Managing the Transition to Competition: The International Air Services Commission

Abstract

AbstractThe aim of the International Air Services Commission (IASC) Act is to promote competition in Australia's international air transport markets. Its role is to allocate new capacity, made available by negotiation of bilateral air services agreements, between incumbent airlines and entrant applicants. The IASC faces a number of dilemmas. It has to operate on the basis of country pairs whereas airlines operate, and competitive outcomes are determined, in country groups or networks. The IASC is also required to apply criteria which confuse means and ends. Most importantly, its objective is pro‐competitive but it has at its disposal only one instrument for that purpose, the allocation of capacity, which may not be the most appropriate instrument for achieving that goal. In the longer run, these dilemmas will be resolved by a movement to a more competitive market and deregulation of air transport capacity. In the meantime, suggestions are made about the weight which the IASC should put on the competition criterion; a simplification of the assessment of applications for capacity; and the IASC's relationship with the Trade Practices Commission.