EU launches aviation strategy to increase competition
7th December 2015 (RTE News)
The European Commission is considering new measures to tackle what it sees as unfair competition from non-EU airlines as part of a package of proposals unveiled today designed to boost the competitiveness of Europe’s aviation sector.
The Commission, which is the EU’s executive, also asked national governments to give it a mandate to start talks on air transport agreements with a number of countries including China, Turkey, United Arab Emirates, Kuwait and Qatar.
The talks with the Gulf countries are likely to be fraught with difficulty since some European legacy carriers, notably Lufthansa and Air France KLM, accuse the Gulf airlines of receiving unfair state subsidies and have been pushing the Commission to address this in negotiations for air transport agreements.
The Aviation Package presented by Transport Commissioner Violeta Bulc and Vice President in charge of the energy union, Maros Sefcovic, contains a wide range of measures designed to improve connectivity in the 28-member bloc, tackle airports’ capacity constraintsand charges and regulate the use of drones.
“It will keep European companies competitive, through new investment and business opportunities, allowing them to grow in a sustainable manner,” Mr Bulc said in a statement.
Europe’s aviation industry, which contributes €110 billion to the EU GDP, [wonder how that is calculated ….] has been hit by the rapid expansion of the Gulf carriers and the rise of Asia as a major air traffic hub.
Its legacy carriers have also suffered at the hands of European low-cost players such as Ryanair and easyJet.
Business lobby group Business Europe said it wanted better implementation of previous packages to ensure coordination and management of European airspace.
“As a comparison, the United States controls the same amount of airspace, with more traffic, at almost half the cost,” it said, adding it wanted to see an international level playing field and better access to growing markets.”
The other countries with which the Commission wants to negotiate air transport agreements are Saudi Arabia, Bahrain, Oman, Mexico and the Association of Southeast Asian Nations.
Next year, the Commission plans to issue guidelines on the law on ownership and control of EU airlines to give legal certainty to investors and airlines.
It will also “actively” pursue the relaxation of the rules on the basis of reciprocity through bilateral aviation and trade agreements.
While the limit on foreign ownership of EU airlines is clearly capped at 49%, there is less clarity on what constitutes effective control.
Etihad, for example, owns 29% of Germany’s Air Berlin and 49 percent of Alitalia.
The executive will also tackle the issue of airlines employing lower-cost workers overseas to avoid high labour costs in Europe by issuing a guide on the applicable labour law and considering whether legal changes are needed.
Europe’s third-biggest budget airline Norwegian Air has, for instance, circumvented Norway’s labour laws by basing some of its crew and jets in countries such as Spain and Thailand, while Ryanair has come under fire in some countries for using pilots employed through agencies, rather than directly with the carrier.
EU member states were urged to complete the “Single European Sky” project, in process for a decade and which would cut costs and emissions by merging national air corridors.
The Commission estimates that fragmentation of European airspace costs at least €5bn a year and up to 50 million tonnes of CO2 emissions.
Europe’s five largest airline groups – Air France-KLM, easyJet, International Airlines Group, Lufthansa Group, and Ryanair – have welcomed the EU’s strategy.
However, in a statement the airlines warned that “we need to act now – large scale airport monopolies, high charges, taxation and inefficiencies characterise the aviation supply chain.
“The focus must be on concrete and measurable actions that support European airlines and their customers by providing more flights and lower fares. Airport charges have risen by more than two thirds over the last ten years. This is in direct contrast to the lower air fares being delivered by Europe’s airlines. We want to create growth and new jobs across Europe, both within aviation and beyond,” it added.
The global landscape of aviation is changing rapidly, thereby creating challenges but also opportunities for the EU’s aviation sector.
In the Commission’s 2015 Work Programme, “A New Start” , an “Aviation Package” is therefore foreseen to identify the challenges facing the EU’s aviation sector and measures that can bolster its competitiveness. The Aviation Package is expected to be adopted by the Commission by the end of 2015. This public consultation is an important element of the stakeholder consultation.
EU Aviation Package Must Benefit European Economy and Consumers
12 November 2015 (IATA press release)
Geneva – The International Air Transport Association (IATA) called on the European Commission to ensure that the upcoming European Union (EU) Aviation Package strengthens the competitiveness and connectivity of the European economy, and benefits European consumers.
“Air connectivity is a crucial driver of economic and social prosperity in the EU. Strong connectivity needs strong airlines. But Europe’s airlines are struggling, in part because they are hampered by unreasonable taxes, high costs for inefficient infrastructure, and regulations unfit for purpose. An effective Aviation Package must help to alleviate these burdens,” said Tony Tyler, IATA’s Director General and CEO.
Since 2010 European airlines have operated on an average EBIT margin of 2.3%, and profitability has lagged their North American counterparts by a cumulative $29.8 billion. If this continues, European airlines will struggle to match the investment plans of their international rivals, with implications for jobs and connectivity. The Aviation Package proposed by the European Commission must address weaknesses in the EU air transport sector that impact on air connectivity options and impose higher costs on airlines and passengers.
“Air transport in the EU supports more than 9 million jobs and EUR500 billion in GDP. It is an industry of supreme strategic significance to Europe and its citizens. But a history marked by a collective failure of vision by European policy makers has restricted the benefits of air connectivity. The Aviation Package is a long-overdue opportunity to reinforce the foundations of European aviation,” said Tyler.
IATA is calling upon the Commission to use the Aviation Package to strengthen European aviation in five areas where broad alignment already exists with wider strategic aims of the EU.
Passenger Taxes. The Bruges Declaration in 2011 encouraged member states to cut taxes on aviation, especially passenger taxes, to “avoid additional burdens affecting European carriers’ competitiveness.”
Security. Europe should enable a risk-based approach to aviation security in line with IATA and ACI’s Smart Security initiative. One-stop security agreements with like-minded countries should also be pursued.
Consumer Protection. The EU’s own ‘Better Regulation’ guidelines should be applied to the revision of Regulation 261 on passenger rights, to bring the regulations more in line with the draft core principles on consumer protection agreed by the International Civil Aviation Organization (ICAO) Air Transport Regulatory Panel in 2014.
Carbon emissions. EU negotiators at ICAO agreed at the 2013 ICAO Assembly to push for a global Market-Based Measure for aviation carbon emissions, to be finalized at the 2016 Assembly. The Aviation Package should reinforce this commitment.
Air Traffic Management modernization. The Commission has long been committed to the implementation of the Single European Sky, but a funding solution for SESAR beyond 2020 is required, and the funding of airborne projects should be increased to 50% (matching the funding given to ground-based initiatives).
Airport Charges Regulation
IATA raised the flag on an area where the Aviation Package risks missing the mark. Effective regulation is needed to rein in airport charges which are an increasing cost burden for airlines. The Aviation Package proposes a substantially weaker regulatory environment for airport charges, which would reduce the benefits to passengers. Airports are failing to match airlines in their efforts to reduce costs and provide better value for money for consumers. Since the year 2000, the price of air tickets has fallen by 37% whereas airport costs per passenger have risen more than 30%, both in real terms.
“The Commission understands the importance of delivering new momentum in areas such as security regulation, the Single European Sky, and working for a globally sustainable industry. That’s good. But urgent action is needed to strengthen the regulation of airport charges. As virtual monopolies, airports have significantly greater bargaining power than airlines and without effective regulation, airports will have insufficient incentive to reduce charges and promote efficiency. This ultimately impacts on passenger connectivity options and on the cost everyone has to pay,” said Tyler.