COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 22.10.1996 
COM(96) 514 final 
COMMUNICATION FROM THE COMMISSION 
TO THE COUNCIL AND THE EUROPEAN PARLIAMENT 
IMPACT OF THE THIRD PACKAGE OF 
AIR TRANSPORT LIBERALIZATION MEASURES 

GENERAL EVALUATION AND FOLLOW-UP 
Liberalisation of civil aviation in Europe was established between 1993-96. Certain 
experts believe that three years is too short a period to carry out an objective evaluation 
of its impact.. However, with only six months before the complete liberalization of the 
market, with unrestricted cabotage, the Commission feels it necessary to present a first 
evaluation. 
The fact, which certainly hits the average traveller, is that the single aviation market has 
not occurred with a "Big Bang": there has been no spectacular reduction in the fares, nor 
any dramatic disappearance of the more important carriers, nor a substantial penetration 
of the domestic markets by foreign competitors. Liberalization has happened in a 
progressive way and without major upsets. This contrasts with the situation that the 
United States experienced at the time of the deregulation of the aviation market. The 
Community has found the correct balance between competition and control mechanisms. 
Competition and consumer have both benefitted. 
The effects of this process, although slow, are nevertheless quite clear and it is 
satisfactory to note that in the end almost all operators have made use of the new 
possibilities offered by the third package. 
For example, when the third package was introduced there were 490 routes, there are now 
approximately 520. This increase contrasts with the situation which prevailed in the 
United States. 30% of the Community routes are served by two operators and 6% by 
three operators or more. It should be noted that out of the 64% of routes operated as a 
monopoly a large number of them have low levels of traffic and are of no interest to 
most other carriers. Furthermore a certain number of the other routes experience real 
competition from neighbouring routes, from charter services or from other modes of 
transport. One of most interesting developments certainly is the fact that the number of 
operators, on a significant number of domestic routes, passed from one to two. Moreover, 
the dominant carrier's market share often fell to the advantage of the second carrier. The 
possibilities of access to the market have been used: there are now 30 routes operated on 
a 5th freedom basis as opposed to 14 in January 1993; routes operated with cabotage 
traffic grew from 0 in 1993 to 20 today. The public service obligations have been used 
on a hundred routes in Ireland, Sweden, the United Kingdom, Portugal, France and 
Norway. 
Capacity increased but did not reduce the load factors in an unacceptable way. 
K 
It is certainly in respect of the creation of new airlines that market dynamics have been 
most visible. Over the three years 800 licences has been granted, the majority going to 
small operators :80 companies has been created, for the most part private companies, 
while 60 have disappeared. Increased competition from the charter companies on regular 
routes should also be highlighted. More important, new entrants appeared on the markets 
of the United Kingdom, France, Germany, Denmark, Ireland, Spain, Italy, Greece, Austria 
and Belgium. Their entry into the market has often contributed to a fall in the fares. 
The downside of liberalisation is that the fall in air fares has been felt only on the routes 
where competition has been fully realised i.e. where more than two airlines operate. 
Certain categories of fares have fallen significantly on routes such as Barcelona/Madrid, 
UK/Ireland, Paris/London, certain domestic routes in Germany, in France, in Italy, in UK 
and in Belgium towards a number of European destinations. In general, the structure of 
the fares on scheduled flights remains complex and sometimes seems non-transparent 
thus preventing the users from benefiting from the competition. 
If the third package has been implemented in 1993 and 1994 because of the economic 
recession, the pace has accelerated since 1995 and 1996 and results are encouraging. 
However, it is clear that, if the "foundations" of liberalization have been well established, 
much still remains to be done to make it a complete success. 
> 
Four grey areas can be identified: 
Air Fares 
Liberalization is not an end in itself. The opening of the markets is only meaningful if 
the increased competition brings to the consumer better goods and services at lower costs. 
Expected beneficial effects of competition on fares has not materialised. An impressive 
number of promotional fares has developed and the share of the passengers travelling on 
scheduled flights with tickets at reduced prices has passed from 60.5% in 1985 to 70.9% 
in 1995 and, taking into account that the share of the charter market accounts for 
approximately 50-55% of the total market, it is estimated that 85-90% of the passengers 
travel at reduced prices. A sharp drop, of almost 20%, of the yield also confirms this 
tendency. However, these tickets are often accompanied by restrictions with regards to 
schedules flexibility and are available only for a limited number of seats. The new 
distribution techniques (Internet etc) should facilitate access to these fares by the 
individual traveller: however, the existence of these techniques must be known and access 
to them must be established. The Commission is examining ways of informing the public 
on this subject to ensure the necessary transparency for the consumer and to avoid 
differences in tariffs which cannot be justified on objective grounds. 
In contrast to the promotional fares most of the fully flexible fares have continued to 
increase. On certain routes these fares can be described as excessive. A detailed 
examination will consequently be necessary in order to pinpoint the cases of excessive 
fares under Regulation 2409/92 and the rules of competition. Where necessary the 
H lb 
Commission will use the powers of enquiry conferred by this regulation to put an end 
to excessively high fares. The Commission could in certain cases examine potential 
abuses of dominant position under Article 86 of the Treaty. 
Capacity restrictions 
It would be unrealistic to seek to liberalize civil aviation in Europe, with the consequent 
increase in traffic, without envisaging adjustments to the capacity available. In recent 
years the majority of airports have had to re-examine their development plans, both as 
regards capacity of terminals and use of runways. Similar problems exist with air traffic 
control, where the fragmentation of the European airspace continues to pose serious 
management problems. The Commission is active in these areas: 
• As regards airports, the Commission has just conducted a series of 
consultations on the question of slot allocation. In the light of these discussions 
it will present, during the last quarter of 1996, a proposal for amendments to 
Regulation 95/93. One of the objectives sought by the system of slot allocation 
is to allow optimum use of capacity while encouraging increased competition. 
• With regard to air traffic control, the Commission published in March a White 
Paper on "the management of air traffic". One of the fundamental ideas proposed 
by this document is to guarantee that common rules apply at the widest possible 
European level and cover the largest possible geographical space in order to 
abolish the artificial capacity restrictions connected with the 
administrative/political parcelling out of the airspace. 
The costs of air transport 
When the aim of liberalization is to give operators more choice and provide users with 
better services at competitive prices, it is necessary to examine the costs. It has been 
estimated that infrastructure charges alone account for 25 % of total operational costs 
these are believed to be 40% higher than in the United States. These costs not only 
concern air traffic control but also airport fees and ground handling: 
• A directive on the liberalization of ground handling has been adopted by the 
Council on October 15 this year. The aim is to open the market for ground 
handling and should, in the long term, reduce prices for these services. 
111 I C 
• With regards to air traffic management, the aim of the above mentioned White 
Paper is to improve service levels and recommends the separation of regulatory 
activities from the provision of services to the users. This should give more 
freedom to the airlines and reduce costs. Indeed until now the system of air 
traffic management has been such that the ATM service providers are not at all 
encouraged to seek the best cost/effectiveness ratio. Decentralized services will 
encourage rigorous management and a better control of the costs. 
• Lastly, as regards airport fees, the Commission plans to submit a proposal 
before the end of 1996. It will be based on three major principles: 
non-discrimination, transparency and cost effectiveness. 
Access to the market 
The internal market remains fragile in sofar as it remains incomplete External relations 
continue to be subject to bilateral agreements between the Community Member States 
and non-member countries. These agreements always contain provisions incompatible 
with the internal market, such as the nationality clauses, and their existence is partly 
responsible for the loss of competitive pressure on the Community market, it is to 
preserve the internal aviation market and to be in a position to control the impact that 
the bilateral agreements can have on the Community market that the Commission 
proposes negotiations with third countries. Based in part on such considerations, the 
Council has granted a Community negotiating brief with the United States in several 
fields. The Council has granted a negotiating brief with the associated countries of 
Central Europe. 
The effects on competition of the alliances, which have increased rapidly, can only be 
appreciated on a case by case basis. Certain of these alliances have ended fairly quickly 
whilst others are too recent to evaluate. Nevertheless their association with the practice 
of code-sharing, coupled with the frequent flyer programmes, can cause a number of 
difficulties in respect of access to the market for the small operators who are not in a 
position to cope with such dominant positions. Similarly by using such practices, certain 
non Community carriers can overcome the barriers of entry to the Community market 
by making use of the services of a Community carrier which is permitted to operate 
without restrictions between Community airport to the detriment of certain Member 
States. These practices merit examination by the Commission under the competition 
rules. 
IV Id 
We have seen above that public service obligations (PSO) have been used frequently. 
It will be advisable to check that PSOs do not become a disguised means of restricting 
the market. In this context the Commission will have to ensure that the provisions 
concerning PSOs are carefully monitored. 
Access to the market will only be completely liberalized in April 1997, when the last 
restrictions on cabotage traffic are removed. However, it is prudent, as of now ,to take 
the necessary measures, as described above, in order to prevent obstacles for access to 
the market being retained. There are still numerous routes which are not operated, or 
are operated with low traffic densities, where the lack of competition provides very 
good opportunities for a new carrier to take advantage. The Community market is not 
yet optimal: its restructuring is on going privatizations continue. During this 
restructuring exercise, it will be the Commission's role to ensure that competition rules 
continue to be applied rigourlously With the completion of the single aviation market 
in 1997 "the Commission will not be able to authorize restructuring aid unless under 
very stringent conditions"1 
The Commission is also conscious of the potential implications of the liberalisation of 
air transport on employment. In this context, a study of the social impact of the 
liberalisation of air transport is underway 
Lastly, and although it is not the purpose of this analysis, it is important to recall that 
improvements in the Community aviation system will have to be accompanied by more 
stringent safety measures and better consideration of the environment. Proposals will 
be tabled to this end. 
with regard to this, see the guidelines of the Commission on the Application of 
articles 92 and 93 of the Treaty and article 61 of the EEA agreement to state aids 
in the aviation sector (OJ C 350 du 10.12.94) 
1<L 

INTRODUCTION 
On 1 January 1993, the third package of measures for the liberalization of the 
Community's air transport market entered into force. The aim of the liberalization 
policy, which began in 1987, is the gradual creation of a truly single market based upon 
the freedom to provide services throughout the Community in accordance with a single 
set of rules. 
The third package consists of the following elements : 
common rules on the licensing of air carriers, laid down in Council Regulation 
(EEC) No 2407/921; 
rules on access for Community air carriers to intra-Community air routes, laid 
down in Council Regulation (EEC) No 2408/921; 
rules on fares and rates for intra-Community air services, laid down in Council 
Regulation (EEC) No 2409/921; 
the full application of the competition rules of the Treaty to the liberalized air 
transport market in accordance with Council Regulations (EEC) No 3975/87 and 
(EEC) No 3976/87 (as amended)1. 
As of 1 July 1994, the third package is also fully applicable within the framework of the 
Agreement establishing the European Economic Area (EEA), thus further including 
Norway and Iceland. 
Article 13 of Regulation (EEC) No 2408/92 and Article 9 of Regulation (EEC) 
No 2409/92 oblige the Commission to publish a report on the application of those two 
Regulations by 1 July 1994 and periodically thereafter. In June 1994, the Commission 
adopted a communication entitled "The way forward for civil aviation in Europe"2. In 
the meantime, a number of major factual and legal developments have occurred which 
necessitated the drawing-up of a more detailed report on the functioning of the third 
package. This report is based on the experience acquired by the Commission with 
regard to the functioning of the internal air transport market from 1 January 1993 until 
1 January 1996. 
Nevertheless, the findings are sufficient to show that the liberalization process is 
producing a significant number of positive results without the instability that some may 
have feared. Market access possibilities are being used. New routes and services are 
being created. On some of the most heavily travelled routes, new entrants are bringing 
competitive pressure to bear on traditional duopolies. Indeed the number of European 
companies offering regular service is increasing substantially and most are now privately 
owned. The market share of the dominant so-called flag carriers has also fallen 
1 OJL 249 of 28.8.1992 
2 COM(94) 218 final. 
i 
I) 
noticeably. The charter market continues to grow. Alliances and partnerships are being 
formed. Carriers have taken advantage of new opportunities. After several loss-making 
years, most carriers regained their profitability in 1995. As to fares, on average prices 
are beginning to fall, with particularly notable reductions where more than two carriers 
are competing on the same route. The full liberalization of cabotage in 1997 should give 
further impetus to the process. 
On the other hand, as yet, many routes continue to be served by monopolies or duopolies 
and in those circumstances significant consumer benefits have not appeared. In some 
cases this situation is attributable to limits on capacity in congested airports but in others 
such constraints are not present, suggesting that the full benefits of the present 
liberalization regime have yet to be realized. Also the ability of carriers to exploit the 
full potential of the internal aviation market is constrained by limitations on access to the 
ground handling market, producing high costs and inadequate service and is also affected 
by the diverse bilateral arrangements maintained between Member States and third 
countries. Finally, while the development of alliances and partnerships may in part be 
positive, it also involves the risk of, if taken too far, limiting competition to the 
disadvantage of the consumer. 
In brief, the third package is already bringing considerable benefits to the aviation sector 
and the consumer and shows potential for the realisation of further benefits in coming 
years. At the same time, the process is far from complete and is subject to constraints, 
actual and potential, which need to be effectively addressed if the full benefits of the 
process are to be realized. 
Impact of the third package of air transport liberalization measures 
The third package of air transport liberalization measures has had a definite impact on 
the Community air transport market. However, the changes brought about have not been 
sudden or spectacular, due partly to the fact that the liberalization process itself got under 
way initially in a period of economic recession. Some were a long time coming (the 
major developments on domestic markets did not happen until 1995, for example), while 
others had occurred well before 1993 (alliances, capacity increases, etc.). The fact that 
the third package got off to a slow and, at times, patchy start - coupled with the 
extremely short period covered by this study - frequently makes the task of analysis 
difficult, all the more so as it is sometimes hard to distinguish the direct consequences 
of the third package from actions or measures that would have come about anyway in 
view of current international developments (globalization, alliances, etc.). Furthermore, 
while it is true that the charter sector is carrying more passengers, the data available are 
scanty. For this reason, certain results need to be interpreted with caution just as, by 
the same token, certain conclusions cannot yet be regarded as definitive. 
I. FARES 
The rules and their application 
The principle of price freedom for Community air carriers on intra-Community air routes was 
established under Articles 3 and 5(1) of Regulation (EEC) No 2409/92. Consequently, 
Member States are no longer allowed to subject air fares to the requirement of prior 
authorization. This freedom has advantages just as much for the scheduled carriers as for the 
charter flight operators. 
- Articles 6(1), 7(1) and 7(2) of Regulation (EEC) No 2409/92 allow, on the one hand, the 
Member States, under certain conditions, either to withdraw an excessively high basic fare or 
to stop an excessive downward spiral in air fares, while at the same time empowering the 
Commission to examine, at the request of a Member State or on the basis of a complaint, the 
legality of any action taken by the national civil aviation authorities under Article 6(1). So far, 
neither the Member States nor the Commission have used their powers under the Regulation. 
As far as the evolution of tariffs is concerned, the Commission has deemed it appropriate, 
however, to draw up guidelines which it can use in the future, as and when it is called upon to 
exercise its powers. 
For the air traveller, the most tangible aspect of air transport liberalization in Europe is 
unquestionably its impact on fares. This new freedom was demonstrated in spectacular 
fashion just one day after the introduction of the internal air transport market, when right 
at the beginning of 1993 Lufthansa offered the European market a very simplified range 
of fares (3 levels) to all European destinations. Although it lasted only until 
31 March 1993, the scheme had a dramatic impact in that it marked the beginning of a 
new phase in European fares competition. 
1. Observation of the market in general 
Contrary to what happened in the United States in the wake of air transport deregulation, 
there have been no across-the-board or high-profile fare reductions in Europe. Instead, 
the European airlines have preferred to pursue a more selective policy introducing, 
alongside the thousands of official rates laid down in the I ATA conferences, their own 
prices under their code with their own restrictions and periods of validity. 
Fare categories 
Three categories of fares are available on the European market: 
- the most flexible fares, also called full fares, which are the no-restriction economy fares, 
business fares and first-class fares; 
- promotional fares (APEX, PEX, etc.); 
- special fares (special offers for limited periods). 
In the European market the proportion of passengers travelling on scheduled flights with cut-price 
tickets rose from 60.5% in 1985 to 70.9% in 1995. Allowing for the fact that the charter market 
accounts for some 50 to 55% of the total market, it is reasonable to assume that 90 to 95% of 
passengers are currently travelling at reduced fares. The acceleration in this decline can be traced 
back to the end of 1991 and is due, on the one hand, to the overcapacity on the market and, on the 
other, to the effects of the competition rules and the Community provisions liberalizing fares. 
According to the AEA there was a constant and gradual fall in yield in Europe by about 20% 
between 1991 and 1995. 
The market has been characterized by a proliferation of promotional offers and special 
fares for limited periods, which usually have the effect of complementing, rather than 
modifying, the existing fares structure. These fares are fed into the Computerized 
Reservation System (CRS) virtually in real time, since prior authorization by the national 
authorities is no longer required. It is to be hoped that the new distribution techniques 
(Internet, etc.) will make it easier for the average traveller to obtain the best bargains. 
However, these fares are subject to considerable restrictions, and the number of seats 
offered at these prices, by the major carriers at least, is often limited. Within this 
special-offer market, one has to distinguish between two types of competitor: the large 
airlines, which compete with each other on markets or routes with equivalent services 
and frequencies, and offer a wide range of fares with some seats offered at special prices 
as a function of yield management, and the other airlines, which compensate for their 
limited services and/or frequencies with genuinely attractive prices applying to all the 
seats sold. Examples of this second category are EuroBelgian3 and Ryanair, both of 
which offer a limited service but at very competitive prices. 
from September 1996 Virgin Express 
Return fares 
(in BF) from 
Brussels to: 
Madrid 
Vienna 
Rome Jan. 
93 
IATA 
14570 
16290 
18730 January 1995 
SN 
11230 
17790 
9990 BQ 
5600 to 
9000 
5600 to 
9000 
5600 to 
9000 IATA 
14500 
17790 
20170 July 1995 
SN 
8490 
6990 
5600 BQ 
5600 to 
9000 
5600 to 
9000 
5600 to 
9000 IATA 
14500 
17790 
20170 
Table 1 - Source: REED database (fares) 
As Table 1 clearly shows, the introduction of these special prices has had the effect 
of reducing the fares charged by the national carrier, in this instance SABENA. 
2. Observation of the market by routes 
a) By intra-Community routes 
Competition has had little effect on the routes run as a monopoly or a duopoly, which 
represent 94% of intra-Community routes. Since the introduction of the third package 
in 1993, fares have continued to rise on a large number of these routes, both in the case 
of the most flexible fares (no-restriction business and economy fares) and promotional 
economy fares (PEX, APEX, etc.). 
On the other hand, on routes operated by more than two carriers (6% of intra-
Community routes) a number of initiatives designed to increase market share through 
fare reductions have been observed. On the markets to and from the United Kingdom, 
British Midland has been one of the principal protagonists in the fares war, reducing its 
business class fares by 10:20 % on the London-Amsterdam/Paris/Brussels/Frankfurt 
routes over the 1992-1995 period. Mention should also be made of the routes to and 
from Belgium operated by EuroBelgian. 
b) By domestic routes 
Compared with fares on international routes, domestic published fares (other than special 
offers) tend to be simpler in structure. In addition, above all, prices are lower relative 
to distances, as a consequence among other things of greater intermodal competition. 
The graph below (source: REED, January 1996) shows that there is still room for fare 
Air fares on selected domestic and intra Community 
routes with equivalent distances 
—i—I—U^—i—I—L. 
I I i 8 I ! I 
1 I I l Î I $ t § I I É 
i l l 3 2 
Note: For city codes see list of abbreviations (Annex II) 
reductions on the international routes, all the more so as a recent study published by 
American Express (New York Times, 20.12.95) indicates that the fares on international 
European routes are roughly double those charged for comparable distances in the United 
States. 
On the domestic markets Europe has become divided up into open markets (sensitive to 
competition on fares) and closed markets. In the case of the open markets, major fare 
wars were witnessed, especially in 1995, on the German market (DBA and Euro wings), 
the French market (with the arrival of AOM, Air Liberté and TAT), the Spanish market 
(Air Europa and Spanair) and the Italian market (with Air One on the Rome-Milan 
route). These are four markets where the arrival of new carriers on certain routes has 
sparked off considerable competition. 
In the closed markets we find Italy (with the exception of Rome-Milan), Portugal and 
Finland, where the fares structures adhere to the conventional pattern and new entrants 
benefit the service to the detriment of prices. Lastly, Ireland, Austria, the Netherlands 
and Greece remain inflexible markets, in so far as all the domestic lines continue to be 
operated as monopolies. 
c) By fifth freedom or cabotage routes 
These routes account for only 1 % of total European production, and it is therefore 
difficult to draw meaningful conclusions. Nevertheless, although they are of little 
significance in terms of European output as a whole, fifth freedom and cabotage 
operations allow a new type of competition on fares (examples: Alitalia, on its French 
domestic routes (Lyon to Nantes and Toulouse), introduced a return fare more than 30% 
lower than that of Air Inter. Conversely, none of the fares offered by Finnair, which 
has developed a series of fifth freedom flights departing from Stockholm, are my lower 
than those of its third and fourth freedom competitors. 
Conclusions 
Fares competition has been characterized, by and large, by the launching of new 
promotional and special fares rather than reductions in existing fares. 
The proportion of passengers travelling on scheduled flights with cut-price tickets 
rose from 60.5% in 1985 to 70.9% in 1995. Allowing for the fact that the charter 
market accounts for some 50 to 55 % of the total market, it is reasonable to assume 
that 90 to 95% of passengers are currently travelling at reduced fares. 
Such reductions as have occurred have not affected the most flexible fares. On the 
contrary, these fares have even risen slightly, notably on the duopoly routes, i.e., 
on 93% of all intra-Community routes. A detailed investigation clearly needs to be 
carried out in order to identify instances of excessive fares in the context of 
Regulation (EEC) No 2409/92. 
Competition has not played any role except on (intra-Community or domestic) routes 
operated by more than two carriers. Furthermore, initiatives aimed at securing 
market share by reducing fares have been confined to a few carriers only. 
Certain domestic markets (Italy (with the exception of Rome-Milan), Portugal and 
Finland, Ireland, Austria, the Netherlands and Greece) are still strangers to real 
competition, either because competition is confined solely to quality and service and 
not fares, or because the domestic lines are operated as monopolies. 
II ACCESS TO THE MARKET 
The rules and their application 
- Inasmuch as it establishes the principle that Community air carriers are free to provide services on 
intra-Community air routes, Article 3 of Regulation (EEC) No 2408/92 is the cornerstone of the 
third package. This freedom brings to an end the exchange-of-traffic-rights arrangements that had 
existed hitherto. 
- The Commission has received many requests for information and interpretation concerning 
Regulation No 2408/92, as well as several complaints. The Member States have been closely 
involved in examining the latter through the Advisory Committee on Market Entry set up under 
Article 11. The Commission has therefore been required to take decisions on: 
the scope of the Regulation; 
authorization procedures for traffic rights; 
safeguard clauses provided for in the Regulation. 
- Among the cases that have been resolved, mention may be made of the following: the definitive 
national regulation in February 1996 allowing seat-only sales on non-scheduled return flights to the 
Greek islands; the Commission reaffirmed, pending the introduction of specific rules on the subject, 
that this practice was covered by the principle of free market access; as regards public service 
obligations, more than 100 intra-Community routes (in Ireland, Sweden, Portugal, the United 
Kingdom and France) had been opened up under the new Regulation. 
- But the major areas where Commission interpretations and decisions were required were Articles 5 
(exclusive concessions) and Article 8(1) (distribution of traffic within the same airport system), with 
particular reference to the TAT case (Orly-Marseille and Orly-Toulouse) and access to the Orly-
London routes. The provision of access to Orly Airport has been particularly crucial in ensuring the 
effective liberalization of the air transport market in France to the extent that 85% of domestic traffic 
was handled by this airport. The French authorities, after appealing to the Court of Justice, 
eventually accepted the Community decision. 
Following the introduction of complete freedom of access to the market, except for a few 
restrictions affecting cabotage until April 1997, it has finally been possible to break the 
duopoly situation resulting from the bilateral agreements, both with respect to the 
scheduled airlines and the companies previously classified as charter operators. 
Nevertheless, evidence is emerging that the new spirit of competition, which benefits the 
consumer enormously, may prove to be a mixed blessing. 
1. Development and competition on the intra-Communitv routes 
Since 1992, while the number of intra-Community routes has increased somewhat, there 
has been a marked drop in the number of routes with two carriers, both relatively 
(compared with the total number of routes) and in absolute terms. The number of routes 
(airport to airport) for which more than two airlines compete has remained limited, 
accounting for only 2% of all the intra-Community routes operated at the beginning of 
1993 and 6% at the beginning of 1996 (see following table). 
Intra-Community routes (airport to airport)4 
Total 
Monopoly 
2 carriers 
More than 2 carriers 
(airport - airport) 
More than 2 carriers 
(city - city) 
Source: Reed data base. Jan. 1992 
510 
283 
(56%) 
208 
(40%) 
19 (4%) 
28 Jan. 1993 
488" 
296 
(61%) 
182 
(37%) 
10(2%) 
20 Jan. 1994 
482 
318 
(66%) 
150 
(31%) 
14(3%) 
22 Jan. 1995 
522 
342 
(66%) 
154 
(29%) 
26(5%) 
39 Jan. 1996 
518 
329 
(64%) 
158 
(30%) 
31 (6%) 
38 
In contrast, operating frequencies on these same intra-Community routes have increased 
considerably, and it will be noted that the proportion of flights operated on intra-
Community routes with more than two carriers has risen from 12% at the beginning of 
1992 to 16% at the beginning of 1996 with an even higher capacity share since all the 
major routes are included such as: Heathrow-Roissy, Dublin-Heathrow, Arlanda-
Copenhagen, Brussels-Rome, Amsterdam-Heathrow, etc. 
While it is true that there has been a relative increase in the number of monopoly-
operated routes, the majority of these routes are still in low traffic-density sectors, which 
are of little interest to the big carriers and, as a result, offer a certain protection to new 
entrants. 
It should also be stressed that a large number of these monopoly-operated routes have 
faced real competition not only from neighbouring routes but also from charter services 
or other modes of transport. 
2. Development and competition on domestic routes 
It is certainly on the domestic routes that competition has been most in evidence, albeit 
in varying degrees from one country to another, inspite of the restrictions of article 3.4 
of the Regulation 2408/92 which are applicable until the end of 1996. 
Since the liberalization of market access, the traditional hiatus between, on the one hand, 
countries where even prior to 1993 a multitude of small companies have existed 
alongside the major carriers and, on the other, countries where the national carrier 
enjoys a quasi-monopoly, is tending to disappear. 
Routes without intermediate touchdowns, from airport to airport, for which the capacity on offer is more than once a week 
and more than 100 seats a week. 
Whereas at the beginning of 1992 some 90% of domestic routes were still operated on 
a monopoly basis, by the beginning of 1996 this figure had dropped to 80%. The 
number of routes operated by two competitors or more almost doubled, going from 65 
in January 1993 to 114 in January 1994. The biggest change occurred in 1995, mainly 
on the French, Spanish and German markets. 
Spain, for example, changed in the space of one year (1994) from a situation where all 
domestic flights were operated on a monopoly basis to a situation where 17 routes (i.e. 
almost 30% of the total) had been opened to competition. Air Europa, Spanair and, to 
a lesser degree, Air Nostrum were the main instigators of this change. 
In France, the biggest Community domestic market with more than 20 million 
passengers, the situation has changed radically in three years. Between 1 January 1993 
and 1 January 1996 the number of flights increased by 36% on the French domestic 
market, and the number of departures to the airports of Toulouse, Nantes and Mulhouse 
more than doubled. TAT, AOM, Air Littoral, Euralair and Air Liberté were the 
operators most actively involved. 
In Germany Lufthansa dominates a domestic market of around 15 million passengers. 
Of the 13 competitors no fewer than 6 are new since the end of 1992. Their activities 
are still limited, however, on routes where there is practically a monopoly. In total, a 
little more than 20% of domestic routes are not monopoly-operated. 
The number of domestic markets where more than two carriers are active on certain 
routes increased from three in 1993 (United Kingdom, German, Portugal) to six in 1996 
(the same three plus Spain, France, Denmark). 
Lastly, in the Netherlands, Austria, Ireland and Greece, the national carrier alone 
operates all domestic routes.5 
3. Fifth freedom, cabotage, seventh freedom 
Regulation (EEC) No 2408/92 abolished all restrictions to fifth freedom operating. 
Thus, whereas as at 1 January 1993 only 14 routes were operated with fifth freedom 
rights, by January 1996 no fewer than 30 intra-Community sectors, including six routes 
operated on a code-sharing basis, were on offer. This change has also affected the 
carriers, inasmuch as, now in 1996, all the major Community national carriers operate 
at least one fifth freedom link, whereas in January 1993 only eight did so. However, 
certain carriers, notably Finnair, Iberia, Alitalia and Luxair, have been using fifth 
freedom links more extensively. Furthermore, it would appear that fifth freedom sectors 
are mainly operated by national carriers, with the exception of certain flights by Regional 
Airlines and Portugalia and, more recently, Lauda Air. Lastly, it should be stressed that 
only four routes have been operated continuously by the same carrier between 1993 and 
1996, which can be explained by the fact that this kind of operation is more expensive 
than direct services and is also subject to greater operational constraints. 
With the exception, in Ireland, of a number of interregional services provided by Aer Arann with nine-seater planes, in 
Austria, of three flights provided by Lauda Air and, in Greece, of the brand new service by Venus Airlines between 
Athens and Thessalonika. 
10 
11 -
The fact that cabotage is still subject to a number of restrictions provides a possible 
explanation why the Community carriers have used this freedom only on a very limited 
scale. Thus, in 1992 three cabotage services were provided by three different airlines. 
As at 1 January 1993, 18 different sectors were being operated on a cabotage basis by 
11 Community carriers, including three on a code-sharing basis. Between 1993 and 
1995 nearly 20 sectors were operated in cabotage, only to be discontinued, generally not 
long after being introduced. By January 1996 the situation had hardly changed, with 
only 22 different sectors operated in cabotage (15 under their own codes and seven on 
a code-sharing basis). With the exception of Aer Lingus, however, all the main carriers 
have been using cabotage services during the period under consideration. Nevertheless, 
by the beginning of 1996, Lufthansa, SAS and Air France were no longer providing any 
service of this type. 
The seventh freedom, which is the freedom to be established in and to operate from any 
Member State, has also been used on a moderate scale. As examples, one could cite the 
two special experiments of DBA and TAT, if operating under the BA code as used by 
these two carriers (and not under the code of the principal shareholder) is considered to 
be seventh freedom. While DAB continues to develop without major hitches, TAT has 
had to review its international development. These two airlines have developed 
international links on the basis of, and in parallel with, domestic activities. At the 
instigation of its shareholder Lufthansa, Lauda Air, for its part, switched some of its 
activities to Milan-Malpensa airport so as to provide a whole range of European services 
as from the summer of 1995. However, this experiment has not been continued. Lastly, 
as far as the charter companies are concerned, TEA was the first to relocate its 
operations by setting up subsidiaries in Italy, France, the United Kingdom and 
Switzerland before 1993 in anticipation of the future liberalization of the European 
market. Indeed, it is the charter services that have used seventh freedom on a really 
significant scale. 
4. Under-capacity routes with potential for new entrants 
Between European capitals (see map on next page), at the end of 1995, there were still: 
10 routes without any link; 
10 routes without a daily link; 
6 routes without a direct link. 
This state of affairs is due in part to the fact that most big carriers are engaged in 
restructuring and rationalization programmes and are concentrating on their main 
operating bases and on certain routes rather than diversifying. With the exception of 
Luxembourg, it is usually the capitals farthest away from the centre that are affected by 
this phenomenon. On the other hand, all these capitals are linked via "turntable" 
services (e.g., Copenhagen for SAS). 
12 
r.:~j-
- 13 -
In its CAP 654 report the British CAA estimated that, out of 33 intra-Community routes 
registering more than 250 000 passengers per year and still operating as monopolies or 
duopolies, 15 could cope with increased competition and accommodate new entrants 
The report also identified 34 domestic routes in Europe operating at the end of 1994 on 
a monopoly or quasi-monopoly basis which could justify additional competition. 
5. Code-sharing 
The term "code-sharing" refers to a form of commercial arrangement between two air 
carriers, whereby a carrier operating a certain service allows the other carrier to provide 
this same service under his own code or under a shared code. On an international scale, 
more than 70% of alliances nowadays involve code-sharing arrangements. This practice, 
developed in the United States, has secured the transatlantic links and over the last few 
years has been making considerable inroads into the intra-Community routes. In 
proportion to their activities, at the beginning of 1993 Sabena and Air France were the 
biggest users of this formula among the main carriers and Eurowings (NFD), 
Maersk UK, Hamburg Airlines and Lauda Air among the regional carriers. At the 
beginning of 1996 British Midland, TAP, Iberia, Austrian and Luxair were the most 
active operators in this sector. For some companies, especially medium-sized or regional 
companies, code-sharing activities have grown to such an extent that at the beginning of 
1996 they accounted for the main bulk of their intra-Community operations. Transwede, 
Air Dolomiti, Lauda Air, Eurowings, Portugalia and Air UK, for example, were 
cooperating with other carriers using code-sharing formulas on more than 50% of their 
intra-Community flights (more than 90% for the first three). It is also clear that since 
1993 these agreements are no longer limited to a single partner, at least as far as the 
principal carriers are concerned. With the exception of Luxair and Olympic, they all 
have several different partners depending on the sector concerned. Finally, code-sharing 
has also tended to develop on domestic routes and British Midland has concluded 
agreements with a whole raft of European airlines whereby the latter attach their codes 
to domestic flights of British Midland out of London. Furthermore, BA has developed 
franchised code-sharing services with a large number of companies. 
14 
Conclusions 
The monopoly-operated routes still account for 64% of all intra-Community routes. 
In addition, the routes served by more than two carriers have risen from 2% of all 
intra-Community routes at the beginning of 1993 to 6% at the beginning of 1996. 
It is at the domestic level where the impact of competition has been more marked, 
in that the number of routes operated by two or more competitors has almost 
doubled, increasing from 65 in January 1993 to 114 in January 1996. The greatest 
expansion has occurred on the French, Spanish and German markets. 
Although the number of fifth freedom routes has doubled between 1993 and 1996 
from 14 to 30, this type of operation still retains its secondary character. 
Under Regulation (EEC) No 2408/92, the use of cabotage is authorized only as an 
extension of an international service up to 50% of the seasonal capacity on the initial 
service. 
Seventh freedom has been used on a limited scale only. 
The Community market is capable of sustaining increased competition on both the 
intra-Community and the domestic routes. This has been supported by the 
Commission for example as it has been illustrated in the crucial case of access of 
Orly airport. 
Reflecting the international trend, the practice of code-sharing has evolved 
considerably on the Community market to the extent that, for some companies, this 
activity accounts for the bulk of their operations. 
15 
III. DEVELOPMENT OF AIRLINES 
The rules and their application 
Regulation (EC) No 2407/92 laid down rules on the issuing of the Community licence. Under these 
rules the Member States have issued more than 800 licences during the period under consideration. 
An extremely limited number of these licences have been revoked, mainly because of financial 
difficulties or bankruptcies. 
Discussions over these three years have centred basically on the question of ownership and effective 
control. This was clarified as a result of the Swissair/Sabena case, the general aim being to protect 
the interests of the Community's air transport industry - until such time as the Community airlines 
are permitted to invest freely abroad - by ensuring that non-Community operators cannot unilaterally 
exploit the liberalized Community market by means of financial holdings. 
As regards the question of leasing of aircraft, the Commission has reaffirmed that, at this stage, the 
authorization of leasing arrangements under Regulation (EEC) No 2407/92 is required solely for the 
purpose of ensuring compliance with safety and liability standards. Accordingly, the national 
licensing authorities must not prevent air carriers from entering into leasing arrangements for reasons 
other than ensuring safety and liability (for example, for aeropolitical considerations). 
1. General development of company capacity 
Capacity has developed to a limited extent and, in the case of scheduled services, is 
mainly the result of the activity of small and medium-sized enterprises and the arrival 
of some new entrants in certain markets. In general, output (expressed in numbers of 
flights or seats available) of virtually all airlines increased and load factors improved 
because of renewed growth in traffic. The breakdown of output between the different 
categories of airline on the European market is as follows: 
Breakdown of output on the European market 
Major airlines (AEA) 114.791 31 % 
Medium and regional airlines (ACE) 25.384 7 % 
Medium and regional airlines (ERA) 24.0756 6 % 
(32.100) 
Charter airlines (ACE)7 206.4708 56 % 
APK (million): 370.720 100% 
Estimate, excluding non-EC airlines and subsidiaries of AEA carriers. 
Whose main activity is charter operations. 
Considering that 75 % of their overall traffic is intra-European. 
16 
In terms of the creation of companies, some spectacular developments have occurred, 
so much so that the number of European companies operating scheduled services in 
Europe has increased by just over 50%. 
250 T 
200 
100 Total number of Community air carriers 
operating scheduled airlines 
156 
122 130 T ?a 125 13G _ J*i 
99 
44 M£j <5 132 
49 |_52j I 48 I I 49 I LHJ Ul D All air lines 
• Major airlines 
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 
Years 
Source REED - Market Analysis 
CAA London - CAP 654 
Around 80 new businesses have been set up as against 60 closures, including a certain 
number of absorptions (Air Vendée, Brymon) and re-absorptions (ATI, Viva). 
With the exception of the UK, each of the Member States still has a sizeable share in its 
"national airline". These companies have experienced a further increase in output in 
1995. It should be noted, however, that the total market share (domestic and intra-
Community) of the national carriers departing from each Member State has declined vis-
à-vis their direct competitors. Thus, whereas in 1993 the principal carriers of 10 
countries still accounted for over three-quarters of the available seats in their home 
market, by 1996 the decline in concentration is such that only six countries are still in 
this situation. However, while concentration is declining, there are still considerable 
differences between the national carriers and their nearest rivals. Nevertheless, the latter 
are making considerable advances in boosting their output. 
- 17-
Output of the second largest carrier in relation to the largest9 
Ireland 
United 
Kingdom 
Austria 
Portugal 
France 
Belgium 
Denmark 
Germany 
Italy 
Spain 
Netherlands 
Sweden 
* .._—= Ryanair/Aer Lingus 
British Midland/British Airways10 
Lauda Air/Austrian 
Portugalia/TAP 
TAT/Air France (Air Inter) 
EBA/Sabena 
Maersk/SAS 
DBA/Lufthansa 
Meridiana/Alitalia (ATI) 
Air Europa/Iberia (Aviaco) 
Transavia/KLM 
Transwede/SAS 1990 
16 % 
29 % 
-
-
6 % 
-
2 % 
-
7 % 
-
6 % 
-1993 
27 % 
28 % 
5 % 
31 % 
6 % 
-
28 % 
8 % 
14 % 
-
4 % 
2 % 1996 
60 % 
24 % 
28 % 
29 % 
12 % 
6 % 
31 % 
13 % 
14 % 
10 % 
6 % 
16 % 
2. Scheduled and non-scheduled airlines 
The third package has removed the distinction between scheduled and non-scheduled 
services. Henceforth, charter specialists can sell tickets to private individuals at both 
ends of the route on a seat-only basis. Furthermore, like scheduled airlines, they can set 
up in any European market. Some of them have benefited from these new provisions 
to enter the scheduled market (Air Europa, Spanair, Air Liberté, LTU, etc.) while 
retaining their purely charter activities in parallel. 
Despite these changes, the charter market has continued to grow in terms both of output 
and traffic. In the case of certain destinations such as Spain and Greece, charter traffic 
still accounts for more than 80% of the total traffic (scheduled and non-scheduled). 
The European non-scheduled market involves some 40 companies, 600 aircraft and 
65 million passengers. The United Kingdom, Germany and Spain operate 80% of this 
traffic. The charter airlines continue to fall into two main groups: those dependent on 
10 Comparison based on the output for a week in January (Reed data base). 
British Airways and the franchisees sharing its code. 
18 
a national carrier (Sobelair/Sabena, Condor/Lufthansa, etc.) and those linked to or 
controlled by a major tour operator. 
3. Alliances and partnerships 
In a world of global markets and trade liberalization, airlines have taken to thinking in terms of 
cooperation, alliances and holdings. The obvious objective is to achieve economies of scale at all 
levels, by combining or developing joint activities, but it is also seen as a way of gaining access to 
markets that are otherwise difficult to penetrate. 
Some agreements are of a marketing type and purely commercial. Some tend to reflect a control 
strategy through the acquisition of holdings, while others constitute a new approach: franchising. All 
have the generic name of alliances. 
These alliances may also be divided into two categories: tactical and strategic. The tactical or 
ad hoc alliances focus more particularly on a range of activities, a joint marketing technique (code-
sharing) or even a particular route, while the strategic alliances generally cover a wide variety of 
activities (marketing, technical aspects, representation, administration, code-sharing, etc.) and 
theoretically have a long-term objective. 
While it is true that these alliances are not a direct consequence of air transport 
liberalization in the Community, the provisions of the third package have nevertheless 
facilitated this type of agreement. From 59 alliances in 1990 there has been a 
progressive increase to 138 in 1994 and 171 in 1995 (Airline Business, June 1994 and 
June 1995). 
Although acquisitions of financial holdings were rare at the beginning of the 1990s, a 
number of companies were still able to attract potential investors: Tyrolean, Brymon, 
Air UK, Martinair, I^uda Air and Business Air. Conversely, Air France severed all 
links with Sabena (49.5% of whose capital has meanwhile been taken over by Swissair). 
Nevertheless, the trend remains one of link-ups and consolidation. All the European flag 
carriers have subsidiaries or more or less sizeable holdings in other European or even 
non-European airlines. These link-ups are motivated by a threefold strategy: 
Gaining control of your own market (Air France/Air Inter, British 
Airways/British Caledonian/Dan Air, Austrian/Tyrolean) 
Getting established on another Community market (Lufthansa/Business Air/Lauda 
Air, British Airways/Deutsche BA/TAT). 
Seeking a more global alliance at world level (KLM/Northwest, Iberia/Aerolineas 
Argentinas, British Airways/US Air). 
19 
In many cases, alliances without financial participation are still planned. The first 
important example in Europe dates from 1990: the European Quality Alliance between 
SAS, Swissair and Austrian until 1991. Since then, there have been alliances of a more 
global nature, as between Lufthansa and SAS (integration of frequent-flyer programmes, 
ground-handling services, development of code-sharing, etc.), under certain conditions 
imposed by the Commission (freeze on frequencies, release of slots, etc.). It should be 
noted that most of the alliances not involving financial participation have one thing in 
common: the development of code-sharing arrangements. 
With franchising, a new concept has emerged. Five British carriers (City Flyer, Manx, 
GB Airways, Loganair, Maersk) now fly under the British Airways code and livery. 
Through these agreements, British Airways' partners are authorized to use the British 
Airways' logo (British Airways Express) and colours (uniforms, cabin furnishings, sales 
desks, etc.) and certain services (control of cash receipts, management of the frequent-
flyer programme, reservations, etc.). In exchange, in addition to a fee, they must 
undertake to respect British Airways' standards of service. The advantages of such 
cooperation are real for both parties. The partners acquire a name and a system. British 
Airways, for its part, develops its operations at zero cost on a wide variety of highly 
diversified routes and benefits from the feed-in of passengers to its European or long-
haul services. The concept also has advantages for consumers, since British Airways 
undertakes to deal with and solve any problems that may arise in the course of their 
journey, which is not always the case where code-sharing only is practised. 
4. Airline traffic 
The AEA airlines have seen a steady growth in their traffic in geographical Europe since 
1992. Overall traffic increased by 8.1% in 1994, the biggest rise for 15 years leaving 
aside the 9.1% in 1992 following the drop in traffic recorded in 1991. This trend 
continued in 1995 with growth reaching 6.1%, and a new record of 8.3% in terms of 
PCK for all the AEA airlines taken together. This fairly sustained growth in traffic, 
coupled with a more moderate increase in output, was reflected in an improved load 
factor for all the national carriers which, like the productivity improvements, brought 
many of them back into profit ability. 
After running a deficit for several years, most airlines managed to get back into the black 
in 1995. Net profits for the 12 main Community airlines are in the region of 
US$ 800 million against a net overall loss on the same scale in 1994. However, only 
British Airways, Finnair and KLM achieved universally favourable results over the entire 
period from 1990 to 1994. Among the medium-sized and regional airlines which have 
been particularly active since the introduction of the third package, good results were 
achieved in 1995 by Regional Airlines and Air Littoral with net profits of FF 9 million 
and FF 8.5 million respectively, by EBA (net profit of BF 200 million) and by Tyrolean 
Airways (net profit of US$ 3 million). 
20 
As part of the effort to increase productivity, most airlines have reorganized and cut 
staff. For example, the AEA carriers, which are the main companies involved in 
reducing numbers, shed 5 000 staff in 1994, so that the total number of employees is 
now the same as in 1986. Together with traffic increases and improved output, these 
staff cuts have had the effect of improving productivity per person considerably. 
5. Employment 
While there have been no dramatic disappearances among the more important carriers, 
the Commission is conscious of the potential implications of the liberalisation of air 
transport for employment in the sector. 
The creation of greater competition, and the growth in total air traffic which this is 
bringing about, should counterbalance to some extent the restructuring already underway 
among existing operators. 
Furthermore, the Commission continues to consult the social partners in the Joint 
Committee on Civil Aviation on the measures to implement air transport liberalisation 
and in this context, a study on the Social Impact of Liberalisation is in progress. 
Conclusions 
- A large number of airlines have been set up since 1993 (some 80 new airlines were 
created while 60 disappeared). 
- In the case of scheduled traffic, the development of capacity (expressed in numbers 
of flights or seats available) has been mainly attributable to the activities of the small 
and medium-sized enterprises. 
- The share of the national carriers in total output is declining compared with their 
main direct competitors (example: Ryanair's output is already over half that of Aer 
Lingus). 
- The charter market is continuing to grow as a result of the changes brought about by 
the third package. In certain countries charter traffic may account for more than 80% 
of the total traffic. 
- In keeping with the international trend, alliances within the Community are continuing 
to develop. 
- 1995 stands out as the year when most of the European scheduled airlines got back 
into the black thanks, among other things, to a sustained growth in traffic, coupled 
with a moderate increase in output, which was reflected in improved load factors and 
increased productivity. It is striking to observe that throughout the same period 
almost all the charter companies made a profit. 
21 
IV. OBSTACLES TO COMPETITION 
The third package has now been in place for three years. However, despite the ensuing 
liberalization, the anticipated results have not been fully achieved. Indeed, there are still 
a number of factors preventing the air transport market of the Europe of the Fifteen from 
achieving its full potential. 
- First and foremost, attention must be drawn to the problems linked to infrastructures: 
airports with limited capacity, overcrowded runways and time-slot problems. An 
IATA study predicts that by 2005 European passenger traffic will double, which 
means that there will be about 600 million additional passengers and 7 million 
additional landings and takeoffs. In contrast, more than 10 European airports could 
well be operating below their actual capacity. 
- For years, airports and governments have restricted access to the market in ground-
handling services with the result that the national carrier, one of its subsidiaries or 
sometimes an independent company has exercised a monopoly in these services. The 
rates charged are frequently excessive, if not prohibitive. 
- The absence of a common external policy leaves the internal air transport market in 
a fragile state and at the mercy of positions acquired through bilateral agreements 
concluded between the Member States and third countries. Because of the diversity 
of these agreements the Member States and their air carriers have to work with non-
harmonized systems and rules in their dealings with non-member countries. These 
rules are in some cases even incompatible with the internal market (e.g. national 
designation clauses, obligatory trade agreements, etc.). Lastly, the open sky 
agreements concluded recently by certain Member States with the United States make 
no provision for any accompanying measures ensuring the proper functioning of this 
liberalized environment. 
- To these should be added a number of external factors, such as disparity in social and 
tax legislation or the environmental aspect to which some Member States attach more 
importance than others. Historical factors, such as situations resulting from bilateral 
agreements (designated national carriers, designated single national carriers) are also 
still likely to favour some companies (generating intercontinental traffic, 
recapitalization) and thus form an obstacle to competition. 
During the period under consideration, the Commission took action on all of these 
problems, and continues to do so, in collaboration with the relevant organizations and 
authorities with the aim of achieving total liberalization, without obstacles or 
discrimination. 
22 
Examples of this action include: 
- Council Regulation (EEC) No 3089/9311 amending the code of conduct for computerized 
reservation systems in accordance with the rules introduced by the third package; 
- publication at the beginning of 1996 of the White Paper on Freeing Europe's Airspace, 
which deals with the problems posed by the fragmentation of European airspace into 
incompatible systems and the serious implications this has in terms of air traffic control; 
- Directive on the gradual liberalization of access to the ground-handling services market; 
- Council Regulation (EEC) No 95/9312, adopted in January 1993, on the allocation of 
slots; this is now being revised and should be the subject of new Commission proposals 
during 1996; 
- efforts by the Commission, in the context of the common external policy, to obtain a 
Community mandate for negotiating air agreements with non-member countries; in this 
context the Commission also intends shortly to submit its proposals to expand the scope 
of Council Regulations (EEC) 3975 and 3976/87. 
- introduction by the Commission, before the end of 1996, of a proposal on airport 
charges based on the three major principles of non-discrimination, transparency and true 
reflection of costs. 
- In addition, at the end of 1994 the Commission adopted strict rules on state aid and 
reiterated the principle that state aid should be paid only once. The Commission's 
policy in this respect is to permit airlines which benefit from such aid to re-establish 
their viability while limiting as much as possible distortive effects on competition. In 
addition the Commission continuously monitors that conditions under which the aid was 
approved are respected. To this end in the case of restructuring aid the Commission will 
normally request that a progress report on the implementation of the restructuring 
programme together with the respect of the conditions is submitted at regular intervals. 
OJL 278 of 11.11.1993 
OJL 14 of 22.1.1993 
23 
Finally, the Commission continues to work on new legislation to step up consumer 
protection, quality of service and safety. In this connection, the National Aviation 
Authorities, combined in the JAA, have also worked out a set of technical and 
operational conditions (JARs) which have to be submitted for examination for their 
incorporation in Community legislation on the basis of Regulation (EEC) 3922/9113 so 
that the various national practices in this field may be harmonized. In particular, this 
will include provisions to harmonize the implementation of Article 10 of Regulation 
(EEC) No 2407/92 on the leasing of aircraft. 
13 OJL 373 of 31.12.1991 
24 
Selected Fully Flexible Air Fares in the EU 
Y fares for 100 - 500 Km - July 1996 
Lowest Domestic 
Preveza-Athens 
Alexandroupolis-Athens 
Thessaloniki - Ioannina 
Corfu - Athens 
Kavala - Athens ECU 
32 
46 
25 
53 
45 ECU/Km 
0.11 
0.12 
0.12 
0.13 
0.13 Highest Domestic 
Limoges - Lyon 
Toulouse - Clermont-Ferrand 
Turku - Tampere 
Lille - Metz 
Eindhoven - Amsterdam ECU 
188 
187 
87 
199 
75 ECU/Km 
0.65 
0.67 
0.67 
0.70 
0.71 
Lowest International 
Belfast - Cork 
Exeter - Dublin 
Cardiff - Dublin 
Bristol - Paris 
London - Dusseldorf ECU 
119/ 124 
126 / 131 
108 / 113 
185 / 241 
197/ ECU/Km 
0.34 / 0.35 
0.35 / 0.37 
0.36 / 0.38 
0.41 / 0.53 
0.41 Highest International 
Brussels - Luxemburg 
Mariehamn - Stockholm 
Le Havre - Southampton 
Luxembourg - Frankfurt 
Le Havre - London ECU 
166 
112/ 115 
184 / 179 
182 / 177 
255 / 210 ECU/Km 
0.89 
0.92 / 0.93 
0.89 / 0.96 
1.04/ 1.01 
1.42/ 1.17 
fe\ Source : OAG 
All routes are operated at least on all weekdays. 
Selected Fully Flexible Air Fares in the EU 
C fares for 100 - 500 Km - July 1996 
Lowest Domestic 
Thessaloniki - Athens 
Oporto - Lisbon 
Paris - Bordeaux 
East Midlands - Aberdeen 
Munich - Berlin ECU 
70 
74 
138 
156 
158 ECU/Km 
0.23 
0.28 
0.28 
0.32 
0.33 Highest Domestic 
Frankfurt - Dusseldorf 
Leipzig - Hamburg 
Frankfurt - Munster 
Hamburg - Rostoch 
Stuttgart - Frankfurt ECU 
149 
246 
184 
131 
138 ECU/Km 
0.79 
0.82 
0.83 
0.86 
0.89 
Lowest International 
London - Waterford 
Bristol - Brussels 
Cork - Birmingham 
London - Dusseldorf 
London - Amsterdam ECU 
170 / 177 
200/ 
188/ 
197/ 
149/ ECU/Km 
0.37 / 0.38 
0.40 
0.41 
0.41 
0.42 Highest International 
Hanover - Brussels 
Leipzig - Copenhagen 
Bremen - Copenhagen 
Luxembourg - Frankfurt 
Rônneby - Copenhagen ECU 
291/ 
387 / 361 
320 / 306 
157 / 148 
221 / 218 ECU/Km 
0.73 / 
0.83 / 0.77 
0.85 / 0.81 
0.90 / 0.85 
1.25/ 1.23 
Source : OAG 
All routes are operated at least on all weekdays. 
Selected Fully Flexible Air Fares in the EU 
Y fares for over 500 Km - July 1996 
H 
^ Lowest Domestic 
Paris - Ajaccio 
Milano - Catania 
Paris - Biarritz 
Paris - Calvi 
Verona - Catania ECU 
142 
165 
142 
142 
165 ECU/Km 
0.16 
0.16 
0.16 
0.17 
0.17 Highest Domestic 
Mulhouse - Nantes 
Toulouse - Mulhouse 
Rennes - Lyon 
Toulouse - Rennes 
Lyon - Le Havre ECU 
262 
264 
251 
252 
260 ECU/Km 
0.39 
0.41 
0.44 
0.46 
0.47 
Lowest International 
London - Helsinki 
London - Malaga 
London - Shannon 
London _ Lisbon 
London - Faro ECU 
353 
335 / 427 
119/ 124 
319 
343 ECU/Km 
0.20 
0.20 / 0.26 
0.20 / 0.21 
0.20 
0.20 Highest International 
Hamburg - Strasburg 
Munich - Nice 
Luxemburg - Hamburg 
Paris - East Midlands 
Stuttgart - Nice ECU 
371 
399 
340 / 328 
331 / 243 
404 ECU/Km 
0.63 
0.63 
0.66 / 0.55 
0.66 / 0.48 
0.70 
Source : OAG 
AU routes are operated at least on all weekdays 
Selected Fully Flexible Air Fares in the EU 
C fares for over 500 Km - July 1996 
Lowest Domestic 
Canary Islands - Barcelona 
Marseille - Paris 
Genova - Cagliari 
Paris - Nice 
London - Belfast ECU 
178 
146 
134 
167 
136 ECU/Km 
0.08 
0.22 
0.23 
0.25 
0.25 Highest Domestic 
Friederichshafen - Berlin 
Stuttgart - Hamburg 
Saarbrucken - Dresden 
Stuttgart - Berlin 
Saarbrucken - Hamburg ECU 
258 
237 
223 
224 
249 ECU/Km 
0.42 
0.43 
0.43 
0.43 
0.47 
Lowest International 
London - Palma Majorca 
Manchester - Palma Majorca 
London - Athens 
East Midlands - Malaga 
London - Helsinki ECU 
150 / 155 
180 / 186 
434 / 574 
343 / 384 
353 ECU/Km 
0.11 / 0.11 
0.11 /0.12 
0.18/0.24 
0.19/0.25 
0.20 Highest International 
Niirnberg - Paris 
Strassburg - Vienna 
Luxemburg - Hamburg 
Paris - East Midlands 
Stuttgart - Nice ECU 
377 
395 
330 / 284 
331 / 235 
404 ECU/Km 
0.61 
0.61 
0.63 / 0.55 
0.66 / 0.47 
0.70 
Source : OAG 
All routes are operated at least on all weekdays. 
ANNEX II 
List of abbreviations 
SOT GOT 
STO OSL 
MAD AGP 
MAD OPO 
LON NCL 
LON DUB 
FRAHAM 
FRAPAR 
HEL KOK 
HEL STO 
PAR BOD 
PARAMS 
VCE ROM 
VCE STR 
ATM 
JAA 
JAR 
IATA 
APEX 
PEX 
AEA 
CAA 
ACE 
PKT Stockholm - Gothenburg 
Stockholm - Oslo 
Madrid - Malaga 
Madrid - Oporto 
London - Newcastle 
London - Dublin 
Frankfurt - Hamburg 
Frankfurt - Paris 
Helsinki - Kokkola 
Helsinki - Stockholm 
Paris - Bordeaux 
Paris - Amsterdam 
Venice - Rome 
Venice - Strasbourg 
Air Traffic Management 
Joint Aviation Authorities 
Joint Aviation Regulations 
International Air Transport Association 
Advanced purchased excursion ticket 
Purchased excursion ticket 
Association of European Airlines 
Civil Aviation Authority, UK 
Association des Compagnies Aériennes de la 
Communauté Européenne 
Passagers kilomètres - transportés 
l°l 


ISSN 0254-1475 
COM(96) 514 final 
DOCUMENTS 
EN 07 08 
Catalogue number : CB-CO-96-541-EN-C 
ISBN 92-78-10653-4 
Office for Official Publications of the European Communities 
L-2985 Luxembourg