The Legal Impacts of COVID-19 in the Travel, Tourism and Hospitality Industry

3 of reciprocity and bilateral agreements for air transport. Showing that most British humour, delegates then dubbed these restrictions the ‘freedoms’ of the air. The restrictions were etched into stone in the first bilateral air service agreement between the UK and the US, agreed in Bermuda in 1946. At Bermuda, the US and UK reached a compromise over many points of discrepancy in Chicago. The US accepted the UK’s proposal to have tariffs (fares) set by an international organisation – IATA – and the UK, in turn, agreed to allow airlines to set capacity and to grant designated air carriers a fifth freedom traffic right – the ‘right’ to fly on to a third country after dropping off or picking up passengers. This became the model for more than 40 years. Although the US favoured economic liberalism at the Havana and Chicago Conferences, in reality, it created a highly regulated oligopoly within its own borders, with the Civil Aviation Board allocating geographic regions and routes to particular carriers 8 . That changed during the Carter Administration, in the late 1970s, when the first steps were taken to deregulate the aviation industry. In a deregulated industry, legacy carriers who competed on services under the CAB-induced oligopoly had to compete on prices with new entrants who cut costs and service quality. Many carriers experienced bankruptcies, both legacy carriers and new entrants alike. However, by- in-large, the heightened competition led to overall growth, as well as to decreases in ticket prices. This was not without its detriments, deregulation also commodified the passenger ticket, leading to decreases in customer service and less comfort for passengers. By the 1990s, the US began pushing for a deregulated environment internationally 9 , with the development of the Open Skies agreements, which allowed airlines to set their own fares, rates, routes and capacities. Further liberalisation occurred in the European Union, with the advent of the European Common Aviation Area. Notwithstanding a push for liberalisation, several Bermuda-style elements carried forward into the Open Skies framework, the most notorious of those being substantial ownership and effective control. These provisions mandate that a certain percentage of airline ownership and control be vested in nationals of an airline’s home country. As a result, international mergers are impossible in this most international of industries. Nationalism – indeed, protectionism – is, in many ways, baked into the aviation industry due to safety, security and sovereignty concerns. These sentiments are shaping the response to the COVID-19 crisis and will likely shape the recovery as well. With these in mind, we turn back to our four scenarios. 3. Back to COVID-19 – Outlook and the Four Possible Scenarios Scenario one: Business as usual 8 See, generally, Andreas F. Lowenfeld, Aviation Law: Cases and Materials (1972). 9 Aqsa Mahmud, “International Air Services Agreements,” in David Heffernan & Brent Connor, eds, Aviation Regulation in the United States (American Bar Association, 2014) 23, 25-27.