation Organization

The International Civil Aviation Organization("ICAO"), located in Montreal, Canada, specifies the international regulatory framework in aviation. Founded at the Chicago Convention in 1944 as a UN organization, ICAO has 190 contracting states as of July 31, 2010 (list of contracting states). Usually delegates meet every three years, the upcoming assembly of contracting states (the 37th) will be held in September 2010. The World Bank participates as an observer at the Assembly.

As in other international regulatory environments, ICAO does not act as an enforcement authority. Instead, contracting countries pledge to adhere to standards set forth by the organization, and establish civil aviation authorities and civil aviation regulations within their own governments, in concurrence ICAO’s Annexes to the Chicago Convention. The United States’ Federal Aviation Administration (FAA) has played and continues to play a key role in the setting of safety standards and best practices, and has developed a set of Model Civil Aviation Regulations (MCARs) available to countries. The 18 Annexes to the ICAO charter contain the international standards and recommended practices (SARPS) for civil aviation as follows:

  • Annex 1: Personnel licensing
  • Annex 2: Rules of the air
  • Annex 3: Meteorological services for international air navigation
  • Annex 4: Standardization of aeronautical charts
  • Annex 5: Units of measurements for both air and ground operations
  • Annex 6: Operations (air transport airplanes, general aviation, and helicopters)
  • Annex 7: Aircraft nationality and registration marks
  • Annex 8: Airworthiness of aircraft
  • Annex 9: Facilitation
  • Annex 10: Aeronautical communications (this is a large annex with five volumes)
  • Annex 11: Air traffic services
  • Annex 12: Search and rescue
  • Annex 13: Aircraft accident and incident investigation
  • Annex 14: Aerodromes (airports)
  • Annex 15: Aeronautical information services
  • Annex 16: Environmental protection (noise and emissions)
  • Annex 17: Security
  • Annex 18: Safe transport of dangerous goods by air

ICAO also sets standards for safety and security through audit programs. ICAO's Universal Safety Oversight Audit Program (USOAP) provides audits of contracting countries' adherence to safety standards. Similarly, the Universal Security Audit Program (USAP) audits contracting states' adherence to security standards. It is important to note that throughout the aviation industry safety and security are treated as two separate and distinct topics.

Regionalization of Regulatory Oversight

Since aviation requires a continued and vigilant emphasis on safety, and the associated costs of training, inspection, and facilities are high, smaller countries not capable of immediately investing in a larger aviation infrastructure may combine regionally to create oversight bodies providing technical and regulatory support. Both ICAO and the FAA have been active in supporting such regional entities. For example, the FAA has been highly active in helping Kenya , Uganda , and Tanzaniacreate a regional aviation oversight committee under the East African Community (EAC). Oversight committees are created to harmonize regulations and share the costs and assets of a group of countries within a region. In the EAC, for example, one effort focused on harmonizing the CAR of each country with the rest of the group. In other cases, the shared resources may include ramp inspection personnel, test and calibration equipment, and other infrastructure support. One country in the group may have the highest standards and take the lead to help others achieve the same results. Also, smaller regional groups may become part of a larger group as regional interests grow. Other examples of current oversight groups include:

  • MAK: The Interstate Aviation Committee of the newly independent states
  • LACAC: Latin American Civil Aviation Commission
  • RASOS: Caribbean Regional Oversight System
  • COCESNA: Central American Cooperation for Civil Aviation
  • PASO: Pacific Aviation Safety Office
  • ACSA: Aviation Safety Authority for Central America

Freedoms of the Air

ICAO has created a framework for analyzing the relationship of over flight and landing rights between countries using nine "Freedoms of the Air". These freedoms manifest themselves through bilateral and multilateral agreements between countries on overflight and landing rights.

  • First Freedom of the Air: the right granted by one country to another country to fly across its territory without landing (i.e. an airline of Country B may overfly Country A.)
  • Second Freedom of the Air: the right granted by one country to another country to land in its territory for technical reasons, such as refueling, but not for commercial reasons (i.e. an airline from Country B may stop in Country A to refuel on its way to another country, but may not unload passenger, freight, and mail (PFM))
  • Third Freedom of The Air: the right granted by one country to another country to land for the purpose of unloading PFM from the carrier's country of origin (i.e. an airline of Country B may bring passengers loaded in Country B to Country A.)
  • Fourth Freedom of The Air: the right granted by one country to another country to load PFM from the granting country for purpose of carrying them to the carrier's country of origin (i.e. an airline of Country B may pick up passengers in Country A and bring them to Country B.)
  • Fifth Freedom of The Air: the right granted by one country to another country to land and unload, in the first country, PFM coming from or destined to a third country (i.e. an airline of Country B may unload PFM of another country in Country A, or may pick up PFM in the Country A to go to a country other than Country B.)
  • Sixth Freedom of The Air: the right of transporting, via the home country of the carrier, PFM moving between two other countries (i.e. an airline of Country B may pick up PFM in Country A, fly and land in Country B, and then continue on to a third country with the same PFM.)
  • Seventh Freedom of The Air: the right granted by one country to another country to transport PFM between the granting country and any third country without the involvement of the carrier's home country in the itinerary (i.e. an airline of Country B may shuttle passengers directly between Country A and a third country.)
  • Eighth Freedom of The Air: the right of transporting traffic between two points within the granting country on a flight originating or terminating in the home country of the foreign carrier or anywhere else outside the granting country (i.e. an airline of Country B may move traffic between points within Country A as long as the first or final leg of the flight terminates in any other country than Country A.)
  • Ninth Freedom of The Air: the right of transporting traffic between two points within the granting country without any conditions of the flight starting or terminating outside the granting country (i.e. an airline of Country B may move traffic between points in Country A without any part of the flight ever leaving Country A. Movement of PFM within a country's borders is often termed "cabotage".)

The freedoms beyond the fifth freedom of the air are considered "so-called" freedoms, since only the first five have actually been recognized internationally by treaties. For ICAO's official definition of the freedoms of the air, visit their web page on this topic by clicking here.

The U.S. Department of Transportation (DOT) and Federal Aviation Administration (FAA)

The civil aviation authority in the U.S. is the FAA, which falls under the U.S. DOT. The Department of Transportation works together with the FAA in helping other countries build air transportation networks, ideally with the ability to fly to and from the U.S. The DOT has authored the Model Air Commerce Act to create a blueprint legal framework establishing a Civil Aviation Authority within a country. The model act has six key objectives when implemented in a country, namely

  • The ensurance of a coordinated and effective administration of the civil transportation programs,
  • Facilitation of development and improvement of coordinated transportation among different modes of transportation,
  • Encouragement of cooperation between national, local, and other interested parties to achieve transportation objectives,
  • Providing general leadership in identifying and solving transportation problems,
  • Development of transportation objectives to meet the needs of the public, users, carriers, industry, labor and other interested parties, and
  • Setting of ministerial-level responsibilities for economic regulation.

The FAA has also initiated an "Open Skies" program of bilateral and multilateral agreements. Open Skies agreements are designed to create a free market for aviation services, and allow for two countries the right to operate air services from any point in one country to any point in the other, as well as to and from third countries.

In order to have an agreement with the U.S., countries must meet FAA's International Aviation Safety Assessment Program (IASA), which gives countries either a Category 1 or Category 2 status. Only countries with a Category 1 status may initiate additional flights to the U.S. or form open skies agreements with the U.S (list of countries - PDF, 18KB).

The FAA has been the primary author of the Model Civil Aviation Regulations, which are organized as follows:

  • Part 1: General Policies, Procedures, and Definitions
  • Part 2: Personnel Licensing
  • Part 3: Aviation Training Organizations
  • Part 4: Aircraft Registration and Marking
  • Part 5: Airworthiness
  • Part 6: Approved Maintenance Organizations
  • Part 7: Instruments and Equipment
  • Part 8: Operations
  • Part 9: Air Operator Certification and Administration
  • Part 10: Commercial Air Transport by Foreign Air Carriers within adopting state
  • Part 11: Aerial Work

These regulations are available to countries in their efforts of establishing their own regulations and meeting FAA safety standards for flights to and from the U.S. In addition, countries must also meet the U.S.'s Transportation Security Administration's ("TSA", part of the U.S. Department of Homeland Security) criteria on air transport security.

The Cape Town Convention

On November 16, 2001, 20 states signed the "Convention on International Interests in Mobile Equipment" and the "Protocol on Matters Specific to Aviation Equipment", with other states following suite. The convention is formally known as the Cape Town Convention and has been negotiated for five years with the involvement of UNIDROIT and ICAO. The convention is intended to cover more than the air transport sector through protocols to be added in the future (list of signatories - PDF, 48KB)

The intention of the convention is to mitigate leasing, financing, and ownership risks with respect to high-value mobile equipment moving across international borders. In terms of aircraft, a core component is the establishment of an electronic international registry of equipment containing the manufacturer, model, and serial number. Records of international creditor interest can be attached to the aircraft, and once such an interest is registered, this interest precedes all other subsequent and unregistered interest.

The goal of the convention is to standardize the rights of creditor claims and therefore lower interest rates on mobile equipment leasing and purchasing by reducing the risks associated with different national legal standards and enforcement mechanism. For developing countries in particular the lack of legal standardization has added a risk premium to financing aircraft that the Convention hopes to mitigate.

The Warsaw and Montreal Conventions

International air carrier liabilities were originally addressed by the Warsaw convention in 1929. However, constant change in industry and technology (air transport hardly existed at the time, not to mention computerized ticketing) has yielded continuous attempts to update the convention, and in September 1994 the U.S. Senate ratified the Montreal Protocol 4 changes that had been on the table since 1975. In 1999, a new set of regulations aimed at replacing the Warsaw Convention was created by the ICAO charter states in Montreal, the Unification of Certain Rules for International Carriage by Air, now known as the Montreal Convention (list of signatories - PDF, 56KB).

Chief points of the Montreal Convention:

  • The complete removal the liability limits for death or injury of passengers if the air carrier solely is at fault
  • The ability of victims and their families to pursuit damages through the victim's permanent residency's legal system
  • The ability of victims and their families to seek economic redress in a quick manner as needs arise
  • The Updating of regulations to reflect latest developments in e-ticketing and code sharing
    formal instatement of regulatory improvements in air cargo operations formulated in the Montreal Protocol 4
  • A per person liability in relation to delay, baggage and cargo of 4,150 SDRs
  • A baggage loss claim limit at 1,000 SDRs per passenger unless the claimant has made a declaration of higher value in the baggage and paid any extra fees if so required
  • In general, a limit on cargo loss claims of 17 SDRs per kilogram.



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