1 Directorate-General Energy and Transport / Air Transport Directorate Euromed Transport EU External Aviation Policy Towards a Common Aviation Area EUROMED

1Directorate-General Energy and Transport / Air Transport Directorate

Euromed Transport EU External Aviation Policy

Towards a Common Aviation Area

EUROMED AVIATION PROJECTAIR TRANSPORT SEMINAR

Amman (Jordan), 17–18 October 2007


The EU Single Market

27 Member States 450 Million Inhabitants (and consumers) One Single Market (in fact wider than EU27)

Freedom of establishment & provision of services The “Four Basic Freedoms”: Freedom of

movement of goods, services, capital and persons No barriers to trade (technical harmonisation and

common standards)

EU law has primacy over national law


From National Markets to a Common Market

Pre-1987: protected and fragmented national markets To fly between two major cities: little alternative but to fly

with one of the two national “flag carriers” (duopoly); Three successive packages of liberalisation

measures adopted 1987-1992 have gradually completely transformed this landscape;

Most extensive example in the world of regional liberalisation, by far. Regarded as successful;

Liberalisation and market integration based on three main Regulations: Air carrier licensing (Regulation 2407/92) Market access (Regulation 2408/92) Fares (Regulation 2409/92).


From National Markets to a Single EU Aviation Market

Pre-1987: protected and fragmented national markets

Post-1992: Liberalisation and market integration Results:

Non-discriminatory air carrier licensing across Europe (from national to Community carriers with equal rights)

Market access: no capacity restrictions – cargo came first

Full cabotage since 1 April 1997 Free air fare setting Any Community carrier can now operate on any route

within the EU – and they do! Comprehensive body of Community legislation in

relation to all key aspects of aviation


Liberalisation within a Modern Regulatory Framework

Common requirements for licensingApplication of competition rulesStrict control of state aidHigh safety standardsHigh security standardsConsumer protection – Passenger RightsCommon rules for slot allocation High standards on noise emissionsSingle European Sky

Open Markets need coherent regulatory standards:


What Have We Achieved?

Tripling of air travel 1980-2000. Doubling expected by 2020

25% more airlines since 1990 Emergence of low-cost carriers

1% of capacity in 1996. +20% in 2004

More competition between air carriers Lower fares – price response of traditional carriers to LCC Massive productivity gains More routes with more than two competitors (+150% 1992-2004)

More intra-EU routes (+100% 1992-2004) Since 1998 more intra-Community traffic than domestic


Single European Sky becoming a reality EASA taking up increasing responsibilities EU-wide black list of unsafe air carriers Airport capacity and costs of use (infrastructure charging)

Broad consultation in 2005; Communication with possible measures to be presented in 2nd half of 2006

Revision of EU single market regulatory framework Simplification of Third package, slot regulation, ground handling

The possible inclusion of aviation in the EU’s emissions trading system is being discussed

Security Passenger’s rights – consumer protection EU External Aviation Policy

Other Key Topical EU Aviation Developments


The External Dimension of the Single EU Aviation Market

The single European aviation market also covers Norway, Switzerland and Iceland (EFTA members).

European Common Aviation Area (ECAA - Balkans) + Morocco.

Since the “open skies” judgements of the European Court of Justice in November 2002 it has been recognised that the EU has exclusive competences in external aviation.

This reflects the development of the internal single market and the comprehensive body of EU legislation in aviation.


“Open Skies” Judgements of the European Court of Justice

The European Court of Justice found on 5 November 2002 that the bilateral air services

agreements between eight EU Member States and the USA were not in conformity with EC law.

The nationality clauses in all

agreements infringe the right of

establishment (Art. 43 EC Treaty) as they are discriminating on

grounds of nationality.

The agreements infringe the exclusive external competence of the EU.

In areas where EC legislation affects third

countries, only the EU can enter into international

commitments.


June 2003 Council agreement on: US negotiating mandate to the COM “Horizontal” mandate to the COM Regulation on the negotiation and implementation of

air service agreements between EU Member States and third countries (formally adopted as Regulation 847/2004 in April 2004)

June 2005 Council agreement on: Road-map on external aviation policy

External Aviation Relations – Political Decisions


I. Bringing existing bilateral agreements into line with Community law

II. Conclusion of ambitious comprehensive agreements with key partners (US, China, Russia, India, Australia, New Zealand, Chile)

III. The creation of a “Common Aviation Area” with neighbouring countries

Three Key Pillars of EU External Aviation Policy


Pillar I: Progress on the Legal Issue

93 non-EU states have accepted Community designation

564 Bilateral ASAs have been brought into conformity with Community law

29 Horizontal Agreements covering 461 Bilateral ASAs (since September 2004)

Negotiations/talks on-going with many countries


Southern and Eastern neighbouring countries Morocco (Euro-Mediterranean agreement)

EU-Morocco Agreement signed in December 2006 Pre-accession context: Western Balkans (ECAA)

ECAA Agreement signed in June 2006 Next: Ukraine, Jordan, Lebanon, Israel Particular case of Russia (Siberian overflight)

Why a common aviation area? Economic and aviation policy reasons

Pillar II:Common Aviation Area by 2010


A Wider Common Aviation Area

The EU today:• 27 Member States• 490 Million Inhabitants • One Single Market

Potential of a Common Aviation

Area by 2010:

48 States900 Mio Inhabitants


The EC-Morocco AgreementThe EC-Morocco Agreement

• First Euro-MediterraneanFirst Euro-Mediterranean Aviation Aviation AgreementAgreement

• CCreatreateses a common area for aviation a common area for aviation

through through high-level regulatory high-level regulatory convergence and through market convergence and through market openingopening

• Covers EC, its 25 Member States and Covers EC, its 25 Member States and MoroccoMorocco


Negotiating processNegotiating process

• Mandate to Commission in Dec. 2004Mandate to Commission in Dec. 2004• First of four roundsFirst of four rounds of negotiations in Feb. of negotiations in Feb.

20052005• Horizontal agreement initialled in May 2005Horizontal agreement initialled in May 2005• Global agreement initialled in Dec. 2005Global agreement initialled in Dec. 2005• Signature of „global” and horizontal Signature of „global” and horizontal

agreements on 12 December 2006agreements on 12 December 2006


Basic principlesBasic principles

• OpenOpen market access market access

• High High technical technical standards of the standards of the EU EU internalinternal air transport maair transport market rket will be will be implemented by Morocco implemented by Morocco


Basic principles (cont.)Basic principles (cont.)

• TheThe core core EUEU aviation aviation legislationlegislation is the is the basis of the agreementbasis of the agreement

• Transitional phasesTransitional phases

• Technical assistance to MoroccoTechnical assistance to Morocco


Market accessMarket access

• Phase 1: Phase 1: • Process of regulatory convergence starts• Full liberalisation of 3rd and 4th freedoms

• Phase 2: Phase 2: • Regulatory convergence achieved• Intra-Community 5th freedom for Moroccan

carriers; 5th freedom for EC carriers beyond Morocco

• Cargo unlimited

• Pax to Neighbourhood countries


SStructure of the Agreementtructure of the Agreement

• Main Main ttextext• Annex I: Annex I: agreed services and routesagreed services and routes• Annex II: ASAs between EC Member States Annex II: ASAs between EC Member States

and Moroccoand Morocco• Annex III: competent authoritiesAnnex III: competent authorities• Annex IV: transitional measuresAnnex IV: transitional measures• Annex V: List of other statesAnnex V: List of other states• Annex VI: Rules applicable to civil aviationAnnex VI: Rules applicable to civil aviation


Structure: Main Structure: Main ttextext

• DefinitionsDefinitions• Traffic rights, authorisationTraffic rights, authorisation• InvestmentInvestment• Competition, state aidCompetition, state aid• Traditional soft right provisions (offices, Traditional soft right provisions (offices,

charges etc.)charges etc.)• Free pricingFree pricing• Regulatory cooperation: safety, security, Regulatory cooperation: safety, security,

ATM, environment, Consumer protection, ATM, environment, Consumer protection, CRSs, Social aspects CRSs, Social aspects → Annex VI→ Annex VI


Structure: Main Structure: Main ttext (contd.)ext (contd.)

• InterpretationInterpretation

• EnforcementEnforcement

• Joint CommitteeJoint Committee

• Dispute Dispute ssettlementettlement

• Safeguard measuresSafeguard measures

• Extension of the agreement („Euro-Extension of the agreement („Euro-Med clause”)Med clause”)


Structure: Main Structure: Main ttext (contd.)ext (contd.)

• Relationship with other agreementsRelationship with other agreements

• AmendmentAmendment

• TerminationTermination

• ICAO registrationICAO registration

• Entry into forceEntry into force


ConclusionsConclusions

• The world’s largest single air transport The world’s largest single air transport market further extendedmarket further extended

• The same high technical standards to be The same high technical standards to be applied (safety, security, ATM) with EU applied (safety, security, ATM) with EU technical assistancetechnical assistance

• Part of „Common Aviation Area” to be Part of „Common Aviation Area” to be established by 2010established by 2010

• First Euro-Mediterranean Aviation First Euro-Mediterranean Aviation AgreementAgreement


The European Common The European Common Aviation Area Aviation Area

AgreementAgreement


The European Common The European Common Aviation Area AgreementAviation Area Agreement

• Multilateral Aviation AgreementMultilateral Aviation Agreement

• Creates a common area for aviationCreates a common area for aviation

through the application of the same through the application of the same legislation and through extending the legislation and through extending the EU internal air transport marketEU internal air transport market

• Covers 3Covers 377 parties with more than 500 parties with more than 500 million peoplemillion people


Multilateral AgreementMultilateral Agreement

Contracting Parties:Contracting Parties:- The European Community and its

Member States

- Norway, Iceland

- The Western Balkans parties: Albania, Bosnia and Herzegovina, Croatia, the former Yugoslav Republic of Macedonia, Montenegro, Serbia, UNMIK-Kosovo


Creating a common area for Creating a common area for aviationaviation

Open market access and high Open market access and high technical standards of the EU internal technical standards of the EU internal air transport market are extended to air transport market are extended to the Western Balkans partthe Western Balkans partiesies in in preparation to their eventual preparation to their eventual accessionaccession to the EU to the EU


Application of the same Application of the same legislationlegislation

• The EU aviation legislation is the The EU aviation legislation is the basis of the agreementbasis of the agreement

• The EU aviation legislation becomes The EU aviation legislation becomes applicable throughout the European applicable throughout the European Common Aviation AreaCommon Aviation Area i.e. the i.e. the Western Balkans parties will also Western Balkans parties will also implement itimplement it


ECAA – Benefits for allECAA – Benefits for all

• Pre-accession instrument in a key Pre-accession instrument in a key sectorsector

Prepare for accession by early adaptation

• Application of high standardsApplication of high standardsEU standards become applicable in all Western

Balkans parties, and these standards will be implemented in the same way

• Economic interestsEconomic interestsFor both the EU and the Western Balkans parties


ECAA - Structure of the ECAA - Structure of the AgreementAgreement

• Main text: objectives, principles, Main text: objectives, principles, functioning, future developments etc.functioning, future developments etc.

• Annex I: list of EU aviation legislation Annex I: list of EU aviation legislation which becomes applicablewhich becomes applicable

• Protocols: one Protocols: one for each Western for each Western Balkans partyBalkans party, setting out transitional , setting out transitional measuresmeasures and allowing for and allowing for implementation at own speedimplementation at own speed


Structure: ProtocolsStructure: Protocols

• Transition: yes, derogation: noTransition: yes, derogation: no• Gradual opening of markets subject to Gradual opening of markets subject to

implementation of EU legislation implementation of EU legislation through two through two transitional transitional phasesphases• Liberalisation of 3rd and 4th freedom rights

upon application of the agreement until the implementation of key EU aviation legislation (first transitional phase)

• Liberalisation of 5th freedom right during the second transitional phase

• Full liberalisation including cabotage after the implementation of the whole EU aviation legislation (transition is over)


ECAA implementationECAA implementation

• Agreement applied Agreement applied atat administrative level by all administrative level by all PartPartiesies since its signature in June 2006 since its signature in June 2006

• Ratification completed by Albania, Ratification completed by Albania, the former the former Yugoslav Republic of Macedonia, UNMIK Yugoslav Republic of Macedonia, UNMIK and and several EU Mseveral EU Member Statesember States

• First First annual ECAA annual ECAA Joint Committee meetingJoint Committee meeting: : Brussels,Brussels, 12 December 2006 12 December 2006

• ECAA ECAA Joint Committee Special meeting on safety Joint Committee Special meeting on safety and securityand security: Brussels,: Brussels,19 March 200719 March 2007

• Next annual ECAA Next annual ECAA Joint Committee meetingJoint Committee meeting: : Dubrovnik,19 October 2007Dubrovnik,19 October 2007


ConclusionsConclusions

Liberalization and regional integration of air transport Liberalization and regional integration of air transport promises large economic gains for the Neighbouring promises large economic gains for the Neighbouring countriescountries

The reform agenda of the CAA is ambitious and will The reform agenda of the CAA is ambitious and will successfully integrate the region into the EU Single successfully integrate the region into the EU Single Market for air transport.Market for air transport.

Cross-border cooperation and consolidation will be Cross-border cooperation and consolidation will be essential. essential.

With the appropriate policies, most needed investments With the appropriate policies, most needed investments can be mobilized from the private sector (e.g. airport can be mobilized from the private sector (e.g. airport concessions, airline privatizations, cost-recovery in concessions, airline privatizations, cost-recovery in ATM).ATM).


EU-US Agreement Further requested mandates:

China India Australia New Zealand Chile

Pillar III:Comprehensive Mandates


The EU–US The EU–US AgreementAgreement


Objective of the Council’s mandate of 5 June 2003: To create an open market for aviation between and within the EU and the US- Remove all market access restrictions- Open foreign investment on a reciprocal basis- Ensure effective competition- Guarantee high standards of safety, security,

environmental protection and passenger protection

- Bring bilateral agreements into conformity with EU law

- Staged approach with mechanism to ensure progression to second-stage

The US Mandate: Towards an Open Aviation Area


Over the first 5 years:

More than 25 million additional passengers between EU and US

Up to 12 billion EUR consumer benefits

Creation of 80,000 new jobs on both sides of the Atlantic

Economic Benefits of the EU-US Air Transport Agreement


MARKET ACCESS US accepts Community air carrier concept Unlimited 3rd/4th and 5th freedom rights 7th freedom rights: Unlimited all-cargo rights for EU

airlines, but no additional rights for US airlines; limited passenger rights for EU airlines (ECAA!), no rights for US airlines

Free pricing, except US carriers cannot price-lead on intra-EU routes

Unlimited code sharing Franchising and branding opportunities New opportunities for EU airlines to provide aircraft

with crew (wet-lease) to US airlines on international routes

Access for EU airlines to certain Fly America traffic EU airlines qualify for antitrust immunity

First-stage EU-US Air Transport Agreement


OWNERSHIP AND CONTROL US airlines: Guarantees concerning permissible

percentage ownership by EU nationals, including possibility to exceed 50% of total equity

Guarantee of fair and expeditious consideration of transactions involving EU investment in US airlines

EU airlines: Right to limit US investments in EU airlines reciprocally to 25% voting equity

Acceptance by US of any EU airline owned or controlled by EU or ECAA citizens

3rd country airlines: Unilateral acceptance by US of EU ownership + control of any airline in the EEA, ECAA, and 18 African countries

Joint Committee role in matters concerning ownership and control



REGULATORY CO-OPERATION

Security

Safety

Competition

Government subsidies

Environment



Joint Committee

Arbitration Procedures

2nd Stage Negotiations

Institutional provisions


Second Stage Negotiations

Commitment to open second-stage Commitment to open second-stage negotiations within 60 days of provisional negotiations within 60 days of provisional applicationapplication

Priority items for second-stage:Priority items for second-stage:Facilitating foreign investmentFurther liberalisationEnvironmental and infrastructure constraintsFurther access to Fly AmericaWet-leasing


Timescale for Second Stage Negotiations

Mechanism to ensure progress to Mechanism to ensure progress to second-stage agreement within second-stage agreement within defined timescaledefined timescaleNegotiations start 60 days after

provisional application (May 2008)Review after 18 months (end of 2009)If no progress within 12 months (end of

2010), suspension of certain rightsEU-internal decision on internal

mechanism for suspension of rights


Transport Council approved the agreement on 22 March 2007

Signature at EU-US Summit 30 April 2007

Agreement will be applied provisionally from Summer season 2008 (commencing on 30 March 2008)

Next Steps


National ownership rules are out-dated National ownership rules are out-dated and inappropriate in a globalised and inappropriate in a globalised economyeconomy

Ultimate consequence is fragmentation Ultimate consequence is fragmentation of the world’s airline industryof the world’s airline industry

Hamper much-needed consolidation Hamper much-needed consolidation and development of the sectorand development of the sector

Why should air transport be treated as Why should air transport be treated as a special case differently from other a special case differently from other industries?industries?

Time to normalise the regulation of this Time to normalise the regulation of this industry: Going beyond “Open Skies”. industry: Going beyond “Open Skies”.

General ConclusionTime to Normalise the Aviation Industry

Documents

1 Directorate-General Energy and Transport / Air Transport Directorate Euromed Transport EU External Aviation Policy Towards a Common Aviation Area EUROMED