The Open Skies Agreement with the United States: A New Horizon for Dominican Aviation

Among the most impactful recent developments, the new “Open Skies Agreement” (hereinafter referred to as “the Agreement”) signed by the governments of the Dominican Republic and the United States on August 2, 2024, stands out.

This innovative accord emphasizes the need to facilitate greater aviation services between the two signatory nations and to strengthen air transport security. The Agreement aims to achieve these objectives by implementing more flexible measures regarding customs regimes and flight restrictions for commercial airlines. Consequently, this will lead to a more competitive market, significantly benefiting consumers with increased destination options between the United States and the Dominican Republic.

Below, we provide a summary of the most relevant aspects of the Agreement, addressing key points such as the rights and obligations of the parties and the decisions regarding transport operators’ routes, including passenger and cargo air transportation.

 

I. Granting of Rights and Creation of New Business Opportunities

The Agreement between the United States and the Dominican Republic introduces new business opportunities for airlines, allowing them to operate freely in the market under conditions and pricing determined at their discretion, with minimal government restrictions beyond the indispensable requirements to ensure operational safety and aviation security.

This is made possible through the expansion of rights granted to the signatory states and the reiteration of exemptions from taxes and tariffs previously outlined in the July 22, 1986 agreement. These measures are advantageous to carriers and end users alike.

According to Article 2, each state is not only granted the right to fly over each other’s territory without landing or to make non-commercial stops but is also authorized to provide air transport services with complete freedom between authorized points. This allows airlines from both countries to operate routes with stopovers and connections beyond the territories of the Dominican Republic and the United States, granting autonomy in route planning and service provision without geographical limitations.

These rights extend to both passenger and cargo transportation, enabling continuous and flexible flows between regions connected by this Agreement. This is expected to result in positive outcomes such as cost-efficiency for the services offered.

Additionally, Article 8 highlights other commercial opportunities, reiterating previously granted rights and responsibilities. These include the ability for airlines to establish representative offices in partner territories and the requirement to adhere to existing safety standards in each jurisdiction.

The Agreement also formalizes the possibility for airlines to enter into administrative agreements to streamline operations, such as blocked space arrangements, code-sharing, or leases with foreign airlines or transport providers.

 

II. User Protection, Fair Competition, and Pricing

While the 1986 Agreement already addressed combating unfair and discriminatory practices that harm users and consumers, the new Agreement introduces an obligation for states to oversee the fees and taxes applied to ensure they remain within reasonable and prudent limits. The competent authorities in each country are tasked with reviewing these charges.

Provisions related to taxes imposed by national organizations and authorities remain protected under principles of reasonableness, ensuring fair distribution among user categories, as outlined in Article 10.1 of the new Open Skies Agreement.

Similarly, Article 11 grants airlines the autonomy to determine their transport frequency and capacity without state intervention or restrictions. Airlines can also set pricing based on market conditions, both past and present.

Although these provisions aim to foster fair competition among airlines, challenges remain for smaller or newer carriers that may struggle to compete with well-established players offering greater capacity.

Thus, achieving the opportunities envisioned by this new Agreement will require complementary educational, financial, and structural measures to enhance competitiveness in the demanding and mature civil aviation market in the Dominican Republic.

 

III. Tariff and Customs Exemptions

Regarding tariffs and customs duties, Article 9 provides and reiterates exemptions for:

a. Ground equipment, lubricants, fuel, consumable technical supplies, spare parts, and onboard provisions for international air transport.
b. Aircraft provisions introduced or supplied within a signatory state’s territory for use during international flights.
c. Ground equipment, spare parts, engines, lubricants, fuel, and consumable technical supplies used for aircraft maintenance or repair.
d. Promotional and advertising materials for outbound aircraft.

These exemptions extend to scenarios involving contracted airlines that enjoy similar agreements. However, all equipment and supplies must be monitored and supervised by the respective competent authorities in each territory.

It remains to be seen how these exemptions will be addressed in potential tax reforms.

 

IV. Conclusions

Through this Open Skies Agreement, the Dominican Republic joins over 130 global allies that have partnered with the United States to promote flexibility in restrictions and tariffs within the civil aviation sector.

This forward-thinking Agreement is poised to become a milestone for the tourism and civil aviation sectors, aiming to open the market to new and future commercial airlines while offering more affordable fares due to increased competition. A study by the journal Science, Economics, and Business from the Instituto Tecnológico de Santo Domingo (INTEC), titled “Potential Impact of an Open Skies Agreement Between the U.S. and the Dominican Republic”, estimates that this could generate approximately $745.2 million annually for the Dominican government.

However, these considerations must be approached cautiously. The same study emphasizes that the benefits depend on timely measures to foster tourism, workforce education, and the protection of existing airlines, which may face adverse factors such as fuel costs, hangar access, aviation insurance, and other structural and financial challenges that could threaten the Dominican civil aviation sector. These challenges have likely been anticipated by the Dominican government as tasks to address following the Agreement’s ratification.