RMUN 2023 • BEGINNER • ICAO

STUDY GUIDE

INTERNATIONAL
CIVIL AVIATION
ORGANISATION (ICAO)
THE QUESTION OF AIRLINE
REGULATION

TEMPORA MUTANTUR
TABLE OF CONTENTS
WELCOME LETTER 3
DAIS INTRODUCTION 4
Zames 4
Jiacheng 4
Justin 5
Kanishka 5
INTRODUCTION TO THE COMMITTEE 6
Committee Mandate 6
Specialised Rules of Procedure 6
BACKGROUND INFORMATION 7
Environmentalism 7
Consumer Protection 11
Competition 18
KEY ISSUES 21
Environmentalism 21
Consumer Protection 26
Competition 29
SCOPE OF DEBATE 35
Environmentalism 35
Increasing Consumer Protection 36
Promoting Competition in the Industry 37
Effective Policy Making 38
POTENTIAL SOLUTIONS 41
Encouraging Sustainable Environmental Practices in Aviation 41
Strengthening Consumer Protection Laws 42
Increasing Competition Within the Aviation Industry 42
KEY STAKEHOLDERS 44
Airlines 44

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 Governmental Regulators 45
Passengers 45
CONCLUSION 47
GUIDING QUESTIONS 48
QUESTIONS A RESOLUTION MUST ANSWER 48
REFERENCES 49

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WELCOME LETTER

Ladies and gentlemen,

Welcome onboard your journey with us as we explore the complexities of the global aviation industry;
the total duration is expected to be around 15 hours. On behalf of everyone, it is our pleasure to have
you with us today.

Unfortunately, we expect to encounter turbulence. Unsustainable actions, anti-consumer practices and

anti-competitive behaviour have cast dark clouds on the horizon. As we fly through the storm, please
remain calm, and we will do our best to tackle these challenges, no matter how turbulent it may be.

In the likely event of a rapid change in cabin pressure, please stay seated and breathe normally. If
anyone chooses to act like children, we have child-size life jackets for you. Please remember to help
yourself before assisting others.

This is a non-smoking flight. Smoking in any form is strictly not tolerated.

Please take a moment to locate your nearest exit, taking note that it may be behind you. In the event of
a stormout, please proceed to your nearest exit in a calm and orderly manner.

If you have any questions, feel free to reach out to us for clarifications. As we conclude departure
preparations, we hope you have a great time, be it at RMUN’23, or wherever this journey may take
you.

Thank you for choosing RMUN’23, and we wish you a pleasant flight.

Kevin Khoo, to your takeoff stations please.

Yours faithfully,
Zheng Yizhi Zames
Head Chair of the International Civil Aviation Organisation
Raffles Model United Nations 2023

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 DAIS INTRODUCTION

ZAMES
After fending off doubts on his niche council, Zames is simply astounded that he is even here writing a
chair introduction. Fresh from attending a council with the RMUN Secretary-General as his head
chair, Zames has learnt from the best and is fully ready to helm his very own council.

Zames is deeply passionate in aviation and economics. He warns any paper tiger economics professor
attempting to bewilder and confuse to tread carefully or risk an esoteric lecture on airline economics.

As his dabbling in MUN comes to a close, Zames is honoured to serve at RMUN’23, which is his
swansong. This council is the culmination of his passion in aviation and economics, and Zames is ready
to watch as chaos unfolds. Finally, Zames maintains that mathematics is only one tool to study
economics; quantitative means cannot adequately measure social phenomena.

P.S. Did Zames mention he is passionate in aviation and economics?

JIACHENG
Jiacheng is a Year 5 student, perhaps the most mundane and interest-less student on the entire RI
Campus you can find. He fell into the Singapore MUN circuit with Bilingual Youth Model United
Nations in 2021 during Year 3 while representing Argentina, and since then has been truthfully
delighted and thrived in battling on paper and over the mic with equally enthusiastic delegates. As a
further mathematics student chairing with an extremely rare science-stream-only committee, he hopes
all delegations of respective organisations also find equally like-minded companions and counterparts
within this year’s ICAO, and forge bonds and friendship while spitting fire at each other on the
pertinent issue of airline regulation and addressing stakeholders.

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 JUSTIN
Justin is a Year 5 student who has the peculiar hybrid subject combination of PMEH. As a student
consistently interested in many global strategic issues, he has decided to bring this passion forward by
joining the MUN circuit in 2023 in hopes of building new and fulfilling experiences. 2023 marks the
first year where he will be chairing a MUN Council, ICAO, which builds on his love for aviation since
young. Justin looks forward to fruitful and constructive discussions between delegates during the
council sessions, and hopes that delegates will have a meaningful time gaining greater insights from one
another regarding the airline industry. Delegates, prepare for takeoff to an exciting journey with
RMUN!

KANISHKA

Thrown into the MUN circuit not too long ago, Kanishka has certainly developed a strong love-hate
relationship with MUN-ning. A science student through and through, whose aspirations have nothing
to do with MUN, it’s safe to say that she is doing it for the mere fun of it. Outside of MUN and
drowning in her devastating pile of lectures and tutorials, she plays hockey as well. As one of the chairs
of a one of a kind council, Kanishka hopes that RMUN’s ICAO would be a pleasant journey for
delegates to learn and grow. Onward and upward, here’s to soaring the skies.

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INTRODUCTION TO THE COMMITTEE

COMMITTEE MANDATE

The International Civil Aviation Organisation (ICAO): the United Nations’ specialised agency for all
matters regarding civil aviation. Established in 1947 with the signing of the Chicago convention, the
ICAO has 193 member states, of which all are part of the aforementioned convention; as many as the
United Nations General Assembly itself, and a rare show of universal solidarity.

Of importance to note is that the ICAO is not a global regulatory body; it has no regulatory authority
over nations. Instead, the ICAO issues Standards and Recommended Practices (SARPS) on matters
under its purview. For this council, SARPS should not differ from conventional UN resolutions
structurally. Thus, it must be emphasised that these SARPS are not legally binding; local laws
ultimately supersede ICAO SARPS. That said, ICAO is still widely recognised as the expert on civil
aviation, and nations usually defer to the ICAO SARPS, where they are often if not always abided by.

SPECIALISED RULES OF PROCEDURE

For this council, airline delegations1 hold observer status to provide industry insight and promote their
causes. These delegations hence do not have substantive voting powers and cannot sponsor any
SARPS, but retain all other rights of a delegation, including serving as a signatory for these SARPS.

1
Airline delegations refer to delegations representing individual airlines, which differ from airline association delegations
representing industry trade associations comprising various airlines under different ownership structures. The latter enjoys
all rights usually conferred to a delegation, including substantive voting powers.

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BACKGROUND INFORMATION

ENVIRONMENTALISM

Overview

1. Ghost Flights

In the aviation industry, ghost flights refer to completely empty flights devoid of any passengers or
cargo. Such flights occur for a multitude of operational reasons, such as repositioning aircraft,2 training
crew, maintenance or to comply with regulations. For instance, many busy hub airports operate a “use
it or lose it” slot system, where carriers have to operate a minimum number of flights to the airport if
they wish to maintain their landing and takeoff rights or risk losing those rights to other carriers. Such
a policy was instituted to ensure fair competition within the industry, by ensuring that carriers would
not hoard valuable resources, simply to prevent their competitors from having them. However, airlines
have been operating ghost flights as a way to maintain slots that they do not need, exploiting a policy
loophole.

Such flights are an environmental concern as they result in unnecessary pollution. Ghost flights do not
bring positive externalities for society or the carriers, and are simply a way to satisfy regulators. Hence,
any emissions are completely redundant and preventable without much tradeoff.

2. Noise and Light Pollution

Traditionally, noise and light pollution from aviation are the most significant sources of dissatisfaction.
While technological innovation has gradually improved the mitigation of sound from aircraft, the
sheer increase in volume of arrivals and takeoffs at airports has resulted in the continued increase of

2
Repositioning: the practice of flying an aircraft from its base to another airport for the purposes of operating a flight out
of the second airport, which might not necessarily be the airport which the aircraft is based in.

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noise levels. Aviation-generated noise pollution also impacts surrounding wildlife, such as the
fragmentation and disruptions caused to particular bird species when exposed during prolonged
periods of significant noise or abandoning of habitats and breeding sites.

Recent Developments

1. LHR Expansion Plans

Whilst the London Metropolitan area has six international airports, London Heathrow (LHR)
remains the uncontested hub for flights serving greater London. As the gateway to the British and
European markets, LHR has access to significant population centres and has been operating at
capacity.

Consequently, LHR faced significant expansion pressures to add capacity, with multiple plans ranging
from additional runways to more terminals and aircraft stands. Yet, environmentalism manifested itself
as LHR’s achilles heel. Its expansion plans have been blocked by court orders for its lack of alignment
with the government’s ratification of the Paris Accords, as well as opposed by the residents around the
airport who fear displacement and noise pollution (Schlappig, 2020a). Currently, the project hangs in
limbo whilst the government remains non-committed to its expansion.

LHR’s inability to accommodate more flights has been seen as the limiting factor for further economic
growth in the region. This is a typical example of the conflicting interests between economic
development and environmental concerns, and as Europe develops whilst Britain drifts further away,
we see the gradual but unmistakable shift away from LHR to other hubs such as Frankfurt and Paris.

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Current Legislation

1. France
As of April 2022, domestic flights on routes which can be completed in under 2.5 hours via an
alternative mode of transport are banned, in line with nationwide targets to reduce carbon emissions
by 40% before 2030 (Schlappig, 2022a).

However, its impact remains limited for now. As the policy intent was to target domestic short-haul
travel, flights out of Paris Charles de Gaulle (the busiest airport in France) were exempted from the
ban. Consequently, only 12% of domestic flights were affected (Globaldata Travel and Tourism, 2022).

Nonetheless, this sets an important precedent for the banning of short-haul flights, signifying the
commitment of the French government to reducing emissions, and the feasibility of such a solution.

2. Austria
In Austria, flights under three hours were eliminated. Moreover, a €30 ticket tax is levied for flights
under 350 km, and the Air Transport Levy for short-haul flights above 350 km was increased from
€3.50 to €12. In addition, the Austrian government is setting a price floor, where the minimum ticket
price on any flight has to be equivalent to the combined value of all taxes and fees (Schlappig, 2020b).
Hence, Low Cost Carriers (LCCs) which rely on unbelievably low ticket prices as their selling point to
customers would be disproportionately disadvantaged.

The Austrian government’s approach highlights another less interventionist (and draconian) measure
than outright bans: an eco-tax to dissuade consumption. By artificially increasing the prices of flights,
the government expects the quantity demanded for flights to decrease, hence reducing the number of
flights and consequently, the amount of emissions. Moreover, the government’s choice of a specific tax3

3
Specific tax: fixed amount per unit consumed, regardless of price

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rather than an ad valorem tax4 is curious, as its impact on short-haul flights is more severe (given that a
specific tax is a much greater percentage of the total price of a short-haul ticket rather than a long-haul
ticket). Hence, some see this as a measure targeted at reducing short-haul flights, beyond its perhaps
protectionist agenda against LCCs to shield Austrian Airlines from competition.

3. Netherlands
On June 24, 2022, the Dutch government announced plans to cap the maximum number of flights
out of Amsterdam Schiphol Airport at 440,000 annually, a 12% reduction from the current cap of
500,000 annual flights. The Dutch government also increased taxes on itineraries originating in the
Netherlands by 350%, from €7.95 to €28.58 (Schlappig, 2022b). This move was touted as raising
prices for air tickets to incentivise consumers to choose more sustainable substitutes, such as rail
transport.

Predictably, these policies drew much criticism from airlines, specifically Dutch flag carrier KLM. It
highlighted the importance of global connectivity to attracting business into the Netherlands, as well as
how the demand for air travel remains strong, hence passengers would simply opt for less efficient
routings to their destinations if their flights were cancelled as part of the flight cap, which would not
reduce aviation’s environmental impact (Schlappig, 2022c). Consequently, the reduced flight cap was
blocked by a Dutch district court (Schlappig, 2023).

This seems to demonstrate the inherent tradeoff between sustainability and economic growth; as we
pursue sustainable practices, it may come at the expense of sustained economic growth, as it is these
very contributors to sustained economic growth which are unsustainable. A balance needs to be struck
between environmental sustainability and sustained economic growth.

4
Ad valorem tax: a percentage of the value of the good (hence the tax increases as the price increases)

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 CONSUMER PROTECTION

Overview

1. Overbooking
The practice of overbooking within the airline industry refers to carriers intentionally selling more
tickets than available seats on particular flights. Using complex network planning and revenue
management algorithms, carriers can anticipate the percentage of no-shows,5 and sell those tickets to
other passengers, allowing carriers to fill up all the seats and maximise load factors on flights, increasing
revenue.

Whilst it seems counter-intuitive to sell more tickets than seats, it is considered standard accepted
industry practice. However, such a practice would have consequences on consumer protection, such as
when the carrier’s predictive algorithm fails. In such an instance where more passengers show up than
the number of available seats, carriers would not have fulfilled their obligations to the passenger.

Historical Events

1. 1978 Airline Deregulation Act

Before 1978, the competitive landscape of the domestic American aviation sector was one of stringent
regulation. Fares, routes, capacity and even service levels were overseen by the federal government
through the Civil Aeronautics Board (CAB), and any material change had to go through a lengthy and
cumbersome approval process (Wong, 2022). Competition in the domestic American sector was thus
extremely limited, characterised by high costs, high prices and inefficiency.

Hence, the Airline Deregulation Act of 1978 was signed into law by then-President Jimmy Carter,
effectively deregulating the American aviation industry. This sparked deregulation in the global
5
No-show: passengers who purchase a ticket but subsequently do not turn up for their flight.

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aviation sector, as other governments were inspired and followed suit. This was a pivotal moment in
the industry, as it sparked the birth of the global aviation industry as we know it today.

2. IATA Price-Fixing

The International Air Transport Association (IATA) as it exists today, in its relatively benign role as the
industry trade association for airlines, is not the same as the IATA of the past.

During the 1940s and 1950s, IATA engaged in price fixing for the industry, essentially acting as a cartel
within a collusive oligopoly. IATA restricted competition by regulating the maximum prices and
service levels of its members, down to the thickness of and ingredients allowed within a sandwich. For
example, in 1958, IATA banned asparagus from being served in sandwiches for economy class
passengers (Friedlander, 1958).

Gradually, IATA lost its antitrust immunity (culminating in the 2007 US Department of
Transportation order to withdraw antitrust immunity for IATA tariff conferences), as nations
recognised the damage of stifling competition within the industry (United States Department of
Transportation [US DOT], 2007).

Recent Developments
1. UA David Dao Incident
On 9 April 2017, United Express flight UA3411 from Chicago to Louisville was overbooked when it
needed to accommodate deadhead crew6 to position for their flights, and United Airlines hence needed
to bump passengers7 from the flight. When it failed to solicit volunteers to take a later flight in
exchange for travel vouchers and accommodation, the airline algorithm randomly picked four

6
Deadhead crew: crew members who travel on flights as passengers for operational reasons.
7
Bump passengers: the practice of denying boarding to passengers with confirmed itineraries, either voluntarily or
involuntarily.

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passengers for involuntary denied boarding, one of them being Dr David Dao, a pulmonologist
travelling to Louisville to visit patients.

Whilst the other three complied, Dr Dao politely refused, as the next flight would put him into
Louisville too late for him to see his patients. Unfortunately, United Airlines was not so compassionate
over his refusal, forcibly removing a bloodied and unconscious Dr Dao from the aircraft.

The following PR meltdown was the greatest public relations crisis in recent memory. United Airlines
was criticised for its brutal treatment of Dr Dao, for initially complimenting its staff who adhered to
company policy, and for its complete and utter lack of empathy. It drew bigger issues such as
overbooking and involuntary denied boarding into the limelight.

United Airlines’ handling of this issue is a shining example of how not to treat customers. It was a
highly public and obvious instance of complete lack of consumer protection within the airline
industry, and emphasised the need for more consumer protections to prevent other airlines from
mistreating their passengers in such a manner again.

2. COVID-19 Cancellations/ Withholding of Refunds

During COVID-19 and the subsequent devastation of the aviation industry, many carriers found their
cash flows incredibly strapped, as demand for travel suddenly plummeted and borders closed. Carriers
scaled down operations and cancelled flights, attempting to preserve liquidity to tide themselves over
the difficult period.

Hence, a few carriers decided to withhold refunds for cancelled flights, as issuing refunds would put
tremendous strain on their already tight cash flows by significantly drawing down upon carriers’
liquidity. At the start of COVID-19, the worst offenders included established carriers such as Air India,

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TAP Portugal, Aeromexico, El Al and Avianca, who were fined $7.25 million for failing to refund
cancelled tickets (US DOT, 2022). Air Canada meanwhile paid $4.5 million to settle with American
regulators for its failure to promptly refund tickets (Schlappig, 2021).

Airlines decided to withhold refunds as they were uncertain if they would even survive the pandemic.
If they collapsed as a result of the pandemic, then their withholding of refunds would not matter
anyways. At that point in time, the more pressing issue was to survive.

However, that does not give carriers the right to withhold refunds after cancelling flights. Although
carriers can claim that survival was an immediate priority, and that not refunding would preserve
liquidity and allow them to weather the pandemic, after which they would be able to refund
passengers, this practice is problematic. Carriers promised to deliver a service, received payment for this
promise, and hoped to retain the fare they charged consumers without delivering their end of the
bargain.

3. 2022 Southwest Airlines Winter Meltdown

Over the busy Christmas holiday, Southwest Airlines suffered a historic operational meltdown, where
it cancelled nearly 17,000 flights. Whilst poor weather conditions in key hubs was the trigger,
underlying problems such as an antiquated crew scheduling system meant that after the initial batch of
cancellations, Southwest could not recover its operations even whilst the weather improved.

This left thousands of passengers stranded, as passengers looking to travel home and celebrate the
Christmas holidays with family members were stuck in airports across the nation. Waiting times across
Southwest call centres spiralled out of control, and stranded passengers were left without information
or alternatives to rebook, exacerbating the situation.

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 4. Airlines Lost Luggage Crisis
During the post-COVID-19 travel spike, carriers operating on a skeleton crew suddenly found
themselves swarmed with dozens of luggage, and no crew to process the luggage. This resulted in a
massive backlog of lost luggage, where passengers arrived at their destination, but their baggage did not.

The most egregious offence involved baggage handlers at Dublin airport dumping passengers’ lost
luggage, as they were simply overwhelmed (McAleese, 2022) Considering that some passengers were
charged a fee for their luggage, the carrier’s failure to deliver their luggage is unacceptable.

Current Regulation

1. EC261
Under Regulation (EC) No. 261/2004, passengers on flights within the European Union’s jurisdiction
are entitled to compensation of up to €600 during flight disruptions depending on the length of delay,
distance of travel and notice served by the airline.

Figure 1: EU261 Compensation (Kokkinidis, 2017)

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Unsurprisingly, affected airlines are not the most enthused by this piece of legislation, given the
complex and resultantly highly unpredictable nature of airline operations means flight delays occur
more frequently than one might imagine, which makes the airline liable for a substantial amount of
compensation. Airlines hence attempt to evade compensation whenever possible, instituting long and
convoluted claims procedures to deter consumers from claiming compensation. Airlines also try to
claim that the delay was not within their control, attempt to disengage, or even threaten unknowing
consumers with legal actions regardless of whether the claim was legitimate. Consequently, almost 90%
of passengers do not file a EC261 claim even if they were entitled to compensation (AirAdvisor, 2023).
It is often the most persistent and discerning traveller who can wrestle the deserved compensation from
the airline, and usually only with the aid of governmental intervention, will the airline concede.

Hence, this piece of legislation holds two lessons; it is first and foremost an example of how to
concretely achieve the ideals of improving consumer protection within the industry, but more
importantly highlights the need for compliance and enforcement to complement regulation for
effective policy making.

2. US DOT Airline Customer Service Dashboard

Under the Biden Administration, the federal government has taken a renewed interest in establishing
consumer protection within the American airline industry, especially considering the whole host of
recent fiascos. Hence, the US Department of Transportation recently launched the airline customer
service dashboard, which serves as a platform to highlight all the entitlements offered by the American
carriers during a service disruption.

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Figure 2: Airline Customer Service Dashboard for Controllable Delays (US DOT, 2023)

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 COMPETITION

Overview
1. Airline Nationality Ownership Clauses
Under the Chicago convention, ownership of carriers are regulated by their home nations, or the
nations which issued the carrier’s Air Operators Certificate. Therefore, whilst certain nations allow
foreign entities to own controlling stakes in their carriers, especially nations that lack the technical
expertise to run an economically viable airline, others impose significant restrictions on who could own
carriers based in their nations, given the strategic importance of aviation. This means that whilst the
major carriers may own minority shares in other airlines, especially airlines based in important markets,
mergers and majority ownership of airlines by a foreign carrier remain limited and subject to high levels
of antitrust scrutiny.

2. Airline Partnerships
To get around the aforementioned airline ownership clauses, airlines cooperate in other forms, such as
codesharing, interline agreements, alliances, joint ventures or minority ownership/acquisition, in
increasing degrees of cooperation.

a) Codesharing: this is the most basic form of cooperation between airlines. Carriers which
codeshare on another carrier’s flight add their flight numbers onto the other carrier's flight, and
sell those flights on the carrier’s own distribution channels. This is a cost-effective way for
airlines to expand their network without having to operate those additional flights.

b) Interline agreements: carriers with interline agreements with other carriers are allowed to sell
itineraries involving those carriers, as well as the transfer of the passenger’s luggage and tickets.
This is also a relatively cheap way to offer more connectivity without having to operate
additional flights.

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 c) Alliances: a group of airlines which cooperate beyond codesharing and interline agreements,
where they offer elite status recognition across all airlines, as well as share facilities (such as
airline lounges and terminals) at key hubs. There are three main airline alliances in the world:
Star Alliance, Oneworld and Skyteam, which collectively account for nearly half of global air
traffic (Grant, 2022).

d) Joint ventures: carriers coordinate schedule, capacity and pricing, as well as enter into revenue
sharing agreements on specific routes. This essentially eliminates one (or more, depending on
the number of participants in the agreement) carriers, with the participants effectively acting as
one to better compete with other carriers.

e) Minority ownership/acquisition: the most extreme form of partnership, where one carrier
owns shares in another, hence having direct say over the operations of another airline. This
ranges from Delta’s 20% stake in LATAM (arguably the most important South American
carrier), to the complete merger between Air France and KLM into the Air France-KLM
group.

Historical Events

1. Chicago Convention: Freedoms of the Air

Freedoms of the air are rights conferred to carriers to operate flights between two territories, without
which carriers will face significant limitations on the kind of flights they can operate. The most
controversial freedom involves the fifth freedom, which is the right to carry passengers and cargo on
flights between two other foreign countries, provided the flight originates or terminates in the carrier’s
home country. If granted such a freedom, it allows carriers to operate flights between foreign countries,
thereby increasing competition in those markets.

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 2. Open Skies Agreements

Open skies agreements allow carriers to operate flights with little to no restriction on capacity and
frequency between the signatories. Such agreements are usually based on reciprocity, and hence focus
on promoting competition within the industry.

This is contrasted to an air services agreement, which serves a similar purpose of establishing services
between nations, except it is much more restrictive than an open skies agreement. An air services
agreement between nations usually establishes a cap on capacity, frequency and destinations between
the signatories, and usually occurs due to differing bargaining power between the signatories, as services
to one nation is much more desirable than the other way around.

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KEY ISSUES

ENVIRONMENTALISM
Aviation accounts for 3.5% of effective radiative forcing8 (Ritchie, 2020). Whilst this may seem small,
air travel is projected to grow by 4.3% per annum for the next 20 years (International Civil Aviation
Organisation, n.d.). Moreover, green technology in aviation is still in its infancy. Thus, aviation’s
contribution to climate change will only increase. It is hence imperative that the aviation industry
considers options to reduce its environmental impact for sustainable growth within the industry.
Doing so would better align the industry with the United Nations Sustainable Development Goals,
such as climate action (goal 13).

Lack of Sustainable Alternatives

Aviation has come a long way in terms of sustainability. However, it still lacks sustainable alternatives.

One key area of research involves the electrification of aviation. Drawing a parallel to the shift from
fossil fuels to electrical sources of energy in the automobile industry, researchers attempt to build a
business case for electric-powered aircraft. However, there are some key limitations holding them back
from a major breakthrough.

First, battery technology is still in its infancy. This is problematic for application in civil aviation in two
main ways. Chiefly, current batteries lack sufficient energy density.9 Consequently, battery-powered
electric planes are too heavy to be commercially viable. Conventional lithium-ion batteries have energy
densities of around 0.3 MJ/kg (Schlachter, 2012). This pales in comparison to aviation-grade fuels,

8
Radiative forcing: global warming as a result of greenhouse gas emissions (United States Environmental Protection
Agency, 2021)
9
Energy density: amount of energy stored per unit mass. (MJ/kg)

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which are around 150 times more energy-dense at around 43.5 MJ/kg (Singapore Management
University, 2009). Moreover, civil aviation has a stringent requirement on safety, given that many lives
are at stake. As battery technology is still a relatively unproven technology, it is unable to fully satisfy
regulators on its fire safety. For instance, Boeing’s flagship 787 aircraft were grounded for three months
in 2013 due to overheating batteries which posed a fire risk (Drew et al., 2013). Thus, the use case of
battery-powered electrical aircraft is limited to general aviation aircraft, and it will be difficult to scale it
up to meet the growing demands for consumer travel. This does not even take into consideration how
only 30% of the global electricity supply is produced sustainably, and that acquisition costs of such
aircraft may be greater than conventional aircraft (Duggal & Hussein, n.d.). Evidently, more research in
this field is necessary.

Another breakthrough in sustainable aviation is the concept of hydrogen-propulsion based aircraft.

However, hydrogen also suffers from the issue of a highly polluting production process, similar to
electrical generation. Considering how renewable energy accounts for only 30% of global electrical
production, as previously mentioned, we can approximate that less than 1.5% of hydrogen is produced
using sustainable methods (International Renewable Energy Agency, n.d.)

Transitioning from aviation fuel to hydrogen will require significant infrastructural investments from
airport operators, airlines as well as aircraft manufacturers. This issue of scalability and costs also
plague other sustainable aviation fuels, such as biofuels. Stakeholders need to consider the necessary
compromises to achieve the mass adoption of sustainable aviation fuels.

Currently, the most promising research into hydrogen fuel cell aircraft is conducted by Airbus, an
established global aircraft manufacturer. Termed the ZEROe project, Airbus is looking at constructing
aircraft powered by hydrogen combustion and hydrogen fuel cells, and targets for entry into service by
2035.

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Inefficient Operations

Another issue plaguing the industry is the inefficient operations of airlines. This can stem from
operational reasons, or a difficulty to further reduce emissions from a fuel efficiency standpoint.

Since the 1973 oil crisis, aircraft manufacturers have focused on fuel efficiency, which has a positive
impact on emissions.10 We hence see a whole host of innovations, from high-bypass engines to
lightweight carbon composites in the construction of aircraft fuselage. Therefore, it can be argued that
innovation in this area has reached a saturation point where further extraction of aircraft fuel efficiency
is much more difficult and complex, as the low hanging fruits have already been developed and
introduced into commercial aviation. Further innovation may not yield significant results, short of a
radical departure from the current paradigm of aircraft construction.

This is further evidenced by the fact that aircraft fuel efficiency has already regressed. Increasing aircraft
capacity is the next logical step to increase fuel efficiency, as the fixed emissions required for operating
each flight (regardless of the number of passengers on each flight) can be spread across a greater
number of passengers, hence reducing per passenger emissions for each flight. However, high capacity
aircraft are not economically viable, at least considering current market forces, as high capacity aircraft
are only fuel efficient provided high load factors;11 otherwise they are dramatically less efficient than
lower capacity aircraft. Given that it is much harder to fill higher capacity aircraft, these aircraft often
depart with a low load factor, and resultantly are less fuel efficient. As the current global demand for
aviation is unable to sustain high load factors on high capacity aircraft, we are unable to pursue this
obvious developmental path for aircraft development, as evidenced by the failure of the A380, which
many hailed as ahead of its time.

10
Aircraft with higher fuel efficiency usually have less emissions.
11
Load factors: percentage of available seats occupied by passengers; a flight with more passengers would have higher load
factors.

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Short-Haul Flights

Short-haul flights emit more CO2/seat/km as compared to long haul flights (Boner, 2020). This
implies that relative to duration, short-haul flights emit more greenhouse gases than long haul flights.
This can be attributed to how takeoff and landing are the most polluting segments of any flight, whilst
cruising emits relatively less pollutants. This nature of short-haul flights has resulted in much legislative
scrutiny recently. Legislators see short-haul flights as an important target, where they account for more
than 17% of total airline emissions (Esqué et al., 2021).

Moreover, short-haul flights have more immediate close substitutes12: rail travel. Whilst aircraft may be
faster, its advantage over a shorter travel distance is much less substantial, especially when factoring in
travel times to and from the airport. Aviation also suffers from requiring more land to build
infrastructure, and aviation is inherently less efficient than trains since trains have much larger
capacities than aircraft.

Tragedy of the Commons

The environment is a common pool resource; non-excludable but rivalrous in consumption. The use
and consequent pollution of the environment will deplete the resource (rivalrous), but it is impossible
to prevent any one firm from consuming the resource (non-excludable). Common pool resources
(such as the environment) suffer from the tragedy of the commons (Hardin, 1968). A firm utilising the
resource will enjoy its benefit in full (through the increase in output), whilst only bearing a fraction of
the cost, since the full cost is incurred upon society. Thus, firms may treat the environment as a public
good13, since it reaps the full benefit whilst incurring lower costs for both. This would result in
overconsumption of the resource.

12
Close substitutes: goods that are similar in function such that consumers do not have a strong preference over one or
another.
13
Public good: non-rivalrous and non-excludable in consumption.

24
Therefore, we see the depletion of the environment in the industry. Because environmental
conservation efforts require the participation of all firms, yet each firm does not have the incentive to
reduce their consumption of the resource, we see the resultant pollution of the environment in the
airline industry.

25
 CONSUMER PROTECTION

Market Power
It is generally accepted to consider the commercial aviation industry as oligopolistic14 in nature. In such
an industry, firms control high levels of market power, which confers them the ability to dictate prices,
whilst consumers have little bargaining power given that the number of consumers simply outweigh
the number of firms. When such an imbalance over the bargaining power of supplier and consumer
exists, it means that carriers can cut provisions meant to protect consumers without much fear of
retaliation from consumers.

Unaccountability/ One-sided Contract of Carriage

The relationship between an airline and its passengers are dictated by the terms of the contract of
carriage: a legal document which lays out the airline’s obligations and passenger’s rights (or lack
thereof).

As with so many other contracts between a firm and its consumer, the airline contract of carriage is
plagued with the same issue – it is convoluted and filled with legal jargon rendering it nearly impossible
for the layman to understand. Consequently, passengers often unwittingly enter into the contract of
carriage with the airline, without full appreciation of its implications, as they check the “I have read
and accepted the terms and conditions” box thinking of it as nothing but an inconvenient formality.

As a result, airline contracts of carriages become one-sided: airlines usually absolve themselves of
responsibility with regards to irregular operations (IRROPS). When challenged, airlines often declare
that they have clearly informed the passenger of its obligations, that the passenger willingly entered into

14
Oligopoly: a market structure characterised by high market concentration ratio, where each producer has high market
power and hence have control over prices.

26
the contract of carriage, and that it is industry practice. Only when it turns into a PR meltdown will
airlines scramble to compensate, then disingenuously claim that it was a one-off gesture of goodwill.

For example, pursuant to Article 10 Paragraph 2 Subparagraph (b) of Singapore Airlines’ Contract of
Carriage:

“When circumstances so require, for example if schedules are affected by issues such as, but not
limited to, technical/mechanical failures, adverse weather conditions or operational restrictions
… Carrier shall carry, re-route or make a refund … and shall be under no further liability to the
Passenger.” (Singapore Airlines, 2021)

Thus, whilst the carrier promises a later flight, refund or re-route to the destination, the carrier is not
liable to any other damages suffered by the passenger, even if it was a result of a delay within the
carrier’s control. For example, if a passenger were to miss a cruise as a result of a flight delay and had to
cancel the cruise itinerary, the carrier is not liable for the cost of the cruise itinerary, even if the
cancellation was due to the carrier’s delay.

Low-Cost Carriers
Since the 1990s, the aviation industry saw the widespread introduction of a new business model:
low-cost carriers (Picardo, 2022). Focused on providing the bare minimum viable product required to
get passengers from origin to destination, LCCs have cut back on any frills which gave flying that
glamorous touch, in pursuit of offering consumers the lowest possible fares.

The rise of LCCs have affected consumer protection within the industry in three ways. First, and more
evidently, LCCs have removed much of what consumers have taken for granted from their product.
This becomes an issue, when such cutbacks have encroached on basic passenger rights.

27
Moreover, because LCCs operate a point-to-point business model, this means that during IRROPS,
they are unable to quickly find crews and equipment to provide replacement flights. A delay in one
flight can cause ripple effects across the whole network, since aircraft would be stuck at its origin
airport, and hence cannot operate its subsequent sectors.

Another less evident but equally significant result of the rise of LCCs is the impact on Full Service
Carriers (FSC). The rise of LCCs have put significant downward pressure on price. In order to better
compete with LCCs, we see a cutback in offerings as FSCs try to cut costs to match the LCCs in terms
of price. For instance, we see the introduction of basic economy on American legacy carriers, where the
ticket price includes nothing more than a guarantee that when you step off the plane, you and a
personal item will arrive at your destination (Cudahy, 2023).

28
 COMPETITION

Market Power

Given that the airline industry is highly oligopolistic, carriers have enormous market power to engage
in anti-competitive practices, the most egregious of which being (alleged) price gouging – a form of
price fixing where carriers charge excessively high prices for travel. On one hand, carriers argue that the
high prices are simply a function of demand and supply, as well as pricing discrimination.15 When the
number of buyers outstrip the amount of goods available for sale, prices will rise. However, airlines
have been noted to charge exorbitant prices. For example, during the lead-up to Hurricane Irma in
September 2017, prices for tickets out of Florida ballooned to over $3000 from around $500 for those
looking to escape the hurricane, drawing criticism from consumers and policymakers (La Roche,
2017). This disproportionately affected consumers requiring immediate travel, perhaps for urgent
family matters, who had to pay outrageous prices for a ticket.

Cooperative Strategies in the Airline Industry

Within the aviation industry, cooperation is prevalent, as seen in the various degrees of airline
partnerships. In fact, some may go as far as to call it collusive behaviour, where carriers work together
to arbitrarily raise profits by avoiding competition or setting high prices.

Such cooperation exists simply because it is more profitable to do so. It is unfeasible for each carrier to
operate and compete in every market, and hence cooperating with each other allows for carriers to
easily expand its network reach without having to sink much resources. Moreover, if each carrier
embarks on intense price-competition with each other, they would be eroding each others’ profits to
fight for market share, as compared to cooperating with each other and agreeing not to compete, hence
allowing each carrier to retain their profits.

15
Price discrimination: charging different prices to different groups of consumers not due to difference in cost of
production.

29
However, such cooperation results in increased market power for both carriers, which can be
detrimental to passengers. Since cooperation amongst carriers reduces competition in the industry,
there is less need for carriers to reduce prices, and hence passengers may have to bear the cost of
increased profits within the industry.

Protectionism

Protectionism16 is also prevalent within the industry, and occurs due to a few reasons. First, some
governments perceive aviation as an infrastructural project. Air services may serve as the key link to
far-flung communities, and hence its provision is necessary in these regions, where businesses will only
consider the viability of operations in these communities if regular air services exist.

Moreover, aviation is a key economic driver of a nation. In 2019, aviation contributed USD $2.7
trillion of direct and indirect economic benefit (Industry High Level Group, 2019). Many other
industries are dependent upon aviation, most obvious of which being tourism. Given that the
interconnectivity and accessibility of a nation through the provision of air services is a necessary
condition for the development of a domestic tourism industry, growth in the aviation sector will result
in increased derived demand in these industries. For instance, we see the launch and significant
investment of the Saudi Arabian sovereign wealth fund in Riyadh Airlines and NEOM Airlines being
the first steps of developing a compelling tourism industry in Saudi Arabia, as part of their long term
diversification plan away from crude oil.

Aviation also supports a total of 65.5 million jobs globally, including 10.2 million direct jobs (Industry
High Level Group, 2019). As such an important source of employment, governments hence protect

16
Protectionism: Governments implement anti-competitive policies which favour domestic firms in order to shield them
from global competition.

30
domestic carriers, viewing them as “too big to fail”, where their closure would have unimaginable
consequences and result in mass unemployment. Hence, where the provision of air services has
overwhelming positive externalities, the extent of which worthy for it to be considered a merit good17,
governments who hold this opinion engage in protectionist measures to subsidise and ensure its
uninterrupted provision by domestic entities.

Protectionism manifests itself in the industry through many forms. For instance, governments may
restrict capacity of foreign carriers on routes within their jurisdiction by signing unequal treaties with
one-sided agreements to favour domestic carriers. For example, the Air Services Agreement between
Qatar and Australia limits Qatar Airways to 28 direct flights per week to Sydney, Melbourne, Brisbane
and Perth, which is just enough to cover one daily flight to all those destinations, beyond the fact that
Qatar Airways cannot operate direct flights to other major population centres or destinations in
Australia such as Adelaide and Gold Coast (Schlappig, 2022d). Qatar Airways has been longing to
increase capacity to Australia and lobbying for an Open Skies treaty between both nations (which
removes most caps on capacity), but domestic lobbying from Qantas has resulted in much hesitancy
from the Australian government, given Qantas’ reluctance to compete with the highly competitive
Qatar Airways. Governments also continue to subsidise perpetually-loss making flag carriers, instead of
letting them fail and allow the free market to take over. We see this in the now-defunct Alitalia
(renamed to ITA Airways, without much structural change), or Etihad Airways (whilst under former
CEO James Hogan).

Protectionism is problematic because it is inefficient and distorts competition. Protectionism

diminishes the profit motive for firms, which is a key rationale guiding decision-making for carriers.
When firms no longer have to pursue profits, it removes the incentive to sustain a competitive
advantage, either through product innovation to differentiate its offerings (which would have negative
knock-on effects on consumer welfare), or to chase after cost leadership. The latter will either result in

17
Merit good: a type of good where its consumption is beneficial to society.

31
higher prices, or bloated state-owned carriers, placing an increased burden upon the taxpayer. This is
evidenced by the multitude of floundering national carriers who can never seem to turn a profit, from
Thai Airways and South African Airways, to Air India and Air China. Moreover, it also becomes
incredibly difficult to compete with these protected carriers, since they have an unfair advantage of a
bottomless wallet. Therefore, the protected carriers can engage in predatory pricing,18 which the rival
carriers cannot match.

Difficulty for Entrants to Compete with Incumbents

First, the airline industry faces objectively-high barriers to entry (BTE), as a result of its oligopolistic
nature. For instance, given the incredibly high safety and operational requirements imposed upon
airlines, the application process for an Air Operators Certificate (required for the scheduled operation
of commercial flights) is highly complex and rigorous. This is a form of legislative BTE deterring new
entrants. Moreover, airlines face high startup costs, such as aircraft acquisition costs, high labour costs
and unionisation, as well as volatile fuel costs. That said, this is a comparatively lower BTE since the
booming aircraft-leasing industry means airlines do not incur the full aircraft acquisition and labour
costs.19

Looking beyond the high barriers to entry, it is still extremely difficult for entrants to compete with
incumbents, due to the high costs required to cultivate and sustain a competitive advantage in the
industry.

The S-curve effect between schedule and market share postulates that on unsaturated routes, raising
frequency will result in a more-than-proportional increase in market share (Franke, 2020). Thus, for

18
Predatory pricing: setting prices below a firm’s cost function to drive competitors out of business through capturing their
market share.
19
Under a ‘wet lease’ agreement, the lessor provides the aircraft as well as the crew, maintenance and insurance. This means
that the lessee can quickly start operations without being bogged down by these fixed costs.

32
airlines competing on routes, the dominant strategy is to raise the frequency of flights to capture
market share from its competitor.

Figure 3: S-curve effect

Yet, there is an inherent tradeoff between efficiency and frequency. Offering lower frequencies is more
efficient since an airline can deploy larger aircraft, hence lower cost per available seat mile (CASM)
through exploiting greater economies of scale,20 or higher aircraft utilisation through lower turnover
times since airlines do not have to time their frequencies. Thus, entrants find it extremely difficult to
compete on routes, since raising frequency is the dominant strategy, yet they do not have to cost
structure or financial backing to raise frequency, whilst incumbent firms can increase capacity relatively
easily given their greater resources.

20
Economies of scale: in an industry characterised by high fixed costs (costs which do not vary by output, i.e. aircraft
acquisition cost, maintenance cost), raising output will allow more efficient utilisation of fixed costs, reducing cost per unity
quantity.

33
However, the limitations of the S-curve effect must be noted, where this effect is inapplicable on routes
with high LCC competition, as well as leisure destinations where consumers are more price-sensitive
rather than schedule-sensitive. That said, the majority of long-haul trunk routes are still characterised
by low (to nonexistent) LCC competition, and high business demand (and hence schedule-sensitive).

High BTE and difficulty to compete with incumbents deter entrants from entering the industry, as it
affects the profitability for entrants. Without new entrants, incumbents can consolidate market power,
as well as engage in anti-competitive acts. This results in a vicious cycle: where incumbents consolidate
more market power, they have higher ability to enact BTE to prevent entry of incumbents, which
further deters new incumbents, consolidating even more market power in incumbents.

34
SCOPE OF DEBATE

ENVIRONMENTALISM

Evidently, ensuring the sustainable development of aviation is a priority for the industry.

On one hand, policymakers need to be aware of how to swiftly rectify the immediate impacts of
aviation on the environment. In the short run, given the lack of maturity of sustainable technology in
the aviation industry, it seems inevitable that the only way to reduce aviation’s impact on the
environment is to reduce output for any significant effects to be observed. Immediate measures such as
an eco-tax and flight caps can serve to deter unnecessary travel. Regarding this, the raising of the air
passenger duties in Austria and the Netherlands immediately come to mind. It is strongly suggested
that a short-haul flight ban, such as one implemented in France, is discussed during council debate as a
short-term measure to address climate concerns within the aviation industry. However, we need to be
aware of the significant pushback such measures will draw from carriers, as well as their potential social
and economic impact. Beyond aviation’s role as a key propeller of an economy, aviation fills a niche but
critical gap in certain communities, given its ability to traverse terrain which other modes of transport
simply cannot. In the United States, where the federal government subsidises operations to far-flung
communities through the Essential Air Services programme, the banning of flights to these
communities would be catastrophic as these communities would lose their only link to the outside
world.

In the long run, the focus should be on how to transition the aviation sector away from its inherently
polluting nature. As the aviation industry grows at a sustained pace, the discussion needs to shift from
sustained to sustainable growth. A collective effort to mitigate and control emissions is necessary, where
the pivot away from the current state of pollution needs to be augmented by support for the
development of newer green technologies. Again, however, one needs to be mindful of how the

35
aviation sector will respond to these changes, and mitigate their concerns accordingly to achieve
compromise.

INCREASING CONSUMER PROTECTION

As demonstrated, consumer protections are sorely lacking in the airline industry. However, we should
consider whether this is an issue in the first place. On one hand, some may consider such a
phenomenon as merely an effect of market forces at work. In fact, it can be argued that the
segmentation of the market (between no-frills LCCs and FSCs) increases consumer choice: the trend
of unbundled fares means passengers only need to pay for what they deem necessary, and do not have
to pay with those that they do not need. Moreover, whilst passengers in the pre-1978 US aviation
sector enjoyed high service levels and carriers were willing to stoop low to accommodate and win their
business (hence more self-imposed consumer protections), it was also more inefficient and was a
playground only for the elite where the masses were priced out of the market.

However, other examples highlight that this issue extends beyond an uncomfortable seat or rude
service. Due to passengers’ lack of bargaining power, airlines have been steadily encroaching upon
consumer protections beyond a reasonable point. From selling seats that do not even exist
(overbooking), to cancelling flights and stranding passengers (Southwest 2022 winter meltdown), these
are practices that are unethical, and it is high time for the government to intervene.

Thus, it needs to be established what are considered business practices which violate basic ethical and
moral codes – it is thus within public interest to intervene to ensure the provision of such basic services
– and what is acceptable to exclude in the provision of air services which, whilst not desirable, does not
put the consumer at personal risk and harm. Regulations should target the non-negotiables, and clear
boundaries need to be set for discussion to take place, before determining how best to regulate and
ensure the provision of such non-negotiables.

36
 PROMOTING COMPETITION IN THE INDUSTRY

As the aviation industry matures, it would be germane to consider how to foster competition within
the industry. A higher level of competition within the aviation sector is not only more efficient, it will
help to apply downward pressure on prices within the industry. However, such intervention can result
in negative consequences for the industry. For instance, it would encroach upon the already-narrow
profit margins for carriers, which would erode the long-run profits which carriers enjoy. This may
result in reduced innovation within the sector, as carriers rely upon their past reserves built up through
long-run supernormal profits to invest in product innovation. With less profits to rely upon, airlines
would have less funds to invest in product innovation and fleet renewal. More importantly, increasing
competition within the industry can impact the financial health and robustness of the industry’s cash
flow in general. This would put carriers at greater risk of financial turmoil, especially during weak (or
negative) economic growth, compounded by travel disruptions such as those during COVID-19. As
the industry emerges scarred from the complete standstill of international travel, one needs to weigh
the benefits and downsides of each decision to ensure the industry emerges stronger as a whole.

It is also important to consider how to offer a level playing field in the global aviation industry, where
every carrier willing to compete has a fair and equal opportunity to do so, based on merits such as cost
or product leadership. Rooting out anti-competitive behaviour such as hogging airport landing/takeoff
slots/gates to prevent other carriers from being able to operate into key hubs, as well as the associated
measures to keep these slots (such as ghost flights), should be a priority. Another barrier preventing
carriers from challenging incumbents is the lack of open skies agreements between nations. Because
some carriers are restricted from the maximum number of flights it can operate to certain destinations,
this means that it can make little headway into the market given the significance of frequency in the
aviation industry (as explained by the aforementioned S-curve in Fig. 3). However, a truly multilateral
open skies agreement remains elusive, given that this benefits carriers from developing nations more
than carriers from developed nations, as carriers from developing nations wish to operate flights into
these mature economies which sustain high demand, whilst the converse might not be true. Hence,

37
developed nations which succumb to domestic lobbying defend their flag carriers from protectionist
measures, whilst developing nations wish for more opportunities for their carriers to have access into
these developed economies.

EFFECTIVE POLICY MAKING

Avoiding Over-regulation
Whilst more stringent oversight is definitely necessary, one must be mindful of over-regulation.

This is especially salient when considering the razor-thin profit margins which airlines operate on.
Increasing regulations which require airlines to commit to environmental or consumer protection will
incur costs for airlines. Conventional economic theory suggests that rising costs for airlines will result
in increased prices. Moreover, raised costs would erode the already narrow margins. Thus, if airlines are
over regulated, it may diminish the profits beyond a point where there is a viable business case for the
industry. At this point, loss-incurring airlines may choose to leave the market, given that their ability to
turn a profit will be further reduced. Moreover, prospective new entrants may be deterred from
entering the industry, since the already high entrance costs are further raised as part of the new
regulations. Deterring new entrants and disincentivising incumbents will result in less players in the
industry. Holding all else constant, this would reduce competition within the industry, and the already
powerful incumbent firms will further gain market share, increasing the consolidation of market power
within the industry. Therefore, increasing regulations may be counterproductive, where instead of
improving societal welfare, it further deteriorated the situation.

38
Maintaining the Policy Intent

When crafting policies, one must be clear of what the policy intent is, whether the application of the
policies crafted preserves the policy intent, and how to ensure that their policies are watertight in the
upholding of the policy intent. Policy intent refers to the objective and rationale behind the policy; why
the policy was crafted in the first place. As such, ICAO SARPS should uphold the ICAO’s mission to
ensure a stronger and more robust aviation industry as a whole. Hence, one must consider whether
when taken in its totality, a policy preserves this intent. This is especially important when certain
policies aimed at strengthening one aspect of the industry can have negative impacts on another. As an
example, the ‘use it or lose it’ policy for slots at congested airports, whilst originally intended to
promote fair competition within the industry, has resulted in the rise of ghost flights, which has
negative impacts on the environment. As such, one can consider how such policies may be tweaked to
reduce its negative externalities on other aspects of the industry to ensure that the integrity of the
industry is still protected as a whole.

Moreover, beyond crafting effective policies, policymakers need to be cognisant of the need for
complementary enforcement measures to ensure compliance to its policies. Without which, the policy
intent would not be upheld, as the target group would simply attempt to evade or breach regulations
without much consequence. This is demonstrated in the significant reluctance of carriers to comply
with EC261, and policymakers need to contemplate on how to improve compliance to achieve the
policy intent.

Lastly, policymakers need to ensure that their policies are watertight, in that there are no loopholes to
exploit. Otherwise, the target group would simply skirt the regulations, and in such cases the policy
becomes nothing more than a resolve signalling, as there would be limited impact upon the industry.
The rise of ghost flights as a response to the aforementioned “use it or lose it” policy seems to suggest
that refinement is required, or carriers would simply exploit this loophole and the policy intent is not

39
maintained. As such, one must be aware of potential flaws of suggested policies during debate, and
work to correct such pitfalls.

Deterrence vs Incentives

Whilst considering policies to induce behavioural change, we should be aware of the differences
between deterrence and incentives, as well as their applicability for different situations. Deterrence
refers to punishing undesirable behaviour, such as through taxes or even outright bans, which would
be more draconian. Meanwhile, incentives refers to rewarding the desirable behaviour, such as
subsidies for meeting various targets.

On one hand, mainstream economic theory posits that a deterrent will be more effective than an
incentive at influencing behavioural change. Thus, taxing a carrier for not meeting emission
requirements, for instance, would be more effective than providing subsidies for meeting emission
requirements. However, the target group would invariably be more receptive towards an incentive as
compared to a deterrent, especially if there exists a considerable amount of inertia within the industry,
or the undesirable behaviour is so deep-rooted such that it becomes very difficult to alter.

There is a fine line to thread between effectiveness and receptiveness, and we should be mindful to
consider whether either, or perhaps even a combination of both, would be more effective.

40
POTENTIAL SOLUTIONS

ENCOURAGING SUSTAINABLE ENVIRONMENTAL PRACTICES IN AVIATION

Given aviation’s impact on the climate crisis, it is pertinent to consider both short term mitigatory
measures and long term developmental measures.

A controversial but undeniably effective short term measure would be the restriction of short-haul
flights, be it through a specific tax as a targeted measure towards short-haul flights, or an outright ban
of said flights. This would undoubtedly be effective in immediately cutting down emissions, but would
also equally undoubtedly face pushback from airlines. Whilst current literature disagree as to the true
impact such a measure would have on the climate crisis, it is still an easy target and low hanging fruit,
given the considerable close substitutes to short-haul aviation. Thus, regardless of the percentage which
short-haul flights contribute to emissions within the aviation industry, it would bring immediate relief
to the climate crisis, which would definitely help, regardless big or small.

Other band-aid solutions can include incentivising the adoption of more sustainable measures. For
instance, carriers deploying newer and more fuel-efficient fleets can receive preferential treatment,
especially with regards to the allocation of slots at congested airports. Small tweaks can also promote
more sustainable practices in the industry. Measures to target the consumer such as mandating the
display of the amount of carbon emissions for each flight during ticket purchase may be able to nudge
passengers towards greener flights, and incentivise carriers to offer these greener flights.

In the longer term, governments can consider the establishment of a fund to invest in emerging green
aviation technologies, such as hydrogen propulsion and biofuels. This will help lay the foundations for
a future where aviation and environmentalism can coexist. However, the financing of the fund will be
controversial. Another potential solution adopted by governments is the imposition of an eco-tax, as

41
seen in the Netherlands. One can consider the benefits and downsides of different types of tax regimes
to determine which is the most appropriate. If adopted, it would be germane to consider how to
redistribute the tax income, perhaps even redirecting a portion to the aforementioned green fund.
Regulators should also consider implementing carbon neutrality throughout the industry by a target
date, and more importantly holding airlines accountable to their carbon neutrality targets.

STRENGTHENING CONSUMER PROTECTION LAWS

There is a stunning lack of consumer protection laws specific to the aviation industry, outside of
Europe. Thus, regulators can consider mandating minimum service requirements for passengers.
During IRROPs or involuntary denied boarding, carriers should have a contingency plan, detailing the
steps carriers will take to ensure passenger safety.21 For instance, airlines should be responsible for clear
and accessible information, at predetermined time intervals. Moreover, regulators can consider holding
airlines liable for rebooking passengers on alternative routings, or full refunds (if requested by the
passenger), accommodation (especially for overnight layovers), and even compensation, if the airline is
unable to reach a resolution agreed upon by the passenger. Airlines can also be held liable for
compensation for late, lost or damaged luggage, as well as any resulting costs incurred by the
passengers. Anti-consumer practices such as overbooking should also receive due scrutiny. Lastly,
regulators can consider implementing an appeals, investigation and enforcement process, in the event
of noncompliance of the aforementioned policies.

INCREASING COMPETITION WITHIN THE AVIATION INDUSTRY

To improve competition within the airline industry, we need to consider how to reduce
anti-competitive behaviour. A clear definition for what constitutes anti-competitive behaviour, as well
as the consequent banning of such behaviour is important. Again, this needs to be backed up with

21
For reference, Singapore Airlines implements delay contingency plans for its operations in some regions (Singapore
Airlines, n.d.)

42
effective enforcement and punishment for non-compliance for effective policy making. We can also
consider whether a global regulator, empowered to investigate and conduct these enforcement actions,
would be necessary. This agency can also be responsible for granting (and withholding) antitrust
immunity for airline cooperation within the industry, and should remain independent from the
influence of carriers and nations. A global regulator (as opposed to individual antitrust agencies) would
enjoy the benefit of having oversight over the entire industry, instead of examining each case
independently as from individual perspectives, which would allow for a more holistic approach.

Moreover, protectionism needs to be reduced within the industry for carriers to be able to freely
compete. A signing of a multilateral open skies agreement would be a watershed moment within the
industry and signal a paradigm shift in embracing competition within the industry, but challenges
remain. The various parties hence need to consider how to mitigate the concerns others may have, and
everyone needs to concede a certain amount of individual benefit for the collective prosperity of the
industry and usher in a new era for global cooperation.

43
KEY STAKEHOLDERS

AIRLINES
As firms answerable to shareholders, airlines usually have little interest in environmental protection
beyond their CSR (Corporate Social Responsibility). Whilst we often see airlines commit to lofty
climate goals, announce fleet renewals under the guise of sustainability and even try to persuade
consumers against flying, it is rarely due to a genuine interest in environmental protection, but rather a
profit motive wrapped in a good dose of PR.

Similarly, airlines have little interest in consumer protection, unless it is a matter so grave it threatens
their bottom line. Whilst there may be exceptions of airlines acting out of goodwill, it is much more
common to see airlines trying to preserve their profit margins at the expense of the consumers. That
said, as previously mentioned, some airlines do engage in consumer-friendly practices out of goodwill,
perhaps as they believe in the long-term benefits of strong brand association. Fundamentally, all
airlines, regardless of their attitude towards the trade off between consumer protection and brand
equity, are all guided by their bottom lines.

Lastly, airlines would naturally favour greater cooperation, since it raises profitability in most
situations. However, they realise the hesitance of regulators in granting them greater market power and
market share, and would hence lobby aggressively to defend their interests, or attempt to skirt around
the rules to pursue further cooperation.

Ultimately, airline decisions are driven by the profit motive. Consequently, their stances will align with
what is best for their bottom line.

44
 GOVERNMENTAL REGULATORS

Governments generally defend the interest of the public, and hence usually look favourably upon
actions that improve social welfare. Thus, governmental regulators are one of the main proponents of a
more environmentally sustainable future for aviation, even if it is less cost effective. Moreover, with the
recent bout of airline operational and financial meltdowns, we see governments become increasingly
concerned with consumer protection in order to keep airlines in check.

With regard to competition, however, it is a little less straightforward. On one hand, governments
usually frown upon higher prices, which can stem from a lack of competition. However, governments
also perpetuate protectionism to give their carriers an competitive advantage, which can artificially
inflate prices.

Thus, governments are cognisant of the need to maintain a pro-business environment, given aviation’s
strategic importance and significance to the economy. A balance needs to be struck between stronger
enforcement, and ensuring the business viability of the industry as a whole.

PASSENGERS

Passengers in the aviation industry mainly comprise business and leisure travellers. The former values
time and network/schedule convenience whilst the latter is much more price-sensitive, but neither
party is really concerned about the environment if it means they can get a faster, cheaper and more
direct flight. However, it is undeniable that people in general are increasingly becoming more
environmentally conscious, and whilst there is no doubt that environmentalism can generate some
goodwill amongst consumers, it remains to be seen to what extent such goodwill will result in a change
in consumption patterns.

45
With regards to consumer protection, passengers usually seek more protection whenever possible. This
is especially true since passengers usually have little leverage over the airline during irregular operations,
and are often left hung out to dry. However, passengers in and of themselves are unable to pressure
carriers into offering them greater consumer protection, and hence usually rely on governments to
represent them on this matter.

Finally, the passengers’ interests are usually misaligned with lower competition within the industry, as
that usually results in higher prices for passengers. Again, however, passengers individually lack the
power to pressure carriers into reducing prices, and hence would have to rely on governmental
intervention to defend their interests.

46
CONCLUSION

The global civil aviation industry has matured from its humble beginnings into the intricate and
interconnected industrial complex it is today.

As aviation crawls out of the rubbles of COVID-19, it is pertinent to ensure the industry’s
sustainability, equitability and viability. Since aviation’s mass global deregulation in 1978, airlines have
been given free rein for most aspects of their business, except with regard to safety. Driven by
commercial interests, other considerations like environmental protection, consumer interests and fair
competition slowly but steadily deteriorated, having been tossed aside as airlines chase further profits.

Dark clouds lurk on the horizon. It is the ICAO’s role to chart a path forward to ensure that the
miracle of flight which so enthralled mankind is guarded against its seemingly inevitable
self-destruction if the natural laws of economics were left to pervade.

47
GUIDING QUESTIONS

1. What are your delegation’s stance with regards to the key issues, and what would be the most
effective way to forward this agenda?

2. How can the differing interests of the various stakeholders be reconciled to achieve a common
set of goals and standards for the industry?

3. What are some limitations of existing measures and how can these limitations be addressed?

QUESTIONS A RESOLUTION MUST ANSWER

1. Taking into consideration the contentions resulting from the key issues, is intervention
necessary to rectify these issues?

a. If so, what is the best way to intervene in the industry, taking into consideration the
various vested interests?

2. How can we ensure a balance between greater industry regulation to promote societal welfare,
and the need to maintain a certain level of commercial viability within the industry, such that
intervention would result in the overall betterment of the aviation industry?

3. How can a balance be struck between short-term strategies and long-term solutions while
accounting for the wellbeing of various stakeholders?

48
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