Euromed Transport

1
EUROMED AVIATION PROJECT AIR TRANSPORT
SEMINAR Amman (Jordan), 1718 October 2007
Euromed Transport EU External Aviation
Policy Towards a Common Aviation Area
2
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

3
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).

4
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

5
Liberalisation within a Modern Regulatory
Framework
Open Markets need coherent regulatory standards

• Common requirements for licensing
• Application of competition rules
• Strict control of state aid
• High safety standards
• High security standards
• Consumer protection Passenger Rights
• Common rules for slot allocation
• High standards on noise emissions
• Single European Sky

6
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

7
Other Key Topical EU Aviation Developments

• 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 EUs
  emissions trading system is being discussed
• Security
• Passengers rights consumer protection
• EU External Aviation Policy

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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.

9
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.
10
External Aviation Relations Political Decisions

• 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

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Three Key Pillars of EU External Aviation Policy

• Bringing existing bilateral agreements into line
  with Community law
• Conclusion of ambitious comprehensive agreements
  with key partners (US, China, Russia, India,
  Australia, New Zealand, Chile)
• The creation of a Common Aviation Area with
  neighbouring countries

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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

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Pillar II Common Aviation Area by 2010

• 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

14
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 States 900 Mio Inhabitants
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The EC-Morocco Agreement

• First Euro-Mediterranean Aviation Agreement
• Creates a common area for aviation
• through high-level regulatory convergence and
  through market opening
• Covers EC, its 25 Member States and Morocco

16
Negotiating process

• Mandate to Commission in Dec. 2004
• First of four rounds of negotiations in Feb. 2005
• Horizontal agreement initialled in May 2005
• Global agreement initialled in Dec. 2005
• Signature of global and horizontal agreements
  on 12 December 2006

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Basic principles

• Open market access
• High technical standards of the EU internal air
  transport market will be implemented by Morocco

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Basic principles (cont.)

• The core EU aviation legislation is the basis of
  the agreement
• Transitional phases
• Technical assistance to Morocco

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Market access

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

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Structure of the Agreement

• Main text
• Annex I agreed services and routes
• Annex II ASAs between EC Member States and
  Morocco
• Annex III competent authorities
• Annex IV transitional measures
• Annex V List of other states
• Annex VI Rules applicable to civil aviation

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Structure Main text

• Definitions
• Traffic rights, authorisation
• Investment
• Competition, state aid
• Traditional soft right provisions (offices,
  charges etc.)
• Free pricing
• Regulatory cooperation safety, security, ATM,
  environment, Consumer protection, CRSs, Social
  aspects ? Annex VI

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Structure Main text (contd.)

• Interpretation
• Enforcement
• Joint Committee
• Dispute settlement
• Safeguard measures
• Extension of the agreement (Euro-Med clause)

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Structure Main text (contd.)

• Relationship with other agreements
• Amendment
• Termination
• ICAO registration
• Entry into force

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Conclusions

• The worlds largest single air transport market
  further extended
• The same high technical standards to be applied
  (safety, security, ATM) with EU technical
  assistance
• Part of Common Aviation Area to be established
  by 2010
• First Euro-Mediterranean Aviation Agreement

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The European Common Aviation Area Agreement
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The European Common Aviation Area Agreement

• Multilateral Aviation Agreement
• Creates a common area for aviation
• through the application of the same legislation
  and through extending the EU internal air
  transport market
• Covers 37 parties with more than 500 million
  people

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Multilateral Agreement

• 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

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Creating a common area for aviation

• Open market access and high technical standards
  of the EU internal air transport market are
  extended to the Western Balkans parties in
  preparation to their eventual accession to the EU

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Application of the same legislation

• The EU aviation legislation is the basis of the
  agreement
• The EU aviation legislation becomes applicable
  throughout the European Common Aviation Area i.e.
  the Western Balkans parties will also implement it

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ECAA Benefits for all

• Pre-accession instrument in a key sector
• Prepare for accession by early adaptation
• Application of high standards
• EU standards become applicable in all Western
  Balkans parties, and these standards will be
  implemented in the same way
• Economic interests
• For both the EU and the Western Balkans parties

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ECAA - Structure of the Agreement

• Main text objectives, principles, functioning,
  future developments etc.
• Annex I list of EU aviation legislation which
  becomes applicable
• Protocols one for each Western Balkans party,
  setting out transitional measures and allowing
  for implementation at own speed

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Structure Protocols

• Transition yes, derogation no
• Gradual opening of markets subject to
  implementation of EU legislation through two
  transitional phases
• 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)

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ECAA implementation

• Agreement applied at administrative level by all
  Parties since its signature in June 2006
• Ratification completed by Albania, the former
  Yugoslav Republic of Macedonia, UNMIK and several
  EU Member States
• First annual ECAA Joint Committee meeting
  Brussels, 12 December 2006
• ECAA Joint Committee Special meeting on safety
  and security Brussels,19 March 2007
• Next annual ECAA Joint Committee meeting
  Dubrovnik,19 October 2007

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Conclusions

• Liberalization and regional integration of air
  transport promises large economic gains for the
  Neighbouring countries
• The reform agenda of the CAA is ambitious and
  will successfully integrate the region into the
  EU Single Market for air transport.
• Cross-border cooperation and consolidation will
  be essential.
• With the appropriate policies, most needed
  investments can be mobilized from the private
  sector (e.g. airport concessions, airline
  privatizations, cost-recovery in ATM).

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Pillar III Comprehensive Mandates

• EU-US Agreement
• Further requested mandates
• China
• India
• Australia
• New Zealand
• Chile

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The EUUS Agreement
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The US Mandate Towards an Open Aviation Area

• Objective of the Councils 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

38
Economic Benefits of the EU-US Air Transport
Agreement

• 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

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First-stage 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

40
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

41
First-stage EU-US Air Transport Agreement

• REGULATORY CO-OPERATION
• Security
• Safety
• Competition
• Government subsidies
• Environment

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Institutional provisions

• Joint Committee
• Arbitration Procedures
• 2nd Stage Negotiations

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Second Stage Negotiations

• Commitment to open second-stage negotiations
  within 60 days of provisional application
• Priority items for second-stage
• Facilitating foreign investment
• Further liberalisation
• Environmental and infrastructure constraints
• Further access to Fly America
• Wet-leasing

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Timescale for Second Stage Negotiations

• Mechanism to ensure progress to second-stage
  agreement within defined timescale
• Negotiations 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 rights
• EU-internal decision on internal mechanism for
  suspension of rights

45
Next Steps

• 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)

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General Conclusion Time to Normalise the Aviation
Industry

• National ownership rules are out-dated and
  inappropriate in a globalised economy
• Ultimate consequence is fragmentation of the
  worlds airline industry
• Hamper much-needed consolidation and development
  of the sector
• Why should air transport be treated as a special
  case differently from other industries?
• Time to normalise the regulation of this
  industry Going beyond Open Skies.