Airlines believe a new liberalization commitment signed by seven countries and the European Commisson could play a major role in untangling the cross-border restrictions that are stifling the industry.

The signatories have agreed to a statement of policy principles, which are aimed at boosting market access and encouraging the flow of international capital to airlines. Both these goals are seen by the industry as vital to achieving long-term financial stability.

The policy statement was signed at an industry-government summit meeting near Montreal on Nov. 16, hosted by the International Air Transport Assn. The airline group has been the driving force behind the new agreement, as it uses the industry’s economic woes to prompt governments to act.

In addition to the U.S. and EC, the signatories are Chile, Malaysia, Panama, Singapore, Switzerland, and the United Arab Emirates. While the initial list seems small, IATA notes that it includes the two largest aviation markets. Collectively, the seven and the EC countries account for 60% of the world’s traffic.

IATA Director General Giovanni Bisignani is confident other nations will quickly sign on, and he identified Australia, New Zealand, Vietnam and India as the most likely to follow. “Some of the countries asked for a bit more time” before signing, says Bisignani and “a couple of big players” are expected to join the list in the next few months.

Bisignani admits that the policy statement is non-binding, but the principles are “an important statement of common government intention among the most active countries driving global aviation policy.” IATA stresses that such a multilateral statement of intent “can be a powerful diplomatic tool.” Its goals are “perfectly in line” with ICAO’s vision for liberalization, says ICAO Council President Roberto Kobeh Gonzalez.

There are various ways the commitment could affect national aviation policy. It can be used as a basis for negotiating new bilateral aviation agreements, and can also be applied to existing bilaterals.

An overall aim is encouraging governments to unilaterally waive certain restrictions in cross-border agreements. Many of these “hamstring the industry” while providing no public policy benefits, says Jeffrey Shane, a former U.S. Transportation undersecretary who chaired the Montreal summit. Simply not enforcing some restrictions will help advance the process of liberalization without “long, tedious negotiations,” Shane says.

A major thrust of the agreement is improving access to international capital markets. To this end, it calls on nations not to exclude carriers from the benefits of bilateral treaties just because they are owned by citizens of a third country. In other words, if a carrier in one country is part of a cross-border merger, it should still be treated as an airline of the first country for the purposes of open skies agreements.

Many governments already waive this nationality clause. If enforced, it can dissuade a carrier from merging with another because it may lose open skies rights.

However, the new agreement stops short of calling for governments to relax ownership and control laws within their own borders. This has been a major sticking point in open skies negotiations between the U.S. and the EC, with the Europeans pressing the U.S. to ease airline ownership restrictions. One industry observer notes that IATA focused on areas where it knew there was consensus, rather than pursuing more controversial reforms.

Another main goal of the policy statement is lifting limits imposed on certain routes under bilateral aviation agreements. In many of these deals, there are caps on the number of airlines allowed to fly in specific cross-border city pairs. Such restrictions should be “the exception not the rule,” and waived wherever possible, according to the principles.

The eight signatories also agreed to eliminate international airline pricing controls where possible. While increasingly rare, there are some bilateral agreements—such as between the U.S. and Japan—that include veto rights over fare increases.

To support the policy statement, IATA commissioned a study on the benefits of liberalization. Conducted by InterVISTAS Consulting, it examined how 12 countries would be affected if their aviation markets were opened further—although it assumes far greater reforms than those in the IATA principles. The study found that opening market access would lift international traffic by an average of 33%, and removing ownership and control limits would increase traffic by 22%. This traffic gain would help offset any loss of market share by local carriers.