Commercial Aviation Turns 80

The Chicago Convention in 1944 [Credit: ICAO]

Last week, commercial air transport celebrated an important milestone in its history. Exactly 80 years ago, on December 7, 1944, at the Stevens Hotel in Chicago, 52 states signed the Chicago Convention, the document that established the general principles regulating commercial air transport up to this day.

The convention became effective on April 4, 1947, when it was ratified by the 26th signatory country, and later that year the United Nations formed the International Civil Aviation Organization (ICAO), a specialized agency responsible for the international coordination of all norms and principles regulating air transportation across the world.

On December 5, the 36 members forming the ICAO Council held an extraordinary session in the very same room of the Chicago Hilton (formerly Stevens Hotel) where the diplomatic conference took place in 1944, while World War II was still in progress. ICAO president Salvatore Sciacchitano in his speech reminded all the delegates of the significance of the Chicago Convention.

“Eighty years ago, as the Second World War still raged, 54 states came together in this very city to imagine a different future—one where aviation would serve as a bridge between nations rather than an instrument of conflict, Sciacchitano said. “Those delegates in 1944 could not have imagined the scale and complexity of today’s aviation system. Yet they created a framework flexible enough to accommodate technologies they could never have dreamed of, and robust enough to guide aviation’s development through decades of unprecedented change.

The convention has been revised eight times so far, the last of which was in 2006, and it is supported by 19 annexes that provide guidelines and technical specifications for every aspect of commercial aviation, from operations to communications, from airport infrastructures to safety management.

Currently, there are 193 signatories to the convention, which are all members of the United Nations except Liechtenstein, because it does not have an international airport, but it has delegated Switzerland to enter the agreement on its behalf.

The Birth of the ‘Freedoms of the Air’

The Convention on International Aviation—as the document signed in Chicago is officially called—constitutes the backbone of today’s structure of commercial aviation.

Article 1 of the convention establishes that “every State has complete and exclusive sovereignty over the airspace above its territory.” This constitutes the basis for what is established in the following article and especially in Article 6, which states that “no scheduled international air service may be operated over or into the territory of a contracting State, except with the special permission or other authorization of that State, and in accordance with the terms of such permission or authorization.”

A British Airways Airbus A380 taxis in Los Angeles. [Credit: AirlineGeeks | William Derrickson]

This was one of the key outcomes of the conventions. In fact, there were two opposing schools of thought going into the meeting: the “traditional” view, supported by most European and colonial powers, who regarded traffic rights as a national asset and as a way to protect national security; and the “open skies” view, led by the United States, which preferred a much more open approach that would allow every airline to enter any market worldwide as they saw fit.

The Chicago Convention established the basis for the need of bilateral “Air Services Agreements” that would be needed for any international flight connecting two countries, as well as which conditions airlines had to satisfy in order to be recognized as airlines of a certain State. These Air Services Agreements are still very much part of today’s landscape in international commercial services, regulating routes, frequencies, and sometimes even capacity and fares.

In Chicago, only the first five so-called “Freedoms of the Air” were included in the Air Services Agreements. These are:

First Freedom: The right to fly over a foreign country without landing.
Second Freedom: The right to refuel or carry out maintenance in a foreign country without embarking or disembarking passengers.
Third Freedom: The right to fly from one’s own country to another country.
Fourth Freedom: The right to fly from another country to one’s own.
Fifth Freedom: The right to fly between two foreign countries on a flight originating or ending in one’s own country (e.g. if a U.S. airline were to fly Atlanta-Tokyo-Seoul).

The remaining freedoms are those more commonly used nowadays due to more liberal Air Services Agreements

Sixth Freedom: The right to fly from a foreign country to another (or between two places in a foreign country) while stopping in one’s own country for non-technical reasons (e.g. Lufthansa transporting a passenger from Paris to Athens via Frankfurt, or Air Canada transporting a passenger from Honolulu to Denver via Vancouver).
Seventh Freedom: The right to fly between two foreign countries where the flights do not touch one’s own country (e.g. Ryanair flying between Madrid and Rome).
Eighth Freedom: The right to fly inside a foreign country with or without continuing to one’s own country (e.g. Wizz Air flying between Rome and Milan).

The Ownership and Control Clause

The Air Service Agreements template produced in Chicago were mainly two-freedom or five-freedom agreements, and each of them contained a provision that has been tying the aviation industry’s hands for almost a century.

In Section 5 of two-freedom agreements and in Section 6 of five-freedom agreements it was stated:

“Each contracting State reserves the right to withhold or revoke a certificate or permit to an air transport enterprise or another State in any case where it is not satisfied that substantial ownership and effective control are vested in nationals of a contracting State, or in case of failure of such air transport enterprise to comply with the laws of the State over which it operates, or to perform its obligations under this Agreement.”

In other words, if airline XYZ of country A is operating a service between country A and country B under an Air Services Agreement, it may have its license to operate that service revoked if country B is not satisfied that the airline is “substantially owned and effectively controlled” by individuals or entities from country A.

This provision has blocked most cross-national mergers and acquisitions in the airline industry, leading to a much higher fragmentation of the market and reducing efficiencies of scope and scale for many operators.