Bilateral Air Service Agreement

A Bilateral Air Service Agreement is a treaty between two countries that defines the terms and conditions under which the airlines of each country may operate commercial air services to and from the other. These treaties — commonly referred to as ASAs or bilaterals — form the legal backbone of international aviation, since the 1944 Chicago Convention expressly preserved state sovereignty over airspace and required that traffic rights be negotiated country-by-country rather than granted multilaterally. Without a bilateral agreement or its modern successor form, the Open Skies Agreement, no airline can legally operate scheduled international services between two countries.

What Is a Bilateral Air Service Agreement?

Bilateral Air Service Agreements are typically negotiated between governments and specify several key elements: which airlines are designated as authorised carriers, which routes may be operated, how many flights per week are permitted, whether capacity is capped, which airports may be used, and whether the arrangements are reciprocal. Traditional bilaterals, sometimes called Bermuda-type agreements after the model 1946 UK-US treaty, were heavily restrictive, limiting each side to one or two designated carriers and placing strict limits on capacity and pricing. Over the following decades this model gave way to progressively more liberal arrangements culminating in Open Skies agreements, which eliminate most capacity and frequency restrictions while continuing to apply nationality requirements for airline ownership and control.

How It Works in Practice

Airlines seeking to operate a new international route must verify that a bilateral agreement is in place between their country and the destination country, and that their airline qualifies as a designated carrier under that agreement. Designation is typically contingent on the airline being incorporated in the home country and substantially owned and effectively controlled by nationals of that country — a requirement that creates the linkage between ownership rules and bilateral traffic rights. When an airline from country A wants to serve country B but country A has no bilateral with B, the airline may attempt to operate via a codeshare or interline arrangement with a carrier that holds the rights, or lobby its government to negotiate access.

The US pursued an Open Skies policy aggressively from the 1990s onwards, signing more than 100 bilateral Open Skies agreements that removed government control over routes, capacity, and pricing while preserving the 25 percent foreign ownership cap. The US-EU Open Skies Agreement of 2007, often called the Transatlantic Common Aviation Area agreement, was the most consequential, liberalising the world's busiest aviation market and triggering a wave of transatlantic restructuring including the formation of the three major alliance joint ventures.

Why It Matters

Bilateral agreements determine which airlines can serve which markets — and by extension, where competition exists and where it does not. Routes served under restrictive bilaterals that limit designations or capacity to one or two carriers per side tend to have higher fares and less frequency than equivalent routes covered by Open Skies arrangements. The difference in consumer outcomes is measurable: the US Department of Transportation found that Open Skies agreements were associated with 8 to 32 percent lower fares and significantly higher traffic volumes on affected routes compared to the pre-liberalisation baseline.

Key Facts and Figures

• The US has signed more than 130 Open Skies agreements with countries around the world, more than any other nation.
• The first bilateral air service agreement between the US and UK — the Bermuda Agreement of 1946 — became the template for dozens of subsequent treaties.
• The EU-US Open Skies Agreement, signed April 30, 2007, covers over 400 million passengers and 500 billion dollars in annual transatlantic trade.
• Countries with no bilateral agreement between them cannot legally operate direct scheduled services; charter flights may still operate under separate arrangements.
• The Asia-Pacific region remains the most bilaterally fragmented major aviation market, with many restrictive bilaterals limiting growth on intra-Asian routes.
• ASEAN completed a multilateral air services agreement covering all ten member states, a rare instance of regional multilateralism in aviation traffic rights.

Related Concepts

Foreign Ownership Rule, Slot Regulation, ICAO, Air Carrier Certificate, Montreal Convention