GUINGONA: RP MUST STAND FIRM IN AIR TALKS WITH U.S.

Manila, July 17, 2003 (Star) Vice President Teofisto Guingona urged yesterday the Philippine panel in air talks with the United States to push for reciprocity and the protection of the national interest.

Speaking at a forum on open skies at the Dusit Hotel in Makati, Guingona said negotiations on air access must be based on passenger load, tonnage and traffic, and not just the number of flights.

The Philippines had always been at a disadvantage in past negotiations for air access for foreign carriers flying into the country. The private sector was not represented in the present negotiating panel, he added.

In the talks, the US is asking for a "complete open skies" on passengers, third country carrier code sharing and/or the same country carrier code sharing, and the open skies policy on cargo with seventh freedom rights.

Under the Philippine-US Air Transport Agreement, restrictions on capacity, frequency and route of flights would be lifted by Oct. 1, unless the two countries agree on new terms.

The Philippines is asking for a 15-year postponement of the lifting of the restriction. The Philippines and the US started negotiations for a new air transport agreement yesterday.

About a thousand PAL employees protested in front of the Hyatt Hotel Manila, where the three-day air talks are going on.

Ed Oredina, chairman of the PAL Employees Association mobilization committee, said the "open skies" policy will result in losses and eventual closure of local airlines. – Marianne Go, Rainer Allan Ronda

RP-US air talks: Is open skies a done deal? By Conrado M. Diaz Jr. (Star) 

The signals out of Washington, DC, as reported by STAR bureau chief Jose Katigbak concerning the crucial aviation talks between the Philippines and the US, are revealing. It quoted a highly-placed State Department source as saying: "We are not proposing an open skies agreement with the Philippines. Eventually, someday in the future, we will. But not now."

The second round of talks between the two countries resumed yesterday at the Hyatt Hotel in Pasay City, and will last until tomorrow.

Knowing how contentious the issue of "open skies" is not just here but throughout the world, even the Americans’ closest ally, the British, have rebuffed Washington’s constant attempts to force an agreement.

While it might sound well and good, what is more startling is what the source did not say: "There is no need for outright open skies right now because we can attain our objective anyway through ‘backdoor’ open skies."

The US wish list of proposals for the talks is anchored on three major demands: Third-country-carrier code sharing; same-country-carrier code sharing; and 7th freedom rights on cargo carriage. Although couched in technical jargon, these demands would constitute the worst aspects of open skies and would lead to the demise of the Philippine aviation industry.

What is more disturbing is the "understanding" reportedly reached by President Gloria Macapagal-Arroyo and her US counterpart George W. Bush during the former’s recent state visit to Washington. According to a White House source, an effusive Bush, after approving a multi-billion-dollar benefits package for the Philippines and proclaiming the country as a major non-NATO ally, whispered a request that President Arroyo favorably consider the US proposals in order to get the air talks moving. The negotiations had broken up after the first round of discussions in Washington last February.

After being gifted with $4.1-billion worth of economic and military goodies and hailed as a true friend and a dependable US ally, what else can the Philippine president say in return?

In any case, if this is indeed a done deal, then what is the Philippines agreeing to? First, the so-called "third-country-carrier code sharing" scheme would allow American carriers to tap airlines from other countries to fly the lucrative routes between the US and the Philippines on their behalf – in effect to proxy for them. All the US carrier needs to do is sign a "code-share" deal with its chosen partner, meaning it simply tacks on its code to the flight of its surrogate airline to automatically become its own service.

For example, Northwest Airlines would appoint its global alliance partner KLM Royal Dutch Airlines to operate flights between Manila and New York via Amsterdam. Northwest simply adds the "NW" code to the KLM code for the flight and it officially becomes a Northwest flight, part of the US entitlements under the RP-US air treaty.

Hence, without putting up its own flights, Northwest gets additional access to the RP-US market. This situation will then be replicated in the case of other US carriers which belong to giant airline blocs like Star, Oneworld, Sky Team and Wings.

Thus, American Airlines will code-share with Cathay Pacific or Qantas, its allies in Oneworld; Delta Airlines will team up with Sky Team partners Korean Air or Air France; or even the cash-strapped United Airlines will rely on the Star Alliance – Thai Airways, Singapore Airlines, All Nippon Airways or Asiana Airlines.

But while airlines from many countries enjoy the benefits of this "proxy-carrier" scheme, the struggling flag carrier, Philippine Airlines is unfortunately left out in the cold. Ironically, it is the RP-US market – supposed to be reserved for Filipino and American players – that is the subject of the talks, yet only one side seems to get all the benefits and worse, pushes for other countries’ airlines to share in the bounty, at the expense of Filipino aviation companies.

The second US demand, the "same-country-carrier code sharing" is simply a variation of the first scheme, with the difference being that airlines from the US (instead of other countries) are the ones involved in the proxy game.

For instance, American Airlines, which is not an officially-designated carrier under the RP-US air treaty (where only three are allowed), can code-share on Northwest flights to Manila. AA can thus go around the treaty and offer services to the Philippines by piggybacking on Northwest.

On the other hand, why can’t even one major US airline be enticed to code-share with PAL on at least a few US domestic routes? What PAL directly needs now is wider access to the huge US interior and East Coast markets to complement its trans-Pacific services to the West Coast.

The sad reality is that PAL and other Philippine carriers dipping into the RP-US route are competing with their hands tied against American giants. The Philippine carriers are already barred from over 50 percent of the total US air market as the current treaty limits the airlines to only nine gateways, mostly on the West Coast, effectively ceding the passenger-rich interior and East Coast markets to US competitors.

The third US proposal is to legitimize the patently illegal exercise by American cargo carriers of the so-called 7th freedom operations from Clark and Subic. The 7th freedom is a right bestowed by a host country (in this case, the Philippines) on the airlines of another country to use its territory as a base to fly to and from other countries.

It is a privilege that is extremely valuable to the beneficiary airlines and thus rarely granted in international aviation. Even the current RP-US treaty does not grant this right to either country’s carriers. Yet Federal Express and UPS both brazenly operate major cargo hubs in the former American military bases, dispatching and receiving all-cargo flights to China, Japan, Korea, Indonesia, Singapore, Taiwan, Thailand, Vietnam and many other Asian states.


Reported by: Sol Jose Vanzi

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