Everybody wants to go to heaven, but nobody wants to die: the story of the Transatlantic Common Aviation Area.

• Author: Rynerson, Stephen D.

The Transatlantic Common Aviation Area (TCAA, also known as the Common Transatlantic Aviation Area, CTAA, or simply the Common Aviation Area, CAA) (1) is a revolutionary idea in the field of international aviation, seeking to move beyond the framework that has dominated the industry for over half a century. (2) Yet despite the significance of the TCAA in the realm of international transportation law, it has been virtually ignored by the American legal community. (3) The purpose of this article is to bring this important new development the recognition it merits. Part I will explain the history of the TCAA's development, from the Convention on International Civil Aviation of 1944 (Chicago Convention)through the European Court of Justice's 2002 decision on the ability of E.U. Member States to set their own aviation policies. Part II will examine what the TCAA might look like if it came to fruition. Finally, Part III will identify obstacles to the establishment of the TCAA.

PART I: THE PAST IS PROLOGUE

The Bilateral Regime in 15 Minutes or Less (4)

The legal structure of modern international aviation was established by the Chicago Convention of 1944. (5) Created for the purpose of establishing a multilateral framework for "openness, trade, and mutual co-operation," the Chicago Convention instead gave rise to a system largely based on individual national interests, (6) embodied in treaties, executive agreements, and other documents collectively referred to as bilateral air services agreements, (7) bilateral air transport agreements, (8) or, just simply, "bilaterals." (9) The conventional wisdom is that the United States intended to push for a "laissez-faire, free market philosophy" in international aviation as part of the Chicago Convention. (10) However, it could be argued that the path to restrictive bilaterals was set down from the very beginning, when in his opening statement the U.S. representative to the International Civil Aviation Conference, where the Chicago Convention was drafted, (11) analogized international aviation to railroading, (12) which was already being crippled domestically by heavy regulation at the time of the conference. (13)

Regardless of whether the possibilities of a liberal multilateral regime were defeated before drafting even began, the structure of the Chicago Convention shows it clearly was not designed to easily facilitate such a system, as several articles in the final document gave national governments broad powers to regulate international air traffic that crossed their borders. (14) Yet the Chicago Convention did not compel the formation of bilateral agreements, either. (15) The reasons for the historical dominance of bilateral agreements are open to debate, but most commentators suggest that this resulted from a combination of security concerns, (16) a desire to ensure that benefits resulting from governmental negotiations would be reaped primarily by the negotiating states, (17) and/or a desire to protect existing national airlines. (18) Ultimately, the conjunction of the Chicago Convention framework and national interests gave rise to a situation where "the mission of every country with an airline capable and desirous of handling transnational services [was] to facilitate its airlines access to foreign markets, while simultaneously protecting its own market from an influx of foreign carriers." (19)

Only a few traces of multilateralism emerged from the International Civil Aviation Conference. (20) The first was the creation of the International Civil Aviation Organization (ICAO) by the Chicago Convention itself. (21) The ICAO was tasked with developing the "principles and techniques" of international air transportation, (22) but it was also obligated to do such things as "[p]revent economic waste caused by unreasonable competition" and to make sure "every contracting State has a fair opportunity to operate international airlines." (23) Two side-agreements did more to promote a nascent multilateral framework, however, and began the process of establishing the spectrum of aviation freedoms known today. (24) Of the fifty-two states that signed the Chicago Convention, thirty-two signed the "Two Freedoms Agreement," (25) while a further twenty signed the "Five Freedoms Agreement," (26) which together came to define the basic premises of modern international aviation. (27) Yet only the "Two Freedoms Agreement" attained the required number of signatories to enter into force, thus obligating nations to separately negotiate agreements to gain additional international traffic rights. (28)

Soon after the Chicago Convention, the United States and the United Kingdom entered into the first major bilateral in what was commonly termed the Bermuda Agreement. (29) The Bermuda Agreement represented a compromise between U.S. and British interests. (30) The key elements of the Bermuda Agreement were its relatively liberal capacity restrictions (31) and its elaborate rate restrictions that relied on the International Air Transport Association (IATA) (32) to impartially establish fares. (33) Liberal Fifth Freedom rights were also granted to both parties. (34) The Bermuda Agreement (later known as Bermuda I) became the rough model for most other bilaterals for over three decades. (35) The late 1970s, however, saw the first major cracks appear in the bilateral regime. (36)

Following a dispute about whether the United States was abusing Bermuda I's loose capacity limits by authorizing too many carriers on U.S.-U.K. routes, (37) the United States and United Kingdom entered into the Bermuda II Agreement (Bermuda II) in 1977. (38) Bermuda II was significantly more restrictive than its predecessor: (39) limiting the number of carriers that could serve routes between the two nations, (40) giving the parties' respective governments considerable control over capacity, (41) and noticeably diminishing U.S. Fifth Freedom rights beyond the U.K. market.(42)

Following the disappointment of Bermuda II, the United States launched an aggressive campaign to liberalize international aviation, for the purpose of both improving the market choices for consumers and to punish the United Kingdom by dealing more directly with other European nations. (43) The United States succeeded in completing eleven new bilaterals between 1978 and 1980 with nations including Belgium, the Netherlands, the Federal Republic of Germany, Iceland, and Finland, (44) which particularly resulted in gains for Belgian and Dutch carriers to the detriment of U.K. carriers. (45) Although the sheer number of bilaterals completed in so short a span was impressive in and of itself, of more significance was that these bilaterals were qualitatively different than the earlier Bermuda I-type. (46) Popularly called "Open Skies" agreements, these bilaterals:

1. Permitted flexible pricing;

2. Banned capacity restrictions;

3. Permitted multiple designations, i.e., different carriers operating the same route;

4. Gave access to secondary U.S. markets, e.g., Atlanta, Dallas, etc.;

5. Granted new Fifth Freedom rights for U.S. carriers;

6. Allowed charter operations under the rules of the charter's country of origin; and

7. Banned discriminatory and unfair methods of competition. (47)

   The final blow against the bilateral regime came in 1978 when the United States menaced IATA with removal of its antitrust protection. (48) While the threatened action was never carried out, (49) IATA was sufficiently intimidated that in 1979 it divided itself into a two-tiered structure: a trade association, to which all member carriers belong, and a voluntary tariff coordinating body. (50) Today, somewhat less than forty percent of IATA's members participate in tariff coordination. (51) Yet at what seemed to be its moment of triumph, the United States turned away from the aggressive path of liberalization, (52) although some suggested that this was because there were no more victories to be won from reticence. (53) The legacy of this liberalization drive, however, lived on as U.S. deregulation increased the competitive pressure on trans-Atlantic routes, prompting the European nations to begin examining intra-European liberalization more closely. (54)

   As American liberalization efforts were tapering off, northern European governments began to lead a gradual shift away from bilaterals calculated to protect national air carriers from open competition toward a system more closely resembling the U.S. Open Skies bilaterals of 1978-80. (55) The United Kingdom and the Netherlands formed the vanguard of this movement, believing that consumers and air carriers alike would benefit from a more laissez-faire market. (56) In June 1984, the United Kingdom completed a new bilateral with the Netherlands that allowed carriers to serve any route between the two countries, set their own capacities, frequencies, and schedules, and set fares subject only to disapproval by the country of origin. (57) Hailed as a "bilateral revolution," the U.K.-Netherlands bilateral was accompanied by predictions that it "could have a domino effect." (58) This prognostication was proven partially correct when the United Kingdom developed other, more limited, bilaterals soon thereafter with the Federal Republic of Germany, France, Finland, Greece, Italy, Portugal, Spain, and Switzerland. (59)

   In the spring of 1985, the United Kingdom completed a new bilateral with Luxembourg, which liberalized route access, capacity controls and fare approval procedures. (60) The agreement provided for unrestricted market entry and capacity, while fares could ordinarily be rejected only by the agreement of both governments, (61) although the country of origin could unilaterally reject a fare it found predatory or excessive. (62) This agreement became the United Kingdom's desired model for subsequent bilaterals. (63)

   Not all parties were happy with the United Kingdom's bilateral-mania, with such aviation noteworthies as Lufthansa's...