Fifth Freedom Rights (from a congressional hearing):
(Fred Smith- Fedex speaking) The construct of the 1944 convention and these aviation treaties is built around ten freedoms of the air, and they are known. The first and second are technical and the ninth and tenth are also arcane and technical. But for the purposes of the understanding of this committee, the most significant are the third, fourth, fifth, and sixth freedom rights. The third and fourth freedom traffic rights are simply the rights to carry traffic to and from one's own home country to another. Where the issue becomes arcane but hugely important is the issue of fifth and sixth freedom traffic rights, as Mr. Greenwald pointed out in his excellent primer on the significance of the Bermuda II agreement in 1977. The fifth freedom traffic is the right of a carrier such as FedEx or United to land in Japan or the United Kingdom and enplane cargo or passengers from Japan or the United Kingdom to another country, or vice versa. The sixth freedom traffic is exactly the same economic right but by the carrier of that country enplaning traffic from another point to yet a third point. An example of that might be Japan Airlines or Nippon Cargo Airlines picking up a load of semiconductors in Malaysia bound for the United States, commingling it with traffic to Japan, stopping in Tokyo, off-loading the traffic destined for Japan and picking up traffic destined for the United States. That is called ''sixth freedom traffic.''
Now the United States, by virtue of the 1952 bilateral treaty based on the principles of the Chicago Convention of 1944, has three carriers which have broad beyond rights over Japan—United Airlines as the successor to Pan American whose Pacific routes it bought some years ago; FedEx as a successor for all cargo operations only to Flying Tigers, a company which we bought 6 years ago; and Northwest Airlines, which has enjoyed those routes and rights for many years. The treaty was amended slightly in 1959 and 1989 but basically the rights that it gives those three U.S. carriers are to participate in the fifth freedom markets beyond Japan without hindrance by the Japanese government. And the treaty is very specific and very straightforward.
Mr OBERSTAR: Mr. Smith (Fred), when you bought Flying Tigers, did you anticipate that you bought the beyond rights?
Mr. SMITH. The authorities held by Flying Tigers, Mr. Chairman, were the basic reason we bought Flying Tigers.
Mr. OBERSTAR. You anticipated having those rights?
Mr. SMITH. And the sale was conditioned on those rights being transferred.
Mr. OBERSTAR. Mr. Greenwald, when United bought Pan Am's Pacific routes, did you anticipate that you also bought beyond rights that were available under the treaty?
Mr. GREENWALD. There is a direct parallel here. United bought Pan Am's Pacific routes and that was also conditioned on the transfer of all those rights fully and it was always intended that they would be put to use.
Mr. OBERSTAR. And in the aftermath of the acquisition in both cases when both carriers tried to exercise those rights, is it not true that the Japanese came back and said you can't do that, we have other rights that we want to exercise in the U.S. in payment for exercising rights you claim under your acquisition. Is that correct?
Mr. SMITH. That's certainly been our experience. (Fedex felt they got screwed….for United it worked out…..its seems freight haulers have been treated differently than PAX operations).
Note: Based upon the precedent set by Pan Am to United, Fifth freedom rights are passed along to an acquiring airline.
(From SEC documents)
International System
Northwest operates international flights to the Pacific and/or the Atlantic regions from its Detroit, Minneapolis/St. Paul and Memphis hubs, as well as from gateway cities such as Boston, Honolulu, Los Angeles, New York, San Francisco, Seattle and Portland.
Pacific. Northwest has served the Pacific market since 1947 and has one of the world's largest Pacific route networks. Northwest's Pacific operations are concentrated at Narita International Airport in Tokyo, where it has 362 permanent weekly takeoffs and landings ("slots") as of December 31, 2004, the most for any non-Japanese carrier. As a result of a 1952 U.S.-Japan bilateral aviation agreement, Northwest has the right to operate unlimited frequencies between any point in the U.S. and Japan as well as extensive "fifth freedom" rights. Fifth freedom rights allow Northwest to operate service from any gateway in Japan to points beyond Japan and to carry Japanese originating passengers. Northwest and United Airlines, Inc. ("United") are the only U.S. passenger carriers that have fifth freedom rights from Japan. Northwest uses these slots and rights to operate a network linking eight U.S. gateways and twelve Asian destinations via Tokyo. The Asian destinations via Tokyo are Bangkok, Beijing, Busan, Guam, Hong Kong, Manila, Nagoya, Saipan, Seoul, Shanghai, Guangzhou and Singapore. Additionally, Northwest flies nonstop between Detroit and Osaka and Nagoya, and uses its fifth freedom rights to fly beyond Osaka to Taipei and beyond Nagoya to Manila.
Atlantic. Northwest and KLM operate an extensive transatlantic network pursuant to a commercial and operational joint venture. This joint venture benefits from having antitrust immunity, which allows for coordinated pricing, scheduling, product development and marketing. In 1992, the U.S. and the Netherlands entered into an "open-skies" bilateral aviation treaty, which authorizes the airlines of each country to provide international air transportation between any U.S.-Netherlands city pair and to operate connecting service to destinations in other countries. Northwest and KLM operate joint service between Amsterdam and 16 cities in the U.S., Canada and Mexico, as well as between Amsterdam and India. Codesharing between Northwest and KLM has been implemented on flights to 51 European, six Middle Eastern, nine African, three Asian and 169 U.S. cities. Codesharing is an agreement whereby an airline's flights can be marketed under the two-letter designator code of another airline, thereby allowing the two carriers to provide joint service with one aircraft.
(Fred Smith- Fedex speaking) The construct of the 1944 convention and these aviation treaties is built around ten freedoms of the air, and they are known. The first and second are technical and the ninth and tenth are also arcane and technical. But for the purposes of the understanding of this committee, the most significant are the third, fourth, fifth, and sixth freedom rights. The third and fourth freedom traffic rights are simply the rights to carry traffic to and from one's own home country to another. Where the issue becomes arcane but hugely important is the issue of fifth and sixth freedom traffic rights, as Mr. Greenwald pointed out in his excellent primer on the significance of the Bermuda II agreement in 1977. The fifth freedom traffic is the right of a carrier such as FedEx or United to land in Japan or the United Kingdom and enplane cargo or passengers from Japan or the United Kingdom to another country, or vice versa. The sixth freedom traffic is exactly the same economic right but by the carrier of that country enplaning traffic from another point to yet a third point. An example of that might be Japan Airlines or Nippon Cargo Airlines picking up a load of semiconductors in Malaysia bound for the United States, commingling it with traffic to Japan, stopping in Tokyo, off-loading the traffic destined for Japan and picking up traffic destined for the United States. That is called ''sixth freedom traffic.''
Now the United States, by virtue of the 1952 bilateral treaty based on the principles of the Chicago Convention of 1944, has three carriers which have broad beyond rights over Japan—United Airlines as the successor to Pan American whose Pacific routes it bought some years ago; FedEx as a successor for all cargo operations only to Flying Tigers, a company which we bought 6 years ago; and Northwest Airlines, which has enjoyed those routes and rights for many years. The treaty was amended slightly in 1959 and 1989 but basically the rights that it gives those three U.S. carriers are to participate in the fifth freedom markets beyond Japan without hindrance by the Japanese government. And the treaty is very specific and very straightforward.
Mr OBERSTAR: Mr. Smith (Fred), when you bought Flying Tigers, did you anticipate that you bought the beyond rights?
Mr. SMITH. The authorities held by Flying Tigers, Mr. Chairman, were the basic reason we bought Flying Tigers.
Mr. OBERSTAR. You anticipated having those rights?
Mr. SMITH. And the sale was conditioned on those rights being transferred.
Mr. OBERSTAR. Mr. Greenwald, when United bought Pan Am's Pacific routes, did you anticipate that you also bought beyond rights that were available under the treaty?
Mr. GREENWALD. There is a direct parallel here. United bought Pan Am's Pacific routes and that was also conditioned on the transfer of all those rights fully and it was always intended that they would be put to use.
Mr. OBERSTAR. And in the aftermath of the acquisition in both cases when both carriers tried to exercise those rights, is it not true that the Japanese came back and said you can't do that, we have other rights that we want to exercise in the U.S. in payment for exercising rights you claim under your acquisition. Is that correct?
Mr. SMITH. That's certainly been our experience. (Fedex felt they got screwed….for United it worked out…..its seems freight haulers have been treated differently than PAX operations).
Note: Based upon the precedent set by Pan Am to United, Fifth freedom rights are passed along to an acquiring airline.
(From SEC documents)
International System
Northwest operates international flights to the Pacific and/or the Atlantic regions from its Detroit, Minneapolis/St. Paul and Memphis hubs, as well as from gateway cities such as Boston, Honolulu, Los Angeles, New York, San Francisco, Seattle and Portland.
Pacific. Northwest has served the Pacific market since 1947 and has one of the world's largest Pacific route networks. Northwest's Pacific operations are concentrated at Narita International Airport in Tokyo, where it has 362 permanent weekly takeoffs and landings ("slots") as of December 31, 2004, the most for any non-Japanese carrier. As a result of a 1952 U.S.-Japan bilateral aviation agreement, Northwest has the right to operate unlimited frequencies between any point in the U.S. and Japan as well as extensive "fifth freedom" rights. Fifth freedom rights allow Northwest to operate service from any gateway in Japan to points beyond Japan and to carry Japanese originating passengers. Northwest and United Airlines, Inc. ("United") are the only U.S. passenger carriers that have fifth freedom rights from Japan. Northwest uses these slots and rights to operate a network linking eight U.S. gateways and twelve Asian destinations via Tokyo. The Asian destinations via Tokyo are Bangkok, Beijing, Busan, Guam, Hong Kong, Manila, Nagoya, Saipan, Seoul, Shanghai, Guangzhou and Singapore. Additionally, Northwest flies nonstop between Detroit and Osaka and Nagoya, and uses its fifth freedom rights to fly beyond Osaka to Taipei and beyond Nagoya to Manila.
Atlantic. Northwest and KLM operate an extensive transatlantic network pursuant to a commercial and operational joint venture. This joint venture benefits from having antitrust immunity, which allows for coordinated pricing, scheduling, product development and marketing. In 1992, the U.S. and the Netherlands entered into an "open-skies" bilateral aviation treaty, which authorizes the airlines of each country to provide international air transportation between any U.S.-Netherlands city pair and to operate connecting service to destinations in other countries. Northwest and KLM operate joint service between Amsterdam and 16 cities in the U.S., Canada and Mexico, as well as between Amsterdam and India. Codesharing between Northwest and KLM has been implemented on flights to 51 European, six Middle Eastern, nine African, three Asian and 169 U.S. cities. Codesharing is an agreement whereby an airline's flights can be marketed under the two-letter designator code of another airline, thereby allowing the two carriers to provide joint service with one aircraft.
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