Open Skies: How This Model Can Benefit Travelers

Two aviation specialists tell the advantages and disadvantages of this release policy

When a foreign airline has plans to operate in the Ecuadorian market or intends to expand its frequencies, you must request permits from the aeronautical authorities of Ecuador and its country of origin.

The frequencies are granted depending on the availability that exists, as there are currently limits, depending on the country. Thus, for example, the United States is already assigned among its airlines the 120 frequencies that can operate in Ecuador.

This frequency limitation would be released in both markets if Ecuador and the United States manage to specify an open skies agreement, a model that allows the free exploitation of international aerocomercial rights between two countries or a set of nations, according to aviation specialists.

Ecuador has an open skies policy since December 27, 2017, when Lenín Moreno's government declared the full liberalization of air transport.

However, an agreement based on that policy has not been completed with the United States because this nation required the withdrawal of the foreign exchange tax (ISD), a 5 % tribute paid by their airlines when they take money from Ecuador to their matrices houses.

Guillermo Lasso's government has announced a dismantling of that tax by sectors and the first will be the air. With this, the way for an open skies agreement would not only be only with the United States, but with other countries that ask for reciprocal treatment and that do not have this type of taxes that it taxes the capital exit.

Sebastián Reina, a lawyer specializing in aviation matters, explains that the closest thing that Ecuador has to the concept of open skies is in the Andean community area, where there are no frequency limits or the equipment used to fly.

Outside this area has bilateral agreements with several countries such as Argentina, Mexico, Brazil, Spain, Holland, among others, but are not properly under the model of open skies freedom.

Reina indicates that in the case of the United States there is an agreement that dates back since 1986 and that it has been updated over time, but with the restriction of 120 frequencies for each country.

"An open skies agreement no longer has that frequency limit, of the aircraft used for flights and neither in the commercial agreements to which the airlines can reach," says the specialist.

Withdrawing the ISD in the air sector represents $ 14 million less in the collection for the State, but the authorities and industry refer that it would be more attracting other airlines that move tourism.

José Luis Aguilar, Undersecretary of Air Transport of the Ministry of Transportation and Public Works, says that with the United States there are 15 destinations, between direct and shared, but when the open skies agreement is signed, 150 cities in the United States could be signed.

The Association of Representatives of Airlines in Ecuador (ARLAE) refers that companies that already operate in the market could also increase their frequencies, as the market becomes attractive to the elimination of ISD, which allows lowering the costs of companies.

The ISD currently gravelleasing(rent) of airplanes, maintenance, insurance, crew salaries, and other items.

For the Government, the benefit not only goes through the possibility of increasing connectivity with new routes, but also having more competitive ticket prices. And the latter does not depend on the tariffs are issued, rather it is a matter of supply and demand.

Having more airlines will end up influencing the cost of air tickets, according to Aguilar.

Reina coincides in this aspect, because it says that the diversity of supply means that in markets such as the United States there are economic passages for travelers.

Chester Salazar, a lawyer specializing in aviation, argues that with an open skies agreement an equal competition opens up, with the possibility that an airline can open offices in the country and have current benefits without restrictions.

He also mentions that airlines could establish economic cooperation agreements, shared codes, access companies from both countries, with fewer requirements.

"When there could be conflicts, the agreement could contemplate the specific and detailed procedures to resolve the differences," says Salazar.

At the security level, an agreement could allow assistance between the two countries to accidents or incidents.

One of the disadvantages Salazar of this type of agreements refers is that by releasing the market, small airlines would have difficulty competing with large multinationals, which have greater capacity.

"With these agreements, state protectionism ends, it is competed equally, because there is the opportunity to come whoever wants to do it," he says.

That is why some countries that have their national flag airlines are reluctant to have an open skies policy.