Cabotage // traditionally refers to shipping along coastal routes, port to port. Now the word is often used to refer to the transport of goods or passengers between two points in the same country by a vessel or an aircraft registered in another country. Originally a shipping term, cabotage now also covers aviation, railways, and road transport. Cabotage is "trade or navigation in coastal waters, or, the exclusive right of a country to operate the air traffic within its territory".
Cabotage is used in the context of "cabotage rights", the right of a company from one country to trade in another country. In aviation terms, it is the right to operate within the domestic borders of another country. Most countries do not permit aviation cabotage, for reasons of economic protectionism, national security or public safety. One notable exception is the European Union, whose members all grant cabotage rights to each other.
Cabotage by merchant ships is prohibited in most countries that have a coastline. Such policies are intended to protect the domestic shipping industry from foreign competition, preserve domestically-owned shipping infrastructure for national security purposes, and ensure safety in congested territorial waters.
In the United States, the Merchant Marine Act of 1920 (Jones Act) requires that all goods transported by water between U.S. ports be carried on U.S.-flag ships, constructed in the United States, owned by U.S. citizens, and crewed by U.S. citizens and U.S. permanent residents. The Passenger Vessel Services Act of 1886 states that no foreign vessels shall transport passengers between ports or places in the United States, either directly or by way of a foreign port.
In passenger aviation
Cabotage rights remain rare in passenger aviation. The Chicago Convention prohibits member states from granting cabotage on an exclusive basis, which has limited the availability of cabotage as a bargaining chip in bilateral aviation agreement negotiations. Cabotage is not granted under most open skies agreements.
Carriers licensed under EU law are permitted to engage in cabotage in any EU member state. Ryanair, easyJet, Vueling and Aer Lingus have bases and operate domestic services outside their home countries.
Australia and New Zealand
The Closer Economic Relations agreement allows Australian air carriers to fly domestically and internationally from New Zealand and vice versa. Two Australian carriers, Jetstar (a Qantas subsidiary) and Pacific Blue (a Virgin Australia subsidiary) fly domestic routes within New Zealand, and Qantas offers flights connecting New Zealand and North America. Air New Zealand offers one international destination from Australia outside New Zealand, flying between Sydney, Australia and Rarotonga of the Cook Islands. Previously, Qantas Jetconnect and Ansett New Zealand were Australian-owned airlines based in New Zealand.
Australia also permits foreign-owned airlines incorporated under Australian law (such as Tiger Airways Australia and the domestic arm of Virgin Australia) to operate on domestic routes, although it prohibits such airlines from operating international routes as Australian flag carriers.
Chile has the most liberal cabotage rules in the world, enacted in 1979, which allow foreign airlines to operate domestic flights, conditional upon reciprocal treatment for Chilean carriers in the foreign airline's country. This unusual regime is partly due to Chile's geographical need for air service, and partly to incentivize liberalization in other countries amid the international expansion of its flag carrier LAN Airlines, which now has major operations in many other Latin American countries. Like Australia, Chile allows foreign companies to set up Chilean subsidiaries to offer domestic flights in Chile, regardless of reciprocity.
Until 1991 Lufthansa was prohibited from flying to West Berlin, so Pan Am, British Airways, and Air France operated the routes between the Federal Republic of Germany and West Berlin. For a short time in the late 1980s, Trans World Airlines also flew between then-West Germany and West Berlin. During this time, Pan Am flew to Tegel, in Berlin, from Munich-Riem Airport (now closed) and Frankfurt. Air France flew from Düsseldorf. British Airways flew from Munster, Osnabrück, Hannover, and some other cities.
In 2003-2004, the United States Department of Transportation authorized Polynesian Airlines to provide temporary cabotage service in American Samoa after the existing US flag carrier ceased operations, one of very few instances where the US has granted cabotage rights in an emergency.
In October 2007, the United Kingdom granted Singapore carriers the right to fly domestic UK routes as part of an open skies agreement, which also allows British carriers to fly to any city from Singapore.
Reciprocal cabotage rights exist by treaty between New Zealand and Brunei and between the People's Republic of China and Albania.
"Modified sixth freedom"
The "modified sixth freedom" refers to the right to carry passengers between two points in country A through a hub in country B; for instance, a Boston-Toronto-Seattle itinerary. Such services are currently considered to constitute cabotage and are not permitted. In 2002, the United States fined Asiana Airlines for selling tickets from the mainland US to Guam and Saipan via Seoul.
Certain airlines operate services within a foreign country without the right to carry local traffic. For instance, Qantas operates service between New York and Los Angeles solely for use by international connecting passengers. Such services are not generally considered to be cabotage.
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