WRITTEN QUESTION E-2962/01 by Erik Meijer (GUE/NGL) to the Commission. Incorporating rising insurance premiums into air fares on a self-financing basis.
Date: 2001-10-25
Institutions: European Parliament, Provisional data
Subjects: State aid, air transport, charges for use of infrastructure, control of State aid, liberalisation of the market, profit, trading margin, transport insurance

6.6.2002

EN

Official Journal of the European Communities

C 134 E/159

Added to these questions are possible legal problems linked to the possession of such data, as
transmissions could be intercepted.

For these reasons, the introduction of a system of direct transmission of data cannot be envisaged at
present without a prior analysis of all these implications. The Commission does not therefore intend to
include such a measure among its proposals on civil aviation safety.

(2002/C 134 E/160)

WRITTEN QUESTION E-2961/01

by Antonio Tajani (PPE-DE) to the Council

(5 November 2001)

Subject: Statements made by Louis Michel against the Italian Prime Minister

Is the Council aware of the statements made by Louis Michel, the Belgian Foreign Minister, (broadcast on
the RTL-TV1 channel and reported by the Wall Street Journal Europe on 9 October 2001), in which he
gave ‘marks’ to the main world leaders?

Does the Council know that Mr Michel, incredibly, gave the same valuation for the Italian Prime Minister
as for the Taleban regime and is it aware of the repeated attacks made by Mr Michel, the President-in-
Office of the EU, against the Italian Prime Minister Silvio Berlusconi?

What steps will the Council take with regard to Mr Michel, who is arbitrarily and wrongfully exploiting his
official position to attack the leader of the government of one of the founding countries of the European
Union, making statements which deeply offend not only the Prime Minister, but also the Italian State and
its citizens?

Reply

(14 February 2002)

It is not for the Council to comment on the statements made by Mr Louis Michel. In any case, Mr Louis
Michel was speaking in a personal capacity, and not as President of the Council of the European Union.

(2002/C 134 E/161)

WRITTEN QUESTION E-2962/01

by Erik Meijer (GUE/NGL) to the Commission

(25 October 2001)

Subject: Incorporating rising insurance premiums into air fares on a self-financing basis

1.
Can the Commission confirm that, by comparison with other large modern businesses, the profit
margins of airlines have been conspicuously low for very many years in spite of the fact that, unlike other
transport services, aviation is in a position to benefit from tax exemptions based on long-standing
international agreements?

2.
Is low profit margin the key reason for the failure to establish sufficient hedging reserves, one
consequence of this being that, at an earlier stage than in other businesses, aviation’s response to financial
setbacks is to plan workforce cuts and ask governments to subsidise or underwrite operating risks which
are hard or very costly to insure?

C 134 E/160

Official Journal of the European Communities

EN

6.6.2002

Is the reason for low profit margin the fact that airlines are engaged in tough competition with each
3.
other in order to increase market share, in relation both to each other and to rail, buses and ferries, and
that, as a result, fares have fallen much further than is considered economically wise?

How much more (amount and percentage) would the average passenger have to pay per flight in

4.
order to enable the airlines themselves to fund the expected increase in premiums for insurable risks?

5.
On what scale (amount and percentage) would air fares as referred to in question 4 have to rise to
enable adequate cover also to be provided for risks of extreme harm to third parties which are temporarily
uninsurable for the time being?

6. What obstacles are there to setting air fares on a break-even basis, including by bringing them into
line with the level of increased insurance premiums expected in 2002, so that the European Union or the
Member States do not have to be saddled with higher costs or underwriting possible risks?

7.
How does the Commission intend to remove any obstacles to break-even price rises in aviation, so as
to prevent the preservation of national carriers in the Member States from costing the taxpayer more or
Member States’ budgetary scope from coming under further strain?

Answer given by Mrs de Palacio on behalf of the Commission

(19 December 2001)

1.
In general, the profit margins of airlines have tended to be low in comparison with many other
service industries, as is their return on capital, however, this is not universal throughout the industry. The
low-cost carriers now expanding in Europe as a result of liberalisation achieve much higher margins than
their traditional counterparts.

2. Many airlines were already planning to reduce costs and capacity progressively before the terrorist
attacks of 11 September 2001. The additional drop in demand caused by the attacks has forced airlines to
enact these measures more quickly than planned and to make further reductions. The intervention of
governments in the insurance of air transport is limited solely to coverage of war and terrorist risks to
third parties. The commercial insurance market is currently unable to provide full coverage with respect to
these risks, as a result of the massive damages in the United States. Member States’ governments are
providing this cover until the market resumes, subject to compliance with state aid rules.

3.
There is indeed considerable competition on many routes inside the Community leading to the offer
of some very low fares. However, there is little correlation between the offer of low fares and financial
weakness of air carriers. Low-fare carriers are among the most profitable in the industry and some of
Europe’s strongest carriers operate in the most competitive markets.

4.
Airlines are taking account of the immediate increases in insurance costs for risks still covered by the
commercial insurance market either by placing surcharges on tickets or by higher fares or by absorbing
the cost. Once the commercial insurance market is functioning more normally, premiums may change and
adjustments in fares may be needed.

5.
For the third party war and terrorist risks that the commercial market is currently unable to cover,
guidelines agreed at Community level require Member States to charge $ 0,85 per passenger for coverage
up to the level typically purchased by airlines before 11 September 2001. These premiums are in addition
to whatever premium is paid to private insurers for the rest of the airline’s cover.

6. and 7.
There are no obstacles to prevent airlines setting fares at whatever level they wish. There are
no obstacles to airlines either raising or reducing their fares. The Commission will continue to ensure that
the market in air transport functions properly and that state aid rules are observed by the Member States.