In 1944, at the meeting called to establish the ICAO, the United States attempted to create an "open skies" multilateral agreement, but since it was clear that when World War II was over the U.S. airlines and aircraft-manufacturing industries would dominate worldwide air transportation, it was rejected. Subsequently the United States and Great Britain met in Bermuda to reopen negotiations on North Atlantic air service between their countries and established an agreement on the exchange of commercial air rights that served as a model for hundreds of similar bilateral air agreements (referred to as Bermuda agreements) between countries.
These agreements are used to ensure that the airlines of each nation achieve a fair share of the international market, and they generally prohibit entry of foreign airlines into domestic markets. The Bermuda agreement avoided government involvement in setting fares by sanctioning the creation of a private commercial association of airlines called the International Airline Transportation Association (IATA). It provided a variety of commercial services that facilitated cooperation among the world's airlines, the most important of which was a mechanism for publishing airfares so that airlines and travel agents worldwide could sell tickets on behalf of a foreign airline.
IATA's annual regional fare conferences produced a set of fares and services that, under the original Bermuda structure, would be reviewed and approved by the governments of the countries involved before taking effect. Since the 1970s this fare-approval mechanism has been radically modified by governments trying to allow some degree of freedom for individual airlines to set their own prices and in so doing introduce competition into international air travel.
In recent years governments of the larger nations have tended to divest themselves of their national airlines. In the 1980s there were various interairline cooperative marketing agreements and even exchanges of ownership shares by international airlines. If large multinational airlines emerge in the 1990s, it will confound the current intergovernmental regulatory structure, with its bilateral agreements on behalf of national flag airlines. A reversal of the historical ban on cabotage (the provision of domestic services by a foreign airline) is being openly discussed, so that perhaps in the future, foreign airlines will be able to offer their services inside the United States.
