CENTRAL INTELLIGENCE AGENCY
PROSPECTS FOR INTERNATIONALIZATION OF AIR TRANSPORT
CIA HISTORICAL REVIEW PROGRAM
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UWlll'lUlLfJ'1'iAL
PROSPECTS FOR INTERNATIONALIZATION OF AIR TRANSPORT
SUMMARY
Internationalization of civil aviation embracing international air transportthroughout the world, under one or more oporating organizations is scheduled for debate atune Second Assembly of the International Civil Aviation Organizationhile it is unlikely thatar-reaching plan will receive favorable consideration, It ts probable that thc discussions will carefully explore the formation of regional pools of air transport companies designed to centralize direction and effect economies.
Consideration of this subject by ICAO will probably advance thc formationegional pool for the air lines of Western Europe; it may also promote similar action by countries in thc Near East, South America, and Australasia. US long-rangewill be affected by the Increased competition of regional air transport pools. Furthermore, an attempt by regional pools or other international groups controlling world routes to deny US air lines important traffic rights, could threaten the present US preeminence in long-range commercial aviation.
If the UShreat to its present strong position In International air transport and is willing to exert pressure on foreign countries at high governmental levels, these countries will generally hesitate to discriminate against US air lines.
Note: The Information in this report is as of
The intelligence organisations or the Departments of State. Navy, and Air Force harein this report. Thc Intelligence Division, Department of the Army, submitted no
comment.
:
1'KOSPECTS FOR INTERNATIONALIZATION OF AIR TRANSPORT Internationalization of civil aviation embracing all international air transport operations throughout the world under one or more operating organizations will be debated at the forthcoming Second Assembly of the International Civil Aviation(ICAOJ whichune at Geneva.
1. Conditions Generating Pfensure rOR Internationalization .
With few exceptions, the major air lines flying international routes haveincreasing operating deficits despite an increase in air travel. The principal factors which contribute to these difficulties are the high cost of equipment, service and repair facilities, and the degree of technical proficiency required for operation of long-range air services. Many countries arc reluctant to continue Indefinitelycompetition for the present limited amount of air traffic and arc unwilling to provide the excessive subsidies which have become essential to the maintenance of their air lines. They are, therefore, receptiveolution which would reduce costs and permit the continued operations which they desire for reasons of national policy and prestige.
2 Steps Previously Undertaken to Promote Internattonauzatioh.
The conceptingle international organization to operate services on the world's trunk air routes has long been heldumber of countries now engaged in international air transport operations.esult, the Chicago Conventiono which nil ICAO members arc signatory, specifically states that nothing ln theshall prevent two or more contracting States from constituting joint airoperating organizations and international operating agencies, or from pooling their air services on any routes or in any regions. The Convention even permits the ICAO Council to suggest to contracting States that they form joint organizations.
In the summerhe First General Assembly of ICAO instructed the ICAO Council to ask thc contracting States to study possible plans for mternationallzation of air trans|>ort. In order that member countries might be prepared In advance for an expression of views on thisetter was despatched by ICAO to contracting States in7 asking them to submit the results of their studies of possible plans for thc organization of international air transport under the following headings: a. ingle organization to operate the world's trunk routes";
organizations to operate trunk servicesiven area by combining the national interests concerned (for example.nd
c. "organizations for the international operation of services on individual routes with thc object ofingle International instrument combining all or some national organizations operating on particular routes (for example. Europe to South America)".
2
Replies lo the ICAO letter on "internationalization" were submitted by only eight countries, four of which (Belgium. China, Nicaragua, and Switzerland) offered no suggestions. Argentina indicated opposition and the Union of South Africa considered that the world was not yet ready for concrete proposals on air transportDenmark and Sweden, although already involved with Norwayonsortium for the operation of Scandinavian Airlines (SAS) declared that they had not yet gained sufficient experience from which to draw conclusions. On thc other hand, Prance and the UK have made careful studies of the problem of internationalization and areto advance definite proposals at Geneva at least with regarduropean pool of air transport companies.
3. Ajcalysis or Punstkkhationalizatiok.
It appears that under the ICAO planool of aircraft would beingle International operating company established under ICAO and financed by member countries.
Under plan <b) air lines operating over trunk routesiven region would bewned and operatedingle regional organization as In planould be pooledingle management but would retain their corporate identity and operate their own equipment with their own personnel under control by thc governing body only as to routes, rates, frequencies and capacities.
Under planhich is in effect an extension of plan th,regional air transport poolingle air line could combine with others in an International organization for operations on trunk routes Into other world areas.
Proponents of plans (a) and (b,ite the following advantages:
policy;
operating procedures;
of administrative functions;
of repair and maintenance elimination of uneconomical routes.
On the other hand, proponents of planhile claiming the advantages of the other plans for their own. point to plan (b.s avoiding the obvious dangers inherent in plans (a) and (b,uch as:
a, monopoly control, making for inefficiency through lack of competitive stimulus; 6. surrender of national control to an international body;
c. threat to national securityreakdown occurs in the international harmony ncccssary for international operations.
It is not likely that the proposal for international ownership and operation of an- servicesnd b.ill gain genera, acceptance at this time Sea dls
StPZdHp'm egton* ^*
3
The anticipated discussion of plan (b.ill find active supportumber of countries .mportant in the air transport field, and winl?^
flewTOKNTIAI.
tlonestern European air transport organization. The nations cooperating in the European Recovery Program will point to the logical application to civil aviation of thc principle of collaboration In Europe. The security of participating countries, furthermore, would be safeguarded under this plan as thc air lines would retain their own operating organizationsertain degree of autonomy Thus, in eventissolution of the pool, the participants would be capable of continuing essential air transport services
1 BrraCT OF Foreign Air Transport Pools on the US.
Thc US, with the greatest air traffic potential In the world within Its borders, and capable of financing Its International air operations without recourse lodivision of expenses, has no compelling incentive to participateingleoperating organizationor would US air lines flying world trunk routes have reason to join In regional air transport pools (plans b,s ain such International operating organizations, the US would be required to accept curbs directly opposed to the principles of free and equal competition It has advocated since the Chicago Conventionon-participant, however, the US would encounter growing competition resulting from the increased efficiency and reduced operating costs effected by foreign air transport pools of air lines either govern-mentewned or heavily subsidized. This eventuality, though of serious concern to US air carricrs. would not necessarily preclude profitable operations unless an attempt were made by such pools to reserve all air traffic over Important segments of their routes to their own air lines.
Although thc Scandinavian countries, now operating international air carriersombined management, have made no attempt to deny foreign air lines the right to pick up traffic in one Scandinavian country for transport to another, afor discrimination by agreement already exists In the case of Portugal and Spain Traffic between these countries has been largely reserved to their own air carriers Furthermore, there is mutual recognition of the "special nature" of traffic between Portugal and Brazil on the one hand and between Spain and the Spanish American Republics on the other. Other nations whose air lines also fly between Iberia and South America, have been forced to recognize the "spreial character" of traffic moving over this route and are not permitted to compete for It
Should this attempt toward restriction of outside interests spread to other world trunk routesossibility, underS air lines wouldontracting overseas market which might threaten the present US lead in world-wide commercial aviation Under these circumstances, the US might be faced with the alternativeonsolidating US overseas air transport operationsingle management in an effort to meet the competition of combined foreign Interests,rotecting US air interests by thc application of political pressure at the highest foreign governmental levels. In the latter event, foreign countries, though able to demand or withholdto US air lines on relatively minor issues, would not be able to deny traffic rights considered by thc US to be essential to its national Interest.
While it does not now appear likely that complete internationalization of airwill develop in the foreseeable future, US strategic interests might be adversely affected if the trend is not carefully controlled. The formation of Internationalorganizations, for example, could threaten the method of direct negotiations by which the US now obtains air agreements with other countries for rights at foreign civil air bases.
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Original document.
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