Cabotage

Not to be confused with sabotage.

Cabotage /ˈkæbətdʒ/ is the transport of goods or passengers between two places in the same country by a transport operator from another country. It originally applied to shipping along coastal routes, port to port, but now applies to aviation, railways, and road transport as well.

Cabotage rights are the right of a company from one country to trade in another country. In aviation, it is the right to operate within the domestic borders of another country. Most countries do not permit aviation cabotage, and there are strict sanctions against it, 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.

Etymology

Cabotage originally meant simply coasting trade, from the French caboter, to travel by the coast. Its ultimate origin is uncertain. The air transport meaning is attested in 1933.

In shipping

Cabotage laws apply to merchant ships in most countries that have a coastline so as 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.

Indonesia implemented a cabotage policy in 2005 after previously allowing foreign-owned vessels to operate relatively freely within the country.

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.

European Union

Carriers licensed under EU law are permitted to engage in cabotage in any EU member state, with some limitations. Ryanair, easyJet, Vueling, Wizz Air 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. An Australian carrier, Jetstar (a Qantas subsidiary), flies domestic routes within New Zealand. 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, Pacific Blue (a Virgin Australia subsidiary) and Ansett New Zealand were Australian-owned airlines based in New Zealand that operated domestic New Zealand services.

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

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.

Other examples

Before 1991, Lufthansa was prohibited from flying to West Berlin, so Pan Am, British Airways, and Air France operated the routes between West 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 Münster-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.

Related concepts

"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.

Tag rights

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.

External links

• European Commission > 3rd railway package including cabotage
• "European transport policy for 2010 : time to decide" European Union Commission White paper