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Introduction
Trans-Tasman Single Aviation Market (SAM) is a product of deregulation of two countries: Australia and New Zealand, which implies an agreement on freedom of flight and landing in these countries and standardizes air transportation in these territories. Similar agreements are also linked to the European Union and ASEAN, linking the states in South-East Asia. All have nine freedoms, but there are only seven in the SAM agreement. The seventh freedom gives the right to fly between two foreign countries, where flights do not touch their own country (Johnson et al., 2002). In this paper, he will conduct an inductive business report on this system in the context of the goals of the two governments of these countries, its key features, and their relevance. The work also includes a discussion of benefits and recommendations for Australia and New Zealand regarding this system.
Goals of Governments
In the early 90s in Australia, serious reforms began in air travel both domestically and abroad. Australian Airlines merged with Qantas in 1992 to become the leading state-owned airline with only one competitor, Ansett (Findlay, 1996). At first, Ansett lost the competition due to the lack of international flights, but by 1993 it began to produce them. The state focused on the privatization of Ansett, but this was destined to happen later.
In New Zealand, the deregulation of the domestic market occurred much earlier. By 1989, a foreign company could have all airlines without obstacles (Findlay, 1996). The largest company Air NZ was also privatized in 1989. In parallel, new airlines Ansett NZ appear, and the state regulates the legislation regarding the ownership of airlines and restrictions on their activities.
The Australian governments goal was to reduce the number of competitors in the Tansman market from three to two, excluding Qantas, which had a strong presence in the Australian domestic market. Air NZ and Ansett were seen as solid players in the union (Findlay, 1996). By 1994, a conflict between states was brewing, as the Australian Department saw a great interest in New Zealand in the original agreement, in connection with which it responded with the closure of the internal market and the lack of additional rights (Pearce, 1995). The New Zealand authorities responded with a court ruling, but Australia was opposed to losing Qantas and growing Air NZ. Only two years later did the authorities start a dialogue.
The buying and selling shares of these airlines began, concrete proposals came from other countries, but as a result, it only came to the sale of a part of Ansett into the hands of Air NZ and a long-term and partial sale of Qantas. Each country had a vested interest in taking advantage of this manipulation, which created the likelihood of Air NZ monopoly on the domestic New Zealand market, which prompted Qantas to try to enter the market despite high prices (Findlay, 1996). Moreover, dominance leads to high tariffs, a lack of incentives for development, a crisis of innovation, and poor quality of services (Donnet et al., 2018). As a result, News was able to absorb Ansett NZ, preventing Air NZ from doing so. This takeover was out of step with Australian law, which allowed only 25% foreign ownership (Findlay, 1996). As a result, there was a division of these air transportation into international and domestic, and the international segment remained in most of Australia.
System Features
Before this system, airspace and transport over Australia and New Zealand were regulated by a rather old document of 1961, demanding restrictions. This Memoranda of Understanding (MOU) document described the fines, opportunities, and frequency of flights between the two states (Findlay, 1996). By 1992, both countries concluded that profound changes were needed since many document points were outdated and required intervention at the federal level. In that year, the first steps were taken to create a single market system for these countries, which had several distinctive features. First, airlines were given more freedom in pricing and tariff setting (Findlay & Kissling, 1997). Secondly, the documents terminology was improved, new designations and standards for passengers and cargo were introduced. Thirdly, this document has a flexible structure and may be subject to changes in specific periods. Finally, the potential creation of a block of international communication and the elimination of formalities in the form of, for example, visas should have brought the states extremely productive cooperation, where each represented its own interests.
The system has liberal solutions and, in its long-term perspective, taking into account, the above-described experience was focused on the development of competition and prevention of a possible monopoly. Liberal decisions eventually led to the opening of the skies to other airlines. These issues go beyond the initially established rights, especially concerning third countries (Kissling, 1998). However, ownership restrictions persisted, which raised questions from shareholders and buyers about control and regulation. As a result, the experience of cooperation between airlines began to be seen as definitely positive, opening up many new opportunities than a closed approach.
Benefits to Countries
By 1996, this system was modified; in 2000, it changed again. In 1996, using the experience of the European Union, the regulation of cabotage was included in the agreement (Kissling, 1998). Moreover, given the above experience, the regulation encouraged competition, including preferential terms for third countries. The benefits of countries are best assessed closer to the present day. At the time of 2007, the agreement was utterly open skies, adopting the practice of Canada and the United States of open skies, which allowed many other air carriers to travel over states. As a result, countries have been able to achieve much-desired competitiveness in the air travel market.
New Zealand gained a fairly significant advantage in the international transport market, has significantly strengthened its position. Qantas, on the Australian side, is not as liberal as New Zealand. However, by 2004, air travel parity had been achieved between Qantas and Air NZ (Vowles & Tierney, 2007). Australia has much congestion in the cities of its airports, while New Zealand has only one such airport, in Auckland. In terms of growth, New Zealand airports outperform Australian airports. In general, it is difficult to say which country has benefited most since 10% of the market is held by Emirates, and other foreign firms also hold a certain percentage. High competition creates incentives for development, and a liberal approach contributes to the constant preservation of this competition. It can be concluded that both companies benefitted equally from this system.
Recommendations
Seventh freedom has various drawbacks, including the entire open skies approach. In the absence of strong local players, there is a risk that foreign companies will be able to capture the entire market both international and domestic. Regulation is also required by the authorities, which can establish the level of ownership of airlines by foreign shareholders and the share in the air transportation market. Therefore, the first prerequisite for applying the experience of Australia and New Zealand is the presence of solid local players with a significant percentage of domestic and international traffic from the total percentage of a single market or country. Secondly, the open economy in the current pandemic has severe consequences for such airlines. Only with a credit guarantee and capital injection in the current situation of the spread of the virus will these companies be able to survive (Czerny et al., 2021). Robust control systems and stringent quarantine and isolation requirements are driving the slow recovery of air travel. In this regard, it is necessary either to wait until the end of the pandemic or to consider all these requirements for monitoring the health of passengers, which will require additional costs and complications in the event of a new global lockdown. The risks are significant enough, but they give time to weigh the pros and cons of this approach in countries where such an agreement has not yet been reached.
Conclusion
Australia and New Zealand have achieved their goals by achieving equality and decent competition over many years of negotiating the system. The same success in many markets suggests that the benefits for these countries were approximately the same in the end. Through lengthy debate and concessions, the most competitive market with the highest passenger load has been created. Competition fosters innovation, and the liberal approaches in this agreement stimulate competition. In a pandemic, the entire world economy is in a difficult situation; therefore, airlines are suffering heavy losses due to the restriction of communication between the countries. Nevertheless, now bubbles are gradually making flights delayed from last year, in connection with which there is an opportunity to solve this problem.
References
Czerny, A. I., Fu, X., Lei, Z., & Oum, T. H. (2021). Post pandemic aviation market recovery: Experience and lessons from China. Journal of Air Transport Management, 90, 101971.
Donnet, T., Ryley, T., Lohmann, G., & Spasojevic, B. (2018). Developing a Queensland (Australia) aviation network strategy: Lessons from three international contexts. Journal of Air Transport Management, 73, 1-14.
Findlay, C. (1996). The trans-Tasman single aviation market. Journal of Transport Economics and Policy, 30(3), 329-334.
Findlay, C., & Kissling, C. (1997). 11. Flying towards a single aviation market across the Tasman. In Asia Pacific Air Transport (pp. 181-191). ISEAS Publishing.
Johnson, E., Calise, A., & Corban, J. (2002, August). A six degree-of-freedom adaptive flight control architecture for trajectory following. In AIAA Guidance, Navigation, and Control Conference and Exhibit (p. 4776).
Kissling, C. C. (1998). Beyond the Australasian single aviation market. Australian Geographical Studies, 36(2), 170-176.
Pearce, D. G. (1995). CER, trans-Tasman tourism and a single aviation market. Tourism Management, 16(2), 111-120.
Vowles, T. M., & Tierney, S. (2007). The geographic impact of open skies policies on TransTasman air passenger service. Asia Pacific Viewpoint, 48(3), 344-354.
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