COMMISSION OF THE EUROPEAN COMMUNITIES 
C0M(92) 164 final 
Brussels, 29 April 1992 
COMMUNICATION FROM THE COMMISSION TO THE COUNCIL 
The European Aircraft Industry: 
First asses sme n t 
and possible Community actions 
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I. INTRODUCTION 1 
II. THE SITUATION OF THE EUROPEAN AIRCRAFT INDUSTRY 3 
II.A Large commercial aircraft 3 
II.B Regional transport aircraft 4 
II.C Helicopters 5 
III. DIAGNOSIS OF COMPETITIVENESS 6 
III.A The essential role of economies of scale 6 
1. Large conmercial aircraft 7 
2. Regional transport aircraft 7 
3. Helicopters 8 
Conclusion 8 
III.B The necessary technological base 8 
1. Technological needs 8 
a) ensure safety and reliability of air transport 9 
b) improve operational performances of air transport 9 
c) meet environmental requirements 10 
d) develop new technologies and design and production 
methods 10 
2. Financing of R&D 11 
a) public financing systems for R&D 11 
b) fragmentation of the public financing of R&T 13 
III.C Financial and conmercial techniques and mechanisms 14 
1. Financing and financial guarantees 14 
2. Industrial offsets 14 
3. After-sales service 14 
4. Fixed prices 15 
III.D "Detente" 15 
1. Conversion of the military aircraft industry 15 
2. Aircraft industries of Central and Eastern Europe and of 
the Independent States of the former USSR 16 
a) aircraft industry of Central and Eastern Europe 16 
b) aircraft industry of the Independent States of the 
former USSR 17 
III.E Handicap of the dependence on the US dollar 18 
III.F The environment 19 
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III.G National heritage 20 
1. Technical standards 20 
a) industrial standards 20 
b) airworthiness certification regulations and procedures 21 
2. Vocational training 22 
3. Air traffic control 22 
IV. PROPOSALS FOR COMMUNITY ACTION 23 
IV.A Create a favourable framework 23 
1. Accelerate harmonization of technical standards 23 
a) industrial standardization 24 
b) airworthiness certification regulations and procedures 24 
2. Create a cannon legal framework: the European company 
statute 24 
3. Promote vocational training 25 
4. Set up trans-European networks 26 
5. Promote social dialogue 27 
IV.B Ensure a level playing field 27 
1. Apply competition rules inside the Conmunity 27 
2. Guarantee fair international trade 28 
IV.C Maintain the technological level 29 
IV.D Cope with the dollar issue 30 
TV.E Guarantee balance "with the environment 31 
IV.F Launch cooperation with Central and Eastern Europe ........ 31 
IV.O Itorsuethe dialogue "with the European aircraft industry ... 31 
4 b 
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I. INTRODUCTION 
1. In July 1990, the Conmission adopted a Conmunication on the 
European aircraft industry. The objective was to establish, in 
close cooperation with the Member States and the manufacturers, 
an analysis of the situation of this industry and, on this 
basis, start reflecting on measures to set up the most 
favourable legal and economic environment for its development. 
This forms part of the industrial policy approach as defined by 
the Conmission in its Conmunication on industrial policy in an 
open and competitive environment of November 1990. In that 
Conmunication, the Conmission stresses the importance of the 
completion of the internal market and its implications for com­
panies' structures in connection with an increase in competi­
tion on the international market. The Commission is in favour 
of continuing and/or strengthening the horizontal (adjustment) 
policies with the objective of helping the industry to adapt to 
market needs and of ensuring the coherence of national poli­
cies . 
Considering in particular the considerable opportunities opened 
up by the aircraft industry for the transfer of technologies to 
other industrial sectors, the Conmission, in its Conmunication 
on industrial policy, considered that this industry is an im­
portant industrial sector. 
2. This second Conmunication on the aircraft industry has two 
objectives: 
* to show the progress of thinking on the situation .within the 
sector; 
* to prepare a coherent set of measures that the Conmunity, 
Member States and the European aircraft industry, - each 
according to their respective roles -, should carry out to 
strengthen the long-term competitiveness of the European 
aircraft industry. 
After a period of sustained development, the aircraft industry 
currently has to cope with structural adjustment problems. 
Despite enormous efforts, at both national and European level, 
the European aircraft industry is still suffering from the 
effects of excessively long partitioning of its industrial 
structures, particularly in the equipment sector. To adapt the 
industrial structures to the internal market and to the in­
creasing globalization of the economy, the priority questions 
are: do current competition conditions allow the European aero­
nautical industry to be effective? Wiat suitable measures can 
be taken to improve European competitiveness? 
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A strong aeronautical industry in Europe has to respond to the 
dual aims of: 
* preserving a major economic and industrial asset in the con­
text of international competition; 
* remaining in the forefront as regards the acquisition and 
mastery of technologies to remain competitive and because of 
technological spinoffs on industry as a whole. 
3. Developments since the first Conmunication have confirmed 
that: 
* on the one hand, certain phenomena already perceived at 
the time influence current structures increasingly. 
This is the case in particular with the reduction of 
defence budgets and military progranmes, and the opening 
up towards the countries of Central and Eastern Europe 
and the Independent States of the former USSR, which 
offers new prospects for industrial cooperation; 
* on the other hand, the extremely fragile financial posi­
tion of the airline industry in the face of cyclical 
phenomena which has repercussions for the aircraft indus­
try: the drop in air traffic shown up by the Gulf war 
resulted in a drop in orders of 2/3. 
Consequently, whereas in mid-1990 it could be expected that the 
impact of military conversion would be partially offset by the 
demand for civil aircraft, from early 1991 it clearly appeared 
that this would not be the case. 
Based on the analysis carried out in collaboration with the 
European aircraft industry, the first part of this Comaunica­
tion aims at describing the situation in the sector and estab­
lishing a diagnosis of the competitiveness of the European air­
craft industry in relation to its main competitors while taking 
account of the challenges with which it is confronted. 
The second part of the Conmunication describes proposals for 
Conmunity action which could help to place the aircraft indus­
try in an economic and legal environment conducive to improving 
its competitiveness. 
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II. THE SITUATION OF THE EUROPEAN AIRCRAFT INDUSTRY 
In 1990 the European aircraft industry generated a turnover of 
about 37 billion ECUs, while directly employing approximately 
450,000 persons, and indirectly more than a million persons. 
This turnover, which experienced an average annual growth rate 
of over 5% during the eighties, now breaks down equally between 
the civil and the military sectors. 
Aircraft manufacturers represent about half the activity while 
the other half is split between the engine (20%) and the equip­
ment segments (30%). 
The analysis of the situation is limited for the moment to air­
craft manufacturers. Later it could be broadened to other seg­
ments. Nevertheless, it is obvious that several problems dealt 
with in this Comnunication also concern engine and equipment 
manufacturers. 
The following three aircraft industry sectors are more closely 
analysed, though the distinction between conmercial and region­
al transport aircraft is relatively arbitrary: 
* large conmercial transport aircraft, which have a capacity 
higher than 130 seats; 
* regional transport aircraft from 20 to 130 seats. A dis­
tinction is made within this range between turboprops from 
20 to 70 seats and jets from 70 to 130 seats; 
* turbine-powered helicopters. 
Taking account of their limited importance, the business air­
craft sector as well as the general aircraft sector are not 
subject to detailed analysis. 
Large conmercial transport aircraft represent 9/10 of aircraft 
activity, whereas regional transport aircraft and helicopters 
share the remainder. 
II.A Large conmercial aircraft 
Growth in the large conmercial aircraft sector has been rapid 
over the last 25 years, as airlines have expanded their fleets 
to cope with growth in world scheduled air traffic of more than 
six per cent a year since the 1970s. Since 1985, the growth in 
orders for new aircraft has exceeded all records and by the end 
of the 1980s, the backlog in orders for large conmercial trans­
port was of more than 3,000 aircraft. 
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Because of low GNP growth in Europe and the US since 1989, com­
pounded by the effects of the Gulf "War and high fuel prices, 
the airline industry has, however, entered in a recession and 
has drastically reduced ordering new aircraft. There is a 
phase deplacement between the aircraft industry, which is con­
tinuing to manufacture at a record level, and the airline com­
panies who are experiencing the most serious financial crisis 
in their history. As a consequence, after deliveries of more 
than 600 aircraft a year between 1991 and 1993, deliveries are 
forecast to decline to about 400 a year. Total deliveries to 
the year 2000 are expected to be about 5,000. 
Despite the success of the European aeronautic industry which 
has gained a considerable position on this market, Boeing 
clearly dominates the market in terms of production volume, 
'family' range and production rate: Boeing has two-thirds of 
the deliveries on average, partly owing to the high value of 
its 747 aircraft. Boeing is also the only manufacturer with a 
comprehensive range of aircraft from 100 to 500 seats. \Miile 
both Airbus and McDonnell Douglas have projects for very large 
aircraft, Boeing is likely to retain its monopoly in the 350+ 
seating category for some time, i.e. its monopoly on more than 
20 % of the total market. 
II.B Regional transport aircraft 
Growth in the large jet sector has been mirrored in the region­
al aircraft sector where annual deliveries rose from around 200 
aircraft in 1984 to more than 400 in 1990. 
Such growth is forecast to continue in all sub-segments : new 
sales are forecast to reach between 5,000 and 7,000 aircraft 
from 1991 to 2010. 
* In the turboprop segment, new aircraft sales over the next 
20 years are forecast to range from 3,500 to 4,300 units, 
but only 2/5 of the total - by value - regional transport 
aircraft market. 
* In the regional jet segment, forecasts vary from 1,500 to 
2,600 units over the next 20 years, but 3/5 of the total -
by value - of regional transport aircraft market. 
The European industry account for about half the deliveries 
world-wide in the regional aircraft sector. The presence of 
European manufacturers varies, however, across the sector. 
European producers dominate the turboprop subsegment while US 
manufacturers have the stronger position in the jet segment. 
In revenue, the strong US position becomes even more marked 
when the higher value of larger aircraft is taken into account. 
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II.C Helicopters 
In the helicopter sector, all the manufacturers are highly 
dependent on military business; almost all civil helicopters 
are derived from military aircraft or have an equivalent mili­
tary version that boosts production volume. In value terms 
military sales account for 20 times as much as sales to the 
civil sector. As demand for military helicopters declines, the 
overall helicopter industry is therefore entering a difficult 
period. 
The majority of civil turbine powered helicopters are operated 
in the utility sector, which comprises the oil and gas, public 
service, emergency medical service and executive air taxi sec­
tors. The market for civil turbine powered helicopters has 
been in depression since 1982. Rapid pre-1982 sales growth had 
been driven largely by the needs of the off-shore and public 
service sectors. Demand plummeted in the early 1980s because 
of the downturn in the overall economic climate, the world-wide 
oil glut and the drastic reduction in oil prices. Annual 
deliveries are now about 450 units. Projections are, however, 
for renewed growth in the civil helicopter sector, with a world 
market of 5,000 new turbine helicopter deliveries from 1991 to 
2000. 
Thei'e are seven main manufacturers of turbine powered helicop­
ters, three in Europe and four in the US. European manufac­
turers account for slightly more deliveries than US manufactur­
ers. 
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III. DIAGNOSIS OF COMPETITIVENESS 
Companies will improve their competitiveness by pursuing a 
dynamic approach: innovation with regard to the technologies 
applied, the products developed, production processes, training 
methods ... 
The aircraft industry has to supply products which meet the 
airlines' requirements. Leaving aside 'political purchases', 
the airlines select an aircraft on the basis of a mixture of 
technical, economic and conmercial criteria. 
Certain factors are involved in the cost concept linked to 
economies of scale, e.g.: 
* the price and 
* the 'family' concept, which makes it possible to adapt the 
size or the type of aircraft to ever-changing requirements 
up to the very last moment. 
Other criteria, which are mainly determined by the industry's 
technological level, include: 
* the yield from the aircraft: the expected aircraft operating 
revenue, including freight revenue; 
* reliability and maintenance requirements 
* the company's image as perceived by the passenger, and 
* the performances. 
Finally, the financial 'package', i.e. the financing and com­
mercial techniques and mechanisms, which have to fulfil the 
requirements of the airline, play a decisive role in the selec­
tion process. 
Within several of these areas, the European aircraft industry 
has strong assets, but this cannot hide sometimes alarming 
weaknesses and gaps. The Conmission, in close cooperation with 
the industry, has carried out in-depth analyses, which have 
enabled the sector's strong and weak points to be defined. 
Certain weaknesses are due to the industry's environment and 
heritage, which still influence the companies' development con­
ditions. 
The main factors highlighted within the framework of studies 
and analyses referred to above are examined below. 
III.A The essential role of economies of scale 
All three European aircraft industry sectors are at different 
stages of their structural development. However, the impact of 
economies of scale plays a major role in each of them. The 
economies of scale apply both on the supply side, making it 
possible to reduce development and production costs, and on the 
demand side, making it possible to reduce maintenance and 
training costs, etc. 
- 7 -
The European aircraft industry consists of several thousand 
companies, mainly equipment manufacturers and subcontractors. 
A very broad industrial base is a key element of a healthy 
industrial structure. 
However, the increasing complexity of products is leading to a 
reduction in the number of progranmes and prime contractors 
capable of being simultaneously viable on this market. Being 
aimed at fragmented markets and not having a sufficiently 
large military market, the European aircraft manufacturers have 
made more limited economies of scale than in the US, by means 
of integration on a national basis and recourse to cooperation 
progranmes. The need for transnational integration is now 
becoming increasingly urgent. 
1. Large commercial aircraft 
The heavy investment required to develop new aircraft and main­
tain the critical mass to stay in the industry has forced a 
restructuring over the last 25 years in both the US and Europe. 
In the US, the result has been the emergence of two large com­
mercial transport manufacturers - Boeing and McDonnell Douglas. 
The single European competitor - Airbus - is a partnership of 
four companies, Aerospatiale, British Aerospace, DASA and CASA. 
Each of these companies has developed through a series of merg­
ers and acquisitions. However, compared to its US competitors, 
the European aircraft industry is still disadvantaged on econo­
mies of scale. 
While the overall market to the year 2000 is expected to repre­
sent about 5,000 deliveries, different segments have to be 
considered when assessing the situation in terms of economies 
of scale. Based on broad estimates of the number of aircraft to 
be produced to get adequate returns - from 1,500 units for a 
short-haul narrow-body aircraft (150 seats) to 700 units for a 
long-haul wide-body aircraft (400+ seats) - it would appear 
that in the present situation - where the 3 producers compete 
world-wide with 11 products - there are too many progranmes 
on the market, except on the large aircraft segment (400+ 
seats) where Boeing enjoys the monopoly situation. This ques­
tion needs to be gone into in more detail. 
This situation, combined with the threat of re-engined entrants 
from Central and Eastern Europe and the escalation in new air­
craft costs - particularly for new 450+ seat aircraft, and 
potentially in the longer term for supersonic aircraft - is 
putting increasing pressure on manufacturers to increase scale 
and efficiency. 
2. Regional transport aircraft 
While many producers of regional transport aircraft have been 
able to coexist up to now, the question of the impact of econo­
mies of scale appears to become critical for some of them 
because of increasing product complexity leading to greater 
costs of new aircraft development. 
- 8 -
Competition is spread among a number of competitors world-wide 
- and is particularly intense within Europe : 11 manufacturers 
compete world-wide with 21 products and 9 projects, out of 
which 5 European companies with 12 products and 6 projects - in 
particular the proposed new regional jet progranmes. Broad 
estimates of the market share required to get adequate returns 
on investment within 12 years can be derived from market fore­
casts and financial models of typical cash flows for new air­
craft progranmes. On this basis it would appear that the num­
ber of direct competitors, i.e. of families of aircraft, that 
can succeed on the world market of regional aircraft would be 
limited to a half dozen. 
This is likely to result in further rationalization, either by 
merger/alliance or by conversion to a 'sub-prime'/component 
supplier position. 
3. Helicopters 
In terms of economies of scale, because of the close links 
between military and civil helicopter design, development and 
manufacture, the European helicopter industry has an overall 
disadvantage to the US, which produces twice more military 
helicopters. 
While US manufacturers have targeted mutually exclusive market 
sectors, thereby minimizing direct competition, European manu­
facturers still compete with each other in some civil markets. 
Moreover, the European helicopter industry is widely diversi­
fied, with some companies having a very small presence in the 
civil market. 
Despite recent European rationalisation, more collaboration and 
more mergers might be required to eliminate duplication in some 
civil sectors and allow manufacturers to remain competitive or 
even viable in the face of strong US competition. 
Conclusion 
The issue of economies of scale is key to all three industry 
sectors, but its relative importance may vary by sector and 
hence the degree to which the European aircraft industry has to 
consolidate to survive. 
III.B The necessary technological base 
1. Technological needs 
Aeronautics exerts a knock-on effect on the acquiring and mas­
tering of a very broad range of leading-edge technologies 
(materials, structures, data processing, design and manufac­
ture) and of know-how (integration, systems aspects), which are 
applicable to other sectors later. 
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To meet varied requirements which have to be coped with and to 
ensure the preservation of long-term competitiveness on the 
world market, the European aircraft industry requires a consid­
erable research effort so as to simultaneously: 
a) ensure safety and reliability of air transport 
Air transport users demand efficiency, flexibility and safety. 
The introduction of new technologies and procedures in aircraft 
requires an increased research effort so as to validate them, 
particularly where safety is concerned (see point III.G.l). 
b) improve operational performances of air transport 
Air transport operators (airlines and airport authorities) 
require improved operational performances of aircraft and 
reduced real costs. 
Airlines in particular, which are confronted with increased 
competition because of the liberalization of air transport in 
Europe and elsewhere, require a reduction of DOE [Direct Oper­
ating Expenses], greater flexibility of air transport, and 
better ground and air traffic management. 
During the development of new models, an increased effort will 
have to be devoted to aspects such as: 
* the aircraft design process: the needs of airlines in terms 
of configuration and performance develop all the time, which 
makes long-term fleet planning difficult. Accordingly, air­
lines require tailor-made aircraft, a request that manufac­
turers hurry to fulfil in the hope of gaining market shares. 
The incorporation of all the specific airline requirements 
entails considerable extra costs and manufacturers are 
starting to recognize that greater standardization of air­
craft configuration would make it possible to reduce the 
initial cost while easing resale on the second-hand market. 
* the interface with airport terminals: airport terminals have 
been developed with the aim of reducing ground irrmobiliza-
tion to a minimum. All the implications of this have not 
yet been taken on board, to ensure that aircraft are con­
ceived as a component part of the terminal in their own 
right. Accordingly, gate control and logistical systems 
require improvement. 
* freight handling: because freight profitability is still 
underestimated, it is regarded as a marginal income rather 
than as a fully-fledged activity. The design of freight 
compartments, and in particular of the doors, could be 
improved to take operational requirements into account. 
More generally, air freight has to be part of an integrated 
approach combining different transport modes. 
* the flexibility of cabin configuration^ including cabin 
elements. 
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c) meet environmental requirements 
The main environmental aspects affecting the air transport sys­
tem (i.e. airlines, airports and aircraft industry), are 
noise, gas emissions, other pollutants and land-use planning. 
Up to now, the biggest impact of air transport on the environ­
ment has been noise. Recently attention has been drawn to the 
problem of the gas emissions in the upper atmosphere. This is 
connected with a growing awareness of the greenhouse effect and 
a need to protect the ozone layer. For the foreseeable future 
these two topics will dominate the environmental aspects of air 
transport. 
In this context, projects for supersonic transport aircraft 
raise concerns which manufacturers will inevitably have to 
address to ensure that a future supersonic transport aircraft 
will be acceptable and conmercially viable. 
Considerable research is necessary to arrive at realistic leg­
islation, respecting at the same time the legitimate concerns 
expressed regarding global climate changes, and safety require­
ments which represent the number one factor governing engine 
design. The Conmission already finances research on different 
aspects connected with gas emissions. There are also links 
with the United States where important research is currently 
being carried out on that topic. 
Medium and long term developments in air transport will need 
the extension of existing airports and the creation of new 
ones. This will only be acceptable from an environmental point 
of view if tangible progress is made in terms of noise and gas 
emissions, and this will need increased research in this area. 
d) develop new technologies and design and production methods 
Manufacturers themselves require sophisticated tools and sys­
tems for the design, integration, validation and manufacture of 
highly complex components and systems, so as to shorten the 
lead times between the design and marketing of products and the 
production cycle as such. 
Most sectors are trying to exploit new potential connected with 
Electronic Data Interchange [EDI] and concurrent engineering 
techniques [CE] so as to reduce the time it takes to put a 
product on the market, by achieving correct design from the 
outset and by improving reliability. 
Mastering these new production tools such as EDI, GE, computer-
aided manufacturing [paperless production] and conmon stan­
dards, which will make it possible to improve the efficiency of 
the production process, will be a decisive factor for the 
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future competitiveness of the European aircraft industry. In 
this respect, Europe cannot allow itself to be outstripped by 
its main competitors, in particular the United States where an 
important CALS programme [Computer-Aided Acquisition and 
Logistic Support] is in hand. 
It also seems that extra productivity gains can be achieved by 
the use of new management and organisation methods and princi­
ples applicable to the whole or part of the design-manufacture 
chain (simultaneous engineering, lean production systems, etc). 
Financing of R&D [research and development] 
To enter the market, an aircraft company has to make an enor­
mous initial investment (up to 10 billion dollars for large 
conmercial transport aircraft), then has to suffer cash-drain 
for several years and finally has to wait more than ten years 
before breaking even. 
Additionally, to stay on the market under good financial via­
bility conditions requires the development of an aircraft fami­
ly, whose initial development costs cannot be completely 
covered by the manufacturer, unless it is present in different 
segments with several models whose life cycles overlap. 
A company cannot, therefore, enter the aircraft market without 
public support during the period between the decision to launch 
the initial progranme and the generation of a sufficient cash­
flow. 
The situation of the European aircraft industry is now being 
made more difficult by: 
* the appearance of new technological priorities .(see point 
III.B.I above); 
* the need to continue, in parallel with these new priorities, 
research and development activities already started under 
various programnes; 
* the growing burden of large progranme RSD costs, which 
increasingly exceed the financial and human capacities of a 
single company and a single country; 
* the greater pressure of international competition, which 
benefits from the effects of industrial structures from 
which Europe does not yet benefit (see point III.A.); 
* the increasing difficulties involved in financing RSD and 
products due to a reduction in military budgets and orders 
and the reduction in public support in general; 
* the low level of the dollar against European currencies. 
a) public financing systems for BSD 
The public financing systems for R&D in the United States and 
in Europe are based on different approaches. Moreover, their 
respective aircraft industries are at different stages of their 
development. 
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The strength of the US civil aircraft industry was built up in 
the inmediate post-war period and developed until the beginning 
of the '80s in a quasi-monopoly situation. On the other hand, 
the European aircraft industry, and in particular the large 
civil transport aircraft industry truly emerged only with the 
launching of the Airbus Programme, i.e. with a differential of 
several decades compared with the US aircraft industry. 
Owing to its strategic importance, the US civil aircraft indus­
try has grown in symbiosis with the State which continues to 
support it through three major financing techniques: DoD 
[Department of Defense], NASA [National Aeronautics and Space 
Administration] and the taxation system. 
DoD 
Technologies which have proved useful to the civil air 
transport sector have been financed through military 
programmes. Thus the entry of Boeing on to the conmercial 
jet market in 1957 with the 707 was made possible by the 
development of the military transport aircraft KC-135. In 
this particular case, the spin-offs of military R&D for the 
civil sector were virtually 100%. 
Over the last 15 years, the DoD has devoted approximately 50 
billion dollars to aircraft R&D. Taking into account reim­
bursements by companies to the government for civil applica­
tions derived from their participation in military 
programmes, the direct impact on the US civil aircraft 
industry is estimated at about 20% of the military R&D bud­
get. 
Moreover, DoD compensates US companies for their civil 
research when it has military applications. The effects on 
companies are significant since, as the research fields are 
chosen by them, they have a better idea of the benefits that 
they can derive from certain dual technologies. This 
research often covers the validation of new expensive and 
high-risk technologies. 
* NASA 
In accordance with its objective of promoting the USA's 
technological lead in the air transport sector, NASA financ­
es new technology development in particular. Over the past 
15 years approximately 9 billion dollars have been devoted 
to technological development. The civil aircraft industry 
has benefited directly from a large proportion of it, due to 
NASA's aim to concentrate especially on the genuine dual 
technologies. 
- 13 -
* Effects of the US taxation system 
This involves especially the FSC system [Foreign Sales Cor­
poration], which in 1985 replaced the DISC system [Domestic 
International Sales Corporation]. This system makes it pos­
sible to exempt part of the export turnover, provided that 
products with at least 50% US content are involved. Al­
though accessible to all US exporters, the complexity of the 
system makes it attractive only to exporters whose products 
are of very high value, such as aircraft products. 
At the same time, where the European aircraft industry, which 
does not benefit from instruments like those of the United 
States to channel the research effort (NASA, DARPA [Defense 
Advanced Research Projects Agency], etc.), is concerned, the 
public support granted in the form of reimbursable advances has 
allowed the initial investment to be covered and especially the 
risk connected with the launching of new programmes. With the 
conmercial success of certain European aircraft programmes, the 
refunding of advances should accelerate very quickly. 
b) fragmentation of the public financing of R£T [research and 
technology] 
A major problem which still penalizes the European aircraft 
industry is the excessive fragmentation of the public support 
for R&T. It results in particular from the initial goal of 
countries to support their national champion in the field of 
aeronautics, and considerations of national strategy connected 
with the dual character of the aircraft industry. It results 
in a certain duplication of programmes and research infrastruc­
tures and in contradictory national strategies. 
Wnereas in the United States NASA concentrates most civil aero­
nautical R&T in three centres, the Conmunity has 7 main centres 
for public aeronautical research. Despite a certain amount of 
specialization, each centre covers the same range of basic 
research, with duplication of overheads and infrastructures. 
There are almost twice as many wind tunnels in Europe as in the 
US, although initiatives like the European Transonic Wind Tun­
nel have been taken to reduce their number. The rate of dupli­
cation of research infrastructures is estimated at 20 to 30%. 
If duplication of operating expenditure is also taken into 
account, the loss is estimated at 20% of total budgets at 
least. 
Several cooperation mechanisms have been set up to reduce the 
disadvantages of the fragmentation of public R&T. Their effi­
ciency is, however, reduced by the dispersed approach to the 
coordination of public R&T. Taking account of the considerable 
amounts in question, an improvement in this situation would 
permit better allocation of public resources available so as to 
meet increased R&T needs. 
- 14 -
III.C Financial and commercial techniques and mechanisms 
Today it is rare that a big aircraft order results from compe­
tition based purely on technical and economic criteria. The 
conmercial factors, which play an increasingly decisive role in 
sales, can be sunmarized as follows: 
1. Financing and financial guarantees 
As the financial cost has become the most significant ele­
ment of aircraft operating costs, considerable attention is 
paid to the methods making it possible to reduce it. But 
this does not necessarily involve the choice of the lowest 
financing cost, since other criteria can come into play such 
as the structure of the airline's balance sheet or the 
national balance of payments. 
Recourse to a combination of financial and operational leas­
ing is becoming the norm, as is recourse to the fiscal 
advantages provided by financing via countries like Japan. 
The structure of financing aircraft is intricate as a 
result, involving several banks, in several countries and in 
several currencies all finally converted back into dollars. 
Finally, the manufacturer's skill in coordinating financing 
by a bank consortium can be as important as the sale itself. 
Since manufacturers are increasingly involved directly in 
the financing of sales, knowledge of financial techniques is 
vital for them. 
Given the intense market competition, manufacturers are con­
stantly being prompted to give better and more flexible per­
formance guarantees, which enables airlines to reduce risks 
borne by them. This practice is becoming general not only 
for short-term sales but also for the launching of new 
programmes, i.e. performance guarantees are given several 
years beforehand. 
2. Industrial offsets 
Industrial offsets, which are not limited only to aeronau­
tics, are one of the most commonly used techniques, with 
major political implications. Industrial offsets are given 
for aircraft sales but also for the launching of new 
programmes. In view of the low cost of its labour force and 
its growing market, Asia is increasingly attractive from 
this point of view. 
3. After-sales service 
After-sales service, and especially its flexibility, plays 
an increasingly important role in concluding contracts. The 
extensive guarantees granted to airlines help to reduce 
their maintenance costs up to 5 years after sale, when, for 
example, replacement parts and engines are provided free. 
The most attractive guarantee is to take back the aircraft 
with little or no penalty exchange for a new model. Techni­
cal staff or crew on loan also ease the introduction of a 
new aircraft. 
- 15 -
4. Fixed prices 
The basic price of the aircraft, as fixed at the order, is 
normally adjusted at delivery according to a price index. A 
significant corrmercial concession is to maintain the initial 
contact price without indexation, for final delivery. 
All these commercial concessions granted by the manufacturers 
owing to the intense competition between them obviously penal­
ize their profitability. 
III.D "Detente' 
"Detente", and in particular the upheavals which have taken 
place in Europe since 1989, affect the world and European air­
craft industry in two ways: 
* on the one hand, the activity of the military aircraft 
industry is reduced; in view of the considerable interaction 
between the civil and military segments, this development 
will have significant repercussions on the civil aircraft 
industry; 
* on the other hand, competition is reinforced on shrinking 
defence markets and on the civil markets, on which the con-
Version of the defence industry simultaneously causes a 
refocusing of some companies and the entry of new competi­
tors; 
* finally, although marked by significant political and eco­
nomic instability, the opening up towards the countries of 
Central and Eastern Europe and the Independent States of the 
former USSR will drastically change the prospects for and 
the context of industrial cooperation. 
In any event, in comparison with the United States, Europe is 
at a disadvantage in facing up to this new situation, because 
of the dispersion of its resources and its structures. 
Conversion of the military aircraft industry 
"Detente" has led to a fundamental revision of defence policies 
towards a reduction in both domestic and export defence mar­
kets. 
For the aircraft industry, the question arises of the impact on 
the civil segment of the significant reduction in defence pro­
duction. The civil and military aircraft sectors are mutually 
dependent, even though not to the same degree. The alternation 
of their respective economic cycles has made it possible up to 
now to ensure the permanency of the aircraft production poten­
tial. Besides, while the defence activity benefits from the 
economies of scale made possible by a parallel civil activity, 
the civil activity benefits from the repercussions of the tech­
nological progress achieved in the defence field. Any reduc­
tion in military R&D activities will therefore have long-term 
effects on the technological capacity and on the competitive­
ness of the civil aircraft industry. 
- 16 -
For the military aircraft industry "d6tente" has, however, only 
been the catalyst of a development which started at the begin­
ning of the '80s. Indeed the current crisis within the mili­
tary aircraft industry is explained mainly by the explosion of 
development costs of most of the recent defence programmes, 
which exceeded the initial budgetary estimates substantially. 
These increases lead to a reduction in the number of aircraft 
ordered. 
If the development phase of the EFA [European Fighter Aircraft] 
and RAFALE programmes runs its full term - i.e. until the 
middle of the '90s - military R&D activities should be affected 
less dramatically than the military aircraft industry as a 
whole. Therefore, if the R&D activities linked to the current 
defence programmes are continued, and if the civil aircraft 
market stabilizes, the total amount of resources allocated to 
European aircraft R&D could be reduced to a lesser extent than 
the contraction of military aircraft industry would lead one to 
expect. 
Overall, it is estimated that to compensate for the effects of 
the reduction in defence R&T, civil R&T expenditure should be 
increased substantially in the future. 
In addition, owing to the reduction in defence activity, which 
guaranteed cash-flow and profitability, the financial perfor­
mance expected of civil programmes is likely to be increased to 
make it possible to maintain the companies' profitability. 
This could result in reallocating the resources towards a redi­
rection of civil R&T activities to less speculative fields. 
2. Aircraft industries of Central and Eastern Europe and of the 
Independent States of the former USSR 
a) aircraft industry of Central and Eastern Europe 
The upheaval which followed the fall of the Berlin wall has had 
an enormous impact on the aircraft industry of Central and 
Eastern Europe. In 1991 the rate of production, including 
spare parts and components, slowed down dramatically. The air­
craft industry of Central and Eastern Europe suffers from a 
serious handicap in terms of efficiency, organization and 
overmanning. In the short term its very viability is at stake. 
The demise of any aircraft policy has weakened an industry pre­
viously accustomed to a high level of public subsidies: day-to­
day operations and the very solvency of the companies are 
seriously affected. In most cases, technical and managerial 
assistance from the former USSR is being or has already been 
withdrawn. The reforms in defence policy, and in many cases the 
lack of a defence policy, leave most companies without 
resources in the short term. 
- 17 -
The replacement of imports from the Independent States of the 
former USSR by imports of Western equipment provides signifi­
cant opportunities in terms of offset, but at the same time 
raises considerable production problems since the aircraft 
industry must adapt to new standards, procedures and practices. 
Compared with a current fleet of less than 300 large transport 
aircraft, the civil aircraft market in Central and Eastern 
Europe, which is estimated around 150 aircraft between now and 
the year 2000, offer very limited prospects. This market is 
based primarily on the needs of fleet renewal and not on 
growth. It is difficult, therefore, to see how it could gener­
ate the volumes of traffic and the incomes necessary for the 
launching of new programmes. 
Under these conditions, the opportunities for the aircraft 
industry of Central and Eastern Europe would mainly seem to lie 
in subcontracting, and the efforts made by the European air­
craft industry on the market in these countries would seem to 
be justified more in terms of long-term positioning. The 
attraction of selling aircraft products there, even in limited 
quantities, would therefore be the prospect of their airlines 
becoming long-term regular customers. 
In the short term, despite extremely low wage costs, the orga­
nization and production management problems, capital shortages, 
and the obsolescence of civil production equipment constitute 
substantial obstacles to investments by the European aircraft 
industry. 
b) aircraft industry of the Independent States of the former USSR 
As a result of the political and economic disintegration of the 
former USSR, combined with a considerable reduction in defence 
sales and exports, its aircraft industry is in ruins. This is 
due to the dissolution of the central authorities, to the iso­
lation of certain aircraft companies in the Independent States, 
to the dismantling of the defence production system and to 
overcapacity and inefficiency in the aircraft industry itself. 
The aerospace industry is, however, the only high-technology 
industrial sector which offers interesting opportunities to the 
West in terms of industrial and technological cooperation. 
The prospects for the aircraft industry, which is primarily 
located in Russia and the Ukraine, are better than those for 
the Central and East European aircraft industry. This is due 
primarily: 
* to the extent of the need for renewal of the domestic 
fleets; 
* to the increasing number of skilled engineers becoming 
available with the reduction in defence production; 
* to a high standard of technology and facilities in certain 
factories; 
* to the attraction of the aircraft industry of the Indepen­
dent States of the former USSR to Western aircraft companies 
involved in offset operations and in search of joint ven­
tures . 
- 18 -
Interesting complementarities are emerging, in particular as 
regards the technological potential, especially in view of the 
shortage of engineers with which the European aircraft industry 
is likely to be confronted around the year 2000 (see point 
III.G.2.). 
A recovery in activity is expected from 1994 as a result of the 
development of joint ventures - in particular involving the 
Western modernization and re-engineering of Russian-designed 
aircraft. 
Despite a certain handicap in terms of performances, mainte­
nance and reliability, Russian aircraft are becoming increas­
ingly competitive and new models, in particular the TU204 and 
the IL96, could well overcome these problems, especially if 
they are equipped with Western engines and instrumentation. 
However, most sales will continue to be on the domestic market, 
because most large Western airlines have already made their 
choice concerning their next generation of aircraft and these 
companies are not yet ready to buy Russian aircraft even if 
they are less expensive. Their prospects of entering the world 
market are therefore still remote. 
III.E Handicap of the dependence on the US dollar 
Since 1971 the dollar has been fluctuating in relation to the 
Coomunity currencies independently of the trend in purchasing 
power parities. Consequently, during their lifetime, aircraft 
programmes have to face considerable fluctuations in exchange 
rates, which affect their financial risk and their viability. 
Since 1986, the European aircraft industry has consistently 
been penalized by the low level of the dollar. 
The European aircraft industry is particularly dependent on the 
dollar exchange rate because its sales prices are expressed in 
dollars, whereas most of the costs are expressed in national 
currencies. 
Overall, the dollar fluctuations have a threefold impact on the 
aircraft industry: 
* first, the European aircraft industry may need to launch a 
new programme at a time when the dollar rate is insufficient 
to guarantee long-term viability for the programme. It may 
well happen that a programme has to be launched at a given 
time because it forms part of a family of aircraft. The 
first Corrmunication on the competitiveness of the European 
aircraft industry explained the reasons why the development 
of a family of aircraft is of primary importance in relation 
to economies of scale; 
- 19 -
* secondly, if an aircraft progranme is launched on the basis 
of a dollar exchange rate which ensures the viability of the 
progranme, it may happen that when the aircraft are actually 
ordered the dollar has weakened and that it is impossible to 
achieve the expected yield. Thus the decline of the dollar 
since 1986 has damaged the European aircraft industry con­
siderably. Commercial cover for the exchange risk is possi­
ble - but at a given price and within limits - for a maximum 
of three to four years - a period which is quite insuffi­
cient for aircraft programmes of a duration of approximate­
ly 20 years; 
* finally, even if the aircraft are ordered at a viable dollar 
rate, it may happen that when the aircraft are delivered and 
actually paid for the dollar is lower and that sales are 
made at a loss. 
For a new programme, the first deliveries take place approx­
imately five years ater the initial order. Thereafter air­
craft are delivered about two years after the order, i.e. 
commercial cover for the exchange risk for such a period is 
possible. In the current situation, however, an increase in 
orders at the end of the '80s led to a considerable build-up 
in the order book. This means that until the middle of the 
'90s more than two years will elapse between the time of the 
order and the time of delivery. This period could even be 
as much as four to five years. Accordingly, the aircraft 
industry could have difficulties in obtaining commercial 
cover for the exchange risks associated with its sales. 
Obviously in the opposite circumstances the profitability of a 
European aircraft progranme can be favourably affected. In the 
same way fluctuations in the dollar exchange rate affect in the 
opposite sense European airlines which benefit from a weak 
dollar exchange rate at the time of delivery. 
To conclude, the impact of the volatility of the dollar consti­
tutes an excessive handicap for the European aircraft industry. 
Relocation towards the dollar zone for purely monetary reasons 
is not a satisfactory solution, involving as it would a loss of 
existing and potential jobs in the Community and jeopardizing 
the viability, and therefore the very existence, of the Euro­
pean equipment and subcontracting industry. 
III.F The environment 
Various international agreements have already led to the with­
drawal of older aircraft, entailing considerable financial 
implications for the airlines. 
The Commission cooperates closely with the ECAC [European Civil 
Aviation Conference] to define noise regulations aimed at the 
gradual withdrawal of the noisiest aircraft: 
- 20 -
* thus, in December 1988 the Council adopted Directive 89/629 
aiming at prohibiting, from 1 November 1990 onwards, the 
registration within the Community of aircraft which do not 
meet the most stringent international standards (Chapter 3 
of Annex 16 to the Chicago Convention); 
* a new Directive aiming at the gradual withdrawal, between 
1995 and 2002, of aircraft not meeting the standards of 
Chapter 3, was adopted in December 1991. This Directive 
takes account of environmental factors, technical feasibili­
ty, and economic spill-overs. 
The Commission, however, sees the need to strengthen current 
environmental standards. On the one hand, intra-European air 
transport will soon face competition from high-speed trains. 
On the other hand, current standards are not adequate to meet 
new environmental requirements: 
* regarding noise, the growth in air traffic itself, combined 
with an increase in the size of aircraft, is likely to erode 
the benefit deriving from regulations implemented during the 
last decade. In the absence of a further reduction in air­
craft noise, the foreseeable restrictions around airports in 
the next century may we 11 supersede current standards; 
* regarding gas emissions, the current standards also seem 
inadequate since they do not take into account all aspects 
of flights. During a long-haul flight more than 90% of the 
gas emissions are not covered by current standards. The 
Commission is studying this problem jointly with the Avia­
tion Environmental Protection Committee of the ICAO 
[International Civil Aviation Organization]. More recently, 
the Comnission has decided to study the particular implica­
tions of future supersonic transport aircraft. 
III.G National heritage 
Apart from the fragmentation of the public financing of R&T, 
the European aircraft industry suffers from the dispersion of 
national efforts, in particular with regard to technical stan­
dards, training and air traffic control. 
1. Technical standards 
a) industrial standards 
Standardization is a significant factor in the competitiveness 
of the aircraft industry, owing to the economies which it gen­
erates. Standardization makes it possible to reduce production 
costs for the products concerned by approximately 20%. 
An estimated 10,000 international, European, national and com­
pany standards are necessary for the implementation of a Euro­
pean aircraft project. Currently, two-thirds of these stan­
dards are still company standards while European and national 
standards account for 10% and 20% respectively. 
- 21 -
Before the year 2000, however, the role of the international 
and European standards will grow appreciably. About half of 
the standards required for an aircraft project will be interna­
tional or European, while the remainder will be made up of com­
pany standards. At the same time national standards will grad­
ually disappear. Consequently, the standardization effort 
should be redirected away from national and company standard­
ization towards European standardization. 
Over the next few years, European standardization needs are 
estimated at approximately 3 500 standards. This will entail 
stepping up the production of standards from 100 standards per 
year at present to 600 standards per year in 1996. 
b) airworthiness certification regulations and procedures 
The technical requirements and procedures, which apply to avia­
tion as a whole, to aircraft construction, operation and main­
tenance, to airworthiness certification and to air traffic con­
trol, contribute to aviation safety. 
While being an essential guarantee of air transport safety, 
airworthiness certification entails a considerable cost for the 
European aircraft industry. In this area it suffers from a 
handicap in comparison with its main competitor, the US air­
craft industry. 
In the United States a single agency, the FAA [Federal Aviation 
Administration], implements a coherent set of airworthiness 
certification rules. Moreover, most of the costs of airworthi­
ness certification are borne by the federal budget, the remain­
der being covered by a tax on passenger tickets. 
In Europe, while JAA [Joint Airworthiness Authorities] have 
been set up, not only is the aircraft industry still confronted 
with the need to obtain airworthiness certification for its 
products in each Member State, but also the airworthiness cer­
tification cost is charged to the aircraft industry, to an 
extent which varies from one country to another. 
This situation hampers the competitiveness of the European air­
craft industry. To have access to the European market, air­
craft products of US origin are subject to the European airwor­
thiness certification procedures. However, the US aircraft 
industry pays only for the supplementary actions required in 
addition to those already carried out free of charge within the 
framework of the US airworthiness certification. On the other 
hand, for the European aircraft industry exporting to the 
United States, only the additional US airworthiness certifica­
tion is free. 
- 22 -
Vocational training 
The availability of skilled personnel is an important aspect of 
competitiveness. The European workforce is generally more 
highly skilled than that of competitors, though there is less 
mobility owing to disparities between national training 
programmes and constraints with language and culture. 
In view of the small number of new entrants, it is considered 
that the majority of personnel who will be in activity in the 
year 2000 already form part of the labour force of the European 
aircraft industry. This means that most training in new 
skills, new technologies and advanced production methods will 
be undertaken within the companies. 
3. Air traffic control 
Congestion of airspace and of airports - in particular in 
Europe and in the United States - constitutes an obstacle to 
the development of air traffic and therefore to the development 
of aircraft demand. In Europe, air traffic congestion alone 
causes airlines and passengers damage estimated at around ECU 4 
bilJLion per year. This situation critically affects certain 
categories of flying, such as business flights, with the risk 
of the virtual disappearance of the market for this type of 
aircraft. 
Forecasts available point to risks of growing saturation of 
airports and air traffic control centres in Europe in the next 
10 to 15 years. 
Although the exponential growth in air traffic is the fundamen­
tal cause of its congestion, a large proportion of it results 
from the disparate division of European airspace between a mul­
titude of centres with non-compatible equipment which control 
air traffic according to non-harmonized procedures. 
- 23 
IV. PROPOSALS FOR COMMUNITY ACTION 
The measures to be taken to strengthen the aircraft industry's 
competitiveness depend primarily on the initiative and the 
responsibility of manufacturers themselves and their capacity 
to exploit the opportunities presented to them. Within the 
framework of long-term strategies, companies must continue 
their productivity improvement drive, adapt their structures to 
competition conditions, anticipate technological progress and 
users' needs, strengthen their complementarities where neces­
sary, and decide on European and world-level industry links in 
compliance with Qirmunity competition rules. 
The Commission considers it equally opportune for there to be a 
dialogue between the social partners to complement industry's 
efforts, so that - by their active participation in the common 
effort - workers can provide an additional measure of success. 
Apart from such corrmi tments from the manufacturers, it is the 
responsibility of the Comnunity and the Member States, within 
the framework of the principle of subsidiarity, to help to pro­
vide an environment conducive to the improvement of the air­
craft industry's competitiveness. The Community should, in 
particular, help to set up trans-European networks for trans­
port, telecommunications and energy. 
On the basis of the above analysis, the Commission proposes the 
following lines of action, the order of which does not prejudge 
of their relative importance: 
* create a favourable framework 
speed up organization of technical standards 
create a common legal framework: the European Company 
statute 
promote training 
set up trans-European networks 
- promote social dialogue 
* assure the existence of competition 
* maintain technological levels 
* face up to the dollar issue 
* guarantee environmental balance 
* consolidate cooperation with Central and Eastern Europe 
IV.A Create a favourable framework 
Accelerate harmonization of technical standards 
The Member States are responsible for the development of tech­
nical standards and airworthiness certification regulations. 
The Community for its part is responsible for the harmonization 
of these standards, to guarantee freedom of movement for air­
craft and passengers and also a high level of safety throughout 
the Conmunity. 
- 24 -
a) industrial standardization 
The stepping-up of common standardization will involve a trans­
fer of' resources from national and company standardization to 
European standardization and the overall cost of standardiza­
tion will therefore not increase significantly. 
The Commission will, however, continue its support for the 
standardization activity of the ABCMA. [European Association of 
Aerospace Manufacturers], which, as a body associated with the 
CEN [European Committee for Standardization], works out the 
European standards for the aerospace sector. This contribution 
corresponds essentially to covering the expenses incurred by 
the application of CEN/CENELBC common rules to standards worked 
out by the ABCMA.. 
b) airworthiness certification regulations and procedures 
So as to reduce the handicap created by the current multiplici­
ty of national airworthiness certification regulations and pro­
cedures, the Commission is attempting to harmonize regulations 
by relying on the technical expertise of the JAA [Joint Avia­
tion Authorities] to work out a complete set of common techni­
cal regulations as JARS [Joint Airworthiness Requirements]. A 
first step was taken with the adoption by the Council on 7 
October 1991 of a Regulation on the harmonization of technical 
regulations and procedures for their implementation. The plan 
is to complete the implementation of all the common regulations 
by 1993. Subsequently, these technical requirements will have 
to be adapted in the light of the development of new technolo­
gies or procedures, so as to maintain an adequate safety level. 
Ultimately, JARS will contribute to the harmonization of air­
worthiness certification rules world-wide. 
In addition to the harmonization of airworthiness certification 
regulations and procedures and bearing in mind progress already 
made within the framework of the JAA, the Commission is in 
favour of the establishment of a single European authority for 
all aviation safety matters, able to face competition from the 
US aircraft industry under equitable conditions in this area. 
To this end, it would be necessary at Community level for the 
interested parties to carry out promptly an analysis covering: 
* the goals that such an organization should pursue; 
* the procedures to be followed to achieve these objectives; 
* the problems that the establishment of a single organization 
would cause. 
2. Create a common legal framework: the European company statute 
With the European company statute, the Community will provide 
the European aircraft industry with a legal framework for 
adapting its industrial and legal structures to the conditions 
of global competition. 
The amended draft Regulation on the European company statute 
and the related proposal for a Directive on the position of 
workers in the new European company are both before the Coun­
cil. The Commission will do all it can to ensure that these 
provisions are adopted before the end of 1992. 
- 25 -
3. Promote vocational training 
The European aircraft industry requires personnel capable of 
developing and using new technologies. The setting up of net­
works of excellence composed of academic and industrial teams 
and spread across the Conmunity should be pursued so as to 
produce mutually complementary "critical masses" of knowledge 
and expertise, and to ensure a better allocation of resources. 
Cooperation between aeronautics schools and the aircraft indus­
try should be strengthened. The setting-up of partnerships 
would make it possible to ensure, on the one hand, that the 
curriculum of aeronautics schools is geared to the future needs 
of the aircraft industry and, on the other hand, the continuous 
training of personnel already employed. Such partnerships have 
already been successfully established thanks to the Community's 
GtMETT programme that supports transnational advanced 
technology training involving both industry and universities. 
For instance, European sectoral industry-university consortia 
such as STAR and CSAMI specifically deal with aeronautics and 
have been operational for a number of years and are 
increasingly involved in a range of European-based training 
projects. 
Conmunity initiatives relating to training within the air 
transport sector concentrate on harmonizing qualifications 
throughout Europe, while improving the level of skills by means 
of continuous training. 
Harmonization of qualifications will have a significant impact 
on the competitiveness of the European aircraft industry since, 
while increasing standards of qualifications and ensuring a 
European dimension, it will further the structural development 
of the aircraft industry. 
The development of common post-graduate level qualifications is 
already the subject of an initiative coordinated by universi­
ties and the European aircraft industry with Community support. 
This programme, ECATA [European Consortium for Advanced Train­
ing in Aeronautics], which covers cooperation aspects in the 
technical management of aircraft projects, is aimed in particu­
lar at young European aircraft engineers. Other advanced 
training activities so far supported by OCMETT have 
demonstrated the variety of training approaches that can be 
devised to respond to the needs of the aircraft industry: 
development of advanced training packages suitable for wide 
dissemination in the aerospace sector (including advanced 
training tools such as computer based training, video, 
simulation, CD-RCM and interactive video), organization of 
crash training courses on highly specialized topics resulting 
from recent aeronautics-related R&D, establishment of new 
curricula in aeronautics and space for both initial and 
continuing education, and exchanges of students and staff for 
technology transfer and training. 
The Commission also proposes to examine to what extent use 
could be made, within the framework of exchanges, of highly 
skilled personnel, in particular engineers and research workers 
- 26 -
from the aircraft industry of the Independent States of the 
former USSR. This item is examined more thoroughly in the com­
munication from the Commission to the Council and to Parliament 
on the development of industrial cooperation with Central and 
Eastern Europe, and the Independent States of the former USSR. 
4. Set up trans-European networks 
In the field of transport, there is interaction and 
complementarity between the various means of transport, and 
improving the operation of the trans-European networks for 
transport, telecommunications, energy and vocational training 
will have a favourable impact on the European aircraft market 
and on the European aircraft industry itself. This item has 
been examined more thoroughly in the Commission communication 
on trans-European networks. 
Air traffic control is a key element of the trans-European air 
transport network. However, the current air traffic control 
system seems saturated and unable to absorb the predicted 
growth in air traffic. Therefore, it is indispensable that the 
processes begun with the different specialist bodies 
(Eurocontrol, ECAC, ICAO) be improved and speeded up, in order 
to arrive at the setting up of an air traffic control and 
management system, capable of meeting current and future needs, 
in the best possible conditions of safety and effectiveness. 
Such a step should: 
* have as its objective a continuous improvement in current 
systems, whereby they can evolve towards an effective uni­
fied system, but with the conditions which are essential to 
guarantee service continuity; 
* maintain such a European system open to the systems in oper­
ation in the rest of the world. 
The important thing is to define and to put in place, in a 
resolute way, a coherent European strategy to which all inter­
ested parties in the Community (Member States, industry, opera­
tors) can commit themselves at political, operational, legal 
and financial level. The Community will work with the special­
ist organisations on the definition of an action plan designed 
to achieve this objective, with the contribution of its politi­
cal framework and its instruments (regulations, research, trans 
-European networks, transport policy, telecommunications, etc). 
The introduction of new technologies - the FANS concept [Future 
Air Navigation Systems] and satellite transmission - to enable 
these problems to be solved will be a gradual process, but in 
the transitional phase (which could last 10 to 15 years) the 
system could nevertheless be improved. The Commission has sub­
mitted proposals to the Council in view of the harmonisation of 
air traffic control equipment, in particular concerning tele­
communications between air traffic control centres and harmoni­
zation of radar data-processing programmes. Other possible 
measures concern the improvement of air traffic controllers' 
workstations and ground/air telecommunications. All these 
measures 'will contribute to reducing the workload of control­
lers and indirectly to increasing air transport control capaci­
ty. 
- 27 -
The Commission also proposes, in cooperation with Eurocontrol, 
to adopt technical and performance standards for air traffic 
control equipment and procedures. 
5. Promote social dialogue 
The Commission is of the opinion that all these initiatives 
need - not only at the time of their conception, but also when 
they are being put into practice - the active participation of 
the social partners acting in common agreement. As far as the 
Conmission is concerned, it will - in application of Article 
118B of the Single Act - make efforts to facilitate such agree­
ment, by creating favourable conditions so that the dialogue 
between the social partners on these different subjects can be 
undertaken in the most effective way. In accordance with the 
engagement the Conmission made on this subject in its action 
programme aimed at the setting up of the Community charter on 
the fundamental social rights of workers (OCM (89) 568 final of 
29th November 1989, Part II, point 6), the Commission is cur­
rently preparing a Communication on the role of the social 
partners in collective bargaining at Community level. 
IV.B Ensure a level playing field 
With the intensification of international competition all com­
panies have to perform under the same competition conditions. 
Given the increasing globalization of the aircraft market, this 
principle applies as much to competition within the Community 
as to competition with its external competitors. In this con­
text, the Conmission considers that all elements likely to 
affect competition have to be considered, in particular both 
direct and indirect public support. 
To ensure the international competitiveness of the European 
aircraft industry, the Commission considers that competition 
rules must be applied inside the Community and guarantee a fair 
international competition be guaranteed. 
Apply competition rules inside the Community 
The Commission is receiving a growing number of notifications 
from the aircraft industry which are analysed as Article 85 and 
86 cases. Several cases have also been assessed under the 
Council Regulation (EEC) Nr. 4064/89 of 21 December 1989. 
Wnen applying competition rules in this sector, the Commission 
takes account of specific viability conditions in this sector, 
such as the high level of investment needed in this area, the 
degree of cooperation necessary and the relatively small number 
of producers. 
Furthermore, as regards the specific economic and industrial 
features of the aircraft industry, the Commission bears in mind 
that certain sectors of the industry are characterized by: 
* the world dimension of the markets whereby domestic markets 
are proving too small to sustain companies of sufficient 
strength to compete internationally; 
- 28 -
* industrial operations on such a scale that no existing Euro­
pean company can master all the technologies and the produc­
tion facilities needed to handle a complete programme in 
industrial and business terms; 
* financial requirements that have risen to a level at which 
no single actor can cover all its needs on its own; 
* the high level of integration of the European industry's 
chief competitors. 
Cooperation between enterprises of this sector can benefit from 
block exemptions for specialisation, R&D and patent and know-
how licensing. 
As regards mergers in particular, it is essential that their 
impact is evaluated from the correct geographical market per­
spective - usually the world market for the aircraft industry -
and the correct market perspective in terms of products. There­
fore a merger combining most of the Community's supply capacity 
in certain sectors of the aircraft industry does not necessari­
ly imply the creation of a dominant position incompatible with 
the common market. 
State aids to the aircraft industry are subject to Articles 92-
94 of the EEC Treaty. There is currently no sectoral aid 
framework establishing special principles to guide Member 
States in granting aid to the aircraft industry. 
In analysing the compatibility of aids granted by Member States 
with the common market, the Commission will particularly take 
into account on the one hand the need for aids for the 
completion of the aided project - and this must contribute to 
the achievement of the objectives of the Community's general 
policy - and on the other hand the distortive effects of the 
aids in terms of other competitors on the market. 
As concerns more particularly state aids related to R&D, the 
Commission applies the rules of framework on state aids to R&D. 
It takes account of the particularities of the sector, charac­
terized by the high-technology element of the products, the 
strong international competition and eventually the aspect of 
collaboration in supported research. 
Guarantee fair international trade 
The GATT [General Agreement on Tariffs and Trade] sectoral 
agreement on international trade in civil aircraft, which took 
effect on 1 January 1980, has lifted most tariff and non-tariff 
barriers to aircraft trade. This agreement governs in particu­
lar various forms of public support for the aircraft industry. 
Because the US and European situations are basically different 
and are founded on different principles, the signatories inter­
pret this agreement in different ways. 
- 29 -
On 31 March 1992, Community and United States negotiators 
reached ad referendum agreement on the long-standing dispute 
concerning trade in large civil aircraft. They now intend to 
pursue the negotiations of a multilateral agreement covering 
all types of aircraft and all major aircraft producing coun­
tries so as to arrive at multilaterally binding rules for this 
sector. 
IV.C Maintain the technological level 
With the aeronautical research undertaken within the framework 
of the BRITE-EURAM programme, and extended in the Industrial 
Technologies and Materials and EURET programmes, the Community 
is striving to attain three objectives: 
* to improve the efficiency of R&T in aeronautics by strength­
ening industrial cooperation; 
* to support - as already proposed in the Commission's first 
communication - the transition of research from military to 
civil areas; 
* to contribute to the solution of problems of general in­
terest regarding aeronautical activities and air transport 
(impact on the environment, improvement of air traffic effi­
ciency and safety, etc.). 
To increase the efficiency of the public financing allocated to 
aeronautical R&T, better coordination and integration of the 
national programmes is necessary. This involves providing the 
aircraft industry with a coherent framework for cooperation and 
mobilization of R&T upstream of industrial projects. 
The aircraft industry will also benefit from the reorientation 
of research policy proposed in the recent Communication from 
the Commission "Research after Maastricht. Statement. 
Strategy". 
According to the new approach, technological priority projects 
(TP projects) will be set up alongside traditional programmes, 
and the objective of these will be the development of key 
technologies and the strengthening of the effects of investment 
in RETT on industrial competitiveness. 
TP projects will bring substantial benefits to the aircraft 
industry essentially in three ways: 
a) the availability and the management of generic technologies 
which are crucial in maintaining the competitive advantages 
of the aircraft industry. These technologies could concern 
notably the fields of new and improved materials, telematics 
for the control and management of air traffic, improvements 
in energy use; 
b) the development of technologies where research expenditure 
is at its highest. At this stage, companies are only partly 
benefiting from the advantages which they are creating for 
other companies and for consumers. Increased cooperation 
and Community support for research needs could therefore be 
decisive. As far as the aircraft industry is concerned, 
this could be, for example, certain superlight materials or 
certain advanced propulsion systems; 
- 30 -
c) access to technologies with environmental objectives. In 
the aircraft sector, appropriate examples are of combustion 
systems which reduce pollution like gas emissions or noise. 
Particular attention must be to the analysis of sub- and 
super-sonic flights. Technologies aimed at strengthening 
air transport security and reliability should also be 
favoured. 
Community R&T activity in the field of aeronautics and air 
transport should be included under the 4th R&T Framework 
Programme (1994-1998). Work could cover some or all of the 
technologies usable in aeronautics (airframe, engine and 
equipment manufacturers), for the enablement of future genera­
tions of aircraft, engines and systems on board and on the 
ground. 
IV.D Cope with the dollar issue 
In the long term only the establishment of a stable world mone­
tary system will make it possible to resolve the dollar 
problem. At the Ckxnmunity level, Economic and Monetary Union 
will contribute significantly to the achievement of this goal. 
In the short to medium term, however, the Commission - aware 
that the fluctuations of the dollar exchange rate and its cur­
rent level constitute an excessive handicap for the European 
aircraft industry and jeopardize its continued existence - con­
siders that a specific solution for the aircraft industry could 
be necessary. 
Although recent developments in exchange risk cover opens up 
the prospect of such risks being covered over longer periods 
and with a more significant volume of cover, such developments 
will not allow European industry to surmount the very important 
difficulties in the face of fluctuating exchange rates. An 
exchange risk insurance system would make it possible to cover 
the risks for periods corresponding to the cycle of aircraft 
programmes. Any system of insurance must of course be in con­
formity with the Community's obligations in the framework of 
the GAIT. Insurance could take the form of a guarantee fund to 
reduce the impact of fluctuations in the dollar beyond certain 
limits, and could therefore be conceived as a European aircraft 
industry cooperation system. The fund would be self-financed 
by the aircraft industry. This would allow the system to 
become stable, whilst at the same time tackling the problem of 
its financing. 
Initial studies by Commission staff have, however, highlighted 
the complexity of such mechanisms and the difficulty of getting 
them off the ground at a time when the US dollar is weak. 
Therefore, the Commission has set up a joint working group with 
the aircraft industry and financial experts to examine the fea­
sibility and the possible methods of setting up such mecha­
nisms. 
- 31 -
IV.E Guarantee balance with the environment 
Comnunity policy regarding aircraft noise and gas emissions 
will continue to be based on close cooperation at European 
level with the 28 nations of the ECAC and at international 
level with the ICAO. 
Concerning environment policy at airports, the Commission ser­
vices have worked out an inventory of noise standards in force, 
relating to areas situated around airports in the various Mem­
ber States. This inventory will aid the deliberations of the 
Council on the advisability of establishing a Community frame­
work in this field, which should take account of the individual 
characteristics of airports. 
On 19 February 1991 the Commission adopted a "green paper on 
the impact of transport on the environment: a Community 
strategy for sustainable mobility" (CCM/92/46final) in which 
the environmental aspects of air transport mentioned above were 
dealt with. 
IV.F Launch cooperation with Central and Eastern Europe 
Give.n the strategic nature of the aircraft industry, and espe­
cially the enormous size of the aircraft industry of the Inde­
pendent States of the former USSR - 10 times larger than the 
European aircraft industry - the question of cooperation with 
these industries arises. 
The aircraft industry in these countries is the subject of many 
initiatives, involving in particular European aircraft compa­
nies and the Member States. In view of the complexity of the 
current situation, of the diverging interests of the airframe, 
engine and equipment manufacturers and also of the long-term 
implications of such industrial cooperation, the Commission 
considers it essential to adopt a coordinated approach at Com­
munity level. 
The Commission proposes to set up a joint working group with 
the aircraft industry so as to establish, as a matter of prior­
ity, a detailed diagnosis of the situation and of the prospects 
for the aircraft industry of Central and Eastern Europe and the 
Independent States of the former USSR, before technical assis­
tance projects or industrial initiatives are launched. 
IV.G Pursue the dialogue with the European aircraft industry 
The Commission wishes to continue and deepen the dialogue with 
the European aircraft industry, while widening it to include 
other players on the air transport scene. 
To create conditions conducive to the development of the Euro­
pean aircraft industry, information, in particular statistical 
information, about the European aircraft industry needs to be 
improved, the Commission intends to work with the aircraft 
industry to ensure more transparency so as to improve exchanges 
of information. 
- 32 
FINANCIAL IMPACT 
By its very nature, this communication has no financial impact. Wnere 
necessary, such impact will be given in detail when the Commission 
makes specific proposals for the implementation of the proposed action. 
- 33 -
IMPACT CN SMALL BUSINESS 
The action described in this communication will have no positive impact 
on all sectors relating to aviation, and especially the SME which are 
already making sizeable contributions to this industry's hi-tech 
achievements. 
ISSN 0254-1475 
COM (92) 164 final 
DOCUMENTS 
^ EN io 
Catalogue number: CB-CO-92-205-EN-C 
ISBN 92-77-43961-0 
Office for Official Publications of the European Communities 
L-2985 Luxembourg