The Bilateral System—how international air services work
This page introduces you to the world of the bilateral air services system. It explains:
What is the bilateral system?
Before an airline can operate international services to another country, the government must first negotiate a treaty level agreement with the destination country’s government. These treaties are known as bilateral air services agreements.
The Australian Government has negotiated 71 bilateral air services agreements and associated arrangements. These agreements allow our airlines to offer the range of services that they do today.
Bilateral air services agreements/arrangements contain provisions on;
- Traffic rights—the routes airlines can fly, including cities that can be served within, between and beyond the bilateral partners.
- Capacity—the number of flights that can be operated or passengers that can be carried between the bilateral partners.
- Designation, Ownership and Control—the number of airlines the bilateral partners can nominate to operate services and the ownership criteria airlines must meet to be designated under the bilateral agreement. This clause sometimes includes foreign ownership restrictions.
- Tariffs—i.e. prices. Some agreements require airlines to submit ticket prices to aeronautical authorities for approval (it is not current practice for Australian aeronautical authorities to require this), and
- Many other clauses addressing competition policy, safety and security.
The result is that international aviation is regulated by a complex web of over 3000 interlocking bilateral air services agreements. In recent years, groups of countries have come together to negotiate air services agreements. These are known as plurilateral agreements, however the majority of international air services are still traded bilaterally.
Caption: Map of bilateral air services agreements between World Trade Organization members. Courtesy of the Air Services Agreement Projector, World Trade Organization, 2007
The Australian Government is engaged in a program of bilateral air services negotiations to continue to expand our airlines’ access to the world and to allow foreign carriers to increase their access to Australia.
History of the bilateral system
In 1944, during the closing stages of World War II, 54 countries came together in Chicago, USA, to discuss the future of international aviation. The conference resulted in the signing of the Convention on International Civil Aviation, commonly known as the Chicago Convention.
The Chicago Convention established the rules under which international aviation operates. It also established the International Civil Aviation Organization (ICAO), the United Nations organisation responsible for fostering the planning and development of international air transport.
In the aftermath of war, with many nations struggling to rebuild their shattered economies, it is easy to understand why protectionist elements were incorporated into the drafting of the Chicago Convention. The treaty determined that no scheduled international air service may be operated over or into the territory of a contracting state without their express permission.
Over the following years, ICAO developed a series of traffic rights, known as freedoms of the air. These freedoms continue to form the basis of rights exchanged in air services negotiations today.
Governments must continually negotiate new treaties to allow international aviation to grow and to expand their carriers’ access to new and emerging markets.
This type of trade arrangement does not exist in any other sector. The Australian Government is working to move beyond the bilateral system through multilateral organisations including ICAO, the World Trade Organization and APEC (Asia Pacific Economic Cooperation). This is a long term goal, but an important one.
In the meantime, we are working within the bilateral system to liberalise air services arrangements and progressively remove restrictions on routes, capacity and airline ownership. The bilateral system has its weaknesses, but it can also be flexible and allow rapid change, where parties agree. Despite its limitations, the bilateral system has allowed international aviation to grow into the vibrant industry we have today.
Visit the ICAO website to find out more about the history of international aviation.