ARCHIVESHISTORIQUES
DELACOMMISSION
COLLECTION RELIEEDES
DOCUMENTS "COM"
COM(79)311
Vol.1979/0118

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COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(79)311 final
Brussels/6thJuly1979
CONTRIBUTIONS OFTHEEUROPEAN COMMUNITIES
TOTHEDEVELOPMENT OFAIRTRANSPORT SERVICE
MEMORANDUM OFTHECOMMISSION
C0M(79)311final

SYNOPSIS
i
1. Thismemorandum containsadiscusson onLong,medium
andshorttermobjectivesforpolicywithregardtoCommunityairtransport
servicesandpointstoanumberofmeasureswhichtheCommission finds
couldbeusefullyinitiatedintheshortandmediumtermtoimprovethe
marketstructurewithintheframeworkoftheseobjectives.AnnexII
containsananalysisofthepresentmarketstructureofairtransport
intheCommunity.Thenisr.iorandumisdesignedtoprovokedialogueamongthe
Communityinstitutions,structured aroundanumberofradicalsuggestions to
improvethescope-forinnovationinCommunityairservices,illuminated by
knowledgeable responsestothemfromthoseconcerned,andthusopening
thewayforspecificactions.InthelightofthisdialoguetheCommission
willsubmitproposalsatappropriate stages.
2. Thestructureofairtransportisdominated byaverylarge
governmentinfluence,throughtheextensivesystemofbilateralagreements,
onthenetwork,thetariffsandoncapacity.Directcompetition ontariffs
islimitedforscheduledairtransportbutpricecompetition doesexist
toalargeextentfromotherformsofairtransport andfromothermodes
oftransport.
3. Thegeneralobjectivestobepursuedtoimprovethemarket
structureofairtransportintheCommunityfallwithinthecontextof
article2oftheTreatyofRome.Theactivities mentionedinarticle3
oftheTreaty,andamongthemasystemofcompetition andatransportation
policy,arenotendsinthemselves,butlooktoapurpose,i.e.towork
towardstheachievement ofthegoalsofarticle2.Forairtransport
thegeneralobjectivesofarticle2should,apartfromthisoverriding aim,
resultinaharmonious development ofthiseconomicactivity.
A. Inviewofthepresentstructuralsituationofthesector
andespeciallyofthehighdegreeofinterrelationship betweenCommunity
airtransport andtheworldsystem(ChicagoConvention,etc.),thecaution
ofgovernments andindustries overinitiating newmeasureswithoutprior
». <
reflection onthenecessity andtheadvantagesoftheODerationIsunder­
«ι
standable.Suchactionisthereforefeasibleonlyifitispossibletoshow
theadvantages whichcouldfollow .fromsuchaprocessintheframework
ofcoherentCommunityaction1n.thefieldofairtransport.

5. Four operational objectives arededuced : i
(
-atotal network unhampered bynational barriers with j
efficient services beneficial tothedifferent user J
groups atprices aslowaspossible without discrimination ; j
-financial' soundness fortheairlines ,adiminution oftheir
costs ofoperation andanincrease intheir productivity ; i
I
-safeguarding the interests ofairline workers inthe
general context ofsocial progress including elimination |
ofobstacles to freeaccess toemployment ; j
|
•improvements inconditions oflife forthegeneral public
andrespect forthewider interests ofoureconomies and j
societies . j
I
I
I
6. TheCommunity should follow' anevolutionary method in j
tackling these issues andavoid abrupt changes which would notleave |
sufficient time foradjustment .
i \
■ : . 1
7. Constituents ofaCommunity system areshown which could j
j
I
give incentives towards flexibility andproductivity andcould be i
developed gradually andthereby ; avoid unwanted repercussions . !
i
These elements would work against abuses ofdominant positions and in
favour ofincreased productivity andthereby lower prices .Itisalso
essential totake account oftheimportance ofthe European market in
world traffic (andtooutside aswell asCommunity andother
European airlines )andthewider repercussions upon European airlines'
treatment andtheir competitive abilities onintercontinental routes
from changes 1nEurope .
8. Several measures for short and medium term action inorder
topursue thefour objectives mentioned above have been described in
chapter III :
Increased flexibi lity -inmarket structure andprocedures
tobenefit user and airlines
Thefollowing measures aresuggested toincrease the
possibilities ofmarket-entry andinnovatiori intariffs and
services :

-Wider application ofcheap tariffs intheCommunity j
•Improved possibilities fordeveloping newscheduled
services
i
-Extended scope fornon-scheduled services .
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s
Anumber ofmeasures areproposed toassist intheimplementation
ofabove Mentioned measures :
-Regulation applying therules ofcompetition inair
transport
-Criteria for state subsidies
-Right ofestablishment
-Stabilizing exchange rates fortariff construction
I
-Compensatioi for -passengers adversely affected by !
» ;overbooking j
:
Measures directly to .reduce operational costs ofairlines
ι
-Simplification offormalities (facilitation )
-Harmonization oftechnical standards for aircraft .
Action affecting staff
-Working conditions ofaircrews andground staff
I
-Mutual recognition ofqualifications ofaircrews and
ground staff .
Action affecting safety
Thepossibilities ofgrowth inairtransport arelimited ,
bycapacity andsafety problems ofairtraffic control .
TheCommission intends toexamine these problems .

-L-
Externa Lrelations
Actionstakenontheinternal marketmaybedependent onor
influence international developments .Inordertodealwithsuch
concerns theCommission suggests :
-Aconsultation procédure
-Improvedrelations withICAO(1)andECAC(2).
(1)International CiviLAviationOrganization CSeeAnnexIIpara8)
(2)EuropeanCivilAviation Conference (SeeAnnexIIpara9)

LIST 0FCONTENTS Parafr-mh
I.INTRODUCTION 1
II.OBJECTIVES ANDFIELD OFACTION 10
OBJECTIVES !' 10•
■ I
TheTreatyofRomeandthegeneralobjectives 10,
Operational Objectivesintheshortandmediumterm 13,
FIELDOFACTION 37
NewInputatCommunity -level• 37
I
(
TheEuropean ;andInternational context 42
IMPLICATIONS FORTHEAEROSPACE INDUSTRY 457
III.MEASURES
INCREASED FLEXIBILITY INMARKETSTRUCTURE ANDPROCEDURES
TOBENEFITUSERSANDAIRLINES • 51
Potentialmarketentryandinnovation 52
Widerapplication ofcheaptariffs1ntheCommunity 56
Scheduled services 61
Norrscheduled services 63
Generalconsiderations • 65
I.
i
.Regulationapplyingtherulesofcomoetition in*irtransport 68
Stateaidsj 76
Rightofestablishment
Stabilizing exchangeratesfortariffconstruction 79
Compensation 'forpassengers adverselyaffectedbyoverbooking 80
AIRLINES 82
J
Simplification offormalities (facilitation ) 82
Harmonizatiort oftechnical standardsforaircraft 83
;
«
STAFF| 84
Workingconditionsofaircrewandgroundstaff .84
Mutualrecognitionofqualifications ofaircrewand 85
groundstaff
SAFETY 86

RELATIONSWITHNON-MEMBER COUNTRIES ANDINTERNATIONAL
ORGANIZATIONS
Consultation procédure
RelationswithICAOandECAC
1
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INTRODUCTION
1. Asthe Council ofMinisters hasrecognised byitsmoves
during the Last twoyears ,thetime isripe forthe Community tomove
forward with aseries ofinitiatives making practical contributions to
meeting itsneeds forfurther development ofairtransport services to
suit modern conditions .Iridoing so,itcanrespond toandtake advantage
ofrecent modifications ofstructure andorganization inworld-wide
civil aviation .
2. Thegeneral public inthe Community and theEuropean Parlia -.
ment C1)have shown growing awareness oftheimportance ofdevelopments
inthis field .Newinitiatives byoperators ,the USgovernment 'sderegula­
tion policy andrenegotiation ofbilateral' arrangements between the USA
andMember States oftheCommunity (andothers )have brought substantial
changes ontheAmerican domestic market and onthe North Atlantic ,including
anincreased number ofoperators ,ahigher degree ofcompetition and a
wider spread oftariffs ,embracing lower fares often under special conditions
ofsale .Thequestion israised whether ,orinwhat form ,similar changes
should beintroduced intheEuropean sectors aswell .Other factors -
sometimes inconflict -notably restructuring ofthe International Air
Transport Association ,reduced andmore expensive fuel supplies ,seasonal
crowding ofairports ,thebearing onairservices ofairtraffic control
capacity andsafety andcostly facilities have necessari lytobetaken into
account byallthose institutions considering airservices .
3. Accordingly ,theCommission seeks ,inthepresent memorandum
.,tomake asolid contribution bydescribing anumber ofpractital
pieces ofaction that could betaken relatively quickly atCommunity
level tobenefit users andthesector andtomeet the requirements of
theTreaty ofRome .They aredesigned toserve short andmedium term
objectives consistently with acoherent coneeptual framework forcontinuing
(1)Report onthepromotion ofefficient airtraffic control byMrNOE
Report onthetransport policy byMrSeefeld
Report on "competition inairtransport byMrCO'tf !ZandMrHAASE
inconnection with aproposed resolution byMrKOFOED

futureactioninairjservices development for'theCommunity.Theseries •
ofactionsoutlined -^somealternatives ,othercomplementary -offersa j
j -•}•rangeofreformswhichwouldbecarriedintoeffectwithoutundue
! . !
difficulty intermsofmechanism,butyetbecapableofproducing [
I • .radicalinnovatory effectsintheprovision andnatureoftheseair
services,theirmarketing andchoices,includingprices,offeredtothepublic.
Aspecificproposal-d )isalsosubmitted foraCouncildecision to
setupaconsultation procedure between -MemberStatesandwiththe
Commission onrelations withthirdcountries andinternational organi­
zations.
4. ThisisnotthefirstCommission initiative totheCouncil
intheairtransport sector.Previousproposals havebeenmade,notably
a"DraftCouncildecision onfirststepstowardsjointactiort'ofJune
1972'(2)anda"Reportandproposed decision onaprogramme ofaction
fortheEuropean Aeronautical Sector"dated1stOctober 1975GT:>,which
concerned essentially theaeronautical industry,butalsooutlined general
objectives (4)ofCommunity actionintheairtransport sector.These
Commission initiatives wereapproved bytheEuropean Parliament andthe
Economic andSocialCommittee .TheCouncil,1nJune1977,askedthe
Committee ofPermanent Representatives toestablish aworkingparty,
specially constituted tostudyairtransport questions,inordertoidentify
thoseareasofgovernment activity,which,withadvantage,couldbe
examinedatCommunity levelatthefirstpossible date.InJune1978,
theCouncilapproved alistof9prioritymatters whichincludes points
inthetechnical,economic andsocialfields(seedetailsinAnnexI).
Italsostressed theneedtoestablish workingrelations withtwo
international organizations ,ICAOandECAC,andtomonitorcarefully
thesituation ontheNorthAtlantic .
5. Thatfirstprioritylistoffers agoodbasisforanumber
ofpractical Community initiatives ;theCommission wi11continuetopress
forwardsitsrealization throughsuggestions andsuitable proposals .It
,<1>COM(79)329
(2)C0M(72)695 •
(3)C0M(75)475
(4)Thecreation ofaEuropeanairspace andtheconclusion ofagreements
betweentheCommunity andthirdcountries *"

constituted ,essentially ,aseriesofheadings,and,naturally,much
needstobedonetoturnthemintoaprogramme .Thepresentcontribution ,
I
directed tothekeyAspectsinvolved inCommunity airservice,setsout
more -fullyandspecifically actionsuponwhichthecoursefor
policydecisions istobesetlThepreparation oftheseproposals and
t
th*implementation ofagreedme.swr;swillre-uirothatthec-onipetfnt
services oftheCommission beadequately staffedandalsodisposeofthe
necessary resources,inparticular with,respecttostudies.Failing
this,theworkcannotbedone.TheCommission lookstotheCouncilto
respond favourably toanyappropriate proposals whichitmightfind
itnecessary tomakeinthisregard.
o. Theobjectives andmeasures suggested inthefollowing
chapters aresupported bytheCommission 'sanalyses ofthepresent
situation ofCommunity international anddomesticairtransport as
wellasitscharacteristics ,detailsofwhichcanbefoundinAnnexII.
Theselatterincludenational sovereignty basedontheChicago
Convention ,bilateral agreements betweenStatescovering routes,tariffs
andcapacity,limitedcompetition ontariffsforscheduled airtransport
although largertariffcompetition existsfromnon-schedgled aircarriers
andothermodesoftransport,etc.
7. TheTreatyconfersverywidepossibilities fornewaction.
Thechoiceoflegalbasesistobemadefromthreedifferent typesof
provisions .Thesearefirstlytheprovisions inthechapterontransport,
secondlythearticles intheTreatyconferring ageneralpowerofaction
(articles 100and235)andthirdlythearticles inspecific chapters of
theTreaty,suchasthoserelatingtotherightofestablishment and
competition .Theseprovisions (penthepossibility forspecific measures
todealwithspecific problems inairtransport aswellasforthe
establishment ofgeneralprocedures (mainlyirhoughart.84.2)todeal
withit.-...But,beforedecidingfinallythataparticular measure maybe
basedonaparticular articleintheTreaty,it1snecessary ;oknowthe
preciseobjectives ahdcontentofthemeasureinquestion.

-4-
8. Inthismemorandum ;Commissionhasdeliberately
setouttostimulatedialogueintheCommunityandamongitsinstitutions
byproposingideasforpossibleaction.Onsomematters'ithassketched
alternative possibilities :somemoreradicalandothersmoretemperedin
detail.Thesearealternatives .Thereisnoreasontobefrightenedof
examining them.Equally,commentsandideas,whichthiscommunication
maysparkofffromotherpartiesconcerned,aretobewelcomedfor
consideration too.TheCommission'sresources andexpertiseinthis
fieldaresharplylimited,butitwouldbeadisservicetotheCommunity
andthesectortohangbackfromLunchingnotionsfromafeartheywill
meetcriticismsofamateurism .Wheretherearetechnical,administrative
andbusinesssnags,demonstrable fromthedaytodayexperienceofthose
directlyengagedintheseaffairs,governmental ly,inairlinesandamong
agentsandusers,itwillbequiterighttorelyontheirbeingvoiced
andgoneinto,withtherest,inthefresh-minded reappraisal theCommission
isouttoprovoke.
9. TheCommissionisconvincedthatthiscontribution willlead
towardsmajorandrealisticcontributions bytheCommunitytobetterair
transportserviceinEurope,aimedtobenefitconsumerssubstantially ,
whilekeepingfirmlytotheneedforairlineviability,^ridwithoutdis­
ruptingtheworld-wide system.

OBJECTIVES .AND FIELD 0FACTION
|
OBJECTIVES !
The Treaty ofRome and the general objectives
ity. Thegeneral objectives tobepursued inthelong run for
air transport atCommunity level fall within the context ofarticle 2
oftheTreaty ofRome .This article sets out thegeneral objectives
oftheEuropean Economic Community as-inter alia -thepromotion of
aharmonious development ofeconomic activities ,anaccelerated
raising ofthestandard ofliving and closer relations between the
Member States *Article 3provides for anumber ofactivities tobe
undertaken asmeans and not asends inthemselves toattain these
general goals *Among these activities are acommon transport policy
and asystem toensure that competition isnot distorted .This princi­
pleofpursuing theobjectives ofthe'Treaty byacommon transport
policy isclearly valid for inland transportation .Itis,however ,
evident that the same general objectives would apply also toany
future legislation forcivil aviation and thediscretionary powers
given byarticle SktotheCouncil aresubject totheaims ofthe
Treaty .
11* Therefore thegeneral objectives ofart .2should beapplied
forair transport asaneconomic sector initself .and result ina
harmonious development ofthis activity inthe whole oftheCommunity .
However ,since airtransport ,■like other modes oftransport ,falls
within art .3itisclear that development ofanair transport policy
should take into account also the other aims announced inthe interest
oftheCommunity ingeneral .Onthe one hand ,therefore ,the aim is
I
tosecure that air ;transport like other economic sectors can take
i,
advantage ofbenefits related toEuropean economic integration and
•theestablishment oftheCommon Market .Ontheother hand ,Community
action should promote asystem ofcommunity-wide air transport
services sufficient toassist ineconomic and social progress by
eliminating barriers intheeconomic union atthe lowest cost for
society .Itisalso necessary more specifically toensure that
policy inthis sector iscoordinated with and contributes tothe

objectives ofother Community policies such asindustrial policy [
» ;
(efficient aircraft andproductivity ),regional policy (regional
accessibility ),energy policy (rational useof energy resources )
andenvironment (reduction ofnuisances )taking into account the
rules ofcompetition andthat those policies ontheother hand are ^
carried outwith a!view totheneeds ofair transport . i
.< . . ■ 1
12. Thus air transport isplaced inaconceptual framework I
i
similar tothat for the common transport policy ' .described [
inOctober 1973 »inChapter 2ofthecommunication oftheCommission i
totheCouncil ,concerning thedevelopment ofacommon transport
policy(1).At thetime theCommission sketched out aCommunity transport
system aimed atrealizing theobjectives oftheTreaty incorporating
all transport modes ,including air transport .Theapproach took
account ofcompetitipn ,especially inpassenger transport ,between |
rail ,roadandairtransport systems .Theinherent characteristics |
ofair transport ,which toalarge degree differ from those ofother j
i
modes oftransport ,should however give rise tospecific measures |
forthis sector . !
t.
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i
!Operational objectives intheshort andmedium term j
1
ί
1.3. The general aims mentioned above need tobespecified
t
and expressed inoperational terms before serious consideration of j
Community initiatives intheshort andmedium term canbeundertaken . j
I
I
14. Inview ofthespecific characteristics ofthesector i.e.
\
thehigh degree of ;interrelationship between European air transport
and theworld system (Chicago Convention ,etc.),theimportant safety ;
aspects andthecomplex market structure asdescribed inAnnex IIit [
isnecessary toreflect indepth onthenecessity andtheadvantages |
ofnewmeasures befor their adoption .Action isdesxraoie only ifitis !
possible toshow thebenefits which could follow from Community action ,j
Theinterested parties towhom' these benefits should bedemonstrated j
are theusers ,theair carriers and their workers ,governments and ;
other public authorities and thegeneral public ,who 'suffer j
aircraft movements andperhaps contribute astaxpayers tothejfinan - |
cing ofpublic enterprises . ' >•'
(1)COM (73)1725 ' ;

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15- The following partial objectives might bededuced from
the interests ofthe users ,the airlines ,the workers and the
general public taking account oftheaims oftheCommunity :
Users
-atotal network unhampered bynational barriers with
efficient services beneficial tothe different user
\
groups atprices aslow aspossible without discrimination ;
I -
I
i
Airlines'
/
-financial soundness for the airlines ,adiminution of
their costs ofoperation and anincrease intheir
productivity j
Staff !
'
-safeguarding theinterests ofairline workers inthe
general context ofsocial progress including elimination
ofobstacles to free access toemployment ;
General •oublie
-improvements inconditions oflife for thegeneral public
andreppect for thewider interests ofour economies and
»societies .
i
!
Services and fretwork inthe consume rintere st
16. Theexisting airtransport system intheCommunity and in
theworld (asdescribed inannex II)meets important needs of
passengers through :
-interchangeability ofmost tickets between scheduled
airlines
-afairiy consistent scheduled tariff structure within
*Europe .
H •
-anextensive system oflow tariffs (1)onsome-routes through
IT,EX,' IPEXandcharter operations
-thepossibility forthegreater part toobtain areservati on
onascheduled flight 'atshort notice
(1>SeeAnnex IITable 7

-the cohesion ofthe scheduled network i.e.itis
possible inmost cases topiece together acombined trip
without excessive ^delay atthe riiain transfer points dueto
coordination oftime tables andfairly high frequencies .
17• Itistrue that these qualities relate inparticular to
needs ofbusiness andgovernment travellers ,which constitute the
largest group ofscheduled passengers intheCommunity .Forthese ,
speed andassociated attributes i.e. availability ,flexibility and
frequency areparticularly important ,with cost being less important
since thetransport activity isrelated topotential loss ofproduc­
tion andworking time .These needs aremetmainly byscheduled air
transport andtaxif lights . ,
. Some oftho deficiencies are :
-Atendency towards high tariffs for scheduled air trans­
port not only because ofthe tariff setting system but
also because business and government account for the
largest single demand associated with costly requirements
astoflexibility and service level .
-Limited flexibility forholiday and inparticular VFR*
traffic .Low tariffs -scheduled and charter air
transport -donot exist onall routes and are further­
more associated with restrictive conditions which limit
their use .
-Limited possibilities for innovation ,inparticular with
respect totariffs and types ofservice *
„-Astrict adherence toabilateral system which works against
•Jthe creation ofsome desirable
cross border services and which .-supports concen­
tration oftraffic between and toand from the main
airports .
-Acertain preservation ofnational barriers due tothe
bilateral agreements and theinternational organization
ofair transport between Member States .
♦VFRaVisiting Friends andRelatives ■*/

-9-
19. These shortcomings ofthe system are felt inparticular
byleisure traffic ,forholidays ,visits ,etc .This market is
!
concerned more with cost oftravel than with immediate availability .
I
\
2G, Theshortcomings and inparticular those relating tothe
preservation ofnational barriers arealso felt forfreight transport ,
where advantages ofair transport relate toe.g. transportation of
valuable goods inorder tocutdown onthe costs linked with floating
stock ,essential spare parts .,toget production restarted ,perishable
products ,airmail ,etc .
η
21. From aCommunity ^oint ofview ,business ,freight and mail
transportation needs are vital ,since they directly influence production
intheCommunity ,themarket ,structure andinparticular theinte - j
gration ofitseconomy .Thepresent qualities ofthesystem inmeeting j
their needs should notbedestroyed when efforts toImprove thedefi - \
ciencies areundertaken . !
r
22. Ontheother hand thepossibility ofquick andcheap air i
t
transport isofgrowing importance for thelevel ofperceived standards ;
ofliving foravery large number ofinhabitants intheCommunity . !
Rarticular importance may begiven tothe important role ofair trans­
port for the economies ofperipheral regions and tothe fact that
tourism insome development regions isdependent oncustomers arriving
byair .Itshould also bementioned that the free movement ofworkers
gradually isgiving rise toanimportant group ofVFRpassengers .
»t
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-- ;i:

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Financial Rcmrndneea of_the_airlinesandreduction ofoneratin«
costs i
2SThemeasures whichshouldbetakentorepairdeficiencies mentioned
7inpara-..18.shouldnotharmthefinancial soundness ofairlinos.
Boththegeneralpublicandtheairlines haveaninterestinavoidingthe
creationoflosseswhichwouldbepassedontotaxpayers .Asageneral
ruletheairlines shouldtherefore offer'servicesinsuch£waythattheir
financial soundness isguaranteed onthebasisofcommercial management .
24.Thepresentsystem,whereitisdifficult forthescheduled ■j
carrierstocompeteon.tariffsasseeninannexII,hasledtoasituation
wheretheefficient airlines arecompeting inotherwayse.g.onservice.
Suchasituation tendstoincrease thecostlevelandtocreate some
servicesinwhichimportant customer groupsmaynotbemarkedlyinterested .
25.TheCommunity couldinthiscontexthaveaninterestinassuring
aninherent pressure inthesystemtowardshigherproductivity and
therebylowerpricese.g.throughtheintroduction ofacertainnumber
ofcompetitive elements andopeningforinnovation .
26.TheCommunity'sairlinesexistinaworldwide contextalso '
andmustatleastbeabletomatchthetariffsofferedbythirdcountry
airlines .Theairlines canmeetthissituation inthreeways:bygetting
stateaids,bycharginghighertariffsonotherroutes(crosssubsidization )
orbyincreasing theirproductivity .Thefirsttwopossibilities
arenotattractive .Financial intervention bytheStateshouldnormally
belimitedtocompensation inrespectofpublicserviceobligations .
(Itcanhardlybeanobjective fortheairlinestoslidedownhilltowards
lossofmanagement discipline throughgeneraldeficitslikesomerailways.)
Thisprinciple isstatedintheTreatyofRomeforinlandtransportation
•anditsimplementation shouldbepursuedalsoforairtransport .Further­
more,tariffincreases withintheCommunity arisingfromexternaldifi'i–
cultieswouldberegrettable andnon-productive .Ittherefore becomeseven
moreimportant toincreasetheproductivity ofCommunity airlines *
ι.,

i. ■
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27. Thewaytowardshigherproductivity iiscomplex.Inanormal
industrial sectorcompetition onpriceorquality -exerts
apressure oncommercially managedenterprises towardsproductivity .This
principle shouldalsobetrueTgenerally forair"transport .
Itisatanyratedifficult toprescribe productivity throughregulation .
Thebeneficial effectonproductivity ofpricecompetition ishighly
visibleinthechartersector. ,
2'& Ontheotherhanditisclaimedthateconomies ofscale
areimportant incivilaviation andthatthisjustifies concentration
ofscheduled airtransport onfewbatlargecompanies .Thisisnot
» 5necessarily true-atanyratealways-andthereismuchevidence to
'
showthatsmalloperations canhavecostadvantages whichoffsetthe
costsavingsrealised bylargescaleoperations .
i ..
.29l Moreimportant inthisrespectisthepossibility ofeconomy
ofoperation thatarational networkgivesriseto.Theaircraft with
associated servicingfacilities represent av*erylargefixedcostelement.
Itistherefore important thattheaircraft arebeingusedasmuchas
possible/notjuststanding aroundwaiting (although environmental 1
reasons maygroundthemduringcertainnighthours).IntheU.S.A.air­
lineshavebeenabletodevelopnetworks basedonoperational efficiency
andtheyhavethereby ,obtained veryhighutilization ratesofaircraft.
t JIntheCommunity noneoftheMemberStateshaveageographical areawhich
initselfwouldensuresuchanetwork anditwouldbenecessary to
establish secondary centersinotherstatesandbeabletooperate
betweenthemtoacertainextent,i.e.withfifthfreedomrights.The
!bilateral agreements ,whichgovernoperations betweencountries show
howevertendencies towards asystemwiththirdandfourthfreedom
rightswithfifthfreedomrightsbecoming rarer.
30- Onemayaskwhetheropencompetition wouldnotproducethe
sameresult.Thismaywellbe,butitisverylikelythatthepresent
systemofconcessions
willbedifficult tochange.Thereareatleastthreereasons.Airlines
earnimportant amountsofforeigncurrency bothdirectly andindirectly
byallowing passengers -topayintheirowncurrency.Allthestates
areinvolvedfinancially andwouldnotallowthecompanies tomake'
losses.Thelastreasonisrelatedtotheinternational nature
*SeeAnnexIItable 1

ofairtransport ."Fluctuations inexchange rates between thetwo
countries involved would inanopen competition have full effect on
business .Member States arenotprepared toaccept this.'
31. Competition inoneform oranother mayhowever
beuseful andpossible .Thepurpose of competition through
market entry andinnovation intariffs ,marketing andtype andnetwork
ofservices would betointroduce acommercial deterrent with respect
toabuse ofdominant positions andtoincorporate apressure towards
productivity . '
32. The introduction ofagreater degree offreedom within
theCommunity concerning both access tothemarket ,tariff setting and
new services should beaccompanied by :
i
-strengthened control ofstate aids and agreater
transparence ofthefinancial relations between the
states andtheir airlines tocheck damaging distor­
tions ;
-afull emphasis onair safety aspects inaccordance
ι
with applicable international norms *

Work people i
« M <mmmm ^
53. Theprovisions of "theEECTreaty onthefrc movement ofporkers I
.areapplicable intheairtransport sector .Forcertain categories of I
staff ,however ,differences between Member States' legislation onthe
issue andmutual recognition oflicences ,certificates andother evidence '
ofnational qualification prevent therealization offree movement .This
applies particularly topilots .Thedismantling ofnational restrictions [
* i
andgreater interchangeability ofstaff ,though complex toattack ,could |
improve flexibility andefficiency ofoperation . S
• (
I.
34. Amore long term objective ofharmonizing theworking conditions ,
bearing onconditions ofcompetition between theairlines ,would needfurther |
examination .There ispressure from airline workers ,trade unions andpro– [
*
C
fessional bodies ,toequalize these conditions asbetween airlines of j
different countries ,taking account ofsafety aspects andsocial progress . j
Aninventory isatpresent' being prepared .Itisthecase that Community
conditions could notbedealt with leaving outofaccount thefact that
airline activity isworldwide andcompetition ^from e.g. Asian airlines
with lower labour costs cannot beneglected .
i
3'51 Although afurther development of Community airtransport nodouci j
will entail important employment gains intheaeronautical sector andancillary j
industries ,other employment effects mustalsobeborninmind .Lower prices |
andhigher productivity mayspell redundancies intheairtransport sector j
unless thetraffic increase (scheduled plus nor>-scheduled )offsets these negative j
effects .The traffic increase will nodoubt toacertain extent betaken from other
transport modes which therefore maysuffer reduction inemployment orfinancial j
r
losses .Pressures forcaution when increasing productivity canbeexpected . J
t
' ': I
Improvements inconditions oflife i
[
36. Itisintheinterest ofthegeneral public that theCommunity
initspursuit ofanairtransport policy takes account also ofbroad
objectives such astheprotection oftheenvironment ,regional development ,
rational useofthenatural resources ,inparticular energy and
theprotection ofhuman life ,i.e. theprevention ofaccidents .
Community initiatives inairtransport must strive forareasonable
balance between general public interests andthose oi.the U3ers *>A

14
■thecompanies .Theseinterests mayfromtimetotime "becontradictory .
Theefforttoreduceaircraftnoiseemissionisanexample.Neverthe­
lessaproposal tothiseffectisbeforetheCouncil.
FIELDOPACTION
111•■1 »
NewInputa.tCommunity level
1)
37.ThenewIATAstructure doesgiveascheduled aircarrier
thepossibility tofileasetoftariffsKhichwouldconstitute abreak
withthepresentstructure .Eachofthesetariffsmusthowever "be
approved by-atleasttwogovernments andittherefore seemsimprobable
thatsubstantial changeswillbeintroduced basedonaunilateral initiative .
TheCommunity presentsthelegalpossibilities forassuringtheimplementation
equallybyallMemberStatesofamultilateral agreement toopentheroad
towardsinnovation .TheOommunity mayapprovedirectives forintra-Comnrunity
service basedonowninitiative orinternational recommendation *
t I
38.Thetendencies towardspredominance ofthirdandfourth
freedomrightsandthegradualreduction offifthfreedomrights
wouldbecontrarytoCommunity philosophy sincetheexistence ofthe
Community shouldpermitthemosteconomicoperation ofitsenterprises in
providing services.TheCommunity couldguarantee the
necessary trustandlegalbasis,allowingthescheduled airlinestore­
structure theirnetworkwith everybody gaininginoperational efficiency .
.39.TheCommunity couldalsoplayanimportant roleinthereduction
ofoperating costsofairlines ,becauseithastheinstitutional possi­
bilitiestoreduceandeliminate thebarriers whichdelayairporthandling
andaddextrastaffrequirements fortheairlines .Suchbarriers
stemfromnon-compatible nationalprovisions .Thisisthejustification
formeasures concerning thesimplification offormalities for
passenger andfreighttransportation aswellastheharmonization
oftechnical standards foraircraft .
4^.TheCommunity disposesoffinancial instruments ,whichmayease
theveryseriousfinancial problemwithrespecttoreplacement ofthe
presentfleet.Duringthe1980'sitwillbenecessary fortheair
i
»
(1)SeeAnnexIIpara14.

-1Ï-
carriers toreplacemostoftheirexistingfleeti.a.toobtainoperational
improvement ,lower .energyconsumption ,toconformtonoisestandards and
alsotoexpandtheirfleets.Theself-financing capability ofthescheduled
airlines maynotatpresentbesufficient tomanagetheseimportant
investments .
I.
»4T. Theexistence oftheCommunity financial instruments
constituted bythetad^theEllwandtheRegionalFund^ould behelpful
inthisrespect.IndeedtheEI8andtheRegional Fundhavealready
extended somegrantsandloansforinfrastructure investments andfor
thepurchase ofaircraft.Notonlywouldtheybeabletoeasethe
futurefinancial burdenbothfortheairlines andtheaeronautical
industry,theirusewouldalsopromotesolidarity atCommunity level
andperhapseveninalargerinternational settingthroughtheirextension
toACPcountries .I
[
i
i.
i
ϊ·
»/•••
(1)NCI=NewCommunity Instrument
(2)EIB=European Investment Bank
(3)ACP=African,Caribbean andPacificCountries

•16•
TheEuropean andInternational context
4.2. Community airtransport isbasically aninternational
activitygovernedbyrulesoriginating >nthe(JhicagoConvention
andbasedonnational sovereignty .Thecreation ofanairtransport
systemintheCommunity withdomesticcharacteristics wouldtherefore
entailacertainnumberofchangesintherelationswith'third
countries andinternational organizations sucha;;ICAOandECAC.It
istherefore indispensable toensureacontinuogs concertation at
Community leveloninternational issues,whichinfluence orareinfluenced
byactionsinairtransport intheCommunity .
A3. Theintroduction ofcertainotherelementsofCommunity
concernintherelations ofMemberStateswiththirdcountries and
international worldwide organisations forairtransport ,mightalsobe
contemplated .Carefulthoughtshouldbegivent<pthequestion asto
whichinterests couldusefully beintroduced innegotiations withthird
countries .Threeexamples canbegiveninthisconnection .Although
itmaybecorrecttosaythat L"someadvantages obtained byMember
Statesinindividual bilateral negotiations ,e.g.withtheUSA,couldbe
prejudiced bytheintroduction oftheCommunity dimension,andevenif
theinterests ofMemberStatesandEuropeanairlines maysometimes
diverge,ageneralargument infavourofconcertation ofnegotiating ---
positions Remains.Thesecondconcerns thepossibleeffectsoftariff
reductions inoperations toandfromthirdcountries onthelevelof
tariffsinsidetheCommunity .Thethirdisthepossibility ofsome
mutualstrengthening oftheposition ofCommunity countries indealing
withrestrictive policiese.g.throughMiddleEJastorSouthEastAsia
gateways ortowardstransitorinthirdworldqountries .
<'4 Theadhesion ofGreeceandlaterofSpainandPortugal
givesrisetoimmediate needsofcontact,consultation andcoordination .
Theexisting cooperation betweenthethreeScandinavian countries must
beconsidered aswellasthecloseinterrelationship between Community
MemberStatesandAustria andSwitzerland .TheCommission intendstoconsult
withthosecountries onairtransport asappropriate .Regardhasalsotobe
hadforthebenefits Community airlines andth^irusersmaydrawfrom
cooperation andpoolingarrangements withairlines fromnon-Member States.

-17
IMPLICATIONS FORTHEAEROSPACE INDUSTRY'
45.TheactivityoftheCommunityscheduledaircarrierscorresponds
toabout40%oftheUSAcarriersand15%oftheworld.Theshareofthe
Europeanaerospaceindustryislessthan10%oftheworldmarket.Itis
evidentthattheaerospaceindustryhasscopefordevelopment .
46.Theaeronautical sectorisimportantbothwithrespectto
nationalsecurityandcommunication .Itisthereforeimportantthatthe
Communitydisposesofawelldevelopedindustry.Theaeronautical industry
represents ahightechnology andhighvalue-added industrywhichitisinthe
Community'sinteresttosupporti.a.withaviewtothecontributions the
industrycangivefortheexportmarket.Athriving,profitable Community
airtransportsystemwouldnaturallyandwithoutimpairmenttousers'choice
beanadvantagefortheCommunityaeronautical industry.
47.Theintroduction ofpossibilities forinnovation andcompetition in
theairtransportindustrywillentailbothpossibilities andrisksfor
theEuropeanaerospaceindustry.Anincreasedactivityofairtransport
shouldgiverisetoadditional demandforaircraftwhichtheEuropeanair­
craftindustryshouldbeabletotakeadvantageof.Theriskbeingonthe
otherhandthatthisgrowthindemandatleastintheshorttermwillbe
off-setbyhigherloadfactors,betteruseoftheexistingfleetetc.Ina
situationwherecostsofoperationareimportant,itisthusintheinterest
ofboththeaircarriersandtheaerospaceindustrythattheaircraft
producedintheCommunityareasefficientandcompetitive aspossible.
ThepresenteffortOftheEuropeanaircraftindustryi.e.theAIRBUSprogramme
isconcentrated onmediumhaullargecapacityaircraft.Thisprogramme
must>beexpandedinordertoobtainahighermarketsharesincemuch
ofthedevelopments inairtransportwilltakeplaceinlonghaul
trafficandalsomediumandshorthaultrafficwithmediumandsmall
capacityaircraft.Theenvironmental requirements,inparticularwithrespect
tonoiseemissionsandthenecessityofmeetingthedemandsdictatedbythe
newenergysituationbothwithrespecttoavailability andpriceoffuel,
poseinthissituationbothpossibilities fortechnically advancedaircraft
butalsodifficulties indesigningcosteffectiveaircraft.

-18-
t
4gp TheCommission findstheemergence oftheAIRBUSprogramme
andtherebythecreation ofanaircraft industry asaveryimportant
development .itintendstosupportthecontinuity ofthisstructure
andthediversification ofprogrammes throughitsownactionsand
stimulation ofconcertation between MemberStates.Inthiscontent
theCommission seekstoencourage andsupportresearchcritical forthe
development ofnewaircraft .AtthesametimetheCommissionwi11
stimulate contacts between theairlines andthemanufacturers toallow
theindustry tobenefit fromtheoperating experience oftheairlines and
theirexpectations withregardtofuturerequirements .Thefinancial
instruments oftheCommunity mentioned in§§4oand41canalsobeused
tosupportthispolicy.
49. TheCommunity isequallyinterested inthedevelopment of
othersectorsoftheaerospace industry .Thisisinthepresentcontext
inparticular trueforindustry manufacturing airtrafficcontrolequipment
asshowninpara88. 1 v

XII.
MEASURES |
50. Thefollowing actionsare •conceived inorder i
todealwithdeficiencies inthepresentsystembyimprovingpotential I
scopeforadaptation' andresponsetonewsituations andneedstoattain [
theobjectivesdescribedinChapterII.Eachmeasurewillinitselfand j
aspartofawiderevolution influencetheinterests ofusers,airlines, j
workersandsociety !ingeneral.Thustheclassification whichhasbeen
followed inthepresentation isonlyindicative ofthemainaimspursued.
Thelistisnotexhaustive andcouldbedeveloped further fromthe
discussion proposed.Theenergysituation shouldbemonitored carefully .Additio­
nalmeasures maybeneededwhenitbecomesclearhowthemediumtermsituation
fffc^A^DtpLEXIBILllY riNrMAR^ETtSTRUCTURE ANDPROCEDURES TOBENEFIT
USERSANDAIRLINES '. ■
»« '
I
51# AsshowninChapterII,theshortandmediumtermaction
oftheCommunity shouldbeconcentrated onmeasures whichbringincreased
flexibility andinnovation toairtransport betweentheMemberStatesof
theCommunity .Thesuggestions theCommission isputtingforwardinthis
respectrepresent anevolutionary approach,which,producing firstresults
intheshortandmediumterm,opensperspectives fortherealization of
morelongtermobjectives .
Potential marketentryandinnovation
|
52. Increasedpossibilities ofmarketentryandinnovation could
I
beintroduced whilstbasically maintaining thenetworkofreliableservices
bydesignated scheduledairlines.Full. freedomofaccess j
£tothemarketcould,however,onlybeenvisaged atlongterm.Theshort S
r £
andmediumtermactionoftheCommunity shouldtherefore beconcentrated ?
onspecificactionssetoutInpara5^-6^,whichshouldbecoherentwiththeji
widerconceptual framework described inpara53-55. •
• *
CT Ifanairlinerequested trafficrightsinordertocarryoutanew;:
routebetweenMemberStates,anewtypeofscheduled service,oran [
existingserviceataconsiderably lowerprice,accompanied bynewmarketing \
measures,thenitshouldnotbeprevented frombeingauthorized . I

20-
-unlesstheairlme(s)alreadydesignated decidedtoofferasimilar
serviceortariff.These carrier(s)couldnaturallychooseto
refrainfrommatchingtheproposedofferinsituations wherethey
judgedthenewactivityunprofitable . J
54.Ifsuchapolicywereintroduceddirectly,itmight
havedisruptiveeffects.Theinclusionofcertaincriteriamighttherefore
provedesirabletominimizethesepotentialeffectspossiblyalongthe
followinglines: •
-the.newcarriermightbeaskedtoshowthatitsproposed
newactivitywouldbeprofitableinordertoavoidpredatory
marketentry;licensingauthorities couldkeepwatchonthe
abilityofthecarriertoexpanditsactivityInviewof
itsresources;
-atariffreductionjustifying marketentryshouldbeofa
certainminimumsize,tobedefined,'inordertopreserve
acertainstability;
-thenumberofnewtrafficrightsthatacarriercould
obtaineachyearundertheserulescouldbelimitedto
avoidsuddentiisruption ;
-inordertogiveacarrier,alreadydesignatedornot,the
$imetobuildupanewroute,itshouldbepossibletogive
protectedtrafficrightsforalimitednumberofyears.
' i
55. Therearemanywaysofphasinginsuchapotentialformarket
entryandinnovation,takingaccountalsoofaspectsconnectedwithstate
aids,safetyand-faircompetition ,forthenon-scheduled carriers.Inorder
tointroducethisprocessofaugmentation ofthepossibilities ofmarket
entryandinnovation,theCommissionsuggestsCommunityactioninthe
followingfields:
•/••9

-21
-,0• Intra-European tariffsareoftencriticized bypublicopinion
andtheEuropeanParliament.ComparisonwithtariffsinforceontheNorth j
AtlanticorwithintheUSA,onwhichsuch.criticismisfrequently founded,
doesnotalwaystakeintoaccountthedifference incostsbetweenNorth
Atlanticanddomestic USoperations andintra-European operations (intra-
Europeancostsasexplainedinsection DofAnnexZIbeingmuchhigher).
Comparisonisalsooftenmadedirectlybetweenthenormaleconomyclass
tariffsforintra-European servicesandthelowertariffsontheNorth
Atlantic,which.ismisleading.lt shouldalsoberememberedthattherearetariffs
inEuropelowerthanthoseintheUSA,thoughburdenedwithrestrictive
conditions ofsale.
57. The.Commission anyhowconsidersthatthereisscopeforimprove­mentandthatitistimefor
arethinkingofthetariffstructure.Thepresentscheduledstructure hasas
itsbasiseconomytariffs,whichincludepaymentforserviceswhichare j
usefultoiprobablythemajorityofbusinessandgovernmenttravel.The j
economytariffisthereforeof:necessityfairlyexpensiveandadhocmodi-j
ficationsofthesystemhavebeenintroduced fromtimetotimetomakereforms j
i
andtoallowscheduledaircarrierstomeetcompetition inparticular fromnon-1
scheduledaircarriers.Thisledoncertainroutestoaprofusionoftariffs
(seeannexII,table7)whicharenotonlysomewhatnon-transparent tofrostusers
but-whichmayalsobeirrational,Whi1stonmanyotherroutestariffoptions
arelimited.Changesinthetariffstructureforscheduledairtransport
may,itisclaimed,producetariffsmoresuitablefortheleisuremarket j
andforpointtopointtraffic. 1
58„ Giventhesituationasitis,theaimshouldbetooffer
usersabroaderrangeoftariffswithoutjeopardizing theeconomicsituation
oftheairlines.AninitialstepcouldbethatMemberStatesasktheair­
linestointroducetrjavelarrangementspermittingareductionoftariffson
i
themostimportanttrafficlinks,preferablyinamultilateral framework.In
ι·
scheduledintra-Community passengerservices,thesearrangements could
i■
providefor:
-theintroduction ofathirdclass,
-theintroduction ofspecialtariffsforacertainpercentage
ofthecapacityofferedonconditionthatthefareispaid
inadvanceandisnotrefundedorisonlypartlyrefunded
ifthepassengerdecidestopostponehisflight,

-theintroduction ofabasic,no–friLispoint-to-point
ticketfarwhichadditionalservicescouldbepurchased
suchasreservation ,interchangeabi lity,etc..
-theofferofaspecifiedpercentageofweeklycapacity
available ontheroutesinquestionatatariffnot
excejeding50%of602oftheeconomyclasstariffwith
suitableconditionsofsale, '
-theintroduction ofaEuropeanroundtripticket,
*generalimplementation ofstandbytariffs.
59. Thegovernments,
theairlines,theirregionalandworldassociations anduserassociations could
makeappropriate proposals.
\
60. InCommunityarrangementsit.shouldbeenvisagedthatshould
airlinesshowreticencetointroducethesereducedtariffs-thegovernments
i
responsible shouldallowtheestablishment ofalimitednumberofservices
4
withsuchtariffsby'otheroperators ontheroutesinquestion.Shouldthe
implementation ofsucharrangements giverisetoconflicts,suchproblems
couldbesubmittedtoe.g.anadhoccommitteeatCommunitylevel.
Sçheduledservices
61.•TheCommissionisexaminingwhatstepsitwouldbeboth
possibleandusefultotaketodevelopnewcrossborder servicesconnecting
alargernumberofregionalcentersintheCommunitycountries.The
possibilityofliberalizing thoseservicesoperatedwithaircraftnot
exceeding afixedcapacitycouldbeexaminedonthebasisofthefindings.,
ofstudiescurrentlyinhand.
\ ♦
62. Another,moreradical,meansthatmightbeconsideredof
I
openingthewayforinnovationinscheduledairservicebetweenCommunity
countriesmightbearrangements tomakeoperationsunderbilateralagreements
moreflexibleinthefollowingway:thatifanairlineofaCommunitycountry
werepreparedinitsowncommercial judgementandwiththeconsentofthe
licensingauthoritiesofthecountryofitsownbaseofoperationtointroduce

-23-
newlinkswithpointsinanotherCommunitycountryorcountriesnotat
presentserveddirectlyorbythroughsame-flight services,ortooffer
servicesofanewtype(accompanied byfareandmarketinginnovation),the
receivingCommunitycountry(ies )should,afteracertainperiodfor
consultation,nolongerbeenabledtoreject(exceptondemonstrable and
non-discriminatory operational,noiseandpollutioncontrolandairport
congestion grounds)thoseservices,whichwouldthenbedeemedtpbe
permissible inaccordancewiththerelevantbilateralagreements .
»· . . ..
N2Dr§£Î22duled_sery2çes
63. Theproceduresfortheauthorization ofnon-scheduled
serviceswithintheCommunitycouldbeamendedsothatusersareoffereda
•.
bfcoaderrangeofalternatives inairtransportwithsubsequentpossibilities
I
ofbenefitting fromcheaptariffs.In1956mostofthecountriesbelonging
._. 1)totheECACconcludedinParisanagreement .toliberalize someoperations
ofthistype.However,authorization tocarryoutnon-scheduled services
I
notcoveredbythis".agreementisnotautomaticandthecompaniesmustin
somecasesrequestit-eachtimefromtheGovernments concerned.
I
I
i
-64.Itis^thereforeproposedtoexamirte,perhapsincollaboration
withECAC,whetherthescopeoftheagreementcouldbeextendedensuring
automaticacceptanceofsomecategoriesofservicesbythecountryofdesti­
nation,forexampleinclusive tourpackageholidaycharters.Thiswould
bebeneficialtotheusersandwouldallowthecompaniesconcernedtoplan
theiractivities andtheirinvestment moreeffectively .Itshouldbenoted
thatintransportthefreedomtoprovideserviceshas-tobeestablished under
theprovisionofthetransportTitleoftheTreatyofRome(Art.61.1).
Generalconsiderations
–-–––InconclusiontheCommission considersthatthegraduated .
introduction ofsuchpolicieswouldcounter&ct abusesofdominantpositions !
infavouroflowerpricesandworktowardsremovalofobstacleswhichthelack ■
ofacceptance byoneMemberStatecannowopposetotheintentionsofair­
linesofanotherMemberState.Theelementswouldnot'4interveneundulyinj
thenormallicensingproceduresoftheMemberStatesandwouldpreservethe
1)Multilateral AgreementonCommercialRightsofNon-Scheduled /
AirServicesinEurope,Paris1956
i ! ii

primaryresponsibi Lityfortheirowncommercial actionoftheairlines
andtheoperation ofscheduled services inaccordance withthecompre­
hensiveframework ofthebilateral agreements .
!
66. Furthermore' theCommunity hasnecessarily totakeinto
consideration that,notwithstanding thegreatimportance ofCommunity
airlines'activitiesoutsideEurope,theeconomicbasisformanyofthem
isinintra-European activities .Modifications fortheintraEuropean
1i «marketcanchangetheircompetitive position ontheintercontinental market.
Changes ,shouldtherefore beintroduced withaviewtogivingtheairlines
timetoadapt. •
t
67. Passenger services shouldbediscussed separately from,freight
services asitmayprovelessdifficult toreachagreement inthelatter
case. |
i'
i:
Regulation applying therulesofcompetition inairtransport
68. Therulesofcompetition (Art.85-90)formpartofthe
ι
generalprovisionsoftheTreatythatapplytoairtransport without any
Councildecision beingnecessary .TheCompetition Titlelaysdowncertain
detailedrulesforthjatapplication andproceduresfortheadoptionof
otherrules. j ~ ■
69. TheCommission currently lacksthepracticable meanstoensure
thattheairlinesregularly andeffectively complywiththerulesofcompe­
tition.Inairtransport thereisnoregulation asthereisforother
industries providing foraninvestigations procedure andpenalties forconduct
causingdistortion ofcompetition .
70. atransitional provision (Art.89)empowerstheCommission,
actingattherequestofaMemberStateorofitsowninitiative,toinvestigate
suspected infringements ofthecompetition rulesandtoissueareasoned
decisionfindingthataninfringement hasbeencommitted .Butifitisto
pursueworthwhile investigations theCommission generally depends onthe
cooperation oftheauthorities oftheMemberStates,whicharerequiredtocome
toitsassistance .Nopenalties existthatwouldactasarapiddeterrent to
illicitpractices .AlltheCommission candoisauthorize theMemberStates
totakethenecessary measures.Whetheractioncanbetakentoinvestigate and
terming"aninfringement thuslargelydependsonthegoodwill ofthe

25
governments oftheMemberStates.TheCommission can,incertaincases, j
however/1takeactiondirectly inrelationtotheMemberStatesonthebasis
ofcertainautonomous powers(Art.90)toenforcecompliance withthe
competition rulesbytheMemberStates,wherenecessary byissuing j
directives ordecisions .
71 Toimprovethissituation aregulation shouldbeadoptedforthe'
(application oftherulesofcompetition toairtransport similartothe j
r^uTations covering otherbranches oftransport andeconomiclife.The
regulation wouldprovidefortheprocedures ,decision-making powersand
penalties thatareneededtoenforcethecompetition rules.Itwouldthus
beaprimarily procedural regulation .Itsprovisions wouldbedirectly applicable
i ' *
tobathpublicandprivatesectorfirms,butonlytotheextentthattheyarej
inapositiontocarryonanindependent businesspolicy.Suchadraft j
regulation willshortlybesubmitted --
î
72. Wheretheconductofanairlineisimposedonitbya j
publicauthority,itistheMemberStates,who! assume j
responsibility forthebusinesspoliciesoftheirairlines andwhoasa"[
consequence arethensubjectto thecompetition principles . I
73. Theregulation wouldfacilitate theinvestigation of !
restrictive practiceorabuseofdominance onairtransportmarketwherethere!
isnoevidenceofsuchStateresponsibility .Inthesecasesconformity""with'-the !
Communitycompetitionruleswouldbecalledfor,takingiptoaccountinter-j
national factors -- :• * i
74. Asregardsservicesthatareaffected bygreater-though
obviously notuniform-degreesofStateintervention ,theCommission 's
endeavour tobringgreaterflexibility intothestructure ofcivilaviation
willcorrespondingly broadenthescopeforcompetitive conductonthe
jxattpfbothairlines andStates.
75. Companies entrusted withtheoperation ofservices of
generaleconomicinterest (art.90.2)canbeexempted bytheCommission
fromtherules.Exemption fromtheprohibition onrestrictive practices
couldbegiven,forinstance,toanumberofcontractual clevises
i .. 9•»/«••

thatdonotsatisfythenormaltestsofthecompetition rules.Butthe
principlecanonlybeappliedcasebycaseafterduescrutinyandinthe
lightofrulingsgivenbythe'CourtofJusticeinrelevantcases.
j
:
Stateaids
76. TheCommissionintendstoworkoutacommonapproachfor
theapplication ofart.92and93inairtransport onthebasisofan
inventoryofaidstotheairtransportindustryandinthelightofthe
competitive problemsthatarefoundtoarise.Theobjectiveofcoordinating
aidswouldbetoconfineStateintervention withinthelimitsofwhatis
warrantedinthecommoninterest.Thepossibility ofreimbursing public
serviceobligations shouldbeaccepted.
77. InadditiontheCommission intendstoimproveitsinformation
onfinancialrelationsbetweenMemberStatesandpublicenterprises (including
airlines).TheCommission hasalreadyannounceditsintentionofissuing'
adirectiveforthispurposeinthesecondhalfoftheyear.
Riahtofestablishment
78. Theprincipleofrightofestablishment (Art.52)applies
directlytoairtransport.AtmeetingsbetweentheCommission'sdepartments
andgovernment expertsontheconsequences oftheapplicability ofthe
generalrulesoftheTreatytoairtransport,allexpertsclaimedthatthe
application ofthisArticlewouldposepracticalandpoliticalproblems,
particularly overtheregistration ofaircraft.Theythereforeaskedthe
CommissiontosubmittotheCouncilaproposa'ltointroducesuitable
)
exceptionsinthiscase.TheCommission hashowevernotbeenpresented sofarv
-withconvincingproofthatwouldjustifysuchanexceptionandaccordinglyj
"U
intendstoensurethatthisprincipleisrespectedalsointhefieldof \
?
airtransport. ^
Stabilizing exchangeratpsf"rtariffrnngtrnrt -inn !
f
1
79. Inconnectionwiththeactivities goingonfortheoperation
ofaEuropeanMonetarySystem,theCommissionisexaminingwhataction
couldbeusefullyundertakenwithregardtodiminishing graduallythe i
existingdirectional differences intariffsforthesameroutebetween t
MemberStates(SeeAnnexIlpara94).Fewerandsmallerfluctuations ; i
inexchangeratesasbetweenStatesparticipating inEMSwouldautomatically ;
overtimereducethisdisparityandimprovethepossibilities forIntro-|
ducingfaircompetition. i

-27-
Compensation fornassp^ers aHwpr<?elvaffectedby*overbooking
80. Thepracticeofoverbooking followedbyairlinecompanies
hastheresultthatsomepassengers whohavepreviously reserved aseat
onaspecificflightinthenormalwayare-notallowedtoboard.Itis
notentirelythefaultoftheairlinecompaniestotheextentthatthey
resorttothispracticetooffsetthenumberof"no-show"-passengers who
a
haveconfirmedtheirbookingsinthenormalwaybutdecidenottotravel ,
withoutbotheringtocancelandsuffernopenalty.
81. Thepassengerishoweverinavulnerablepositionincurring
notonlyconsiderable inconvenience butalsoinmanycasescommercial losses.
Itseemsindicatedthat-heneedsprotection,probably acompensation scheme.
TheCommissionisexaminingtherecentECACrecommendation inthisrespectand
anAEAdraftsystemwithaviewtoproposing adirective.
AIRLINES
Simplification offormalities (facilitation )
82. TheCommission maytakemeasureswithinitsownpoweror
submittotheCouncilproposalstosimplifyprocedures anddocumentsused
ininternational airfreighttransport,particularly intheframeworkofits
multiannual programmefortheachievement ofthecustomsunionandfiscal
harmonization .Measuresmayalsobeworkedoutforpassengertraffic,even
thoughproblemsofsecuritymakeanyactiondifficultyFacilitation is
alreadyonthelistofpriorities approvedbytheCouncilandforthis
reasontheCommissioniscarryingoutastudytobetterdefinetheproblems
directlyrelatedtoairtransport.
Harmonization oftechnical standardsforaircraft
TheCouncilacceptedtheCommission'ssuggestion on
f
thepossibility andusefulnessofharmonizing ;technicalstandardsforair­
craft.Thisexaminationwillconcernanumberofstandardsrecommended by j
agroupofdirectors-general ofcivilaviationfromcertainmembercountries ;
andotherEuropeancountries.Suchharmonization oftechnics'standardsmayj
havepositiverepercussions ontheaircraftconstruction industryandcontri­
butetotheachievementofsubstantialoperational costsavingsbytheairlines ,

-28.
*STAFF |
L\
Workingconditionsofaircrewandgroundstaff |
84.TheCommissionhascommissionedacomparativestudy j
onworkingconditionsintheairindustrywithintheCommunityandhas j
alreadymadecontactwiththeemployersandtradeunionstodefinethe [
scopeofthisstudy.Theresultswillenable'ittodeterminewhat j
actiontobetaken. [
■ ■ ■y
.[MutualpecoQnitionofQualifications ofaircrewaidgroundstaff j
85. Inordertoimplementtheactionprogrammeapprovedbythe !
Council,theCommissionintendstotakestepstobringaboutthemutual
recognition ofqualifications andwillsubmit;theresultsofastudyon ;
I-
thesubjectwhichhasbeencsrriedoutbytheInstitutduTransportA6rien
(ITA).Solutionofproblemsresulting .fromthedifferentregulations' in'force
intheMemberStates wouldextendthepracticalopportunities i
forthefreemovementofworkerswithintheCommunity andforthe ;
\
interchangeabi lityofcrewsbetweenairlinecompanies.
• ^• .V * I
D.SAFETY " !
86. TheCouncildidnotaccepttheCommission'ssuggestionto i
includeairtrafficcontrolonthelistofpriorities.Infact,becauseof t
thetechnicalnatureofthesubject,themilitaryaspectsoftheairspacej
>
problem(defense,NATO)andthefactthattheConvention -ofEurocontroldoesj
notconcernallMemberStatesoftheEECandisalsoopentonon-Member r
I
StatesoftheEEC,acommitment bytheCommunityisdifficult.However, j
I
accountmustbetakenofthefactthattheEuropeanParliament hasconducted
anextensivehearing^nthematter,towhichthemaininternational j_
organiations concernedwithairtrafficproblems 1,wereinvited.Theresults _..'
ofthishearingandtheresponsesobtainedfrompartiesconcernedtogether
withtheresolution approvedbytheParliament mayprovidetheCommission
withinformation enablingittobetterassesstheadvisability ofsubmittingthi:
mattertotheCouncil.onceagainwithaviewtowardspossibleCommunityaction,p
forinstancetoincludecooperation betweentheCommunityandEurocontrol and;•
otherbodies.
(1)PE58.065of8.5.1979 %

87. Anincreaseinpassenger andfreightairtransportwould
almostcertainlyalsoentailanincreaseinthenumberofoperations.
Sincetheaircorridorsandtheairportsatpresentareclosetosaturation
andincreasesintrafficcapacitywouldentailverysubstantial invest­
ments,itbecomesimportanttolookcloselyattherealpossibilities for
expansioninthesystem.ThepresentsafetyrecordoftheEuropeansystem
i
isveryhigh.Overloading theATC-system might,however,leadto
increasedhazardsandreducesafety.It.isalsopossiblethatsaturationof
» *certainairwaysandzonesmightineffectnegatearealcompetition unless
itiscpossibletoaccomodatenewentrants.TheCommissionthereforeintends
tocarryoutastudytoexaminetheseproblems.
b8. Thetechnological differences inATCinfrastructure andequip­
mentposeproblemsnot-onlyforthecapacityofthesystembutalsofor
thecompetitivity oftheCommunityindustries concerned.Arecentexample
isthechoicebyICAI)ofaUSAMLS(MicrowaveLandingSystem)asthestandard
futuresystemsincethepositionoftheUSAwasstrengthened bythepresen­
tationofseveraldivergentproposalsfromCommunity MemberSates.The
Commissionthereforefindsthatastudyisdesirabletodefinethe
operational needswhichafutureintegrated systemmustmeet.Thestudy
willserveasabasisforinitiatives whichtheCommissionwilltaketo
furthercooperation intheseareas.Itisonlythroughsuchcooperation and
harmonization thattheseindustrialsectorswillgainstrengthonthe
exportmarketswheretheAmericanindustryatpresentispredominant .
RELATIONS WITHNON-MEMBER COUNTRIES ANDINTERNATIONAL ORGANIZATIONS
■*Consultation procédure
89. MemberStatesnegotiatetheirowntrafficagreements
individually withothercountries.Negotiations onthegeneralorganization
ofEuropeanandworldcivilaviationarealsoconductedwithincertain
international organizations .Althoughitisprobablycorrecttosaythatthe
interestsofMemberStatesandEuropeanairlinecompanies mayquiteoften
notbeidentical(or[indeedconsiderablydiverge)/thisdoesnotsubtract
fromthegeneralargumentinfavourofCommunityconsultation priorto
I :
I
!'■
•a•/•••

-30_
negotiation (or,perhapsatalaterstage,forCommunitynegotiation assuch
incertaincases).TheCommissionthereforeJia'ssubmitteda pro­
posaltotheCouncilforaconsultation procedure onmattersofcommon
intsrestraisedininternational organizations andinbilateralnegotiations *
i
withnon-Member States.
RelationsuithTTAOandECAC
90. TalksareunderwaybetweentheCommission'sdepartments
andtheICAOsecretariat andtheECAC.Presidentinordertoestablish
officialrelations andtoobtainobservership fortheCommunityorthe
Commissionwiththesebodies.TalkswiththeECACparticularly arealready
fairlyadvanced.
s
/

ANNEXES

LIST 0FANNEXES
Para
I.PRIORITY LISTFORAIRTRANSPORT
II.ANALYSIS OFTHEPRESENT SITUATION 1
THEINTERNATIONAL FRAMEWORK FORAIRTRANSPORT 1
TheChicagoConvention 1
Cooperation atgovernment level 8
Cooperation ofairlines 11
THESITUATION OFAIRTRANSPORT INSIDE THE
COMMUNITY 29
Enterprises andthefleets 29
Policyandinfluence oftheMemberStates 32
THETRANSPORT POLICY OFTHEIJ.S.A. 43
Domestic market 43
International Policy 48
AIRTRANSPORT MARKETS ANDSTRUCTURE OFCOMPE­
TITION 58
Domesticairtransport 60
Intra-Community andEuropeanairtransport 61
Intercontinental airtransport 66
Network 74
Fares 79
11.1Thefreedoms oftheair
11.2Percentage ofcapitalheldbythestatesinmain
_Europeanairlines
"aMainEECscheduledairlines (1977
II.3bMainEECnon-scheduled airlines <1977
TI.4International non-scheduled trafficofpassengers
11.5Principal airlines intheworld-Classification
according totheglobaltrafficintonnes/km
11.6Totaltraffic ofscheduled services in1976
II.7Exampleofpromotional faresavailable inEurope
11.8CharterandScheduled airlinecostcomparison
11.9European andUSdomesticfarescompared withdistance
11.10Anglo-American costlevels
11.11Comparison betweenEuropean andU.S.airlines-1977

AWfi"1
Prioritylistforairtransport approved bytheCouncil inJune1978
1,Commonstandards restricting theemission ofnuisances
duetoaircraft
2*Simplification offormalities (facilitation ),particularly
thoserelatingtoairfreight
3.Implementation oftechnical standards (JAR)
4»(a)Provisions regarding aids
(b)Provisions regarding competition
5«Mutual .recognition oflicences (aircrewandgroundstaff)
6.Workingconditions (aircrewandgroundstaff)
7«Rightofestablishment
8»Possibile improvements tointer-regional services
9«Search,rescueandrecoveryoperations ,andaccidentenquiries.

χANNEXII
ANALYSIS 0FTHEPRESE^NTSITUATION
THEINTERNATIONAL FRAMEWORK' FOR.AIRTRANSPORT
TheChicagoConvention
1.Civilaviationfunctionsatpresentinaccordancewiththeinterna­
tionalrulesestablished bytheChicagoConventionof1944andtheensuing
multilateral andbilateral agreements .
2.Oneofthefoundations fortheseagreementsistheprincipleof
nationalsovereignty .Theconvention makesit,clearthateachstatehas
exclusive andcompletesovereignty fortheairspaceoveritsterritory and
decidesonpermissions togiverightsforcarryingtrafficoriginating inor
destinedforitsterritoryorevencrossingit.Eachcountryisresponsible
forthetechnicalstandards,theoperational andsafetystandardsetc.in
respectofitsaircraftandcrews.
3.Atthemultilateral levelanimportantstepforwardwasrealisedin
Chicagofornon-commercial rightsastofreedomtooverflyandpossibility
tomaketechnicallandings (e.g.totakeonfuel).Fornon-scheduled flights,
suchaschartersandownaccountflights,allstates,whichsignedthe
ChicagoConvention,andthose,whichadheredafterwards,haveextendedto
eachothertheserights.Forscheduledflights,theserightsexistforthe
92states(theEECMemberStatesincluded,exceptItaly),whichhaveadhered
tothe"International AirTransitAgreement".Forotherstatesthetransit
andoverflyingrightsforscheduledservicesareregulatedbythebilateral
agreements ordependant onunilateral authorizations .

ANNEXJ.I
4.Bycontrastthepossibility toobtaincommercial trafficrights
isnotregulated byamultilateral agreement .Theserightscontinueto
bederivedfromthecompetence ofStates,whichaccordingly havecon­
cludedalargenumberofbilateral agreements betweenthemdealing
essentially withthescheduled airservices .
5.Theseagreements remainnormallyfaithful tothegeneralprinciples
oftheChicagoConvention ,inparticular withrespecttothesovereignty
ofnationalstatesandnationalresponsibility forsafetyandaircraft .:
6..Theyalso extendtotheairlines ofthetwocountries concerned
equaltreatment withrespecttooperations ,handling,customs,health,
services etc.
7..Thebilateral agreements definethedifferent routes,whichare
authorised ,andthegateways,notonlyinthetwocountries concerned but
alsointhecountries situated betweenorbeyondthosetwocountries .They
Specifythateachcountry candesignate oneormoreairlines tocarryout
thetrafficrightsagreedupon.Thesebilateral agreements establish in
generalcriteria andprocedures ,consultation procedures included,tofix
theleveloftariffs andincertaincasesalsothetransport capacity .
Cooperation atgovernment level
8..TheChicagoConvention established alsothe"International Civil
AviationOrganization ",ICAO.Thisspecialised agencyoftheUnitedNations
exercises averyimportant rolewithrespecttostandards andrules,
whichitdefinesespecially concerning technical matters,forsafety
andoperations .TheserulesarenormallyappliedbytheMemberStates.
Itdistributes information ,statistics,hasestablished technical assistance

ANNEXII
programmes andorganises diplomatic conferences foradaptation and
development ofairlawe.g.withrespecttoairpiracyandsabotage .
Thisorganization isactually examining theorganization oftheworld­
widetariffsystem.ItisbasedinMontreal andhas144members,amongwhich
alltheCommunity MemberStates.
9.TheEuropean CivilAviation Conference ,ECAC,isanorganization
withoutregulatory power,whichnevertheless playsanimportant rolefor
thedevelopment ofairtransport inEurope.Itworksbyrecommendations
andresolutions whichitaddresses toitsMembers.Theeeareoften
implemented bythecountries concerned inthesamewayasregulations ,
sincetheyareagreedbythedirectors generalofthenationalcivil
aviation administrations .Alargepartoftheworkiscarriedoutby
4permanent specialised committees forscheduled andnon-scheduled air
transport,technical mattersandfacilitation "undertheguidance ofa
coordination committee .ECACorganises meetings ofthedirectors general
forcivilaviation ofitsMemberStates,ageneralassembly everythree
yearsandintermediate annualplenarymeetings,wherethereportsofthe
coordination committee sr®presented .Ithasatpresent 22members,including
alltheCommunity MemberStates.
10-Forairtrafficcontrolitisnecessary tomention EUROCONTROL .Its
roleistostrengthen cooperation andtoorganisejointlytheairtraffic
controlfortheupperairspace(above6000m)fortheadheringstates.
Thisorganization wasestablished byaconvention signedin1960byBelgium,
theFederalRepublicofGermany/France,Luxemburg,theNetherlands andthe
UnitedKingdom,Irelandadheredlater.The*convention willberenewedin
1983.

ANNEXII
Cooperation ofairlines
11.Themostimportant cooperation betweenscheduled airlinestakes
placeinthe"International AirTransport Association ",IATA.It
coversatpresent airlines (1).Theairlinesrepresent about80
countries including allCommunity MemberStatesexcluding Luxemburg .
IATAwascreatedbygovernment intervention inordertocreateamullH-
^uiteralairLines framework alongside theintergovernmental bilateral
agreements .
12.Itcoversamultitude ofactivities dealingwith
allaspectsofair^transportation ;..-!• ." " Ofthese
canbementioned thepublication ofmanystudiesandstatistics on
generaleconomic andactivity issues,butalsoonsafetyandsecurity
aspects.Itprovides specialised services suchastheclearing house
fortickets,whichiscloselyrelatedtotheinterchangeabi lityoftickets
permitting theusertotravelononeticket (paidinonecurrency )on
severalstagesofatrip.Ithasamedicalcommittee forresearch inaero­
nautical medicine andtechnical andlegalcommittees .Italsodevelops
proposals fortransport conditions andhandling procedures inairports.
InshortIATAisatthesametimeacenterforinformation andcooperation
andanorganization whichdefendstheinterests ofitsmembers.
13.Oneofthepossibilities itoffersitsairlinesistoorganize
trafficconferences forcoordiniion oftariffs.Theairlinesthereafter
fileasetoftariffsresulting fromtheseconferences withgovernments
whichmustapprovethembeforetheybecomeapplicable .Otherregulations
andprocedures ofIATAmustalsobeapproved bygovernments beforethey
becomeapplicable .
1)89activememberswithinternational networks and19associated
memberswithdomestic networks .

ANNEXII
14.Thegeneralassembly ofIATAapproved anumberofchangesinits
procedures andstructure,whichwillenterintoforcesubjectto.government
approval :
-aseriesofalternative procedures fortariffnegociation if
unanimity cannotbereachedattheconference ,
-anewmembership structure .Theorganisation willoperatewith
abasicmembership covering tfechnical activities andafull
membership covering alsothetariffcoordination activities
-agreaterpossibility forexternalpartiestofollowthe
activities ofthetrafficconferences .Thiscanbeeither,insome
cases,byobservers,orthroughsubmissions ofcomments by
interested parties.
15.TheneedfortheEuropean scheduled airlines tostrengthen their
cooperation inallfieldswasthereasonforcreation ofthe"Association
ofEuropeanAirlines",AEA.Theassociation represents 19ofthese
carriers.Itpublishes economic andfinancial studiesonairtransport "
Europe.Withintheassociation agroupof10largescheduled air
carriers basedintheCommunity isdeveloping closertieswiththe
Community services whichmaydevelopintoaregularbodyforconsultation .
16.Inthisinternational structure otherorganisations maybe
mentioned,especially thosefornon-scheduled carriers.
17.The"International AirCarriersAssociation ",.IACA,createdin
1971,groupstheindependant non-scheduled aircarriers foreightcountries
inEuropeandAmerica.Itsroleistorepresent anddefenditsmembers
withrespecttogovernments andinternational organisations .

-6-ANNEXII
18.Undertheauspices'ofIACAwascreatedinDecember1978the
.EuropeanFederationofIACA:EURACA"EuropeanAirCarriersAssociation".
Itgroupsabout"10Europeanchartercarriersofwhich5atleastare
basedintheCommunity.
19.The"AirCharterCarriersAssociation",ACCA,groupsthemajorityof
chartercarriersaffiliatedtotheEuropeanscheduledaircarriers.
20.17international airportsinEuropearemembersoftheWEAA,Western
EuropeanAirportAssociation .
21.AtthetechnicallevelcertainEuropeanairlinescooperateinKSSU(1)
andATLAS(2).Eachofthesetwogroups,whichwerecreatedbeforetheintro­
ductionofwidebodiedjets,hasdistributed varioustechnicaltasksbetween
participating airlinesespeciallywithregardtoaircraftmaintenance .
22.Commercial cooperation andpools.Someofscheduledintra-European
andintercontinental servicesarecarriedoutinpoolarrangements between
theairlinesbasedinthecountriesatbothendsoftheroute.Forexample,
thereisapoolbetweenBritishAirwaysandSabenaonLondon-Brussels and
betweenBritishAirwaysandAirFranceonLondon-Paris .Thesepoolsexistall
overtheworldexceptfortheinternational linkswiththeU.S.Someofthese
commercial agreements aredesiredbythegovernments interestedintheroute
ortheyareincludedintheirbilateralagreements.Apoolagreementdeals
withtheconditionsofoperation ontheroute,itpermitsthedistribution
offlights,tospreadthefrequencies andthecapacityoverthedayandso
improvetheserviceofferedtothepassengers.Generally apoolagreement
willincludeasharingoftherevenueundercertainconditionswithout
modifyinganystructureor,creatinganyinstitution .Thecompaniesinpartner­
shippreservetheircommercialidentity.
23.Thereexistsanothertypeofcommercialcooperationi.e..ajoint
venture.Thismeansthecommonoperationbytwocompaniesofaroutewith
thesameaircraftandsharingoftherevenueandcosts.
••/•m

ANNEXII
24.Commercial cooperation hasplayedanimportant roleinthe
development ofintercontinental relations provided byEuropeanair­
lines.Aclosecollaboration ofaEuropeanairlinewithathirdworld
airline maystrengthen itsposition outsideEurope.Examples are
UTAwithAIRAFRIQUE andSASwithTHAIAIR.AtothertimesaEuropean
airline maypurchaseitstrafficrightsthroughcommercial collaboration
withathirdcountryairlineorevenbymanagingtheairlineofanew
state.
25.Cooperation mayalsotakeplacewithrespecttoagents,reservation
systems,salesandassistance intheairports.
26.Anassistance agreement provides foroneairlinetousethe
services ofanotherfortechnical andcommercial groundoperations ina
givenairport. *
27.Arepresentation agreement provides foroneairlinetorepresent
anothercommercially incertaincountries andairports.'
28-IATAhasanextensivemultilateral interline "agreement .Twocompanies
mayalsobelinkedthroughaninterline agreement.Theytherebypromise
mutuallyt°accepteachotherstickets.,
.THESITUATION OFAIRTRANSPORT INSIDE THECOMMUNITY
Enterprises andtheirfleets
29-Themajority,butnotallofthescheduled Europeancarriers,are
ownedeitherwhollyorpartially byStates(seeAnnexII-2).The non-
scheduled servicesareassuredeitherbyscheduled carriersdirectly,or
byaffiliated chartercarriers,orbyprivatecarriers ofwhichsome
arelinkedwithtour-operators . .

-8-""ANNEXII
30.Theimportant aircarriers intheCommunity amounttoabout30of
whichabout15areLargerscheduled carriers andaboutthesamenumber
largernon-scheduled carriers (seeAnnexII-3and11–45-Theotherairlines
flysecondandthirdlevelservices,(1).Sixlargescheduled Community
airlines areamongthetwentylargestairlines intheworld(seeAnnexII-5)
1200aircraft outofthe7000commercial aircraftpresently inoperation
intheworldbelongtoCommunity airlines.
31.ThescheduledairlinesoftheCommunity flewin197616,60&oftotal
tons/km"(Passengers +freight +mail)ofthescheduled trafficinthe
world(seeAnnexII-6)..in197665%ofnon-scheduled passenger/kmswere
flownbyEuropean companies*'
Policyandinfluence oftheMemberStates
32.EachStatecarriesoutaprotectionist policyforitsnational
aircarriers,aimedtopreserveits.political prerogatives andtoprofit
itselffromitsadvantages ,thesemaybeits.geographical location/the
importance andcomposition ofitsnational marketanditsspecialrelations
withthisorthatpartoftheworld.Thisattitudeisalsoapparent over
e.g.theorganisation ofservices,where,inEuropeasintherestofthe
world,thestatesplayafundamental role.
lDfiy£2£S _2l_il]®_states_on_the -organ2sation_of_seryices _
33.Thepossibility toobtaincommercial trafficrightsdepend,asin­
dicatedinpara.8,onthebilateral agreements concluded bythestates
andnotified atICA0.
/
34.Wherenobilateral agreement existsorwhentheseagreements donot
containatariffclausethestatesthenobeythetariffprocedures contained
inthe"International Agreement ontheprocedure fortheestablishment of
tariffsforscheduled airservices"signedbyallMemberStatesexcept
GermanyandLuxemburg .
(1)Secondlevel:Nationaltransport onimportant lines
Thirdlevel:airtransport withsmallaircraft

-9 ANNEXII
35.MostoftheLinksbetweenMemberStatesarecoveredby27bilateralajree-
ments.Thesebilateralagreements donotalwaysstatepreciselythe
realcontentofthedecisions.Theyareoftensupplemented byconfi­
dentiallettersofunderstanding exchangedbetweentheaeronautical .
authorities oftheStatesconcerned.Theselettersinterprete,specify
orevenmodifytheprovisions oftheagreements .Theselettersmay
concernthecreationofcommercial poolsorcallforthecreationof
suchpools.
36.Theservicesandroutesthusnegociated arecloselyinterrelated
atthebilaterallevel,whererightsmaybeexchangedagainstrights
somewhereelseintheworld.
•37.Throughthesebilateralagreements theMemberStateshavealso
thepossibility tocontrolcapacity.TheStatesdonotnormallyrefuse
capacityincreasesagreedonbythecompanies.
33.Attemptsatpolicyconcertation forscheduledflightshave
failedbecausethedivergentinterestsandbargainingsituationsofstatesand
oftheirairlineshavepreventedthemuntilnowtocreateacommonstand
vis-&-visthirdcountries.-
3-9.Ontheotherhandanattemptatpolicyconcertation hastaken
placefornon-scheduled services.14MemberStatesofECAChavefor
exampleinJune1975approvedthe"Multilateral understanding for
non-scheduled servicesontheNorthAtlantic*'...This"inordertocreate
ajointpositionindealingwith"theUSAwhichwantedcompletelyto
liberalizetheseservices,and takingintoaccountalsoCanada.The
characterofthisconcertation wasoriginallyprimarilydefensive,but
itdoesshowacertainprogress.Howeverthis*agreementhassincebeen
overtaken byseveralagreements concludedbetweentheUSAandtheMember •
Stateswithrespecttonon-scheduled flightsandbyotherchangesinthe
situationfortransatlantic activity.
•lQliysnce_of_t he_States_on_tari,f fs_
40..Theairtariffsofscheduledservic^sin Europearesubstantially
negctiated onamultilateral basisbetweentheairlinessubject .toapprovalby
governments . '' .

-10- ANNEXII
>
AtpresentnearlyaltoftheEuropean governments acceptresponsibility forthe
I
sameinternationfc tariffsandsametransportconditions,mostofthembeing j
coordinated through IATA.Theyimplement themdirectlylin theireconomic . \.
provisions /intheirbilateral agreements andfortheirlicensing systems. ;
i
4»1.AllMemberStatesare infavourofatariffcoordination between i
thescheduled airlines anddonotwishtofightforatoolargetariff t
competition .TheEuropean companies are(goingfurtherintomeansforconsul­
tationbetweenthemselves OnthesemattersataEuropeanlevel. i
... j
I
Adfnini^trat2ye_framewgrk _ j ..... .
A2.Theadministrative frameworkforallthegovernment responsibilities j
israthersimilarinthedifferentcountries.Thefunctionsareeithergroupedin\
atraditional ministryordelegated whollyorparttosemi-government organizations ,
benefitting fromacertaindegreeofautonomydefinedbylawasforexample i
|the"CivilAviationAuthority "("Quango','QuasiAutonomous National Government !
Organisation )intheUnitedKingdom.
THETRANSPORT POLICY 0FTHEUSA
4*.oneofthepromisesofPresident Carterduringhiselection campaign was
toreducegovernment regulation "in"all.areasincludingairtransport .He
furthersaid,inrelation "tofightinginflation,that"airtransport should
beascheapastransport byprivate ,automobile .'
Domesti cmarket
44.Acertainliberalization hadalreadybeentakingplacebut,withthe
addedpressure of"thepresident,,thispolicygainedmomentum.Atotalderegula­
tionconcerning trafficrights,tariffsandcapacity hasnowbeencarriedout
forairfreight.Thesametypeofderegulation isunderwayforpassenger
transportation ,whereithasinfactalreadybeencarriedouttoalarge
extentandshouldbecompleted by1982,"when .the.'CiviC'Aeronautics Board
(CAB)willbeabolished .

-11- ANNEXII
45.Thispolicyisfullyinagreement withsomeaspectsofAmerican
tradition anditsconsequences areunderstood .Theimmediate conse­
quenceshavebeen aspateoflowtariffsforpassenger transportation
inordertomanoeuvre forbettermarketposition andmarketshare .as
wellasacertaindiminution oflocalservices . -The
markethasin1978responded withasurgeintraffic/whichhasfilled
theplanesandthereby madethepromotional faresprofitable intheshort
term.Whatthelongtermeffectswillbeishowevernotyetknownor
evenexaminedingreatdetail.Acertainweakening ofthemarketisalready
apparent .
46.Itis,however,certainthat,withtheaveragerevenueaslowasit
i.onmanyflights,theplanesmustbenearlyfullontheseflightsin
ordertogiveaprofit.Thisfactwillmakeitdifficult tomeetbusiness,
professional andgovernmental travellers' needsforavailability .The
infrastructure hasnotbeendeveloped totakethissuddengrowthandlarge
investments mustbecarried outnow.Itisalsoclearthattheairlines
willhavetolookhardateachroutedprofitability andwillwithdraw from
thoseroutesthatarenotcontributing sufficiently .Theremightbebank­
ruptcies amongtheweakerairlinesaftersometime.Therewillbeatendency
towardsmergersasalreadyexperienced .Thetariffsituation isgetting
moreandmoredifficult tofollowfortheconsumer .Theprocessmight
leadtoasituation whereeachcarrier networkcompetes againsteachother
insteadofcreating atotalnetworkthatservesthenationbest.
^Onemightsaythattheinterests ofthemassmarketconsumerhas
beenmetbythisradicalderegulation ,butmaybenotthoseof "
thebusiness society.Itshouldinthiscontextalsobe
mentioned thatfreighttariffshavebeengoingupafterthederegulation .

-12-ANNEXII
International policy
48-Foritsnegotiation ofnewbilateralagreementsthefollowingpolicy
aimshavebeendefinedbytheUSgovernment :
1.Creationofnewandgreateropportunity forinnovative and
competitive pricingthatwillencourage andpermittheuseofnew
priceandserviceoptionstomeettheneedsofdifferenttravellers
andshippers. - >
2.Liberalization ofcharterrulesandelimination ofrestrictions on
charteroperations .
3.Expansbnofscheduledservicethroughelimination ofrestrictions
oncapacity,frequency,androuteandoperatingrights.
4.Elimination ofdiscrimination andunfaircompetitive practicesfaced
byU.S.airlinesininternational transportation .
5.Flexibilitytodesignatemultiple USairlinesininternational
airmarkets.•'
6.Encouragement ofmaximumtraveller andshipperaccesstointernational
marketsbyauthorizing morecitiesfornon-stopordirectservice,and
byimprovingthe"integration ofdomesticandinternational airline
services.
7.Flexibility topermitthedevelopment andfacilitation ofcompetitive
aircargoservices.
A9-Theseaimsweredefinedin1978afterthenegotiation andconclusionof
theBermudaIIagreementbetweentheUSAandtheUnitedKingdominJuly1977.
TheUSgovernmentlikedtheprovisionsinthisagreementforinnovativepricing,
butwasnot,afterduereflexion,happyaboutthelimitations ofthepossible
numberofdesignatedairlinesandthecapacityrestrictions .
5Q.TherealintendedimpactoftheUSpolicyis,however,betterseenin
anumberofmorerecentbilateralagreements concludedin1978withIsrael,
Belgium,Netherlands andtheFederalRepublic 1ofGermany.

-13- ANNEXII
51.USAobtained multiple designation inallfouragreements .This
meansthattheUSgovernment isencouraging asmanyairlines aspossible to
seektrafficrightsonallroutes.Thisasamatterofprinciple without
takingaccountofthetraffic volume.
52-Countryoforiginrulesmeansthattripswhichoriginate e.g.inthe
USfollowtheUSruleswithrespecttotariffs andconditions oftransport .
Theruleisespecially important withregardtotheconditions underwhich
charter operations maytakeplace.Although theothercountrypreserves
itsownrulesfortripsoriginating onitsterritory,therewillnodoubtbe
aspill-overeffectfromthemoreliberalrules.Thisconcept wasintroduced
intheagreements withtheNetherlands andtheFederalRepublic ofGermany.
53.TheOpenSkyconceptintroduces averylargedegreeoffreedomfor
thetwocountries' carriers,bothscheduled andnon-scheduled ,withrespect
totariffs,"frequency andcapacity .Thisisthecasebothforthirdandfourth
freedomtransport irrespective ofthenationality ofthecarrier.Thisconcept
wasaccepted byIsraelandBelgium.
5tfmInallfouragreements tariffscanberefusediftheyarediscriminatory
°rpredatory .Theseconcepts havenotyetbeendefined bytheCABnorbyany
ofthefourstates.Intheagreement withtheNetherlands andtheFederal
Republic ofGermany,onegovernment canrefuseatariffonthesegrounds.
Intheagreement withBelgium andIsraelbothofthegovernments involved
musttogether opposesuchtariffs.
5^Asaresultoftheseagreements ,Israelwasaccorded 5newgateways
intheUSA,theNetherlands 2,theFederalRepublic ofGermany 6andBelgium 3.

-14- ANNEXII
56.AtthesametimetheCABhasissuedaShowCauseOrderconcerning
theexemption oftheUSantitrust Lawswithrespecttotheparticipation
ofaircarriers intheIATAtariffcoordinating activities .Thepreliminary
findingoftheCABwastoabolishthisexemption,butitinvitedallinterested
partiestosubmittheircomments inthisrespect.
57.ThisOrderhasraisedastormofprotest fromallovertheworld
fromgovernments aswellasairlines.AlloftheCommunity governments and
mainscheduled airlines havejoinedinthisprotesteither
directlyorthrough ECACandAEA.Theirtwomainpointsarea)thereisno
realindication thattheUSpolicyreallyintroduces abettersystemandb)
inviewoftheworldwide aspectsofairtransport aunilateral actionsuch
asthisisdeplorable .IntheUSboththeDepartment ofStateandDepartment
ofTransport haveadvisedtheCABtoproceedwithcaution;theDepartment
ofTransport evensayingthattheywerenotsurethattheCABpreliminary finding
wascorrect orproductive .TheCABhasapproved "adinterim"thenew
structures ofIATA.
AIRTRANSPORT MARKETS ANDSTRUCTURE OFCOMPETITION
58-Inordertoevaluate thedegreeofcompetition inairtransport it
isnecessary todistinguish between:
domestic markets
Community aridEuropean markets
intercontinental markets."
•as

15 ANNEXII
59. Inthisevaluationitisnecessarytotakeaccountofthe
typesofpassenger andfreighttransport :
Scheduledairtransport
Non-scheduled airtransport
Taxiflights ,'
RaiI
Road
Sea.
Domestic airtransport
60. Fivemaintransport modeshavetobetakenintoaccount:these
arescheduledairtransport,raiI,road,taxiflights andsea.Thescheduled
airserviceonagivenrouteisnormallyassuredbyoneaircarrieron
thatrouteandthereiscompetition betweenscheduledaircarriersinonly
afewcases.Inmanycases,anationalcarrierisgiventheoverall
concession anditiswithitspermissionthatthesmallercarriersexercise
theirfunctions.Railandroadtransport andseainsomecasesprovide
stiffcompetition whichisreflectedintarifflevels.Thefurtherdevelop­
mentoffasttrainsintheCommunity wi11nodoubtintroduce afurther
degreeofcompetition e.g.inFranceandU.K.Freightisrarelycarriedby
airsincerailandroadaretoocompetitive .
Intra-Community andEuropean airtransport
61.ThetotallandareaoftheEuropeanCommunityisaboutonesixthof
thatoftheUnitedSties.TheEuropeanCommunity's6NPisaboutsixteen
percentlessintotalthanthatoftheUnitedStates;GNPperheadin
theEuropeanCommunityisnotmuchmorethanseventypercentofthatinthe
UnitedStates.Furthermore,intercityraiIpassengertransportation ismuch

-16 ANNEXII
moredeveloped intheCommunity thanintheUSAandthisiscombined with
thefactthattheplanebecomes competitive onlyfortriplengthsofabout
300kmsormoreorwherenaturalbarriers suchasseaandmountain exist
iscLearthattheoverallpictureofpassenger transport issignificant­
lydifferent betweenthetwoareas.Wecantherefore concludethatthe
potential roleforairtransport isnaturally morelimitedwithinthe
Community .
6^-.Thecompetition forpassengers ontheshorterroutesismainlybetween
scheduled airlines themselves andbetween themandtheothermodesof
transport .Forthelongerroutes,competition isinmanycasesintensified
bythepresence ofcharteroperators ;railandroadarelessattractive .
Particularly forbusinesstraffic.Forleisuretravel,theprivateautomobile
andthetrainareverymuchused,charter operators offervigourous competi­
tiononrouteswheretheyareallowedtooperate.Taxiflightsprovide an
increasing degreeofcompetition forbusinesstravel.
6S.Thereisnormally nopricecompetition betweenscheduled airlineson
singleroutessincethetariffsarenegotiated bytheairlines andapproved
orimposedbythegovernments/ butcompetition stillexists
onservices,typeofaircraft,network,frequencies ,etc.Thereareinfact
atleasttwocarriers oneachrouteandinsomecasesupto12.Price
competition betweenscheduled andcharteroperators andbetweencharter
operators themselves isvigourous .Itshouldbenotedthatthiscompetition
issometimes non-transparent totheuser,sincethetransporttariffis
includedinthetotalpackagetourprice.

-17-ANNEXII
64.Overlongdistances inEurope,Leisuretravelwasformerly
carriedmainlybytrainsandroad,withsomeofthistrafficon''
thescheduled "airlines.Thesituation hasnowprogressed tothestagewhere
themainNorth/Southairtraffic (Scaridinavi a/UK/Germany-Spain/Italy/
Greece/Portugal/Africa)iscarriedbycharterairlines (eitheraffiliated
orindependent )orbyscheduled flightsthroughgrouptravelorpromotio­
nalfares.Itmightbesaidthatthestructure ofthescheduled airlines
doesnotallowthemtocaterverywellforsuddensurgesintraffic ,"like
summerholiday .travel,whiletheorganization ofthechartercarriers
issuchastocaterforpeaktrafficandthenomadicnatureofthese
trafficactivities .
65.Forfreight,competition fromrail"andespecially fromroadis
verystrong.Roadtransport hasirv"fact.turned •outtobefastereven
overfairlylongdistances andin'some':instances .cheaper.Ground
delaysinairfreightoperations ,caused'bybfficial procedures ,have
playedapartinthisrespect.
Intercontinental airtransport -
6aForpassenger traffic,airtransport dominates international
transport ."Inthepast,shippingcarried alargevolumeoftrafficto
theUSA,theEastandAustralia,butthis'hasbeenreducedtoamere
trickle.
67.Thereiscompetition onthesemarketsbetweenthe'different
scheduled airlines andbetween themandcharteraircarriers .Tariff
agreements havebeendifficult toobtain'overtheNorth .Atlantic in
thepastdecadeand,sinceAp>iI'1076,Virtually ,impossible .Therecent CAB
policycreatedanopenmarketsituation aindpermitted theadoption
ofadditional lowfaresbyIATAcarriers xhichhadbeenrefused'bythe
CABbefore.' *

18ANNEXII
6&Developments ontheNorthALantichavetherefore beendifferent
fromthoseonthelongdistanceroutesinEurope.Thechartercarriers,
notablytheAmericancarriers,hadgainedafairlylargeshareofthe
leisuremarket,butthissituation changedrecently .Atthemoment,
mostleisuretravelontheNorthAtlantic isbeingcarried bythesche­
duledcarrierseitherasgroupsoronpromotional fares.Theinsti­
tutional reasonsforthischangehavebeenoutlined inparas48to57
thischapter.
69.Overallcompetition overtheAtlantic hasbecomealotmore
severebetweenscheduled carriers,especially sinceLakerAirways
weregrantedthelow-farerightsbetween NewYorkandLondon.Nearly
thirtyairlines arepresently intheNorthAtlantic market.
70.Itisdifficult tosaywhatthelongtermeffectsofthistariff
competition willbeonthetotalNorthAtlantic market.
71.Firstly,itisdoubtful whetherithasreallybecomemuchcheaper
fortheuserstoflyonthese "routes.Thechartertariffswere
nearly "aslowasmostofthenewscheduled holidaytariffs (incl.
Laker).Theusershave,however,shownthattheyprefertheadded
flexibility introduced bythescheduledcarriersandhavetherefore changed
awayfromcharters .
72.ThetotaltrafficontheNorthAtlantic hasincreased byabout11%
in1978.ThisincreaseisnotmucHhigherthantheoneexperienced 'in
othermarkets (Europeabout9%).Itistherefore difficult tosayifthe
newscheduled lowtariffshaveintroduced significant improvements to
theusers.
73.Withinthe11%therehavehoweverbeenlargechangesin.the
composition oftraffice.g.chartertoscheduled,nonIATAtoIATA
carriers,Americancarriersto.Europeancarriers,siphoning oftraffic
through London,etc. '

-19- ANNEXEIT
Network
7^-BetweenthemaincentresofattractionintheCommunity,there
isaLargeprofitable volumeofpassengers whichformthebackboneof
theEuropeannetworkofthemajorscheduledairlines.Inthisway,the
airlineshavebeenabletoplacetheirmanagement andmaintenance
centresinalogicalmannernearthoseroutes.Thisassuresefficient
operation.Itisalsologicalthattheairlinestrytolinksecondary
centrestothemaincentresinordertoutilizetheiraircraftinthe
bestpossiblemannerandobtaineconomiesofscale.Inevaluating whether
ornottoinitiateanewservice,theairlineswillnaturallyexamine
itsprofitability fromtheirownpointofview'i.e."inparticular
takingintoaccounttheirexistingfleetofaircraft.
75.inthissituationtheairlinesmay,however,choosetooverlook
routeswhichfromanotherairline'spointofviewwouldbeprofitable
ofwhichfromaCommunitypointofviewwouldbedesirable.
76.Aninteresting studyinthisrespecthasbeencarriedoutby
ECAC•Thisstudyshowsthatthereareanumberofrouteswherethere
seemsatfirstsighttobeenoughpassengerpotentialtosupporta
service,butwherenoservicesexist.It'is,however,alsoapparent
thatinmostcasespassengers areabletouseotherservicesthroughthe
maincenters.Oneofthereasonsforthismaybetheattractiveness to
travellers,especially businessandgovernment,ofhighfrequency-
itselfdependenton"thicknessofthesupportingtrafficstream.
77.Similarresultsseemtobeproducedbyanotherstudycommissioned
jointlybytheFrenchgovernment and'the•Commission.'
* , #Rapportsurlesservicesaériensintra-européen ,1978
**Ladesserteaériennetvter-régionale .ertEurope.'

-20-ANNEXEII
To.Itisdifficult tojudgewhetherfromaCommunity pointofview
itwouldbedesirable toobtainservices onallofthesedormantroutes
ase.g.betweenAarhus-Hannover ,Stuttgart-Lille orTurin-Toulouse .It
isclearthatanumberoftheserouteswoulddetract fromthemainroutes
andthereby maketheoperations onthemainrouteslessefficient .
Someofthesedormantroutesmightdeliverpassengers intothemainhub
ofanothercountry'sairline,sothatsuchrouteshavebeendiscouraged
notonlybythedesignated airlines,butalsobythegovernments .There
are,however,alimited numberofroutesbetweensecond-level airports,
where,takingaccountofregional development considerations ,such
services wouldbepossible anddesirable fromaCommunity pointof
view.
Fares
79«Itispossible hereonlytogiveafairlycursorydescription of
thefaresstructure 'inEuropeandsomeofthemainreasonsforits
presentshape.
Structure
80.Thetwoprincipal waysofconstructing atariffsystemare:
a.Relatefaresonallroutesinanetworktothedistance and
thenadjustthetarifflevelassuchinordertoobtainapro­
fitableresult
b.Relatefaresoneachrouteinanetwork ,tothecostofoperation
ofeachindividual route.
InEuropethescheduledtariffsystemis'amixtureofthetwo
methods.Methoda)isthebasisofthesystem buttariffs
oncertainrouteshavebeenreducedfromthenormallevelbecauseof
competition fromothermodesoftransport andfromcharteroperators .
Fprthisreason,tariffsontheshortroutesaregenerally notashigh
astheynormally wouldbe.ThesameisthecaseonseveralNorth/South
routeswhereholidaytariffsapplyto.alargepercentage ofthetotal
traffic.

-21« ANNEX II
82. Thescheduled airlines have repeatedly claimed that competition
ontheNorth Atlantic hascreated asituation where prices have been
"forced down beneath aprofitable level .This would imply that the
European scheduled airlines ,inorder tocarry outthis traffic ,would
have tocharge higher tariffs elsewhere orsuffer trading losses .
This contention cannot beverified since theCommission does notdispose
ofsufficient relevant information .
83. Thecosts perpassenger arelowwhen :
-Passenger volume ishigh
-Large aircraft canbeused
~Seating density ishigh
-Load factors arehigh
-Distances are long . '
84. Itisnecessary totake all .these factor ^andmore into considera­
tion before itispossible to .conclude .whether a'single tariff iscost
related ornot .
Range
85. TheEuropean fares structure is-very diverse .Onmany routes there
isanabundance oftariffs whileonother routes choice islimited .In
general terms,' itmight besaid that 'the :routes with' alarge volume of
tourist traffic arealso theroutes with ;atarge array oftariffs .InAnnex
II-7'a number oftariffs which "areused current ly;onEuropean routes are
listed .
Therationale behind this abundance.of fares' istotrytoseparate
thedifferent user groups andtomeet th'ei ^particular needs .Thefull fares
(first andeconomy )aretailored tomeet business needs i.e. toallow
interchangeabi lity oftickets ,no-shows ,"interlining ,high accessibility ,
etc .This explains therelatively high level ofthese tariffs.' Atthe
other extreme aretheholiday traffic rates represented byexcursion
fares ,apex andcharter fares .

-22-ANNEXII
87«Thedifferences betweenthesetwomainlevelsarenormally
justifiedbyreferencetothedifferentcostlevelsinvolvedin
usingaircraftexclusively foroneortheothertypeoftraffic.An
Englishstudytendstosubstantiate thisclaim(seeAnnexII-8).The
difference can,however,becomeobscuredbecause,inmanycases,the
sameseatsarebeingsoldbutunderdifferentconditionsofsale.
Theconditionsofsalehavebeenfixedsoastodistinguish between
thedifferentcategoriesofpassengers .
88.Anotheraspectwhichmustbetakenintoaccountistheinter­
liningpossibility inthepresenttariffsystem.AflightbetweenCopen­
hagenandRomewithasmanystopoversasdesired,flownbyoneormore
airlines,wi11,.underthefullfarerules,bepricedinthesameway
asthedirectCopenhagen-Rome flight,ifthetotaldistancetravelled
iswithinthenormalflightdistanceplus20%.Thisdirecttariffcanbe
cosiderably smaller "thanthesumofthetariffsforeachlink.Thedirect
tariffissplitupproportionately betweenthedifferentlinksandthe
partanairlinereceiveswillbelowerthanthepublishedfullfare.The
stopoversystemiexistsalsoforothertarifftypes.Thisinterlining
facilityisveryusefulforbusinesstravelandexplainsinpartwhy
publishedtariffsonrouteswherethereisasignificant amountof
interlining mayberatherhigh.
89.Theaveragerevenueperpassengeristhereforeconsiderably
lowerthantheeconomytariff.'Onmanyroutesitgoesaslowasabout
60%oftheeconomytariff.
90.TheticketpriceiscalculatedinFareConstruction Units(FCU's)
andthenexchangedintonationalcurrencies.' Theticketisthenissued
inthecurrencyofthecountrywherethetripstarts.Theexchangerates
approvedorimposedbythegovernments donot,'in"somecases>keepup
todatewiththechangingmarketexchangerates.Thiscancreateadifference
indirectional prices .Thedifferences arelargewithin
theCommunityforIreland,Italyandthe'U.K.Which,inthisway,obtain
lowertariffs (byupto30/£less)forpassengers ,whooriginatetheir
flightsfromtheirairports.TheIAtAclearing .-housecouldeasilycope
withexchangerateswhichwereadjustedmore-quiokly.

-23- ANNEXII
Comgar_ison_Euro^e/USA
91.Itisdifficulttomakeanymeaningful comparison betweentariffs
inEuropeandintheUSA.Theonly,meaningful "comparisonwouldbeon
averagerevenuesperpassenger.Inthisaverageitwouldbenecessaryto
includecharterrevenue,sincelow'fare--.travel'isensuredbycharterto
amuchlargerextentinEuropethanintheU.S.Furthermore,itisdiffi­
culttogetinformation onaveragerevenueinEuropeandnexttoimpossible
togetsuchinformation fortheU.S.'
92.Itis,however,claimedthatEuropeantariffsaremuchhigherthan
theU.S.tariffs.
93.Firstly,itmustbepointedoutthatthefarestructuresinEurope
andtheU.S.aredifferent,intheU.S.thesystemismainlypoint-to-
pointandnotinterlineasinEurope.TherangeoffaresinEuropeismuch
widerthanintheU.S.A.andextendsinseveralcasesbelowtheU.S.
comparablefares(seeAnnexII-^^Thedifferencesintariffsaremainly
duetoadifference incosts,whicharenormallymuchhigherinEurope
e.g.airport-andairnavigation fees,fuel,administration ,commission
onsales,labourClessstringentregulations andeasierhiringandfiring
intheU.S.),etc.Thesedifferences,whi ch.areillustratedinAnnex
11-10,mustnaturally bereflectedintheleveloftariffs.Someofthesecost
elementswhichareexternaltotheairlinescouldbeattackeddirectlybytheCommunity .
94*Productivity is lowerinEuropethanintheU.S.Thiscan
beexplainedpartlybythesmallernetworksinEuropeandthehigher
incidenceofinternational travel.Thisentailsahgherlabourinputthan
fordomestictraffic.Thenetwork'differences mayalsoexplaina
difference inaircraftutilization rates.AnnexII~]lshows howfairlysmall
differences inindividualproductivity ..elements,result ,inalargedifference
inoverallproductivity .
••/••■

«•24~ ANNEX II
95. When allofthese factors aretaken into account ,itcanbe
estimated that the real cost difference tinder airline control per
scheduled passenger is about 20%higher inEurope than intheU.S.,
when account isalso taken ofthedifference inoperational characteristics
"between thetwosystems .Theroad towards lower prices istherefore through
higher productivity and improvement ofoperational characteri sticsand conditions .
96. Nevertheless , theEuropean
airlines have been able todevelop quickly and steadily .Ifthe evolution
oftheaverage intra –European airtariffs iscompared with thestandard of
living inEurope ,theindex forthecost ofliving in1964 of100has
grown to270in1978 *while theindex fortariffs which in1964 wasalso
100 ,hasonly grown to206in1978 *These tariffs have therefore' beoome
relatively lower .

ANNEXI1-1
Thefreedoms oftheair:
1.Thefirstgivestherighttoflyacrosstheterritory ofaforeign
countrywithoutlanding.
2.Theseoondgivestherighttolandfornon-commercial trafficpurposes
(technical operations relatingtotheairoraft,thecrew,refuelling ,
etc.),intheterritory ofaforeigncountry.
3.'Thethirdgivestherighttoanaircompanytoputdown,inthe
territory ofaforeigncountry,passengers ,freightandmailtaken
intheoountryofregistration .
4.Thefourthgivestherighttoanaircompanytotakeon,inaforeign
country,passengers ,freightandmailrforoffloading initscountry
ofregistration .
5.Thefifthgivestherighttoanaircompanytoundertake the
commercial airtransport ofpassengers ,freightandmailbetween
twothirdcountries .

ANNEXI1-2
PERCENTAGE OFCAPITAL HELDBYTHESTATES INMAIN
EUROPEAN AIRLINES
AirFrance 98,8%
AirInter 49,90%
Alitalia 99,-%
British Airways 100,-%
KLM 78,-%
AirLingus .100,-%
Lufthansa 82,16%
Luxair 25,57%
Sabena .100,-%
SAS .50,-%
British Caledonian )
UTA lPrivate

MAINEECSCHEDULED AIRLINES (1977)
Airimes Staff FleetPaxkmflown
internationaIly
(miIlions)Paxkmflown
Total
(mllions)
AERLINGUS 5737(1)13(1) 2231 2288
AIRFRANCE 31400 118 16217
4 -20794
ALITALIA 16089(1)81(1) 10729 11867
BRITISHAIRWAYS 52707(1)184(1) 28773•30243
BRITISHCALEDONIAN A5716 27 3756 3991
K.L.M. 16481(1)48(1) 12562- 12562
LUFTHANSA 27862 92 14220 15038
SABENA •9816 28 44154415
SAS 15556 74 7980 •.9495
UTA 7012
i1839313931
»
i
I
(1)1976 Source:ICAODoc.9180/3

MAINEECNON-SCHEDULED AIRLINES (1977)
Airlines Nationality Staff FleetPaxkm
internationallyPaxkm
total
Bavaria Germanair (1) R.F.A. 743 6 1159 1159
Britannia AirwaysLtd. U.K. 1151 16 3876 3876
BritishAirtours U.K. 758 9 2044 2044
IBritishMidlandsAirwaysLtc*U.K. 938 16 869 1095
IConair A/S DK 4 1277 1277
ICondorFlugdienst GMBH R.F.A.102217 5848 5884
DanAirServices Ltd.* U.K. 315956 4837 4965
fiHapag-LloyçJ GMBH R.F.A. 4308 1536 1536
ILakerAirways * U.K.117711.. 4190 4190
LTU R.F.A. 520 -7 1994 1994
IMaersk DK 60010 1572(1) 1572(1)
IMartinair HollandN.V. NL 714 25<1) 2384 2384
IMonarchAirlinesLtd. 'UK304 6(1) -1341 1341
IScanair DK 522 7 2970 2970
ISterling .Airways A/s DK 1354 22 4197 4197
ITransaviaHollandBV(1)NL 606 8 1358 1358
*doalsoscheduled airservices
(1)1976Source:ITAforstaff
ICA0forotherstatistics

INTERNATIONAL NONSCHEDULED TRAFFIC OFPASSENGERS ,1975
Classification ofthe15firstnonscheduled carriers ardof15firstscheduled carriers
(millionsofpasscn^oro/knris)
IClassification Nonscheduled carriers Scheduled carriers
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15Condor (Germany)
TransInternational (USA)
Sterling (DK)
World(USA)
Britannia (RU)
Laker(UK)
OverseasNational (USA)
Wardair(CDN) ,,
Spantax (Spain)
Scanair (Scandinavia )
Martinair (NL)•
Balair(CH)
BritishAirtours (UK)
Capitol(USA)
Conair(DK)5023
4356
3888
3495
3422
2879
2878
2842
2205
2134
1995
1869
1775
1601
1579PAA(USA)
DanAir(UK)
JAL(Japan)
Finnair (Finland)
TWA(USA)
AVIACO(Spain)
British Caledonian
AirCanada
TAROM(Romania)
KLM(NL):
BA-Overseaa (UK)
FlyingTiger(USA)
THY(Turkey)
Northwest (USA)
Seahord(USA)4675
3657
176I
1684
1579
1429
1408
1245
1221
1166
941
888
884
661
647
Totalofthe15firstcarriers 41941
(68/0)23808
(64/0)
Totaloftheothercarriers 19859
(3#)13662
(36g)
Totalofallcarriers 61800
(100$)37500
(100$)
(Source:Recueildestatistiques n°215del'OACl)
N.B.-EECairlines areunderlined

PRINCIPAL AIRLINES INTHE WORLD
CLASSIFICATION ACCORDING TOTHE GLOBAL TRAFFIC INTONNESAM
(1971 -1976 )
AirlinesMilliards ofT-km
AirlinesMilliards ofT-km j
1971 1976 1971 1976
1-Aeroflot 14446 11-DLH 1402 2560
2-United Airlines 4568 5763 12-Northwest 1412 2491
3-PAA 4631 4617 13-Air Canada 1398 2129
4-American Airlines 3710 if567 14-KLM 1201 1796
.5-TWA 4029 4461 15-Flying Tiger 1252 1496
J6-British Airways 3434 16-Alitalia 1125 13&3
7-Eastern Air Lines 2614 3247 17-Qantas 1353
8-Delta1760 3018 18-Western 874 1.:341
I9-Japan AirLines 1473 2888 19-Continental 877 1272
10-Air France 1407 2771 20-Braniff 809
SAS 801
National 775
Source :Bulletin ITA

TOTAL TRAFFIC OFSCHEDULED SERVICES IN1976
Passengers /kms Tons /kms (freight ) Total tons /kms
(millions ) (millions ) (millions )
Total of141 ICAO
Member States% 7.I
%
762.429 100 21.449 100
i93.048 100
USAirlines 288.027 .37.78 7.440
!
ι34,69 35.214 37.84
EEC Airlines 110.878 14/54 5.014 23.38 15.454 16,61
Source : .'.CAO

ANNEX "II­
..f
■ExampleofPromotional FaresAvaîlobteînEurope
"• .VI•...,.
:• ' I•:••
PerCentofRound
LONDON-PARIS IPublicExcursion TripEconomyFore
(Nightfore(valid1month) 70
Weekendfaro(valid1month) 58
"T,:iIPEX 58
•• .» •..<.i•••
■.î' ■ 1'•r.'•vV
Youthfare :i^ 75
". ι
: '•'-'Si'
,, ,Studentfare , 75
j.Schoolpartygroup;/" 70
».;.USpousefares(validj5days)- 50
• i
,j!CommonInterestGroup
♦
,Groupsof10-14passengers 95(l)
.,Groupsofover15passengers 90(l)
InclusiveTour ^ 36t*'■'■■!*...•• '
.-r'J\
*l
Source?AirTariffManual .
}»
(l)Additional reduction ofwhichever ,fare ,would otherwise toapplicable

ANNEX
ι■
CharterandScheduled airlinecostcomparison
Route
ARoute
BRoute
C
1.Totalscheduled costperpassenger 100 100 100
2.Deductcommission 92 92 91
3.TouristClass(eliminate 1st.Class)86 84 87
4.SeatingDensity j 77 80 83
5.LoadFactor 56 59 60
6.Peak/Troughratio 60 62 63
7.Utilisation ; 57 60 61
!
8.Standards (landingfees,crew
complements ,in-flightservice)5'ί
I51 53
9.Costofservicesnotapplicable to
charter (sales,reservation &advertising
principally )»
i
36 37 39
10.DerivedCharterCost 36 37 39
11.CharterActual 34-37 32 35
12.VariableCost "14-23 17-24 17-2
SOURCE;BritishAirways
Thistableshowshowit'is.possible tostartwiththecostperpassenger
perscheduled airtransport andthroughadjusting forthedifferences {
"betweenscheduled andcharteroperation characteristics arriveatan
adjustedcostlevelforscheduled whichcorrespond quitecloselytothe
chartercostlevelperpassenger .

ANNEX11-9
:1 V*
: ,■' i
; I
i: ■r
.1
t:■ !'
EUROPEAN ANDU.SDOMESTIC FARESCOMPARED
1WITHDISTANCE .
USt
perPax-km
24
\ ir\ –EUROPEAN FARES
15JL.L–»U.SDOMESTICFARES
15 -~Svr' –
^ j *****-FTOnomy(Europe)
ECONOMY(US)
-. | TOURBASING(US)
! SGIT(Europe)
0| 1 1 I II'I I•!
048•12162024
SOURCE:AEA Distanc»(KlOO)km*
■-' -! .•
•l ■ ! i
!
.

ANNEXH-10
ANGLO-AMERICAN COSTLEVELS
KEYTOCOSTBURDENS
ACostsoutsidecontroloftheairline
e.g.higherEuropean fuelandoilprices,landingfees,navigation
chargesandinsurance rates;thesizeoftheUSairtravelmarket.
i•
BCostsdueexternalconstraints -
e.g.shorteroperatingdayinEuropeduetonightjetbansand
trave!habits;USaircraft.are moreeconomical onfuel;abilityto
operatemulti-sector flightsintheUS.
CCostsDuetoDifferingAccounting Policies
e.g.methodofcostamortisation ,orallocation ofcosts.
DCostsDuetoDifferent Customer ServiceStandards
e.g.in-flightmeals,higherratiosofcabincrewtopassengers in.
Europe.
ECostsAttributable toOperating intheEuropeanMulti-Market
Environment
:e.g.Agentscommission costsmorethaninUS;higher j
advertising expenditure ;costsofoperating in30different
countries . I
I
rCosesAttributable toConditions ofEmployment ;Work-place Culture
e.g.lowerpaylevelsinUKandEurope;systemandorganisation
diffarences ;supervisory ratios;jobflexibility inUSA.;»r U.S.Cost BritishCost
F
I B,C,D,E
Cost- A
perI , rr-i H H
ΑΤΚΗ
!h •.
i
F t
i1 !
!Seekey
tocost
burdens
Source;BRITISH AIRWAYS

ANNEX 11-11
COMPARISON BETWEEN EUROPEAN AND USAIRLINES -1977
AIRCRAFT PRODUCTIVITY .
AVERAGES PER AIRCRAFT
No.ofSeat
Rev. Pax Load Factor {%)AEA
LOCAL EUROPE
120.4
58.9USTRUNKS *
DOMESTIC
145.7
56.0USINDEX
AEA=100
121
«2.9 pta
A/CStage Distance (Kms ) 709
Daily Utilisation (Houra ) 7*2
No.ofLandings per Day 5*2
A/CSpeed (KPII ) 510
Daily Productivity
(000 ASK ) 442.1951*
8.8
5.5
595
762.9135
122
106
117
173
SOURCE :SAS
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