Seminar prior to theICAO Air Transport Conference

Perspective of a medium-sized Airline

TAP – Air Portugal

Montreal, March 23rd, 2003

The Future of Liberalization

What does Liberalization mean1. In relation to the Aeropolitical Environment

Freedom for Airlines to:provide services on desired routes, at an economic and

commercially viable scaleaccess new resources and join forces with other airlines,

irrespective of nationalityFreedom for Passengers to:to choose among alternative services

2. In relation to Infrastructure Suppliers and Product Distributors Freedom for Carriers to:

choose how and with whom best to do business where that is not attainable, be able to secure adequate

correlation between service level and price to be paid

To end monopolistic situations, where insufficient number of operators and/or suppliers provide less than satisfactory level of service

To allow fair and sound competition, that can work as a stimulus for inefficient service providers

To allow more flexibility in terms of resource sources and utilization, creating ways for reduction of fixed costs and enhancement of economies of scale, density and scope

Why we think Liberalization is needed

1. In relation to the Aeropolitical Environment Liberalized environment reduction of costs, but also of yields Need for Governments monitoring of evolution to strike a

balance between Liberalization and Sustainability

Market Access -Deregulation Fragmentation Excessive Capacity Insufficient Profitability Restructuring Consolidation

Consistent regulatory policies, to avoid “fighting-for-survival” cycle leading to less competitive configuration

Gradual & regionally customized approach acceptable, if not at consumers’ cost

Capital Access – Remedy for current undercapitalization Liberal Ownership Clause: Crisis-affected, cash-strapped Airlines

need to be able to open up their stock to investors around the world.

How we see Liberalization should be pursued…

How we see Liberalization should be pursued…2. In relation to Infrastructure Suppliers and Product Distributors,

Liberalization must…

… aim at creating fairer and more balanced gain distribution among business partners

Airlines are doing their homework. But reducing controllable costs and increasing efficiency not enough to improve

margins. Time for others in the value chain to become more efficient in

their structures, lower their charges

… go hand in hand with international air policy convergence

different types of measures impose considerable discrepancies of treatment and incurred costs around world

Governments are called to pursue liberalization that:

Promotes an international playing field, freed from national discrimination and based on the sound principles of reciprocity, equal treatment and fair opportunities

Eliminates excessive market power, or otherwise regulate where no alternative exists to natural monopolies

Abolishes anachronistic restrictions, preventing airlines to access and make efficient use of resources, or to take full advantage of market potential

The Future of Liberalization

Thank you for your attention

José Guedes Dias

TAP Air Portugal