News Release
Loyola de Palacio
No.
37/03
June 5, 2003
NEW ERA FOR AIR
TRANSPORT: LOYOLA DE PALACIO WELCOMES THE MANDATE GIVEN TO THE EUROPEAN
COMMISSION FOR NEGOTIATING AN OPEN AVIATION AREA WITH THE US
The Transport Council today agreed on a package of
measures that passes
responsibility for conducting key
air transport negotiations to the
European Commission. In particular, it granted the European Commission a
mandate to begin negotiations on a new
transatlantic air agreement. It
also agreed that the Commission should open negotiations with other
foreign states on airline ownership restrictions and that member states
should be permitted to continue bilateral negotiation subject to a degree
of Community control.
“This
is an historic decision. Today we have reached a deal that will enable the
European Union to assert itself at international level and to work for the
benefit of its consumers and its aviation industry,” said
Loyola de Palacio,
European Commission Vice-President in charge of
Transport and Energy. “We aim to
launch negotiations with the
US within a month on an
agreement that will bring together the two largest aviation markets in the
world.”
The package
agreed today consists of three different parts:
- a
Council decision on authorizing the Commission to open negotiations with
the United States in the field of air transport;
- a
Council decision authorizing the Commission to open negotiations with
third countries on the replacement of certain provisions in existing
bilateral agreements with a Community agreement;
- a
proposal for a Regulation of the European Parliament and of the Council
on the negotiation and implementation of air service agreements between
member states and third countries.
Mandate for negotiating an Open Aviation Area with the US
The agreement
reached at the Council authorizes the Commission to open
negotiations with the
United States and, in addition, grants it a general mandate to open
negotiations with any foreign country in order to secure market access for
all Community airlines on a non-discriminatory basis. This agreement marks
a historic development in the Community's aviation policy. For the first
time, representatives of the two largest aviation markets in the world—the
US and the EU—will be able to discuss opening up their markets and
investment rules directly. The mandate covers a wide range of issues,
among them: traffic rights, routes, capacity, frequency, slots, fares,
application of competition rules and high standards of safety and aviation
security.
Replace the bilateral agreements with Community agreements
On the basis of the
decisions taken today, the European Commission will
present new mandates for negotiation with other countries in view of the
liberalization of air transport. The priorities for negotiations will have
to respond to the economic and commercial expectations of the industry,
starting with the countries which are ready to negotiate “open skies” agreements. As a reminder, Community agreements
already exist with
Norway, Iceland and Switzerland.
Correct the legal problems
Another agreement
gives the European Commission a general negotiating
mandate that will allow the Community to open negotiations with other
countries to correct the legal problems identified by the
European Court of
Justice—the cases
only involved agreements with the US but the same problems exist in almost
all other bilateral aviation agreements. The Commission and the
member
states will work together to identify the priority countries with which
the Community should seek to open negotiations.
Changing the nationality restrictions
The package
recognizes the fundamental importance of changing the
nationality restrictions that exist in most bilateral agreements in this
sector. These restrictions mean that international routes to and from a
member state can be flown only by air carriers owned and controlled by
nationals of that member state—in most cases the national flag carrier.
Because an air carrier cannot risk losing its nationality, since it would
also lose its traffic rights, European airlines have been prevented from
taking any restructuring measures, such as mergers or acquisitions that
would involve cross-border deals. With many traditional carriers facing
economic problems, it is important that they are given this freedom and
greater access to international capital. The nationality clauses will
therefore need to be changed to allow this possibility.
“Under our new general mandate, we will start discussions
with member states immediately in order to identify the countries with
which we should open negotiations as a priority to change the national
ownership restrictions that are so damaging to our aviation industry,”
said
de Palacio.
Coordination between the European Commission and the
member
states
The general
mandate will allow the Commission to pursue negotiations to
seek the amendment of the nationality rules with any country, allowing for
a series of targeted negotiations with important partners. Nevertheless,
in view of the immense and extraordinary task to renegotiate and amend
hundreds of existing bilateral agreements, it was also agreed that member
states—in the framework of a new regulation—are to be authorized to
negotiate agreements under the control of a system of coordination and on
the basis of standard texts agreed at European level. The framework of
cooperation established at EU level will ensure proper coordination and
remove discrimination between different European airlines. “This will
enable the international aviation system to continue without threat of
breakdown,” explained de Palacio.
Background
In November, the
European Court of Justice ruled on the legality of bilateral
agreements between eight
member states and the US.
The Court found
that the agreements had two legal faults. First, they
contain commitments in areas that are covered by Community law, when only
the Community itself can make such commitments. Second, they restrict
access to the air transport market between each
member state and the US on the basis of nationality. This means, for
example, that a European airline must be majority-owned by German
interests if it is to fly between Germany and the US or majority-owned by
Finnish carriers if it is to fly between Finland and the US. Inside the EU,
the
Treaty forbids such
discrimination. Governments may not discriminate
in favor of their own nationals or companies.
As a result of the
first finding, the Community must be involved in the
negotiation of agreements. Community law now covers a wide range of issues
such as safety, security, ground handling, fares, computerized reservation
systems, slots and passenger protection; and the Community must ensure that
these rules are properly reflected in all agreements with foreign
countries.
As a result of the
second finding, all air transport agreements that
include discriminatory clauses must be renegotiated to give any European
airline with an establishment in a
member state the same level of access to international markets as the
national carrier.
These are major
changes. In particular, the current bilateral system has
strictly controlled the ownership of airlines, preventing them from
restructuring on an international level in the same way as other global
businesses. The recognition that these ownership rules must be dismantled
within the EU will permit the emergence of
pan-European airlines, as well
as providing a stimulus for the opening up of investment rules and market
access worldwide.
Q&A on the
air transport agreements with third countries :
Why was this package of measures needed and what does it contain? Who will
negotiate agreements from now on?
The package contains three elements:
-
A negotiating mandate that will allow the Community to negotiate with
the US to redress the legal problems in the existing agreements
identified by the
European
Court
of Justice, to build a more open aviation
market comprising
the American and European markets and to open up the international
investment regime for the airlines.
-
A negotiating mandate that will allow the Community to open negotiations
with other countries to correct the legal problems identified by the
Court—the cases only involved agreements with the US but the same
problems exist in almost all other bilateral aviation agreements. The
Commission and the member states will work together to identify the
priority countries with which the Community should seek to open
negotiations.
-
A general framework for individual negotiations between member states
and foreign states. Given that there are hundreds of bilateral
agreements between EU member states and third countries, it was
essential to establish a system that would also allow member states to
continue to negotiate with third countries on an individual basis and to
manage existing agreements. The Regulation under discussion creates a
system of cooperation between member states to ensure that proper
account is taken of common interests. The final details of the framework
will be confirmed once the Regulation has been formally adopted by the
Council and the Parliament,
but it will operate on an interim basis from
today.
These three measures will allow the Community to focus its attention on
moving its relations with the US to a new level and on negotiations with
countries with whom there is a general Community interest. At the same
time, it will allow member states to use their experience and resources to
ensure that the existing bilateral system is managed effectively and
updated as necessary to meet legal requirements.
What is going to happen with the current agreements?
The current agreements with the US that were the subject of the
Court rulings will remain in force until they are superseded by a
completely new EU-US agreement.
In the case of existing agreements with other countries, the
agreements will remain in force in most respects, but they must be amended
to comply with Community law—in particular with a view to allowing all
European airlines non-discriminatory market access on routes to and from
EU member states. These amendments will either be made by the Community in
its negotiations or by the member states individually, subject to
Community oversight.
Current agreements will not be systematically denounced.
However,
the
Community or its member states will seek amendments where the current text
of an agreement does not comply with Community law. Ultimately, any party
to an agreement always has the option of denunciation if they are not
content with the outcome.
What effect will a renegotiation have on the industry?
The nationality restrictions in most bilaterals require beneficiaries of
the agreement to be owned and controlled by nationals of one of the
parties. In the case of the EU, this means that a carrier wishing to fly
from Germany to the US must be German. This is contrary to the right of
establishment in the Treaty, which requires all airlines established in a
member state to be treated equally. This means that any European airline,
based anywhere in the EU regardless of its ownership, must have access to
the international routes concerned as long as it has a business
establishment in Germany. This should pave the way for more cross-border
investment activity, airline mergers and the expansion of successful
carriers outside their home member state.
How will the system of negotiations work?
As for all Community negotiations, the Commission will negotiate on behalf
of the Community. It will work in close consultation with member states
throughout the negotiations. It will also consult with the European
aviation industry and other interested parties,
such as airports and trade
unions.
For member state negotiations, a member state will notify the Commission
and the other member states of its intention to open negotiations, giving
the opportunity to exchange information about the plans. Once negotiations
are complete, member states will report back to the Commission and the
other member states so that the outcome can be checked. The agreement will
have to permit all Community carriers with an establishment in the
territory of that member state to be treated equally.
EU-US agreement
What issues will be negotiated?
EU/US negotiations will seek to replace existing agreements between
individual member states and the US with a single comprehensive EU/US
agreement. The negotiations will therefore cover all the arrangements
governing air transport between and within the EU and US. This will
include the rules governing market access (routes, capacity, frequency),
how air fares are set, how to ensure effective application of competition
rules and how to ensure maintenance of high standards of airline safety
and aviation security.
The negotiations will also address opening up each side’s internal market
to the airlines of the other side. A key element in this will be the
removal of the special restrictions which currently apply to foreign
ownership and control of airlines in the US and EU.
What would be the impact of an Open Aviation Area (OAA) between the EU and
US?
An OAA would essentially create a free trade area for air transport
between the EU and US. This would produce a more competitive market than
today, generating greater choice of services and lower fares for air
travellers. It would give EU and US airlines complete freedom to serve any
pair of airports in the EU and US—EU airlines are currently able only to
operate between their own member state and the US and
among
airports
within the EU. Relaxing restrictions on ownership and control would also
make it easier for EU and US airlines to enter into mergers and takeovers
with each other.
A report by US consultants, The Brattle Group, has estimated that an EU/US
Open Aviation Area would generate upwards of 17 million extra passengers a
year, consumer benefits of at least $5 billion a year and would boost
employment on both sides of the Atlantic.
Other countries
Will the Commission propose other negotiations?
The Commission will make proposals for further full mandates to allow it
to enter into negotiations on all aspects of air transport with foreign
states as and when it identifies priority markets for EU airlines and
consumers and in response to requests made by foreign states for full
negotiations with the EU.
|
Press Contacts:
|
Willy Hélin
202-862-9530
|
Wilfried Schneider
202-862-9523
|
