EN Official Journal of the European Union C 198/51

Opinion of the European Economic and Social Committee on the ‘Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: The EU's External Aviation Policy — Addressing Future Challenges’

COM(2012) 556 final

2013/C 198/08

Rapporteur: Mr McDONOGH

On 19 December 2012 the European Commission decided to consult the European Economic and Social Committee, under Article 304 of the Treaty on the Functioning of the European Union, on the

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: The EU's External Aviation Policy - Addressing Future Challenges

COM(2012) 556 final.

The Section for Transport, Energy, Infrastructure and the Information Society, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 3 April 2013.

At its 489th plenary session, held on 17 and 18 April (meeting of 17 April), the European Economic and Social Committee adopted the following opinion by 165 votes to 1 with 7 abstentions.

1. Conclusions and recommendations

1.1 The Committee welcomes the Communication from the Commission on External Aviation Policy. Given the increasing reliance of Europe on external trade and the key role that airports play in connecting our continent with the rest of the world, the EESC is fully supportive of an ambitious agenda in the area of aviation.

1.2 In particular, the EESC is keen to see rapid progress towards an enlarged Single Aviation Area encompassing our neighbours both to the Near East, Eastern Europe, Russia, Turkey and across the Mediterranean to North Africa. This would offer development opportunities to secondary and regional airports due to the geographical proximity of these markets and the fact that many of them are experiencing significant economic growth.

1.3 EESC is also very supportive of an ambitious liberalisation agenda with the BRIC and ASEAN countries to give European carriers opportunities to increase co-operation with other airlines and drive additional traffic through European airports.

1.4 The Commission rightly points to the need to pursue a level playing-field for the airline industry. The communication correctly identifies aviation taxes, inappropriate state aid, airport and airspace congestion, consumer-protection liabilities and the cost of carbon emissions among these distortive factors which should be addressed.

1.5 The EESC supports the Commission's concerns regarding the need for investment in capacity at airports. There is an urgent need to guarantee airport capacity in the European Union so as not to lose competitiveness by comparison with other regions experiencing growth, and thus prevent traffic from shifting to neighbouring regions.

2. Introduction and background

2.1 The Committee welcomes the Communication from the Commission on External Aviation Policy.

2.2 The Committee strongly agrees that aviation plays a fundamental role in the European economy both for EU citizens and industry. By supporting 5.1 million jobs and contributing EUR 365 billion or 2.4% to European GDP, it makes a vital contribution to economic growth and employment in the EU.

2.3 As a result of efforts between the European Commission and the EU, 1 000 bilateral air services agreements have been put in place with 117 non-EU countries. Progress has been made in developing a wider Common Aviation Area with neighbouring countries, with agreements already signed with the Western Balkans, Morocco, Jordan, Georgia and Moldova.

2.4 However, the transition from having only bilateral relations between EU Member States and partner countries to a mix of bilateral and EU-level relations has led to occasional confusion among partner countries, and EU interests have not always been best defined and defended.

2.5 Furthermore, national fragmentation means that the aviation industry is still overly subject to local interests and an over reliance on ad hoc initiatives based on individual negotiating authorisations to create the conditions for effective market entry and growth. The pace of un-coordinated market liberalisation at EU Member State level with certain non-EU countries and some Member States' apparent intent to continue to grant bilateral air traffic rights to third countries without commensurate return, or account taken of the EU-level implications, is such that if we do not act now to establish a more ambitious and effective EU external policy, then in a few years' time it may be too late.

2.6 Council has also granted the Commission authorisations to negotiate comprehensive agreements with Australia and New Zealand. Negotiations with these countries have not yet been completed. European aviation at present only has 2 European airlines serving Australia: British Airways and Virgin Atlantic. Previously, there were many more European carriers.

2.7 The EESC welcomes the comprehensive Council Conclusions on the Commission proposal (1), but considers that Member States could be more explicit in their support for some key EU negotiations such as by giving a strong mandate to the Commission for "normalising" the strained aviation relations with Russia.

2.8 Latin America is a fast growing market, and the amalgamation of LAN & TAM poses a real commercial threat to Iberia, Tap and other European airlines serving Latin America. The early conclusion of the Brazilian agreement is urgent.

3. The importance of hubs

3.1 Despite the growth of low cost carriers which have opened up services to non-hub airports, Europe's hubs are of significant importance in global aviation and external relations as traffic agreements are often focussed on them.

3.2 The growth of major hubs in places like Abu Dhabi and Dubai poses a significant competitive threat to long haul EU services. For instance, the recent agreement between Qantas and Emirates is a serious threat to the European airline industry.

3.3 In order to be viable a hub requires a significant level of local demand as well as an extensive network of feeder services, which is why the most successful hubs are usually situated at major city airports, which are becoming more congested and unable to expand mostly because of environmental issues.

3.4 Some European airport hubs are already limiting, due to lack of capacity, the number of feeder routes that can be operated, this must be effectively addressed if European competitiveness is to be maintained.

4. Creating fair and open competition

4.1 The competitiveness of EU carriers, many of which are struggling financially, is hampered when the economic burdens that lead to higher unit costs of production are higher than those of carriers from other regions of the world.

4.2 It is important that the entire aviation value chain (airports, air navigation service providers, manufactures, computer reservation systems, groundhandlers, etc.) is considered and that the cost structures, the level of exposure to competition in other parts of the value chain and infrastructure financing mechanisms in other key markets are taken into consideration when assessing the competitiveness of the EU aviation sector and in particular EU airlines internationally.

4.3 Within the EU, there has been a failure to create a level playing field at Member State and local/regional level, as for example the many cases where small airports provide non-commercial rates to airlines without complying with the Private Market Investor Principle have not been prevented. The recently opened series of in-depth investigations into cases of potential state aid to airlines from regional airports in several EU Member States highlight the necessity to act urgently to finalise EC State Aid Guidelines for airports which have been continually delayed. The recent adoption of EU rules regarding social security for mobile workers in the EU such as aircrew will also improve the functioning of the single market. The Commission has taken action in many cases of perceived unfair competition.

5. A growth strategy based on More Europe

5.1 The independent study carried out for the Commission has estimated that there would be very significant economic benefits, more than EUR 12 billion per year, from further EU-level comprehensive air transport agreements with neighbouring countries and key partners particularly in fast-growing and/or restricted markets.

5.2 It is of strategic importance for the EU to maintain a strong and competitive European-based aviation industry connecting the EU with the world. The fastest-growing aviation markets are now outside Europe, so it is vital that European industry has the opportunity to grow in these markets as well.

5.3 It is important to ensure that, over time, a truly integrated common aviation area evolves from this process where relations between the neighbouring countries themselves also become open and integrated. It no longer makes sense for the Council to have to consider granting authorisations to negotiate agreements on a country-by-country basis. It would be far more efficient to grant the Commission a single authorisation to negotiate with the remaining neighbouring countries albeit still on a country-by-country basis.

5.4 Under the third pillar (comprehensive agreements with key partners) a number of important agreements have been negotiated. However, it is also an area where some key objectives still need to be achieved, notably under the EU-US and EU-Canada agreements regarding the liberalisation of ownership and control of airlines.

5.5 Most countries still maintain rules stipulating that airlines must be majority owned and controlled by their own nationals thereby denying air carriers access to a wider range of investors and capital markets. The effect has been to impose an artificial industry structure on the airline sector that does not exist in other industries. In the US, for example, foreign ownership of voting shares of airlines may not exceed 25%. These national restrictions on ownership and control have given rise to three global airline alliances (Star Alliance, SkyTeam and Oneworld), and more specifically the joint ventures created between some of their members on some routes. These are the nearest proxy to global airlines.

5.6 Under existing EU legislation, however, EU carriers are not subject to national ownership and control restrictions but can be owned by any EU interest.

5.7 The consolidation trend in Europe is unique, in that cross-border mergers and acquisitions are only permitted within the EU while ownership and control regimes remain fundamentally stuck where they were negotiated in 1944 in the Chicago Convention. The difficulties encountered as a result of current ownership and control provisions are significant and require negotiations with partner countries and highly complex governance structures. Alliance members cooperate more and more closely to offer customers a seamless integrated global multi-hub network service.

5.8 The time is now ripe to take the additional steps envisaged in the EU-US air transport agreement to liberalise airline ownership and control in order to enable airlines to attract investment irrespective of the nationality of the investor.

6. Key principles guiding the EU’s future external aviation policy

6.1 The EU should continue to be bold in promoting further openness and liberalisation in aviation, while ensuring that a satisfactory level of regulatory convergence is achieved. In negotiations with partner countries, due attention should also be paid to labour and environmental standards and respect for international conventions and agreements in both areas to avoid market distortion and prevent a race to the bottom. It’s important that airlines serving Europe comply with ILO rules and regulations.

6.2 Given the increasing reliance of Europe on external trade and the key role that airports play in connecting our continent with the rest of the world, the EESC is fully supportive of an ambitious agenda in the area of aviation liberalisation.

6.3 In order to maximise benefits it is important that the EU moves fast (before liberalisation efforts between emerging markets step up) in order to benefit from a first mover advantage. This would both protect and reinforce the position of the European aviation market on a global stage. Failing to do so will put the EU at risk of being completely bypassed in future global air traffic flows.

6.4 "Moving first" on aviation liberalisation would also play an important role for the dissemination of European technical standards, with potentially significant benefits for the European aerospace industry.

6.5 The EESC has long been a supporter of the removal of restrictions on ownership and control (2) as a means of giving carriers access to a wider range of investors and capital markets. Because of the weight of the two respective markets, initial strong pursuit of this policy should be focussed on further amendments in EU-US agreements. This has the potential to deliver a benchmark for a new post-Chicago era in aviation.

6.6 The Commission will need to demonstrate that the coordinated approach to negotiations will deliver within a speedier timeline so that there is no undue delay when opportunities arise when compared to bi-lateral engagement. We are currently witnessing a regrettable delay in the signing of the bilateral agreement with Brazil. It also needs to be mentioned that Member States share responsibility for strengthening Europe's external aviation policy and that the Commission needs strong negotiation mandates in particular when advocating EU market rules towards states and regions where aviation operates along very different standards.

6.7 A further erosion in the position of the European industry would occur if one of the Middle East airline carriers took over one of the financially struggling Indian airlines.

7. Enhancing relations with key partners

7.1 Given its particular characteristics, the European cargo and express industry in particular is suffering worldwide from restrictive bilateral air services agreements and should be given a high priority when obstacles are removed to market access.

7.2 In particular, the EESC is keen to see rapid progress towards an enlarged Single Aviation Area encompassing our neighbours both to the Near East, Eastern Europe, Russia, Turkey and across the Mediterranean to North Africa. This would offer development opportunities to secondary and regional airports due to the geographical proximity of these markets and the fact that many of them are experiencing significant economic growth. A positive and pragmatic agenda for cooperation with Turkey would allow mutually beneficial progress to be made in resolving concrete issues in the region. In particular, a bilateral safety agreement should be advanced.

7.3 EESC is also very supportive of an ambitious liberalisation agenda with the BRIC and ASEAN countries. These nations are fast becoming the dominant global suppliers of both raw materials and manufactured goods and services and their populations have a growing propensity to travel. Significant potential economic benefits have been demonstrated from comprehensive EU air transport agreements with China, India, Japan and Latin America which should be pursued. Liberalising air traffic would give European carriers opportunities to increase cooperation with other airlines in those regions and drive additional traffic through European airports.

7.4 It is also important that any deal is reciprocal in nature, giving benefits to the EU as well as third countries. In this context Russia must urgently demonstrate its commitment to the 2011 agreement to implement the "Agreed Principles on the modernisation of the Siberian overflight system". The Commission, supported by Member States, should take necessary measures if commitments are not met.

7.5 Relations with the Gulf States have in recent years been a largely one-way process of opening EU markets for Gulf carriers, which has created significant imbalances in opportunities. Due to the potential for further traffic leakage it is not therefore recommended that the Gulf States be an immediate focus for further negotiations.

8. Investment at airports

8.1 The EESC supports the Commission’s concerns regarding the need for investment in capacity at airports. This section of the proposal needs, though, further clarification as to which are the proposed actions to deliver the aims and the relation to the earlier "Airport Package" proposal (3) of the Commission should be made more explicit.

8.2 There is an urgent need to guarantee airport capacity in the European Union so as not to lose competitiveness by comparison with other regions experiencing growth, and thus prevent traffic from shifting to neighbouring regions.

8.3 The damage to the European economy will start well before demand exceeds supply. According to Eurocontrol once hub airports begin to employ more than 75% of their theoretical maximum capacity, their ability to cope efficiently with bad weather, operationally caused delays, and to provide reliable flight connectivity reduces rapidly.

8.4 In addition at peak hours passengers are paying more than they would if there was more capacity. For example, the UK House of Commons Transport Committee was recently informed that travellers could be paying GBP 1.2 billion in airfares by 2030 if there is no airport expansion in the South East of England.

8.5 Airport capacity needs to be monitored at an EU level, and EU guidelines need to be delivered, which will provide local authorities with a common comprehensive framework when considering airport expansion schemes.

8.6 While expansion of capacity at major airports is an absolute must for the long term, there also remains a need to make best use of existing capacity, in particular with regard to airport slots. Airports need to be empowered to respond to supply and demand changes, and to be able to guide the use of their airport slots towards the economically optimal outcome. In this context it is important that the Slots element of the current Airport Package (4) continues to facilitate improved performance in the use of airport capacity by taking local circumstances into account in the allocation of slots, as this would effectively be the only way that some airports will be able to grow in the future. Runway use at major airports is at full capacity in many cases, while there is plenty of capacity at nearby regional airports.

8.7 Non-hub airports can also play an important role in reducing congestion at Europe's main hubs, allowing the European airport sector to maintain a leading position. Given the lengthy lead times for any expansion of runway or terminal facilities at major airports, greater utilisation and appropriate investment at non-hub airports can provide more immediate alleviation of capacity problems. A well-developed network of such non-hub and regional airports will also improve passenger safety, by ensuring, among other things, that a network of emergency or alternative airports is available in the event of deterioration in the weather or other circumstances.

8.8 The EESC also reiterates its call for one stop security to be introduced without any further delay, as this would mean huge savings in the costs incurred by airlines, as well as saving time for travellers. The subject therefore needs to be addressed as a priority with key partners.

9. Single SKY/SESAR

9.1 Functional airspace blocks (FABs) are required in order to move the European Single Sky ahead. All the FABs were to be up and running on 4 December 2012. Given the criticality of this issue for optimising the provision of air navigation services and effectively managing the volume of air traffic, it is imperative that the Commission takes procedures in the European Court of Justice against those Member States who have failed to deliver.

9.2 Swift and consistent implementation of the Commission's proposals can assist the industry to grow in a sustainable way and thereby fully contribute to the recovery of the European economy.

10. Tools to be applied

10.1 Comprehensive air services agreements with neighbouring countries and major and like-minded partners should address and synchronise the regulatory conditions for fair competition and for a sustainable aviation industry including essential aspects such as safety, security, environment and economic regulation.

10.2 Exactly what form the proposed new instrument to protect European interests against unfair practices would take is not yet fully clear, but it should resemble a wider complaints procedure addressing the "hidden subsidies" that are reflected in the fares. Presumably, this would gain legal weight through the "fair competition clauses" that the Commission is looking to sign with these external states.

10.3 The Commission rightly points to the need for the pursuit of an international level playing-field to be accompanied by a similar effort within Europe. Europe’s aviation industry is subject to increasing regulatory burdens and inconsistencies. The communication correctly identifies aviation taxes, inappropriate state aid, airport and airspace congestion, consumer-protection liabilities and the cost of carbon emissions among these distortive factors which should be addressed.

10.4 The EU Emissions Trading System (ETS) is particularly noteworthy. ETS has proven a highly contentious issue in the context of a discussion of external aviation policy. China and India have refused to comply, while the US Congress has passed legislation making it illegal for its airlines to abide by the EU rules. While ensuring environmental sustainability is a critical issue, the EU needs to give ICAO the chance to come up with a proposal for a global solution to which all partner countries can agree at the ICAO Assembly in the autumn of 2013, rather than place EU aviation at a competitive disadvantage (5).

Brussels, 17 April 2013. The President of the European Economic and Social Committee Henri MALOSSE

(1) Conclusions of the 3213th Transport, Telecommunications and Energy Council meeting, Brussels, 20 December 2012.

(2) EESC Opinion on the Trans Atlantic Relations in the Air Transport Sector, OJ C 306, 16.12.2009, p. 1-6.

(3) COM(2011) 823 final; OJ C 277, 13.9.2012, p. 110–124.

(4) COM(2011) 827 final/2 - 2011/0391 (COD).

(5) See also the EESC Opinion on the ETS in aviation, COM(2012) 697 final - 2012/0328 (COD) Cat. B1.