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Discussion Responses (5) – 250 Words, 1-2 Sources EACH
250-300 Word Response TO EACH POST. Should either challenge or support the discussion. 1-2 sources must be used for each response.
Response 1:
The definition of an open-sky agreement is, “an agreement between two countries, in which the airlines of one country are allowed to serve any of the other country’s
airports” (Module 3, 2017). The purpose of this agreement is to increase travel, trade, productivity, while also creating jobs and promoting economic growth (DOS,
2017). Although the agreement has saved consumers billions of dollars in air fares, not all airlines are happy with this agreement. Companies like United, Delta, and
American
Airlines are feeling the competition and do not want to participate (Siefring, 2017). The competition has made it financially difficult for the airlines to upgrade
their planes. “All three were either bankrupt or near it less than a decade ago. Through disciplined management and thanks to a fall in oil prices, they have returned
to profitability. But along the way, American, Delta, and United have been forced to scrimp on product offerings and have had do without shiny new fleets of planes”
(Zhang, 2016).
Response 2:
Open Skies agreements is an agreement between the EU and the United States allowing any US or EU airline to fly between to and from any point with the US and the EU.
The United States has extended Open Skies with countries at all levels of economic development such as Brazil, South Korea and smaller countries like Equatorial New
Guinea. The purpose of this agreement is to expand “international passenger and cargo flights to and from the United States, promoting increased travel and trade,
enhancing productivity, and spurring high-quality job opportunities and economic growth” by limiting government interference when it comes to commercial decisions of
air carriers. Carriers are able to freely determine their route, and price for service in order to provide customers flexibility and affordable prices. In addition,
this agreement facilitates trade between countries and makes it possible for carriers to compete within their marketspace and partner with other airlines (local and
foreign). The impact of the Open Skies Agreement has resulted in an estimated $4 billion in annual consumer economic gain in the US. US Airlines estimates that “full
liberalization through Open Skies agreements would lead to a 16-percent increase in air traffic and support 9 million jobs in aviation and related industries” (U.S.
Department of State, 2017).
According to the US Department of State, the United States has over 100 Open Skies partner worldwide. The U.S. also has two multilateral Open Skies accords:
2001 Multilateral Agreement on the Liberalization of International Air Transportation (MALIAT) with New Zealand, Singapore, Brunei, and Chile, later joined by Samoa,
Tonga, and Mongolia; and
2007 Air Transport Agreement with the European Community and its 27 Member States.
Despite the advantages of Open Skies, it is not without its challenges and critics. Interestingly, legacy airlines that have benefited from the freedom of Open Skies
are rebelling against the competition this policy brings about. For example, in an article by New York Times (2015) American Airlines, Delta Air Lines and United
Airlines came together to lobby the government to restrict access to fast-growing rivals in the Persian Gulf, claiming unfair competition because the Middle East
government subsidizes Emirates, Etihad Airlines and Qatar Airways. In another case, Norwegian Air Shuttle has applied to expand low-cost flights from Europe and Asia.
However, other domestic airlines have lobbied against Norwegian Air for the same reason, unfair completion. Delaying the application has prompted EU officials to get
involved in support of the airline (Mouawad, 2015).
In any industry, advantages are welcomes until an unassuming disruptors/competitor in the marketspace finds a better way of optimizing the opportunity. It is then
that lobbyists are employed to restrict access. However, by challenging the Open Skies Policy they are “challenging the very essence of economic liberalization that
the U.S. has championed for decades” (Mouawad, 2015). Once limitations are imposed, it may open the agreement to other obligatory regulations, threatening its intended
purpose. If companies are limited in how they can compete within the market, does this not generally give larger established companies an unfair advantage over
smaller businesses that rely on out of the box thinking (within the parameters of the agreement) and low-cost fairs to remain competitive? Agreeably, some limitations
are necessary to prevent companies from monopolizing the market through unfair advantages such as selling fairs below market value, but it seems the argument is mostly
among heavy players focused on protecting their market share as oppose to developing the necessary capabilities to compete in an ever-changing environment. In the same
NY times article, Delta attempted to block gulf carriers from receiving American loan guarantees through the Export-Import Bank to buy new jets from Boeing. Do you
think if Delta had come across this opportunity, it would feel the same about imposing limits?
It is common place to large companies to “slow down” competitors through petitions and lobbying – tools of competition. Nonetheless, do you feel there is some merit
to imposing restriction? Take for example the argument of government subsidies. Should airlines in the U.S. receive subsidies like their Middle Eat counter parts?
First consider why such subsidies are in place? Compare a country like India to the US. Does your perspective change in this context? Perhaps the situation is more
about defining the parameters, not limiting them.
Response 3:
Pierre David (2013) defines an open-skies agreement as an agreement between two countries, in which the airlines of one country are allowed to serve any of the other
country’s airports. The purpose of open-skies agreements is that the two countries initiating this agreement are believed to reap mutual benefits; like having free
airline access to each other’s airports and the freedom to set pricing. (Winston & Yan, 2017)
According to the U.S. Department of State (n.d.), open-skies agreements have vastly expanded international passenger and cargo flights to and from the United States,
promoting increased travel and trade, enhancing productivity, and spurring high-quality job opportunities and economic growth. Open-Skies agreements do this by
eliminating government interference in the commercial decisions of air carriers about routes, capacity, and pricing, freeing carriers to provide more affordable,
convenient, and efficient air service for consumers.
The U.S. Department of State (n.d.), also mentions open-skies agreements provide maximum operational flexibility for airline alliances. For example, America’s Open-
Skies policy allows U.S. air carriers unlimited market access to their partners’ markets and the right to fly to all intermediate and beyond points. However, in an
article published by Winston & Yan (2016), these kinds of agreements are opposed by countries who want to protect their flag carrier(s) from the added competition.
They do this by closely regulating fares, entry, and flight frequency, so it is vital to know if the open-skies agreement that has been negotiated actually benefits
passengers and if the welfare of the passengers would significantly improve if such an agreement is being considering.
Any thoughts? – What’s your reason(s) for not wanting to enter into an open-skies agreement?
Response 4:
There are two different types of cargo services – one is a Liner ship and one is a Tramp/Charter Ship. The main difference between the two is their availability. A
liner ship follows a regular schedule whereas a Tramp ship can be used at any point in time (Zlatev, 2017). According to the National Taiwan Ocean University, Liner
ships usually have a standard tariff and are “dominated by container ships, roll-on/roll-off carriers and general cargo ships” (NTOU). On the other hand, as mentioned,
Tramp ships are available for charter whenever they are needed. However, in regards to pricing, Tramp/Charter ships pricing is based on supply/demand conditions
(NTOU). Another big difference between the two is that Liner ships are considered public carriers and thus they are unable to discriminate between offers if they have
the ability of transporting the cargo (Kendall,1986). Tramp ships on the other hand are contract/private carriers and can discriminate as they see fit.
One interesting piece of information about Liner ships is the logistics that allow it to operate on a schedule basis. According to Eric Ting’s article Liner ships are
constantly concerned with making sure that there are enough empty containers at each location in order to fulfilled customer’s needs.
Response 5:
Against the maritime context, David (2013) defines the flag as “the flag of the country in which a ship is registered.” This is a friendly reminder of the obvious:
Despite the open waters, each ship is still an extension of a particular country, and, by extension, that country’s laws and regulations, and even tax enforcements.
But there are two comforting caveats for those who don’t like the idea of representing a country far in the seas: 1. the naval forces of the country to which the ship
is registered will protect the ship in times of conflict; and 2. the ship owner may actually select any country to which to register the ship (David, 2013).
David (2013) sheds an especially positive light on the second of the above caveats, considering the “flags of developed countries tend to impose very substantial
regulations on the way a ship is operated.” This means that the laws of the country of registration dictate how–and to what extent–the crew on board will be trained;
daily work hours and vacation; and even the nationality statistics. Cost is also a factor: according to David (2013), operating a ship registered to the U.S. can cost
nearly three times as much as its counterpart registered abroad, and the former’s tax payments are a whopping 70 times higher than those of its Panamanian counterpart.
It should come as no surprise, then, that, of 25 countries listed in David’s (2013) merchandise fleet registry, United States falls to no. 19, with just 6,461 ships
and 11,601 tonnes registered to its flag, while Panama’s fleet comprises 8,127 ships and 214,760 tonnes. That the latter country exercises an open registry–and to
that end a flag of convenience–accounts for more expensive, developed countries, like Denmark, France, and Norway, creating the “secondary registry” with impositions
that are characterized as less strict. Another response to the open registry of developing countries are the so-called “Cabotage” rules that dictate that ships
travelling between two U.S. ports must carry the U.S. flag, and have U.S. crew on-board; to that end, cruise ships destined for Alaska end up leaving from Vancouver,
Canada, and those destined for Hawaii leave from Ensenada, Mexico.
Other issues ensue as to open registry, such as when those in charge take advantage of the fact that the country of registry has no oversight, by issuing work hours
longer, and wages lower, than those allowed by the country of registry. Several military-related conflicts arise as well, such as when there is a maritime attack, and
the military chooses, for legal purposes, to help only those ships that are flying the flag it is associated with.
Furthermore, as predicted, open registries are not immune to scandals: a BBC report states that the International Transport Workers’ Federation (ITF) exposed a case of
a ship registered to Panama, on which a passenger died; in such a circumstance, the ship is legally required to head to the nearest port, but the ship in question, in
fact, continued circumnavigating the waters for another two weeks following the death, having placed the corpse into a freezer. This is an unfortunate example of some
of the reasons the ITF has been trying to bring light to the corruption ensuing in open registries for nearly six decades now! These rarities aside, however, the BBC
confirms David’s (2013) report that ships registered to Panama don’t have to pay taxes.
