Following the ground-breaking move to create a common border between Australia and New Zealand under the bilateral 'Closer Economic Relations' (CER) agreement, Australia's Federal Government says it will shortly complete bi-lateral negotiations with 17 European

countries for a form of 'open skies' agreement between Australia and Europe which is expected to open up competition and change the market forever.

This will make it a lot easier for European airlines to fly directly to any airport in Australia and it will be a further blow to Qantas' dominance in the international market place.

Speaking at the Asia Pacific Outlook Conference in Sydney this month, Mike Mrdak, Secretary of the Department of Infrastructure, Transport, Regional Development and Local Government underlined the government's commitment to opening up the market.

He said: ‘The current economic environment has not altered the Government's commitment to pursuing liberalisation. One of the highest aviation priorities over the next 12 to 18 months will be the negotiation of a comprehensive air services agreement with the European Union. Such an agreement would replace Australia's existing bilateral agreements with 17 of the 28 EU member states. It holds out the promise of removing most, if not all, regulatory restrictions on Australian and European airlines operating between Australia and the EU.’

Quite what the implications will be for duty free operations at Australia's airports remains to be seen, along with whether this new agreement will allow for some easing of the country's strong liquids and gels regulations which have boosted sales at the country's duty free arrivals shops.

However, the move should be positive in overall traffic-level terms and particularly for smaller airports. The decision to open up the Tasman route with airlines able to fly from one domestic terminal in Australia to another in New Zealand (and vice versa) without border controls is also intriguing. It could also be a problem for those airports and operators that have only recently spent millions on upgrading their duty free arrivals shops at Sydney and Auckland airports in particular.

The temptation for European airlines to fly to Australian airports with lower aeronautical fees will also doubtless be there and air fares should come down.

This has been the case with fares between New Zealand and the US where they have more than halved from their previous average level of around $2,500 following a similar 'open skies' agreement.