Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions - A Coherent Framework for Aerospace - A Response to the STAR 21 Report
Date: 2003-10-13
Institutions: European Commission
Subjects: EU industrial policy, aerospace industry, arms industry, competitiveness, international competition, international market, research and development, space policy

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 13.10.2003
COM(2003) 600 final

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL, THE
EUROPEAN PARLIAMENT, THE EUROPEAN ECONOMIC AND SOCIAL
COMMITTEE AND THE COMMITTEE OF THE REGIONS

A Coherent Framework for Aerospace - a Response to the STAR 21 Report

   
COMMUNICATION FROM THE COMMISSION TO THE COUNCIL, THE
EUROPEAN PARLIAMENT, THE EUROPEAN ECONOMIC AND SOCIAL
COMMITTEE AND THE COMMITTEE OF THE REGIONS

A Coherent Framework for Aerospace - a Response to the STAR 21 Report

1.

INTRODUCTION

Over  recent  years  the  European  Union  has  set  out  clear  objectives  aimed  at  improving  the
security  and  the  economic  well-being  of  its  citizens.  The  Cologne  European  Council
recognised  the  need  for  sustained  efforts  to  have  a  competitive  and  dynamic  industrial  and
technological defence base in support of Europe’s capacity to respond to international crises.
At the Lisbon Council, the Heads of State and Government set the Union the strategic goal of
becoming the most competitive and dynamic knowledge-based economy in the world within
the  next  decade.  This  message  was  reinforced  at  the  Barcelona  Council  which  called  for  a
significant boost in the overall R&D and innovation effort in the Union. More recently still,
the Thessaloniki Council decided that the time had come to take concrete steps in the defence
field.

As a high-technology and highly-skilled, dual-use industry, the European aerospace industry
is  uniquely  placed  to  contribute  significantly  to  these  economic  and  strategic  objectives.  It
plays  a  crucial  role  in  maintaining  Europe’s  industrial  and  technological  capability  for
transportation,  communication,  observation,  security  and  defence.  A  globally  competitive
aerospace  industry  is  central  to  the  achievement  of  Europe’s  economic  and  political
objectives.

Europe is now facing the challenge to build an environment in which its aerospace industry
will be encouraged to retain and improve its competitiveness thereby contributing to Europe’s
key  objectives.  That  is  why  the  Aerospace  Advisory  Group,  which  brought  together  senior
industry  representatives  and  members  of  the  Community  Institutions,  was  created  to  look
afresh at the existing political and regulatory framework for aerospace in Europe, to highlight
deficiencies  and  to  make  proposals  for  improvement.  In  its  report  (herewith),  “STAR 21:
Strategic  Aerospace  Review  for  the  21st  Century”,  the  Group  sets  out  its  analysis  and
recommendations for creating a coherent market and policy framework.

This report has been the subject of widespread comment and discussion since its publication
in July 2002 and has served to place in context a series of important Commission initiatives
which impact on the sector. It has also helped to channel industry’s support for Community
initiatives in this field.

The Group met again in June 2003 to review the progress which had been made. It examined
the key relevant initiatives that had  been  launched  by the Commission  or had progressed in
the Council and noted with  satisfaction the  Commission’s emphasis on the  need  to increase
the momentum towards the achievement of the goals set and on the importance of generating
a debate in the other Community Institutions on key political objectives in this area.

2

The Commission’s position on aerospace

Over the past decade, the Commission has regularly identified aerospace  as  a key  industrial
sector requiring supportive policies  in  order  to  improve  its  global  competitiveness.  Its  1997
Communication “The European Aerospace Industry – Meeting the Global Challenge” (COM
(1997)466), focused on the urgent need for consolidation in the European aerospace sector, an
area  where  considerable  progress  has  been  achieved.  Recognising  the  need  to  ensure  the
competitiveness  of  Europe’s  industries,  and  in  particular  to  tailor  policies  to  the  specific
situation  of  industrial  sectors,  the  Commission’s  Communication  “Industrial  Policy  in  an
Enlarged Europe” (COM (2002)714) identified the aerospace sector as a particular example of
a  sector  whose  activities  are  governed  by  specific  factors,  stressing  the  need  for  a  clear
commitment  from  the  EU  and  the  Member  States  to  improving  the  competitiveness  of  this
industry.

industries  and  called  for  specific  actions 

The STAR 21 analysis drew attention to the need to develop a more efficient defence market
as  an  essential  pre-requisite  to  further  enhancing  the  competitiveness  of  the  aerospace
industry.  Already  in  1997  the  Commission  had  pointed  out  the  difficulties  facing  Europe’s
defence  related 
industrial
competitiveness  and  to  preserve  the  technological  base  (“Implementing  European  Union
strategy on defence-related industries” COM (1997)583). More recently, taking into account
important  developments  towards  the  implementation  of  a  European  Security  and  Defence
Policy (ESDP) and the growing recognition of the need for pooling of resources in research
and  development  and  procurement  as  a  necessary  precondition  for  cost-effectiveness,  the
Commission  adopted  a  new  Communication  “European  Defence  –  Industrial  and  Market
Issues”  (COM  (2003)113)  which  stresses  the  importance  of  creating  a  genuine  European
defence equipment market.

to  strengthen 

The  second  critical  area  identified  by  STAR 21  is  space  which,  under  the  pressures  of  a
depressed  market  in  telecommunications  and  increasing  global  competition,  has  been
experiencing  serious  difficulties  in  recent  years.  In  this  case  the  Commission  addressed  the
need  for  close  cooperation  between  the  European  Space  Agency  (ESA)  and  the  European
Union in 2001 in its Communication “Towards a European space policy” (COM (2001)718).
Furthermore,  with  the  recent  Green  Paper  “European  Space  Policy”  (COM(2003)17)  the
Commission,  together  with  ESA,  launched  a  broad  consultation  process  with  the  aim  of
initiating a debate on the medium and long term future use of space for the benefit of Europe.
This will lead to the preparation of a White Paper and action plan later this year.

A  common  theme  in  these  Communications  has  been  the  disadvantages  arising  from  the
relative  fragmentation  of  the  policy  framework  for  European  aerospace  and  the  need  for
coherence in public policy measures which affect the sector. In recent years there have been
promising  developments  at  industrial  and  political  level  which,  despite  the  current  difficult
economic conjuncture, have placed the sector in a stronger position and, if confirmed, notably
in the case of security and defence, hold out better prospects for the future.

This Communication sets out to demonstrate how the Commission has already responded to
the analyses and prescriptions of STAR 21, to identify the steps that should be taken to help to
create the framework needed to secure the long-term competitiveness of aerospace in Europe,
and, more generally, to raise awareness of the key issues in other Community Institutions.

3

2.

AEROSPACE IN EUROPE

Today,  the  manufacture  of  large  civil  aircraft  is  the  biggest  single  element  in  Europe’s
aerospace turnover accounting alone for over € 20 billion annually. This market is cyclical as
it  depends  on  the  acquisition  plans  of  airlines  which  fluctuate  considerably,  especially  in  a
period of uncertain economic perspectives and global security concerns. On the defence side,
demand depends on the defence budgets and the procurement policies of governments which
in  turn  depend  on  geopolitical  developments  and  the  changing  perception  of  threats.  As
products on the civil and the defence side have many commonalties, it is essential for industry
to have as much predictability and stability as possible in both segments. This helps to make
best use of the knowledge base, to optimise technical, human and financial resources, and to
iron out fluctuations in demand when either segment encounters periodic difficulties.

As regards specific aspects, the overall development of the market for large civil aircraft and
the competitiveness of Airbus  are key elements for the  future  development of the European
industry. The general economic downturn, the terrorist threat, the Iraq crisis and SARS have
had  a  significant  dampening  effect.  However,  Airbus  has  been  less  affected  than  its  main
international competitor, Boeing and this has helped the company to improve its market share
to roughly equal that of Boeing with its current product range. This performance could even
be improved upon in future depending on the successful development and market introduction
of the new A380 super-jumbo, scheduled to come into operation in 2006.

On  the  defence  side,  the  number  of  new  programmes  in  Europe  and  also  world-wide  is
limited. If brought to completion as planned, the US Joint Strike Fighter is expected to be the
single  most  important  programme  for  shaping  the  combat  aircraft  industry  over  the  coming
years and could constrain the possibility of developing new European products in this market
segment.  In helicopters the European aerospace industry has developed a  strong position  on
global  markets.  Significant  capabilities  also  exist  in  the  areas  of  missiles  and  unmanned
aircraft.

However,  the  lack  of  a  predictable  framework  at  European  level  affects  industry.  For
example,  with  regard  to  military  transport  aircraft  the  procurement  procedure  of  the  Airbus
A400M  has  been  complicated  and  cumbersome.  As  far  as  missiles  are  concerned,  the
decision-making  process  on  the  future  ammunition  for  the  Eurofighter Typhoon  has  posed
similar problems. Such situations  increase the pressure  for European  companies to focus on
the much larger US defence market and to seek to build alliances in order to secure access to
new business of a scale and continuity capable of assuring a stable flow of revenues and  an
acceptable return to their shareholders.

In  the  space  sector,  the  drop  in  demand  for  satellite  communications  has  affected  both  the
satellite and the launcher business. No significant improvement is expected over the coming
years. The  resulting  fall in  orders has caused a  severe  crisis in the  European  space  industry
which traditionally depends more than its competitors on commercial markets. In addition, the
already high level of international  competition  in  the  launcher  market  from  the  US,  Russia,
China and Japan, is set to increase further now that the Delta 4 and Atlas 5 rockets that have
been developed by the US military can be used to offer substantial numbers of launch services
on the commercial market.

Overall consequences

Significant  further  progress  in  building  a  strong  European  dimension  in  important  market
segments,  such  as  defence  and  space,  is  still  needed  to  maintain  a  competitive  European

4

aerospace industry in the long run. The positive Airbus experience in the civil aircraft market
should  serve  as  the  benchmark  for  other  parts  of  the  business.  Industrial  restructuring
combined with the development of relevant common programmes within a coherent political
framework across European borders is essential for future success in all aerospace sectors.

3.

THE STAR 21 INITIATIVE

Creation of the Aerospace Advisory Group

The European Advisory Group on Aerospace was set up in 2001 to analyse the political and
regulatory  framework  for  aerospace  in  Europe,  to  highlight  deficiencies  and  to  make
proposals  for  further  improvement.  It  comprised  seven  aerospace  industry  chairmen,  five
European  Commissioners,  the  Council  High  Representative  for  Common  Foreign  and
Security  Policy  and  two  Members  of  the  European  Parliament.  The  Group  presented  its
findings to the President of the Commission in July 2002. A review of progress was made by
the Group in June 2003.

STAR 21 findings

STAR 21,  while  acknowledging  the  progress  made  in  a  number  of  areas  such  as  transport
policy, comes to  the primary  conclusion that  the current political  and  regulatory  framework
needs  to  be  much  improved  in  order  to  bridge  the  gap  between  Europe’s  political  and
economic ambitions and the capacity to deliver the required results. It highlights a number of
areas in which the European Institutions, the EU Member States and the industry itself should
act to maintain Europe’s position as a world-class aerospace producer.

STAR 21  stresses  the  need  for  overall  coherence  and  the  integration  of  a  variety  of  policy
instruments. It calls for improved access to third markets and the proper application of trade
agreements,  greater  mobility  for  aerospace  workers,  further  coordination  of  R&D  efforts,
especially  on  the  defence  side,  an  EU  lead  in  all  areas  of  civil  aviation  regulation,  the
completion  of  the  single  European  sky  and  a  closer  relationship  between  the  EU  and  the
European  Space  Agency  in  support  of  initiatives  such  as  Galileo  and  the  European  space
strategy.

In  many  of  these  areas,  for  example  the  coordination  of  civil  aeronautics  research  and  the
regulation of civil aviation, the report identified solid progress that has already been made or
will be achieved through the implementation of proposed measures.

STAR 21  identifies  the  most  pressing  need  for  change  on  defence  issues,  particularly
regarding the added costs arising from Europe’s fragmentation of policy decisions and use of
resources  on  a  national  basis.  Pointing  out  that  the  current  situation  negatively  affects  the
competitiveness  of  Europe’s  aerospace  industry  and  jeopardises  the  implementation  of  the
ESDP, it calls for early progress in this area in particular in order to avert closing off future
policy options in relation to Europe’s long term security needs.

4.

KEY ISSUES FROM THE COMMISSION VIEWPOINT

The Commission welcomes the work of the Aerospace Advisory Group. Its report makes an
important  contribution  in  highlighting  the  deficiencies  in  the  existing  framework  for
aerospace  in  Europe  and  in  identifying  the  means  to  ensure  the  industry’s  global
competitiveness. While the STAR 21 recommendations cover a broad spectrum of issues that

5

differ in impact and urgency, they give a clear orientation on the main areas that need to be
addressed.  The  Commission  fully  endorses  the  report’s  main  finding,  namely  that  an
aerospace  industry  which  has  consolidated  on  a  European  scale  needs  a  coherent  policy
framework with a European perspective. Accordingly, within its competencies it will continue
to contribute to the further development of such a framework and to advocate its development
where possible.

There have been efforts and indeed considerable progress towards overcoming the historical
national  segmentation  of  the  aerospace  industry.  The  process  of  creating  a  European
framework  is,  however,  more  developed  on  the  civil  than  on  the  defence  side.  Yet  as  the
STAR 21  report  emphasised,  the  civil  and  defence  sides  of  the  business  are  interdependent
and companies must be active in both if they are to be competitive. Faced with the lack of a
unified market for defence-related aerospace equipment and research at home, there is a risk
that European companies will be increasingly drawn to the much larger US market as a source
of opportunities which will enable them to grow and sustain a broad range of capabilities.

To guarantee the long-term competitiveness of the European aerospace industry and to put in
place a coherent framework, the Commission is convinced that effective action must be taken
on  the  major  STAR 21  recommendations,  especially  regarding  defence,  space,  research,
market access and European regulation of civil aviation.

Defence

The defence side of the business is the area where the scope and need for progress is greatest.
It  still  lacks  one  of  the  basic  foundations  of  a  competitive  European  industry:  an  effective
internal market.

There are many historic reasons why a national orientation is still dominant in defence:

– 

– 

– 

– 

– 

Governments  are  industry’s  sole  customers.  They  alone  determine  the  demand  for
defence  products  and  define  operational  requirements  and  technical  specifications.
Any production or trade of armaments is subject to governmental authorisation.

Long-term  demand  depends  on  the  evolution  and  perception  of  threats,  which
influence the assessment of needs and budget planning. Governments perceive, react
and implement their respective policies differently.

Value  for  money  is  not  the  sole  criterion  for  procurement  policy  -  offsets
(compensation), including industrial cooperation agreements, security of supply and
strategic considerations can also be factors.

The relationships between governments and aerospace companies differ considerably
between Member States in the extent of state ownership, R&D funding, procurement
policies, etc.

Finally,  defence  interests  require  confidentiality  regarding  sensitive  military
information and security of supply which goes beyond the normal customer-supplier
relationship.

Over  the  years,  the  reluctance  of  Member  States  to  take  a  common  approach  at  European
level to improve the efficiency of the defence sector has however become a serious handicap
with  regard  to  industry’s  strong  competitors  especially  in  the  US  which  arising  from  the

6

structure  and  volume  of  the  security  and  defence  budget  in  the  US  have  recourse  to  much
greater opportunities to develop new products and to achieve important economies of scale.

This  slowness  in  pooling  resources  at  European  level  contrasts  with  Europe’s  ambitions  in
building an ESDP. Given the financial constraints on defence budgets in all Member States,
the  implementation  of  ESDP  objectives  depends,  inter  alia,  on  significant  improvement
concerning  the  procurement  and  production  of  defence  equipment.  Compared  with  the  US,
Europe not only spends much less on defence, but the market fragmentation further limits our
resulting operational capabilities.

The  rapid  changes  which  must  be  achieved  require  the  Member  States  to  develop  a  more
European approach given both their commitment to the ESDP and the transnational character
of the industry. In the Commission’s view significant progress depends on the development of
a more coherent defence equipment market and procurement policy taking account of specific
defence considerations as set out in the recent Communication of March 2003.

In  this  respect,  the  Commission  notes  that  the  increasing  support  for  a  greater  European
dimension was also reflected in the European Convention’s draft constitutional treaty which
calls on Member States to “undertake progressively to improve their military capabilities” and
for the establishment of a “European Armaments, Research and Military Capabilities Agency
to identify operational requirements, to put forward measures to satisfy those requirements, to
contribute  to  identifying  and,  where  appropriate,  implementing  any  measure  needed  to
strengthen  the  industrial  and  technological  base  of  the  defence  sector,  to  participate  in
defining a European capabilities and armaments policy, and to assist the Council in evaluating
the improvement of military capabilities.”

In  Thessaloniki,  the  European  Council  further  developed  this  policy  and  endorsed  the
objective of setting up such an intergovernmental agency in 2004.

Space

The need for a European approach to space has long been recognised and led to the setting-up
of  the  European  Space  Agency  (ESA)  in  1975.  Within  ESA,  individual  states  have  pooled
important  parts  of  their  civil  space  activities.  Through  ESA  programmes  and  via  national
efforts, it has been possible to develop considerable European space capabilities and a world-
class industrial capacity in launchers and satellites.

However, defence space programmes have been generally conducted nationally or bilaterally
in Europe, with some major successes but limited budgets (only  about  7 per  cent of the  US
total). There have been discussions aimed at gaining wider support for European collaborative
projects, but  these  have  yielded few results  to  date and  their  future  remains  uncertain.  As  a
consequence, in contrast to civil programmes, there is as yet no structure at the European or
multinational level to address security and defence space programmes.

Europe’s space capabilities are now at risk because of the sharp and sustained downturn in the
commercial (mainly telecommunications-related) market. In the past, the European industry’s
success in the then expanding commercial market allowed it to achieve sufficient critical mass
and  to  compete  with  US  companies  despite  the  fact  that  the  latter  benefited  from  a  much
bigger, protected, institutional market. US space policy and legislation continue to affect the
procurement of foreign launch services and launch vehicles in the US.

7

To maintain a European space industry and the freedom of action which it provides, Europe
needs  to  develop  a  consolidated  industrial  and  institutional  approach  to  further  integrate  its
space-related activities. In this context, the implementation of Galileo plays an important role.
In  order  to  successfully  complete  the  development  phase  (2002-05)  a  single  management
structure  has  been  established  (Galileo  Joint  Undertaking).  The  Galileo  project  breaks  new
ground  as  the  first  major  public-private  partnership  undertaken  at  EU  level,  as  the  first
commercial operation of global satellite navigation and as a service firstly driven to meet civil
users’  needs.  ESA  is  assuming the  technical  responsibility  for  installing  the  space
infrastructure. A concession structure  will provide  for  a clear legal  relationship between the
public  sector  and  a  new  private  sector  company  formed  to  deploy  and  operate  the  Galileo
system.

Alongside the realisation of the Galileo programme and progress on the global monitoring for
the environment and security (GMES) initiative, three key areas must be addressed in parallel:
the  ESA-EU  relationship,  better  coordination  of  civil  and  defence-related  programmes  at  a
European level and the efficient allocation of resources which is also key to competitiveness.

The extensive stakeholder consultation process on the Green Paper on European Space Policy
that  was  launched  earlier  this  year  placed  these  questions  at  the  heart  of  a  reflection  on
Europe’s space needs in terms of wider policy objectives.

Research

There  is  a  large  consensus  among  all  interested  parties  that  the  coordination  of  European
aerospace  research  must  be  improved.  In  numerous  statements,  agreements  and  joint
declarations,  such  coordination  is  seen  as  the  natural  corollary  of  greater  industrial
integration.  However,  experience  has  shown  that  recognition  of  the  need  for  greater
coordination is not in itself sufficient to bring about the required changes to Europe’s complex
system  of  aerospace  technology  acquisition.  New  mechanisms  will,  therefore,  have  to  be
developed to give practical effect to this common objective.

STAR 21  called  for  a  better  coordination  of  aerospace  research  activities  between  the
different  levels  and  actors  involved  (EU,  national  and  regional;  institutional  and  industrial).
As far as civil aeronautics research is concerned, important progress has recently been made
through the work of the Advisory Council for Aeronautical Research in Europe (ACARE). In
October 2002, ACARE presented first results in the form of a Strategic Research Agenda to
better  coordinate  European  research  activities.  Further  steps  will  follow  to  implement  a
European research area for the sector.

In  the  defence  area  the  same  problems  exist  and  should  be  addressed  in  a  similar  fashion,
suitably adapted to take account of the different roles and competencies of the various players
in the defence field. This is of particular importance as European companies strive to compete
with  their  US  counterparts  which  benefit  from  much  higher  levels  of  defence  research
spending.  It  is  also  crucial  as  Member  States  endeavour  to  obtain  the  best  value  for  money
while also creating an environment which helps to retain R&D activities in Europe.

With  this  in  mind,  the  Commission  welcomes  the  decision  of  the  Thessaloniki  European
Council  to  task  the  appropriate  bodies  of  the  Council  to  undertake  the  necessary  actions
towards creating, in the course of 2004, an intergovernmental agency subject to the Council's
authority and open to participation by all  Member  States  in  the  field of defence  capabilities
development, research, acquisition and armaments.

8

This  agency  will  aim  at  developing  defence  capabilities  in  the  field  of  crisis  management,
promoting  and  enhancing  European  armaments  cooperation,  strengthening  the  European
defence  industrial  and  technological  base  and  creating  a  competitive  European  defence
equipment market, as well as promoting, in liaison with the Community's research activities
where  appropriate,  research  aimed  at  leadership  in  strategic  technologies  for  future  defence
and security capabilities, thereby strengthening Europe's industrial potential in this domain.

European Regulation of Civil Aviation

Today, both civil aircraft manufacturing and the air transport industries operate in a European
or global market place. However, much of Europe’s regulatory system is still organised on the
level  of  Member  States  and  coordinated  between  governments.  This  outdated  approach
prevents industry and its customers from enjoying the full benefits that the internal market can
offer.

STAR 21  addressed  particularly  the  deficiencies  of  the  Joint  Aviation  Authorities  (JAA)
system and called for the early creation of the European Aviation Safety Agency (EASA). In
the meantime, important progress has been made: Based upon a proposal of the Commission,
the Regulation of the Parliament and the Council (1592/2002) establishing the legal basis for
EASA was adopted and entered into force on 7 September 2002. The Commission is currently
working  on  major  organisational  questions  to  make  sure  that  EASA  will  be  operational
towards the end of 2003. In parallel, discussions with the US Federal Aviation Administration
(FAA) will continue to ensure that the certificates provided by regulators on both sides of the
Atlantic will be mutually accepted.

Aircraft certification is, however, only one element in building up a coherent framework for
civil aviation in Europe. Progress in other key areas, such as aviation security, is still needed.
Given  the  density  and  interdependence  of  the  air  transport  network  within  Europe,  security
issues need to be addressed at a European level.

Active participation of the European Community in international organisations such as ICAO
is key to guaranteeing an efficient match between the European regulatory system and global
requirements.  The  current  lack  of  effective  mechanisms  to  promote  European  standards
handicaps the competitiveness of the European aerospace industry. Such involvement is vital
for programmes like Galileo and the development of air traffic management technologies.

The implementation of the Single European Sky will require significant technological change
and  investment  in  the  modernisation  and  consolidation  of  the  air  traffic  management
infrastructure  and  related  services.  The  development  of  an  effective  civil-military  interface
will be crucial to allow more flexibility in the use of  Europe’s airspace. Such developments
might also facilitate the harmonisation of military requirements.

Environmental  needs  impose  considerable  pressure  for  the  development  of  safer  and  less
polluting  aircraft.  The  European  Commission  and  the  Member  States  must  strengthen  their
role in environmental discussions on a global level. The aerospace industry should also strive
to improve existing technologies to strike the right balance between environmental needs and
the expected growth in air traffic.

As  far  as  air  service  agreements  are  concerned,  the  European  Court  of  Justice  recently
concluded that the existing bilateral air service agreements of individual Member States were
not  compatible  with  Community  competence  in  important  areas.  The  Court  identified  three

9

such areas of exclusive Community competence: airport slots, computer reservation systems
and intra-Community fares and rates.

Taking account of these and other elements which strongly support a Community approach to
air service agreements on 5 June 2003 the Council agreed on a package of measures that gives
responsibility  for conducting key  air  transport  negotiations  to  the  Commission,  including  in
particular a mandate to begin negotiations on a new transatlantic air agreement.

The  European  aviation  industry  will  have  to  consolidate  to  adequately  compete  on  a  global
level. The new Community approach to redefine international relations for all Member States
will  facilitate  the  process  of  consolidation.  Further  liberalisation  of  aviation  markets  on  a
global  level  will  also  expand  market  opportunities  for  the  European  aviation  industry.
Increased competition will also add to pressure to reduce operational costs  by,  for example,
using more efficient aircraft.

The Commission welcomes this development and will continue to pursue measures to ensure
a coherent regulatory environment that will  both  provide a high  level of  safety and security
and promote the competitiveness of European industry.

Market Access

Aerospace companies operate in a global market place and therefore depend on fair conditions
in international trade and access to markets.

Trade in large civil aircraft is regulated by a system of bilateral and multilateral agreements.
The bilateral 1992 EU-US Agreement on Trade in Large Civil Aircraft specifically regulates
different  forms  of  government  support  such  as  support  for  research  and  development  or
repayable launch aid for new programmes. While Europe has respected its obligations under
the 1992 agreement and will continue to do so in the future, the levels of support provided in
the US regularly exceed those permitted by the agreement. The Commission has criticised this
violation  in  the  bilateral  consultations  foreseen  by  the  agreement  and  it  will  continue  to
monitor the situation closely in future in order to preserve open and fair competition in this
important market.

Concerning  access  to  defence  equipment  markets,  two  specific  difficulties  for  European
companies arise out of current US legislation: First, the US defence equipment market is itself
very difficult to enter:

– 

– 

US  restrictions  on  the  procurement  of  foreign  defence  equipment  limit  European
industry’s access  to the US market.  Recently, the US  Congress  proposed to  further
tighten these  restrictions despite resistance  from  the Department  of  Defence.  These
amendments  would  be  contrary  to  commitments  undertaken  by  the  US  in  the
framework  of  the  1994  WTO  Agreement  on  Government  Procurement  (GPA).  In
addition,  the  implementation  of  US  security  regulations  imposes  considerable
bureaucratic burden. This weighs heavily on any participation of foreign contractors
in US programmes.

The  US  policy  regarding  any  cooperation  of  US  defence  firms  with  foreign
companies  is  very  restrictive.  Moreover,  US  security  requirements  put  legal
impediments in the way of mergers and other company tie-ups.

10

Largely  as  a  result  of  these  restrictions,  the  EU-US  defence  trade  balance  tilts  very  heavily
toward  the  United  States:  24%  of  European  defence  procurement  is  of  US  origin,  whereas
only 0.5% of US defence procurement is of European origin.

Second,  US  authorities  can  block  exports  of  European  equipment  to  third  countries  if  the
products  contain  components  that  are  covered  by  US  regulations.  Compared  with  the
European system, these regulations are wider in scope and more rigid.

The  Thessaloniki  Action  Plan  against  the  proliferation  of  weapons  of  mass  destruction
foresees  a  number  of  actions  to  increase  the  efficiency  of  Europe’s  dual-use  export  control
regime. Early implementation of these actions is crucial to increase Europe’s credibility with
respect  to  the  US.  The  Commission  has  already  presented  proposals  to  the  Council  on  the
implementation  of  the  Thessaloniki  Action  Plan  concerning  export  control  of  dual  use
products.

In  its  November  2002  report,  the  US  “Commission  on  the  Future  of  the  United  States
Aerospace Industry” also highlighted the negative impact of this policy for the US industry. It
called for some loosening of US restrictions on foreign companies that want to take over US
companies involved in defence as well as concluding that “US government procurement rules
should be revamped to support increased collaboration with, and in some cases procurement
from, non US based companies”. Concerning the integration of commercial components into
military products the report called for a general permission “even if they are provided by non-
US companies or worked on by foreign nationals”.

The  US  Commission  also  addressed  the  problems  the  export  control  system  creates  for  its
industry. It stated that “export controls now provide too little security and impose enormous
inefficiency”  adding  that  they  “are  undermining  the  collaboration  between  companies  in
alliance  countries  on  new  system  developments”  and  negatively  affect  “one  of  the  central
goals of military planning during the past 30 years – alliance interoperability”. To overcome
this  situation,  the  US  Commission  suggested  working  "with  our  allies  to  identify  critical
technology and to come up with solutions on how to protect it”.

Transatlantic  cooperation  in  defence  has  been  spurred  by  industrial  consolidation  and  the
development towards fewer, but technically more sophisticated and more costly programmes
and closer transatlantic industrial cooperation is also the necessary outcome of implementing
joint defence capabilities.

However, while welcoming the positive signals from the US and encouraging all transatlantic
initiatives  to  work  towards  early  changes,  the  Commission  believes  that  the  chances  of
obtaining  better  access  to  the  US  defence  equipment  market  and  improving  their  export
control system, will be greatly enhanced if Europe can act from a position of strength where it
has  taken  the  steps  needed  to  ensure  the  existence  of  a  highly  competitive  and  attractive
industrial  base  inside  Europe  with  its  own  strong  design  expertise  and  successful
programmes.

5.

NEXT STEPS

STAR 21 has  shown  that  the  most  significant  progress  has  been  made  in  areas  in  which  an
integrated  European  approach  has  been  taken.  The  creation  of  EASA  to  overcome  the
drawbacks of the existing inter-governmental approach of the Joint Aviation Authorities is a
good example.

11

This  demonstrates  how  the  EU  can  play  an  important  role  in  providing  an  environment  in
which the aerospace industry can thrive as cross border integration and the needs of the global
marketplace increasingly render the national context inadequate.

The  Commission  is  aware  that  depending  on  the  issue  at  stake,  the  most  appropriate
organisational  and  institutional  approach  can  differ.  Some  of  the  problems  might  best  be
addressed by the development of Community policies  while others might  call for  a solution
using different EU structures.

On that basis, the Commission will continue its efforts to improve the political and regulatory
framework  for  aerospace  in  Europe.  However,  the  Member  States  will  retain  a  crucial
responsibility for providing support in terms of R&D programmes, repayable launch aid and
contributions  to  ESA  programmes,  as  well  as  remaining  the  industry’s  major  customers
through defence procurement. Significant progress therefore depends on their cooperation.

The  Commission  considers  that  three  areas  deserve  particular  attention:  defence,  space  and
research.

Defence

Regarding the defence aerospace business, the industrial consolidation process (primarily the
responsibility of companies themselves) has advanced enormously; the key issue faced by the
industry is the remaining fragmentation of defence equipment demand – single Member State
programmes  struggle  to  achieve  production  levels  on  an  economic  scale  and  multi-Member
State  programmes  are  handicapped  by  complex  work-sharing  arrangements  which  add  to
bureaucracy and costs.

Member  States  should  foster  harmonisation  of  the  military  and  other  security-related
requirements with a view to overcoming the problems arising from the national orientation of
today’s defence framework by harmonising the planning and procurement of defence-related
equipment. This is fully in line with the objective of the ESDP to foster a competitive defence
industrial and technological platform and a concrete start has been made in the actions set out
in  the  Commission’s  recent  Communication  ‘European  defence  –  industrial  and  market
issues’.

This  Communication  focuses  on  the  priority  to  be  given  to  the  establishment  of  a  defence
equipment  market,  i.e.  an  appropriate  regulatory  framework  addressing  both  internal  and
external  aspects,  suitable  rules  for  cost-effective  procurement  of  goods  and  services  by
Member  States  and  by  any  future  European  agency  or  agencies  and  economically  efficient
export  controls,  while  also  preserving  ethical  standards  and  promoting  reciprocal  market
access. It also focuses on improved efficiency in research through cooperation and coherence
in defence-related research at European level and the exploitation of civil-military synergies.

In  addition,  it  should  be  recognised  that  the  EU  provides  an  appropriate  framework  for
extending and developing some of the measures agreed in the aerospace and defence related
field  by  the  Ministers  of  France,  Germany,  Italy,  Spain,  Sweden  and  the  United  Kingdom
through the Letter of Intent (LoI) and its Framework Agreement. The benefits accruing from
agreements on intellectual property rights, common export rules and security of information
would be greatly enhanced by covering the whole of the European Union.

Similarly,  various  Member  States  have  already  established  joint  procurement  and  research
initiatives  such  as  OCCAr  (Organisme  Conjoint  de  Coopération  en  matière  d’Armement  /

12

Joint Armament Cooperation Body) and WEAO (Western European Armament Organisation)
and the initiative of the European Council of 19 and 20 June 2003 to set up an agency in the
field of defence capabilities development, research, acquisition and armaments.

As regards obstacles to trade in defence equipment, the Commission welcomes the approach
of the US Aerospace Commission. It invites the US to work towards early implementation of
necessary changes. This would encourage defence cooperation, improve interoperability and
help to reduce the capabilities gap.

Space

Following the 2001 Communication “Towards a European Space Policy”, which focused on
cooperation  with  the  European  Space  Agency,  the  Commission  adopted  a  Green  Paper  on
space  to  encourage  further  debate  on  the  way  forward  with  a  view  to  producing  a  detailed
White Paper later in 2003.

The  absence  of  a  comprehensive  European  space  policy  and  the  resulting  lack  of  efficient
coordination  of  space  activities,  is  now  giving  rise  to  fears  that,  despite  its  technological
excellence, the recent downturn in the commercial space market means that EU industry not
only risks losing market share to the US and other space powers, but may even lose the ability
to preserve acquired capabilities. In the long run this could lead to a situation in which Europe
has no effective choices in a vital sector.

However, the economic stakes of downstream activities including satellite-based services for
transport,  electronic  commerce,  scientific  highways,  tele-working,  leisure  and  culture
services, financial services and of course, communications and security and defence activities,
now  go  far  beyond  the  initial  investments  in  structures.  Such  services  provide  an  added
dimension and have become an important resource for various industrial capabilities.

Therefore  the  Commission  will  take  the  steps  required  to  create  the  most  favourable
environment possible for industry to preserve and further develop its capabilities. That means
setting  out  a  comprehensive  European  space  policy  that  takes  account  of  the  strategic
character  of  this  industry  and  provides  a  common  framework  under  which  the  European
industry and the different national and intergovernmental agencies involved can optimise their
activities.

The  wide-ranging  discussions  which  took  place  during  the  consultation  process  organised
under  the  Green  Paper  on  Space  have  played  an  important  role  in  this  context  and  the
Commission will develop these issues more fully in a White Paper to be presented later this
year.

Research

Over the last decade the Union has increased its role in funding civil aeronautics research in
Europe  and  industry  has  adapted  its  research  structures  to  take  account  of  this  new  support
landscape.  Given  the  long  development  cycles  of  aerospace  it  is  important  to  maintain
stability of research funding structures in the long run.

As  in  civil  aeronautics  with  ACARE’s  Strategic  Research  Agenda,  Europe  would  greatly
benefit from the existence of a comprehensive European defence aerospace R&D plan. This
requires the development of a system that brings together those who understand the strategic,
technical and market issues that  will determine  the  future  of aerospace with those that have
both the capabilities and a stake in the business – the companies themselves, including SMEs,

13

research establishments and so forth – to allow the complex issues involved to be examined in
depth.

The task would be to determine the priorities and objectives with a European perspective in
order  to  influence  all  European  stakeholders  involved  in  the  planning  of  defence-related
research programmes to work towards a system that is more efficient, better focused and more
competitive on a world scale. Individual Member State priorities might need to be adapted as
a  result  of  the  overall  plan  so  a  sufficient  level  of  commitment  and  independent  resources
would be pre-requisites for success.

Besides  better  coordination  of  activities  between  the  Member  States,  new  institutional
structures  will  be  needed  to  overcome  the  existing  fragmentation.  In  its  draft  Treaty
Establishing a Constitution for Europe, the European Convention called for the establishment
of  a  “European  Armaments,  Research  and  Military  Capabilities  Agency”  to  “identify
operational requirements, to promote measures to satisfy those requirements, to contribute to
identifying  and,  where  appropriate,  implementing  any  measure  needed  to  strengthen  the
industrial and technological base of the defence sector, to participate in defining a European
capabilities  and  armaments  policy,  and  to  assist  the  Council  of  Ministers  in  evaluating  the
improvement of military capabilities.” The Commission strongly supports this proposal. Such
a  body  would  help  to  overcome  the  existing  fragmentation  and  to  develop  the  equipment
Europe will need for its security and defence needs in the future.

For its part, as stated in the recent defence Communication, the Commission plans to launch a
preparatory  action  to  increase  Europe’s  industrial  potential  in  the  field  of  security  research.
This  activity  will  aim  at  exploring  the  conditions  and  mechanisms  to  improve  the
environment  for  scientific,  technological  and  industrial  competitiveness  in  this  area.  A  long
term  vision  will  be  developed  in  close  cooperation  with  relevant  stakeholders.  The
Commission intends to present a further Communication on this issue by the end of this year.

6.

CONCLUSION

The  benefits  of  a  strong  European  aerospace  industry  have  been  highlighted  in  past
Communications.  Millions  of  citizens  depend  on  the  sector  for  their  livelihood  and  its
€ 80 billion turnover makes a subs tantial positive contribution to Europe’s trade balance. The
aerospace  industry  and  its  associated  technologies  also  play  a  major  role  in  maintaining
Europe’s strategic position and capacity for security and defence and are key contributors to
the  competitiveness  of  all  sectors  of  the  economy  including  the  emerging  businesses  of  the
Information Society.

While it is true that  since  STAR 21  was  presented,  very  real  progress  has  been  achieved  in
many  areas  including  the  adoption  of  the  EASA  Regulation,  the  relaunch  of  the  defence
debate,  the  broad  consultation  on  space  policy  and  the  creation  of  the  Galileo  joint
undertaking,  the Commission is convinced, in  line  with  its  industrial  policy  strategy  and  its
competitiveness  policy,  of  the  need  to  adapt  and  develop  the  existing  framework  to  help
preserve the benefits of Europe’s aerospace capabilities for future generations.

To do this requires a continuing, coordinated effort which  focuses on  those  areas  where  the
European framework for aerospace is lacking or remains weak. That means that priority must
be given to the effective creation of a European defence equipment market, the launching of a
successful preparatory action on security research and strengthening defence research efforts

14

through  a  European  defence  aerospace  R&D  plan  and  the  establishment  of  an  EU  agency
while also maintaining long-term stability in civil aeronautics research programmes.

The adoption of the space White Paper and the early implementation of an action plan which
makes a reality of European space policy by dealing with all aspects of the business and fully
exploiting the specific capabilities of all the institutions involved is also vital, as is completing
the  single  European  sky  including  external  air  transport  agreements  and  a  fully  operational
EASA.

Given the scale of the challenges, determined action is needed to allow European companies
to  further  improve  their  competitiveness  in  global  aerospace  markets.  The  Commission
therefore welcomes  the STAR 21  recommendations as an  important  starting  point  to  trigger
the necessary changes and it calls on Member States and the other Institutions to support the
thrust of the recommendations and seek actively to advance the key issues raised.

15

ANNEX

STRATEGIC AEROSPACE REVIEW for the 21st century

(STAR 21)

Creating a coherent market and policy framework

for a vital European industry

July 2002

A. MEMBERS

The European Advisory Group on Aerospace was set up in 2001 to analyse the adequacy of
the  existing  political  and  regulatory  framework  for  aerospace  in  Europe,  to  highlight
deficiencies  and  to  make  proposals  for  further  improvement.  Chaired  by  Erkki  Liikanen,
Member of  the  European  Commission  responsible  for  Enterprise  Policy,  it  comprises  seven
aerospace industry chairmen, five European Commissioners, the EU High Representative for
the Common Foreign and Security Policy and two Members of the European Parliament.

Over  the  last  12  months  the  members  of  the  Advisory  Group  have  analysed  this  question,
identifying the key areas which will determine the future competitiveness of the industry and
its ability to contribute effectively to Europe’s main policy goals. Their findings are presented
in the attached report entitled Strategic Aerospace Review for the 21st  Century  (STAR 21),
which the Group presented to the President of the European Commission, Romano Prodi on
16 July 2002.

Jean-Paul Béchat: Chairman & CEO SNECMA

Manfred Bischoff: Co-chairman EADS

Philippe Busquin: Member of the European Commission, responsible for Research

Sir Richard Evans: Chairman BAE Systems

Jean-Luc Lagardère: Co-chairman EADS

Pascal Lamy: Member of the European Commission, responsible for Trade

Erkki  Liikanen:  Member  of  the  European  Commission,  responsible  for  Enterprise  and  the
Information Society

Alberto Lina: Former President & CEO Finmeccanica (until April 2002)

Loyola  De  Palacio:  Vice-President  of  the  European  Commission,  responsible  for  Relations
with the European Parliament, Transport & Energy

Chris Patten: Member of the European Commission, responsible for External Relations

Denis Ranque: Chairman & CEO THALES

16

Sir Ralph Robins: Chairman Rolls-Royce

Javier Solana: EU High Representative for the Common Foreign and Security Policy

Carlos  Westendorp  y  Cabeza:  Member  of  the  European  Parliament,  Chairman  Industry,
Foreign Trade, Research and Energy Committee

Karl von Wogau: Member of the European Parliament.

B. EXECUTIVE SUMMARY

Europe’s needs

In  recent  years  Europe’s  leaders  have  defined  far-reaching  goals  for  the  European  Union
which have major implications for the aerospace industry, setting, on the one hand, ambitious
targets  for  Europe’s  competitiveness  and,  on  the  other  hand,  key  objectives  for  the  EU’s
foreign and security policy.

In  its  Strategic  Aerospace  Review  for  the  21st  Century  (STAR  21)  the  European  Advisory
Group on Aerospace argues that these  goals  can only be met if the  economic and  industrial
structures  in  Europe  are  capable  of  responding  to  the  new  requirements.  A  flourishing  and
competitive aerospace industry is essential to ensuring a secure and prosperous Europe. Apart
from its contribution to sustainable growth, the aerospace industry is a home to key skills and
technologies  and  an  important  driver  of  innovation;  it  guarantees  the  means  for  delivering
services  from  space,  and  makes  an  essential  contribution  to  security  and  defence,  thereby
helping to safeguard Europe’s freedom of action in its external policies.

Industry characteristics

The European aerospace industry is a world leader in several key market sectors, accounting
for one third of  the  world’s  aerospace  business  in  terms  of  turnover,  compared  with  almost
one half for its US counterpart.

The  wellbeing  of  the  industry  depends  on  twin  pillars,  namely,  civil  and  defence.  They  are
both complementary and mutually dependent. Operating in civil and defence markets means
sharing skills and technologies and enjoying economies of scale and the benefits from a broad
product  range.  Civil  and  defence  requirements  both  rely  on  the  application  of  advanced
technologies, while serving private and public customers with different needs.

Entry for newcomers to the aerospace industry is very difficult, especially at prime level. This
stems from the interdependence of the civil and defence sectors as well as the highly cyclical
and capital-intensive nature of the industry. This means also that once the technology, skills
and infrastructure are eroded or disappear, they are extremely difficult to re-create.

As  regards  international  competition,  US  companies  operate  in  the  world’s  single  largest
home market and benefit from a highly supportive operating framework which is designed to
underpin a declared policy  aim to maintain US supremacy in aerospace. The direct linkages
between  defence  and  civil  uses,  and  the  heavy  investments  in  defence  to  fund  research  and
innovation bring clear advantages to the US industry in terms of beneficial spin-off effects in
non-defence  aerospace  applications.  This  situation  poses  a  constant  challenge  to  European
industry and cannot but affect its competitive position.

17

Since  for  most  markets,  US  and  European  companies  will  continue  to  supply  the  needs  of
to
customers  worldwide,  strong  European  aerospace  capabilities  are 
maintaining competition for a wide range of civil and defence products.

indispensable 

Within  Europe  major  restructuring  has  taken  place  in  recent  years,  leading  to  an  industry
organised  on  a  European  scale,  as  a  competitor  and  partner  of  its  powerful  US  counterpart.
Yet,  the  policy  framework  which  governs  its  activities  is  too  fragmented.  It  is  appropriate
that, as the aerospace industry itself has restructured on a European level, the issues that will
determine its future  competitiveness  and  contribution  should  be  addressed  from  a  European
perspective.

Key findings

In  considering  the  issues  from  a  European  perspective,  STAR 21  has  identified  four  key
findings:

1.

2.

3.

4.

Aerospace is vital to meeting Europe’s objectives for economic growth, security and
quality  of  life.  It  is  directly  associated  with,  and  influenced  by  a  broad  range  of
European policies such as trade, transport, environment and security and defence.

A  strong,  globally  competitive  industrial  base  is  essential  to  provide  the  necessary
choices and options for Europe in its decisions as regards its presence and influence
on the world stage.

European aerospace must maintain a strong competitive position if it is to play a full
role as an industrial partner in the global aerospace marketplace.

Europe must remain at the forefront of key technologies if it is to have an innovative
and competitive aerospace industry.

STAR 21  notes  that  while  some  progress  has  already  been  made  in  a  number  of  areas,  the
current political and regulatory framework is insufficient to bridge the gap between Europe’s
ambitions and the capacity to deliver the required results

Policy recommendations

A coherent, long-term perspective is essential for planning and investment by  the  aerospace
industry. STAR 21  identifies  a  number  of  areas  in  which  the  European  Institutions,  the  EU
Member States and the industry itself must act to maintain Europe’s position as a world-class
aerospace producer and to provide the capabilities in defence, security and space which will
allow Europe to make essential political choices and to be an effective partner for friends and
allies.

The  main  recommendations  of  STAR 21  cover  world  markets,  the  operating  environment,
governance of civil aviation, European security and defence, and space capabilities. In many
of these areas, for example the coordination of civil aeronautics research and the regulation of
civil  aviation,  solid  progress  has  already  been  made  or  will  be  achieved  through  the
implementation of measures already proposed. In other areas, for example defence, space and
the level and structure of research and technology in all market segments, which are vital for
the  development  of  industry,  early  decisions  are  required  to  avert  a  closing  off  of  policy
options for the future.

18

As  far  as  access  to  world  markets  is  concerned,  Europe’s  goal  should  be  to  secure  a  level
playing field which will favour competitive enterprises. This will require pushing for further
market opening, especially by seeking changes to ‘Buy America’ practices and convergence
in export control policies. At the same time Europe should build and develop its relations with
third countries, including through international cooperation programmes.

With respect to the  operating environment, STAR 21  highlights the  key  role  of  research  for
industry’s  competitiveness.  While  welcoming  the  creation  of  the  Advisory  Council  for
Aeronautics  Research  in  Europe  (ACARE),  STAR 21  draws  attention  to  the  huge  challenge
involved in mobilising the estimated €100 billion  from private and public sources needed to
fund  a  coordinated  civil  research  strategy  over  the  next  20  years.  In  a  related  area,  the
importance of the impact of tax incentives as a driver for research is acknowledged and more
detailed analysis of this aspect is called  for.  As regards human resources, STAR 21 stresses
the  need  for  appropriate  actions,  especially  at  the  level  of  Member  States,  to  ensure  the
availability of a highly skilled and mobile workforce.

As regards areas in which good progress is being made the report cites in particular the issue
of  governance  of  civil  aviation,  adding,  however  that  the  full  benefits  from  relevant
developments  will  only  be  obtained  by  allowing  the  EU  to  become  the  policy-maker  and
regulator. This requires a wider role for Community bodies including the European Aviation
Safety Agency (EASA), as well as the development and implementation of a master plan for
air traffic management in Europe. It also leads to the Community becoming a member of the
International Civil Aviation Organisation (ICAO) alongside the Member States.

It is in the areas of security and defence and related research that the most pressing need for
added efforts to secure the future of the European industry is identified.

– 

– 

– 

Such  efforts  are  needed  to  ensure  a  highly  capable  European  industrial  and
technological  base  which  is  an  essential  prerequisite  to  guaranteeing  the  industry’s
overall future competitiveness. Yet the mismatch between, on the one hand Europe’s
goals  and  requirements and,  on  the  other hand,  the  policy  framework within  which
the  aerospace  industry  is  called  upon  to  contribute  to  the  delivery  of  the  necessary
capabilities, needs to be addressed urgently.

Putting  in  place  the  arrangements  for  delivering  the  agreed  capabilities  requires
commitment,  resources  and  coherent  organisation.  There  has  recently  been
encouraging progress in defining and agreeing capability requirements as part of the
European Security and Defence Policy. Bearing in mind that this is only a first step
towards meeting the future requirements of the new European security policies, it is
essential  that  adequate  financial  resources  be  committed  to  enable  plans  to  be
realised, and that necessary rules and procedures be put in place to ensure that such
resources are spent efficiently. This will also require a more coordinated approach to
armament at European level, leading eventually to a European armament policy.

But  while  there  is  still  some  reticence  about  agreeing  that  key  questions  such  as
defence  procurement  and  associated  research  -  traditionally  matters  for  national
decision - should also be addressed at a European level, there is growing recognition
that  decisions  on  the  level  of  spending  on  defence  equipment,  re-setting  priorities
within existing defence budgets and the appropriate response to new threats need to
be  approached  in  a  European  context.  Thus,  welcome  efforts  to  improve  the
coordination  of  research  programmes  and  towards  more  cost  efficient  procurement

19

arrangements,  mainly  through  more  intensified  cooperation  among  certain  Member
States, are now being formalised through a number of different agreements.

Independently  of  the  overall  level  of  ambition  which  must  necessarily  be  determined  at  the
highest  political  level,  failure  to  optimise  expenditure  on  aerospace  including  its  key
components, research and defence, will limit future political options for Europe. Apart  from
the overall level of resources, fully coordinated investments in research and development and
efficient  procurement  are  key  to  delivering  the  necessary  European  capabilities,  and  to
ensuring the contribution of a competitive aerospace industry.

Despite recent advances, progress is insufficient. To help overcome this problem, all available
means have to be explored, including action, where appropriate at Community level, in order
to remove the impediments to the competitiveness of European industry. Taking due account
of the special characteristics of the defence and security sector, Community experience should
be  utilised  in  the  situation  in  which  the  products  and  processes  derived  from  technological
development  and  innovation  in  practice  do  not  distinguish  between  civil  and  security  and
defence applications.

On space capabilities, STAR 21 welcomes moves to develop a consolidated European space
policy  and  a  European  space  plan  with  adequate  resources,  in  line  with  the  joint  strategy
between the European Space Agency (ESA) and the European Commission (EC). The Galileo
satellite  positioning  system  must,  however,  be  deployed  on  schedule  with  development  of
downstream  activities,  providing  opportunities  for  early  involvement  of  the  private  sector.
Development of Global Monitoring for Environment and Security (GMES) must be continued
with support from ESA and EC programmes. Equally important is the need for early action to
sustain  European  launch  capabilities  and  to  explore  applications  of  space  technologies
especially  for  communication  and  monitoring,  including  those  required  for  security  and
defence.

Europe’s  political  leaders  are  invited  to  seriously  consider  how  to  bring  about  the  needed
commitment to  the increased resources  and  more  coherent  European  framework  required  to
meet Europe’s existing and future political goals.

The  European  Advisory  Group  on  Aerospace  invites  the  widest  possible  response  to  its
analysis and recommendations. It looks forward in particular to the reaction of those parties
which are best placed to give effect to its recommendations, namely, the Member States and
the Community Institutions. In the light of these reactions and other relevant developments,
the Group stands ready to further contribute to the discussion.

C. STRATEGIC AEROSPACE REVIEW FOR THE 21ST CENTURY

1.

ACHIEVING EUROPE’S LONG-TERM GOALS

Europe  faces  the  21st  century  with  high  ambitions.  It  aims  for  a  better  quality  of  life  and
higher  living  standards,  which  in  turn  depend  on  its  competitive  strength.  Its  citizens  are
aware  that events  far from their own  borders can  have  a  profound  effect  on  their  lives,  and
they wish to exert greater influence for good in world affairs, as valued partners to friends and
allies.

20

A flourishing aerospace industry is a key component in enabling Europe to realise its political
and economic ambitions. Strong European aerospace capabilities have become indispensable
to maintaining competition in world markets for a wide range  of civil  and defence  products
and safeguarding Europe’s freedom of action in its external policies. The aerospace industry
itself  has  restructured  on  a  European  level,  so  the  issues  which  affect  it  should  also  be
addressed from a European perspective.

Over the last few years European leaders have defined far-reaching  goals which have major
implications for the aerospace industry, setting targets for Europe’s economic competitiveness
and for the EU’s foreign and security policy.

1.1.

Competitiveness

The  Lisbon  Summit  in  2000  set  the  ambition  for  Europe  to  become  the  most  competitive
knowledge-based  economy  in  the  world,  achieving  new  levels  of  competitiveness  by  2010.
The 2002 Barcelona Summit took stock of progress in implementing the Lisbon Strategy and
gave it new impetus. The development of the European Research Area following the Lisbon
Council  testified  to  Europe’s  continuing  commitment  to  strengthening  its  technological
capabilities by undertaking more effective research in common. This was also reaffirmed in
Barcelona.

"The Union has set itself a new strategic goal for the next decade: to become the most
competitive  and  dynamic  knowledge-based  economy  in  the  world,  capable  of
sustainable economic growth with more and better jobs and greater social cohesion”

Lisbon European Council conclusion, 2000

“In order to close the gap between the EU and its major competitors, there must be a
significant  boost  of  the  overall  R&D  and  innovation  effort  in  the  Union,  with  a
particular emphasis on frontier technologies”

Barcelona European Council conclusion, 2002

1.2.

Security and defence

Since the end of the 1980s the geopolitical situation has changed dramatically. The end of the
Cold War, the impact of regional conflicts such as that in ex-Yugoslavia and the emergence of
the  global  terrorist  threat  leading  to  the  war  in  Afghanistan  illustrate  the  new  challenges
confronting Europe.

The  aim  of  strengthening  Europe’s  role  on  a  changing  world  scene  was  expressed  in  the
Maastricht  Treaty  of  1994,  which  established  the  European  Union’s  Common  Foreign  and
Security Policy (CFSP). The structure was further refined in the 1997 Amsterdam Treaty.

A European Security and Defence Policy was launched at the Cologne European Council in
1999,  with  plans  elaborated  in  subsequent  Councils  at  Helsinki,  Feira,  Nice  and  Laeken.
Today’s  agreed  goal  of  the  European  Union  is  to  build  up  capabilities  for  humanitarian
assistance, rescue, civil protection, policing, peacekeeping and combat-force tasks  related to
peace-making.  The  immediate  aim  is  the  creation  of  sustainable  forces  capable  of  the  full
range of Petersberg tasks (up to 60 000-strong), deployable world-wide within sixty days by
2003.

21

The  implementation  of  such  ambitious  goals  will  depend  on  the  availability  of  adequate
structures  and  access  to  the  equipment  required.  To  safeguard  its  political  independence
Europe’s  industrial  and  technological  capabilities  –  specifically  in  aerospace  -  must  be
strengthened.

“The  Union  must  have  the  capacity  for  autonomous  action,  backed  up  by  credible
military forces, the means to decide to use them, and a readiness to do so, in order to
respond to international crises…”

“We recognise the need to undertake sustained efforts to strengthen the industrial and
technological defence base, which we want to be competitive and dynamic.”

Cologne European Council conclusion, 1999

1.3.

Matching ambitions and capabilities

These ambitions can only be met if the European economic and industrial structure is capable
of responding to the challenges that lie ahead. Fulfilling these ambitions means looking into
the future, anticipating developments and taking the appropriate policy decisions in the near
term that will enable Europe to meet medium and long-term needs. Much remains to be done
if Europe’s capabilities are to match its political goals.

Aerospace  is  an  industry  accustomed  to  looking  far  into  the  future:  a  new  generation  of
aircraft  can take  a  decade  or  more  from  conception  to  realisation;  a  space  project  may  take
even longer; research into a new composite may mean a generation of work before it is ready
for practical application. By the same token a long-term policy framework is essential if the
aerospace industry is to provide the capabilities which are required to match Europe’s goals.
This  is  especially  true  of  the  defence  side  of  the  business,  where  governments  are  the  sole
customers.

The  wellbeing  of  the  industry  depends  on  the  twin  pillars,  civil  and  defence.  They  are
complementary to each other but mutually dependent. Operating in civil and defence markets
means sharing know-how, skills and products, enjoying economies of scale and the benefits
of a broad product range. Both rely on the application of advanced technologies while serving
private and public customers with different needs.

1.4.

The STAR 21 analysis

Over  the  last  12  months  the  European  Advisory  Group  on  Aerospace  has  analysed  these
questions in depth, identifying the key areas which will determine the future of the industry.
The Group welcomes progress which has already been made, but the political and regulatory
framework  which  currently  exists  cannot  effectively  resolve  the  wide  disparities  between
Europe’s aspirations and its capacity to deliver the required results.

Based upon  an assessment of the strategic  role of the  aerospace  industry  (chapter  2)  and its
profile  (chapter  3),  the  Strategic  Aerospace  Review  for  the  21st  Centruy  (STAR 21)  has
identified  five  main  areas  that  deserve  specific  attention:  competing  on  world  markets
(chapter  4),  the  operating  environment  for  European  aerospace  (chapter  5),  European
governance  of  civil  aviation  (chapter  6),  the  vital  need  for  European  security  &  defence
capabilities (chapter 7) and safeguarding Europe’s role in space (chapter 8).

STAR 21  aims  to  broaden  understanding  of  aerospace-related  issues  in  Europe  and  trigger
action which will ensure that its aerospace industry can play a full part in securing Europe’s

22

economic  and  political  future.  Some  of its  recommendations  require quick policy  decisions,
while others will be seen in a longer time-scale, but it is important to ensure that the necessary
measures  are  taken.  The  monitoring  and  periodic  assessment  of  progress  in  the  areas
examined in this report should help identify where further action is needed.

The aerospace industry has a key strategic role in ensuring a secure and prosperous Europe:

2.

STRATEGIC ROLE OF THE AEROSPACE INDUSTRY

2.1.

A generator of wealth

In 2000, the European aerospace industry employed 429 000 persons directly and many more
indirectly,  with  a  consolidated  turnover  of  €72 300 million.  Almost  15  per  cent  of  turnover
was  spent  on  research  and  development.  Exporting  more  than  half  its  output,  the  industry
provided a positive trade balance of about €1 9 00 million for the EU as a whole. Aerospace
depends  on  an  extended  supply  chain,  including  many  small  and  medium-sized  companies
located in all 15 countries of the Union. This complex industrial structure makes aerospace a
leading contributor to wealth and employment all across the EU.

2.2.

Maintaining global competition

Strong  European  aerospace  capabilities  have  become  indispensable  to  maintaining  global
competition  across  a  wide  range  of  products.  The  outstanding  example  is  Airbus,  in  whose
absence  airlines  would  be  left  with  no  choice  in  the  most  important  market  segment  of  the
civil  aerospace  industry.  Choice  of  supplier  is  also  vital  for  cost-effective  government
procurement programmes for defence and security.

2.3.

Home to key skills and key technologies

Aerospace integrates and promotes the development of a wide range of skills, processes and
to  maintaining  a  broad-based  and  prosperous  economy.  Prime
technologies  vital 
manufacturers depend on a network of second and third tier specialist companies to meet their
needs.  These  firms,  operating  at  many  different  levels  of  the  industry,  are  home  to  the  key
technologies essential for Europe’s future.

2.4.

Driver of innovation

The  aerospace  industry  is  a  powerful  driver  of  innovation  in  the  economy  as  a  whole.  It
makes extreme demands on its products, requiring simultaneously safety and reliability, low
weight,  good  economics  and  minimal  environmental  impact,  enhanced  power  and  high
efficiency.  The  technologies  developed  for  aerospace  products  provide  spin-off  in  many
different sectors.

2.5.

Services from space

European industry has played a leading role in developing new services which rely heavily on
space infrastructures, ranging from  telecommunications to  navigation  and  earth  observation.
Transport,  telecommunications,  media  and  other  sectors  of  the  economy  including  public
bodies benefit from these capabilities, stimulating in turn innovative downstream activities.

23

2.6.

Security and defence

Aerospace is an essential contributor to any national or supra-national system of security and
defence.  Its  products,  which  include  aircraft,  space  technologies,  electronics,  engineering
systems  and  sub-systems,  are  crucial  for  domestic  security  as  well  as  providing  the
capabilities for realising policy aims in neighbouring and in more distant parts of the world. A
competitive  aerospace  sector  is  vital  for  any  nation  or  region  wishing  to  maintain  full
sovereignty  over  its  territory,  to  exercise  political  influence  beyond  its  borders  and  to  have
available to it the necessary range of political choices and options.

Four governing principles for Europe’s aerospace industry

2.6.1. Aerospace is vital to meeting Europe’s objectives for economic growth, security and
quality  of  life.  It  is  directly  associated  with,  and  influenced  by  a  broad  range  of
European policies such as trade, transport, environment and security and defence.

2.6.2. A  strong,  globally  competitive  industrial  base  is  essential  to  provide  the  necessary
choices and options for Europe in its decisions as regards its presence and influence
on the world stage.

2.6.3.

2.6.4.

European aerospace must maintain a strong competitive position if it is to play a full
role as an industrial partner in the global aerospace marketplace.

Europe must remain at the forefront of key technologies if it is to have an innovative
and competitive aerospace industry.

3.

THE AEROSPACE INDUSTRY PROFILE

The European aerospace industry is one of the world’s leaders in large civil aircraft, business
jets  and  helicopters,  aero-engines  and  defence  electronics.  It  accounts  for  one  third  of  all
aerospace  business  world-wide  in  terms  of  turnover  compared  with  almost  half  for  US
industry.

The  industry  is  difficult  for  new  participants  to  enter,  especially  at  prime  level.  Where  the
technology,  the  skills  and  the  infrastructure  are  eroded  or  disappear,  they  are  extremely
difficult to re-create. New entrants are not therefore expected to play an important role in the
foreseeable  future.  In  most  markets  it  will  be  US  and  European  companies  which  will
continue  to  supply  the  needs  of  customers  world-wide  in  what  is  a  highly  competitive
marketplace.

Certain key factors give the industry its distinctive character:

– 

– 

– 

– 

– 

close links between civil and defence activities

cyclical nature of the industry

high level of capital intensity

consolidation

privatisation

24

– 

EU-US relationships

3.1.

Civil and defence links

The two sides of the business are closely intertwined. Major components such as electronics,
engines and materials, and also key processes, use similar technologies. The synergy between
civil and defence work brings major industrial benefits, creating economies of scale through
the  absorption  of  high  fixed  and  non-recurring  costs.  While  the  civil  aerospace  sector  has
traditionally  been  dependent  on  technologies  developed  for  military  applications,  military
technologies are increasingly being derived from the civil side, which has a much higher rate
of new product introduction. Sustaining a viable aerospace industry to serve the needs of civil
markets is intimately linked to maintaining its capabilities in the security and defence fields –
and vice versa.

The links between the civil and defence aerospace sectors are poorly understood and
recognised within Europe, especially compared to the US.

3.2.

The industry’s cyclical nature

Aerospace is a highly cyclical industry, dependent mainly on the investment decisions of the
airlines and on the fluctuating patterns of defence programmes. The strong inter-relationship
between  the  civil  and  defence  sectors  in  many  firms  means  that  in  addition  to  the
technological  synergies,  the  different  cycles  of  civil  and  defence  programmes  allow
companies to balance their development resources more effectively.

The  development  and  increasing  market  penetration  of  the  Airbus  family  was  an
invaluable  counterbalance  to  declining  defence  budgets  in  the  1990s.  The  slump  in  air
transport following 11  September  2001 may  pose  a  similar  but  opposite  challenge,  with
defence and security requirements offering de facto some counterweight to the slowdown
in airline orders.

European airline profitability and aircraft orders

Operating results
(current $ bn*)
2,5

Number of
aircraft ordered

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

1,5

0,5

-0,5

-1,5

-2,5

Operating Results
Orders

(*) international routes, operating result after interest

25

300

250

200

150

100

50

e

0
Source: AEA

3.3.

A capital-intensive industry

Aerospace  is  a  highly  capital-intensive  industry  investing  for  the  long  term.  The  level  of
investment  in  research  and  technology,  product  development  and  capital  facilities  as  a
proportion of turnover for airframes, engines, ground and airborne equipment exceeds that in
many other industries. At the same time, returns are inherently long-term and high risk, which
restricts  the  appetite  of  the  financial  markets.  As  a  result  government  support,  including
research and development funding, repayable loans and risk-sharing partnerships, has become
an essential feature of the business world-wide.

3.4.

Consolidation in the European industry

The  aerospace  industry  continues  to  consolidate.  The  concentration  process  which  began  in
the US, leaving Boeing, for example, as the only US manufacturer of large civil aircraft, has
since  extended  to  Europe,  reflecting  the  call  from  French,  German  and  British  leaders  in
December 1997 for major industrial consolidation. Companies have seen the need to combine
resources in new configurations to meet the challenges of global competition and to respond
to  orders  for  transnational  projects,  both  civil  and  defence,  which  are  increasingly  being
undertaken on a pan-European basis.

This process has resulted in significant industrial restructuring across European borders.
Development and production of airliners, military aircraft, helicopters, missiles, satellites
and  aero-engines  are  now  in  the  hands  of  major  enterprises  operating  at  the  European
level, such as Airbus, Astrium and MBDA.

3.5.

Privatisation

In  several  countries  relations  between  governments  and  aerospace  companies  have  changed
significantly. Formerly state-owned companies are now partly or wholly in the private sector,
quoted  on  stock  markets  and  committed  to  providing  value  for  their  private  shareholders.
These companies clearly cannot exist only on their restricted home markets and increasingly
have developed long-term strategies that make best use of their resources and secure market
access  on  a  global  scale.  This  will  often  lead  European  companies  to  strengthen  their  non-
European links through takeover, merger or outward investment, which could in turn lead to
the disappearance of European capability in some sectors and might even endanger European
security  of  supply.  Such  action  can  be  influenced  strongly  by  access  to  more  attractive
funding or taxation regimes.

The  mobility  of  research  and  industrial  programmes  in  the  face  of  differing
international  support  regimes  poses  a  major  challenge  for  European  policy-makers.
Enterprises  such  as  BAE  Systems,  Rolls-Royce,  SNECMA  and  THALES  provide
examples of European companies undertaking major activities elsewhere in the world.

3.6.

EU-US relationships

US aerospace companies account for about half of the industry’s global turnover. The sales of
Europe’s industry are just over two-thirds those of US manufacturers. The global dominance
of the US industry is particularly evident at prime contractor level.

This industrial structure reflects the advantages of the US aerospace environment. American
companies operate in the world’s single largest home market. They also benefit from a highly

26

supportive operating framework, which is designed to underpin a declared policy aim which
dates back many decades: to maintain US supremacy in aerospace.

MAJOR AEROSPACE INDUSTRY COMPANIES

(based on aerospace related turnover)

2000 turnover in million $

Boeing / USA

Lockheed Martin / USA

EADS / DE ,FR,ES

BAE SYSTEMS / UK

Raytheon / USA

UTC / USA

General Electric / USA

Honeywell / USA

Northrop Grumman / USA

Bombardier / Ca

Rolls-Royce / UK

TRW / USA

Thales / FR

SNECMA / FR

Mitsubishi Heavy Ind. / JP

Textron / USA

Finmeccanica / IT

General Dynamics / USA

BF Goodrich / USA

Alcatel / FR

Dassault Aviation / FR

Embraer / BR

 23 977

 23 336

 19 661

 15 443

 12 358

 10 779

 9 988

 7 782

 7 112

 6 890

 6 237

 5 977

 5 204

 4 841

 4 394

 3 750

 3 674

 3 674

 3 496

 3 212

 2 925

 51 407

US

EU

others

  0

 10 000

 20 000

 30 000

 40 000

 50 000

 60 000

It is evident that Europe’s policy aims are different from those of the US. This translates into
fundamentally different levels of government purchases from the aerospace industry, with the
US  Department  of  Defense  and  government  agencies  buying  $60  300  million  of  goods  and
services  from  US  manufacturers  in  2000  as  against  $15 900  million  spent  by  the  15  EU
governments on European contracts.

Another beneficial aspect of US policy is the spin-off from military research and development
to  civil  aircraft  programmes  and  in  some  cases  the  direct  derivation  of  civil  planes  from
military projects.

US spin-off from military to civil use

Examples  of  directly  transferring  design  of  military  aircraft  to  civil  projects  are  the
B 707 and B 747, where the design teams which had worked on the KC-135 tanker and
the C-5A military transport bid transferred to development of the civil aircraft. Another
is  the  civil  freighter  MD-17,  which  was  derived  from  the  C-17.  Design  tools  used  by
Boeing in preparing to bid for the Joint Strike Fighter contract were also to be used in
civil  programmes,  according  to  the  company’s  Chief  Executive.  In  the  aero-engine
sector,  US  government-funded  development  of  turbine  technology  applicable  for  both
civil and military engines may well result in more civil than defence sales.

European  companies  cannot  afford  to  ignore  the  tremendous  potential  that  the  American
market  offers.  They  have  to  rethink  their  own  future  investments.  But  intense  transatlantic
competition,  especially  between  Airbus  and  Boeing,  should  not  obscure  the  high  degree  of
transatlantic  co-operation.  This 
for  civil  aerospace  products.
Subcontracting  and procurement,  production,  joint  ventures  and  mergers  across  the  Atlantic
are natural developments in an industry serving global markets. It is expected and welcomed
that such links will play an even bigger role in the future.

is  particularly 

true 

27

The Transatlantic Relationship

(cid:1)  Airbus procures a large amount of equipment in the US, including engines (GE and
P&W) and systems. As a result, up to 40 per cent of a new Airbus may well be made
in the US. Development of the A 380 could sustain up to 60 000 jobs there.

(cid:1)  European  companies  are  developing  and  producing  major  components  and  sub-

systems for Boeing aircraft.

(cid:1)  European  engine  manufacturers  like  Rolls-Royce  ,  SNECMA  ,  MTU  and  FiatAvio
are involved in engine programmes in both the EU and the US, even on competing
products.

(cid:1)  CFMI,  which  is  a  50/50  subsidiary  of  SNECMA  and  GE,  manufactures  a  highly

successful range of aero-engines.

(cid:1)  THALES and Raytheon created a joint US-based, 50/50 company (TRS) in 2001.

(cid:1)  BAE Systems has  an overall $4  billion  business in  the  US.  The  company  will  also
have  an  8  per  cent  share  in  the  Joint  Strike  Fighter  (JSF)  programme  and  its
development.

(cid:1)  Rolls-Royce has significant operations in the US and will also be involved with the

JSF development.

4.

COMPETING ON WORLD MARKETS

Fair  conditions  in  international  trade  and  access  to  markets  are  essential  pre-conditions  for
ensuring competitiveness-based growth in aerospace.

4.1.

Fair conditions in international trade: a level playing field

Operating in a global market place, the European aerospace industry faces strong competition
from  companies  located  in  other  parts  of  the  world,  mainly  in  the  US.  Given  the  profile  of
aerospace, governments have always played an important role in this business. Public support
takes differing forms such as protection of domestic markets, support for exports, taxation or
direct/indirect  funding.  Against  this  background,  a  fair  balance  in  international  support
practices and rules is crucial to guarantee a level playing field.

International  trade  agreements  play  a  key  role  in  this  respect.  As  far  as  civil  aircraft  are
concerned,  two  agreements  are  predominant:  The  1979  GATT  Agreement  on  Trade  in  Civil
Aircraft,  and  the  (bilateral)  1992  EU-US  Agreement  on  Trade  in  Large  Civil  Aircraft.  This
agreement  regulates  precisely  the  forms  and  level  of  government  support  for  both  sides,
provides for transparency and commits the parties to avoiding trade disputes.

recognition  and 

Mutual 
the
implementation of WTO rulings, is necessary to allow balanced competition among aerospace
companies in different parts of the world.

trade  obligations, 

international 

respect  of 

including 

28

Access  to  markets  can  be  substantially  hindered  through  import  and  export  barriers  for
foreign companies. This is a particular problem if the protected market is a major one, such as
the US defence equipment market. European manufacturers face two particular problems with
US policy:

4.1.1. Due to restrictive rules which are embedded in many individual pieces of legislation
at both federal and state level, such as the Defense Federal Acquisition Regulations,
the US market is difficult to access. In practice this reflects a ‘Buy American’ policy.

In  2001,  US  Congress  approved  legislation  in  which  it  explicitly  limited  the
procurement  choice  of  the  Department  of  Defense  to  commercial  Boeing
aircraft (Section 8159 of the Defense Appropriation Bill - HR 3338). This
piece of legislation would effectively exclude the purchase of an Airbus air
tanker even if the enterprise offered a competitive product.

For  the  foreseeable  future,  any  US  Government  space  payload  will  have  to  be
launched  on  equipment  manufactured  in  the  US,  unless  it  is  exempted  by
the President or his designated representative.

4.1.2.

The US has stringent export rules which forbid unrestricted export of equipment by
foreign countries if this equipment includes components covered by the US military
and  dual  use  regulations.  These  export  controls  are  being  reviewed  by  the  US
authorities,  but  so  far  on  a  bilateral  basis  with  selected  countries  like  Australia,
Canada and the UK.

As  the  European  industry  becomes  increasingly  transnational,  US  export  control
rules need to be relaxed through a dialogue which brings together as many European
countries  as  practicable.  This  transatlantic  dialogue  should  initially  be  based  upon
ongoing  bilateral  discussions  at  industry  level  with  six  European  countries  (UK,
France, Germany, Italy, Spain and Sweden) which were signatories of the European
Defence  Industry  Restructuring  Framework  Agreement  established  in  2000  by  a
Letter of Intent (LoI) for cooperation in the defence field.

(cid:1)  Shipment to China of an Astrium APR3 satellite for launch by a Chinese rocket in
July  2001  was  blocked  by  delayed  provision  of  export  clearance  from  the  US
authorities  because  the  satellite  included  US  components.  Six  receivers  on  the
satellite were to be used by a Chinese operator.

(cid:1)  Exported US-built warplanes which are to be equipped with non-US Electronic
Warfare Systems must have the equipment installed by the US contractor, which
must  also  supply  certain  key  components.  The  US  Air  Force  must  have  insight
into total system capabilities and approve the installation.

(cid:1)  Dassault  Aircraft  was  denied  the  licence  to  integrate  the  AMRAAM  air  to  air
missile  on the  Rafale  for  sales  to  South  Korea,  thus  weakening  the  offer  in  the
ongoing competition with US competitors.

Although  the  European  and  American  industry  associations  have  been  working  together  to
resolve some of these issues, further progress can only be made with a clear political will and
the involvement of governments. Wherever barriers to trade exist, they should be  relaxed to
guarantee fair reciprocal market access.

29

4.2.

Developing international co-operation

Over  the  next  decades,  experts  predict  a  significant  change  in  regional  demand  patterns.
Almost half the demand for civil aircraft over the next 20 years is projected to arise outside
the large but relatively mature markets of the US and Europe.

Market access everywhere depends on commercial factors such as quality, price and service,
but  also  on  the  building  of  more  broadly  based  political  and  diplomatic  relations.  Given  its
role in international relations, a  major  responsibility  for  these issues  rests with the  EU.  The
aviation  co-operation  agreements  between  the  EU  and  China  and  the  EU  and  India  are
examples  of  strengthening  relations.  Another  is  the  recently  launched  EU-Asian  Civil
Aviation Cooperation project.

Changing  market  patterns  will  have  an  impact  on  the  structure  of  the  aerospace  industry.
Achieving better access to growing markets may well require moving manufacturing capacity
there. As mainly lower added-value manufacturing  might move to  these markets in the first
instance,  the  established  aerospace  countries  will  need  to  concentrate  on  sophisticated
technologies.

A  joined-up  approach,  which  links  competitive  products  and  effective  marketing  from
industry  with  strengthening  relationships  at  the  political  level,  has  proven  important  for
aerospace to strengthen its position in world markets. European policies have a major role to
play in this respect.

 STAR 21 recommendations on world markets

(cid:1)  Ensure a level playing field so Europe’s industry can compete fairly in world markets.

(cid:1) 

Improve access to world markets, especially that of the US.

(cid:1)  Seek wider agreements to simplify export controls on products with US components.

(cid:1)  Ensure fair reciprocal market access.

(cid:1)  Continue developing international co-operation programmes.

5.

THE OPERATING ENVIRONMENT FOR EUROPEAN AEROSPACE

A  broad  range  of  policies  determines  the  operating  environment  for  Europe’s  aerospace
industry. Some emanate from the European Union, while others are largely determined at the
national level. Areas of major concern for the industry are competition policy, taxation, skills
and mobility, enlargement and research.

5.1.

Competition policy

The process of restructuring in the defence and aerospace industries has led to an increasing
number of mergers and other cooperative agreements between companies within the European
Union. These industries have passed from a phase of consolidation at national level to a new
phase  of  pan-European  consolidation.  This  development  enables  European  industry  to  meet
the  requirements  of  dynamic  competition  and  increases  the  competitiveness  of  European
industry, in both civil and defence areas.

30

European Union competition policy and in particular the Merger Control Regulation provides
for a  clear  framework and quick  decisions,  facilitating those concentrations and cooperative
agreements  between  companies  which  do  not  call  into  question  effective  competition.
Moreover,  EU  control  of  state  aids  makes  it  possible  to  distinguish  between  those  aids
necessary  for  research  and  technology  development  and  unlawful  aids  designed  to  protect
uncompetitive firms.

In applying EU competition policy to aerospace there are particular features to be taken into
account  in  individual  cases.  Such  features  concern  specificities  such  as  market  definition,
possible  dominance,  or  negative  influence  on  future  innovation.  In  particular  as  far  as
defence-related activities are concerned, relevant aspects might include:

– 

– 

– 

National government limits on the geographical scope of the markets by procurement
rules and administrative procedures (although competition may increasingly  be at  a
European or even a global scale).

Exercise of the countervailing power of the State as sole customer.

Instances  where  Europe  may  only  be  able  to  sustain  a  single  entity  capable  of
competing globally in a phase of pan-European and world-wide consolidation.

5.2.

Tax incentives for innovation

As  part  of  a  wider  policy  mix,  tax  incentives  for  research  investment  are  a  stimulus  for
innovative work which  will  not  deliver  immediate returns.  Such  tax  concessions  are  part  of
national corporation tax regimes. They vary significantly, both within Europe and compared
with other parts of the world. They are an important policy instrument to promote innovation
in industries with high research and technology investments such as aerospace.

In Canada, qualifying R&D attracts a proportional tax credit, which is offset against
the tax payable on that year's profits. Some provinces have additional incentives. For
instance, Quebec gives a tax credit proportional to the amount spent on R&D spent
on salaries in the Province.

European  countries  must  recognise  the  impact  which  tax  incentives  for  research  have  on
industry’s decision where and how much to invest.

A useful avenue would be to analyse the impact of different  taxation schemes on aerospace
within  Europe  and  to  compare  them  with  jurisdictions  outside  Europe.  The  long  lead  times
common  to  high-tech  industries  and  the  pan-European  nature  of  aerospace  should  be  taken
into  account,  as  substantial  differences  in  European  research  tax  regimes  might  also  distort
investment decisions. Possibilities for applying tax and other incentives to promote innovation
on  a  Europe-wide  basis  should  be  considered,  if  necessary  through  coordinated  national
actions so as to avoid distortions of competition.

5.3.

Safeguarding skills

A ‘skills gap’ in aerospace could prove a major obstacle to the industry’s future growth and
competitiveness in Europe. Rapid technological change and increased competition underline
the  need  for  a  creative,  innovative  and  adaptable  workforce.  Safeguarding  and  further
developing  a  strong  European  skills  base  will  be  a  key  factor  in  maintaining  global
competitiveness  and  retaining  investment  in  Europe.  The  overall  performance  of  education
and  training  systems  must  therefore  be  improved,  within  a  lifelong  learning  perspective,  to

31

provide  a  better  balance  between  initial  and  continuous  vocational  training,  and  to  build
bridges between different learning contexts. As such, full use should be made of knowledge
and  skills  acquired  in  both  formal  and  non-formal  settings.  Signs  that  highly  qualified
personnel are proving increasingly difficult to recruit raises particular concerns.

Initiatives to improve the aerospace skills base in Europe

Hamburg’s  ‘Qualification  Programme’  Task  Force:  The  regional  aerospace  and
aviation  industries,  the  federal  employment  office,  educational  institutions  and  the
City of  Hamburg  have  jointly  developed  supplementary  aerospace  training  schemes
to secure a long-term qualified workforce.

The  Qualification  Programme  encompasses  basic  apprenticeship  schemes  (‘aircraft
electrician’  and  ‘aircraft  mechanic’)  and  dedicated  advanced  vocational  training
programmes.  In  February  2002,  the  first  class  on  aeronautic  technology  started  at
Hamburg’s  public  vocational 
for  product  engineering  and
training  school 
aeronautics technology. It has been designed for specialists who already have several
years  of  experience  in  aerospace.  A  specific  training  programme  on  technical
English,  aviation  law  and  aircraft  technology  –  supported  by  the  European  Social
Fund and the City of Hamburg – has been specifically developed for staff from small
and  medium  sized  suppliers.  The  Hamburg  University  of  Applied  Sciences  offers
various  programmes  on  ‘Aviation  Construction’, 
including  a  postgraduate
programme  for  fully  employed  engineers  not  yet  working  within  aviation.  The
Technical  University  Hamburg-Harburg  has  developed  training  modules  for  young
professionals already working in aerospace with the support of the European Union.

In  Italy  similar  initiatives  have  been  developed  between  industry,  universities  and
authorities, specifically in the areas around Turin, Naples and Pisa. They encompass
both basic and vocational training schemes.

Actions to tackle the threat of a skills gap need therefore:

– 

Increased  cooperation  between  a  broad  range  of  relevant  actors,  including  public
bodies  and  the  industrial  partners  on  different  levels  to  develop  and  implement
measures  aimed  at  improving  transparency  and  recognition  of  diplomas  and
certificates,  as  well  as  the  overall  quality  of  European  vocational  education  and
training in terms of standing and reputation. Such measures should include life-long
learning schemes and vocational training programmes.

– 

An effective inter-link between research institutes and the training system.

5.4.

Facilitating mobility

As  the industry  consolidates on  a  European  scale,  personnel  mobility  becomes  a  significant
factor. Although workers may be asked to relocate to another country as the tasks move, the
absence of a common set of labour laws and regulations in Europe and the limited recognition
of foreign academic diplomas are serious obstacles  to  such  cross-border mobility.  European
aerospace  companies  with  activities  in  several  Member  States  feel  the  effects  of  such
inconsistencies.  Cross-border  programmes  such  as  Eurofighter  require  considerable  worker
mobility  between  specialised  production  centres  located  in  various  European  countries.
Exemption  periods  are  short  and  the  bilateral  character  of  the  existing  agreements  does  not
reflect the reality of a truly European industry.

32

The  European  Commission  addressed  these  issues  in  its  recent  Action  Plan  for  Skills  and
Mobility and called for immediate action to remove practical, administrative and legal barriers
to  mobility.  The  need  to  improve  recognition  of  qualifications  through  the  development  of
mutual  trust  and  transparency  was  highlighted  as  a  priority  for  action  at  European  level.
Aimed  at  addressing  this  issue,  a  process  of  increased  cooperation  between  the  Member
States,  other  European  countries,  and  the  social  partners  has  been  initiated  following  a
mandate from the Barcelona European Council in March 2002.

The  Commission  also  specifically  pointed  out  the  negative  effect  which  the  existing  social
security and pension schemes can produce.

However,  as  common  European  social  security  and  taxation  systems  are  not  expected  to
emerge  in  the  near  future,  targeted  remedies  which  reflect  the  particular  nature  of  the
aerospace  industry  are  needed  to  improve  the  existing  situation.  With  regard  to  taxation
systems,  thus  far  only  bilateral  agreements  between  individual  Member  States  (e.g.  France-
Germany) exist, and they are limited in time. They allow the transferred worker to pay taxes
in  her/his  country  of  residence.  With  regard  to  social  security  systems  a  Community
coordination system is in place guaranteeing social security rights for persons moving within
the  Union  and  determining  the  systems  to  which  they  are  subject.  This  is  in  principle  the
system of the Member State where they work. There are however some exceptions, such as in
case  of  posting  staff  from  one  Member  State  to  another  (up  to  12  or  24  months).  This
coordination  system  is  now  under  review  and  should  be  simplified  and  adapted  to  new
situations.

Security  clearance  of  staff  working  on  defence  programmes  in  different  Member  States
imposes further problems. Existing national legislation has not yet been adapted to the cross-
border  nature  of  major  aerospace  programmes.  Such  regulation  must  be  streamlined  to
prevent unnecessary bureaucratic burdens.

Security  clearance  for  personnel  working  on  multi-national  programmes  such  as
Eurofighter  is  complicated  by  different  procedures  and  delays  in  their  countries  of
origin,  which  have  to  provide  the  clearance  for  the  individuals  concerned.  The  LoI
Framework  Agreement  for  Defence  Restructuring  has  provided  some  relief  for
visiting  staff,  but  the  clearance  provided  is  still  not  sufficient  to  meet  NATO
requirements.

To  facilitate  the  cross-border  mobility  of  the  European  aerospace  workforce  several  actions
are needed:

– 

– 

– 

Posting periods for social security schemes need to be extended. Airbus experience
suggests that at least 12 years would be appropriate.

The existing bilateral agreements between the social security schemes of individual
Member States should be broadened into a wider cross-border European context.

European  aerospace  staff  working  on  defence  projects  in  different  European
countries should be subject to harmonised security clearance procedures.

5.5.

Enlargement of the EU

Accession  to  the  European  Union  of  countries  in  Central  and  Eastern  Europe  will  present
challenges  and  opportunities  for  Europe’s  aerospace  sector.  There  is  an  aerospace  industry

33

tradition  in  countries  such  as  Poland,  the  Czech  Republic  and  Romania.  EU  firms  have
already  developed  specific  business  relationships  with  local  companies.  Opportunities  for
risk-sharing and partnership in new programmes have also been discussed.

Sharing common standards is key to strengthening the dialogue. Work is already under way
with the aerospace industries of Poland and the Czech Republic to share in-depth knowledge
and best practices in areas such as quality control, standardisation and airworthiness. Mutual
recognition  in  these  fields  and  compliance  with  EU  standards  is  a  prerequisite  to  closer
business relationships.

An initiative for training on European civil aviation legislation and Joint Airworthiness
Requirements (JARs) in Central and Eastern European countries was launched with the
support of the European Commission in March 2002.

The  goal  must  be  to  develop  fruitful  long-term  commercial  and  industrial  partnerships,  to
pave the way for strong  collaboration and integration with European  industry  and  assist  the
industry  in  these  countries  to  become  effective  partners  in  the  aerospace  business.  The
European Union should look at ways of further fostering this integration process, through, for
example, support for training in foreign languages or management skills.

5.6.

Civil aeronautics research : key to long-term viability

Aerospace requires significant, long-term research commitments, as today’s innovation is key
to  future  competitiveness.  More  than  half  of  the  EU  Member  States  support  national
aeronautics  research  programmes  while  at  the  same  time  European  funding  has  become
increasingly important. European research framework programmes now account for about 30
per cent of all public spending on civil aeronautics research in Europe.

However, the pan-European structure of the aerospace industry and the importance of cross-
border  projects  are  not  yet  reflected  in  the  approach  to  research  funding  in  Europe.  The
6th European  Framework  Programme,  running  over  five  years,  proposes  to  allocate
€1 075 million  to  aeronautics  and  space  researc h,  but  Member  States  will  also  continue
funding their national programmes. More coordination between all different research schemes
is needed to overcome the current fragmentation of civil research activities in aeronautics and
to  minimise  unnecessary  duplication  of  effort.  As  funding  levels  are  tight,  such  efforts  are
essential to guarantee the resources needed for major research projects.

In January 2001, a High Level Group led by Commissioner Busquin presented its analysis of
the existing situation (“European aeronautics: A vision for 2020” - Vision 2020) stressing the
need  for  action.  The  report  called  for  the  realisation  of  a  European  Research  Area  in
aeronautics, based upon a common understanding of priorities between all stakeholders. First
concrete  steps  have  been  taken  through  the  work  of  the  Advisory  Council  for  Aeronautical
Research in Europe (ACARE).

ACARE’s mission is to establish and maintain a Strategic Research Agenda that will
influence all European stakeholders in the planning of their research programmes at
both  national  and  EU  level,  so  that  they  are  consistent  with  the  goals  of  the  High
Level  Group.  ACARE  will  also  recommend  measures  for  optimising  the  use  of
existing  research  infrastructures  and  improving  educational  policies  to  attract  the
workforce that the sector needs.

34

In  addition  to  improved  mechanisms  of  research  and  technology  acquisition  combined  with
more efficient and effective sharing of tasks, an overall increase in resources is required. The
High Level Group estimated that over the next 20 years some €100 billion from all public and
private  sources  would  be  needed  to  meet  society's  needs  and  to  make  European  industry  a
world  leader  in  civil  aeronautics.  This  will  also  be  consistent  with  the  general  commitment
made by EU leaders in Barcelona to boost Europe’s R&D and innovation effort and so close
the gap between the EU and its major competitors.

The goals set in Vision 2020 to meet the safety, environmental and operational challenges
are very demanding and can only be attained with breakthrough technologies that will need
to  be  fully  researched  and  validated  before  being  committed  to  production.  This  will
require  a  significant  increase  over  the  current  levels  of  expenditure  in  civil  aeronautics
research  to  a  total  of€100  billion  up  to  2020.  This  investment  is  in  line  with  the  growth
R&D and innovation spending in Europe up to 3% of GDP by 2010 called for at the 2002
Barcelona summit and the projected expansion in civil aeronautics research by the US over
the same period.

5.6.1.

STAR 21 recommendations for improved operating environment

– 

– 

– 

– 

– 

– 

– 

The  application  of  European  competition  policy  should  continue  taking
account of specific aerospace features, particularly in defence-related activities.

The  impact  of  different  taxation  schemes  to  promote  innovation  world-wide
should  be  analysed.  Possibilities  for  applying  tax  and  other  incentives  to
promote innovation on a Europe-wide basis should be considered, if necessary
through co-ordinated national actions so as to avoid distortions of competition.

The education and training needs of a long-term skilled work force should be
recognised.

Cross-border  mobility  of  staff  should  be  facilitated.  Existing  problems,
particularly  concerning  social  security  schemes  and  security  clearance
procedures in defence projects should be overcome.

Schemes  of  practical  training  in  accession  countries  should  be  developed  to
accelerate industrial integration.

For  civil  aeronautics  research  key  stakeholders  should  define  long-term
priorities.  Future  research  programmes  on  European,  national,  regional  and
industry levels need better coordination and joint planning where appropriate.

Allocation of sufficient public resources to sustain a long-term civil aeronautics
research strategy requiring an estimated total investment of €100 billion for the
next 20 years from all sources, both public and private.

6.

EUROPEAN GOVERNANCE OF CIVIL AVIATION

It  was  thought  in  the  past  that  the  European  Community  could  limit  itself  to  creating  the
internal market for the provision of air transport services and leave other regulatory aspects to

35

Member States, but this approach has created an unnecessarily complex environment for the
industry as a whole. Caught between Member State and European regulation, it weighs on the
efficiency  of  the  European  air  transport  system.  Experience  has  shown  that  it  also  weakens
Europe’s influence in international bodies.

It is therefore time to establish a truly integrated regulatory framework for civil aviation, with
particular  emphasis  on  key  areas  such  as  air  traffic  management,  safety  regulation,  security
and  environmental  standards.  In  the  longer  term  that  should  lead  to  European  Community
membership of the International Civil Aviation Organisation (ICAO), acting under the general
UN-framework, so  that  the  EU,  together  with  its  Member  States,  can  defend  its  interests  in
that forum.

6.1.

Air Traffic Management and the European Single Sky

The  crowded  and  inadequately  managed  skies  of  Europe  impose  huge  problems  for  the
efficiency of Europe’s airlines which in turn adversely affect the economics of the aerospace
manufacturing  industry.  The  diminished  productivity  of  equipment  on  predominantly  short-
haul  European  services  exacerbates  the  burden  of  ownership  costs,  reducing  profits  and
raising fares, while the associated delays make life intolerable for passengers. A High Level
Group  chaired  by  Commission  Vice-President  Loyola  de  Palacio  has  already  called  for  a
strong, independent regulator capable of managing European airspace across national borders.
The Group has also stressed the importance of using new technologies. Based upon this work
the  European  Commission  proposed  a  package  of  measures  on  air  traffic  management  in
October 2001 which is currently being discussed in the Council and the European Parliament.

Implementation  of  these  recommendations  would  help  overcome  the  chronic  delays  that
already affect European air transport and could affect it even more in the future in view of its
predicted growth.

The total cost of delays in Europe in 2000 has been estimated at between €2.9 billion and
€4  billion,  with  more  than  a  quarter  of  flights  delayed  and  an  average  delay  of  43
minutes. 40 per cent of these delays were attributed to air traffic management.

The  European  aerospace  industry  has  already  developed  advanced  technologies  and
operational concepts that could help to build up a coherent European Air Traffic Management
(ATM) system that is interoperable with existing systems in other parts of the world.

An appropriate forum to develop technical specifications together with industry would be the
Industry Consultation Group,  which  was proposed  to  provide  input  from  industry  and  other
interested parties under the Single Sky Initiative. This group should be set up without delay.
All different activities should be incorporated into an overall master plan.

An effective European ATM approach will be essential if Europe is to be more influential in
international bodies.

6.2.

A single safety regulator

Until now, national agencies have dealt with safety in air transport including the certification
of  aircraft  and  components.  These  activities  are  coordinated  through  the  Joint  Aviation
Authorities  (JAA)  system.  The  JAA  is  an  institutionalised  framework  for  Europe’s  civil
aviation authorities to discuss and harmonise national policies. It is not a juridical body with
the power to take binding decisions.

36

As  industry  has  consolidated  on  a  European  level,  this  inter-governmental  approach  is  no
longer adequate. It causes bureaucratic burdens for industry without improving safety levels.
The  European  Commission  proposal  for  a  regulation  establishing  common  rules  in  civil
aviation and creating a European Aviation Safety Agency (EASA) which is undergoing final
adoption  in  the  Council  of  Ministers  and  European  Parliament  is  an  essential  move.  In
contrast to the JAA system, this will allow for a single entity to take binding decisions.

With the correct level of empowerment, appropriate delegation from the Member States and
operational efficiency, EASA should as soon as possible be established as the European one-
stop  shop  for  certification,  and  appropriate  agreements  should  be  concluded  to  enable  it  to
build  on  the  tradition  of  cooperation  with  other  European  countries  and  major  global
regulators, such as the US Federal Aviation Administration (FAA).

However,  national  authorities  would  remain  able  to  pursue  their  own  policy  objectives  in
domains  not  yet  covered  by  the  EASA  regulation.  These  include  air  operations,  flight  crew
licensing,  airports  and  air  traffic  safety  regulation.  Industry  seeks  an  agency  that  over  time
will be able to play a strong role on an international scene that has so far been dominated by
the FAA, so improving Europe’s strategic position as transatlantic industrial links continue to
grow.  In  a  long-term  perspective  this  could  lead  to  the  regulation  of  safety  issues  in  a
transatlantic  organisational  framework,  but  to  ensure  that  fair  regulations  are  established,
Europe must have sufficient weight to counterbalance the power of the FAA.

EASA’s  remit  must  therefore  be  quickly  extended  to  cover  the  responsibilities  which  are
currently in the hands of national agencies in the individual Member States.

6.3.

Ensuring security in air transport

In the wake of the events of 11 September 2001, Member States realised the extent of their
interdependence and the need to extend their work together to protect civil aviation effectively
against terrorist threats.

As a first step, the Community has been given the task of ensuring that common standards of
prevention  are  developed  and  applied,  but  more  must  be  done  to  adapt  the  means  of
prevention to the threat, using the resources that new technologies can provide in areas such
as cockpit security and encryption.

Such actions should be closely coordinated with the US, so that preventive measures decided
on  each  side  of  the  Atlantic  are  compatible  and  do  not  impose  insoluble  problems  on  the
industry.  In  this  way  European  technology  would  have  a  new  window  of  opportunity  in
parallel with American industry, which has been active in proposing solutions.

6.4.

European approach to environmental issues

Aviation affects the environment mainly through aircraft noise and engine emissions. Aircraft
noise is mostly a local issue. It is a major obstacle to the future expansion of many existing
airports  and  thus  to  growth  in  the  capacity  of  the  air  transport  system.  Gaseous  emissions
from aviation represented 2 per cent of the overall CO2 emissions in 1992, and are expected to
increase  to  around  3  per  cent  of  the  global  total  in  2015.  Other  emissions,  including  NOx,
have implications with regard to local air quality and climate change, and the altitude at which
such emissions occur tends to increase their radiative (global warming) effect.

Significant steps have already been taken to reduce aircraft noise and emissions, but to ensure
sustainable development in the industry continued efforts are essential to reduce them further.

37

Vision  2020  already  set  the  goals  for  aircraft  and  engine  development  over  the  next  two
decades with the target of halving specific fuel consumption and reducing NOx emissions by
80 per cent.

Aviation  is  a  global  industry.  To  avoid  distortions  of  competition  between  carriers  and
between  manufacturers,  environmental  issues  should  be  addressed  on  a  global  level  within
ICAO. Europe and its Member States should seek to strengthen their role in that structure to
allow effective influence on related decision-making processes.

STAR 21 recommendations for improved governance of civil aviation

There is an urgent need for a strong European organisation to drive the overall policy of the
sector. Europe’s influence will have to extend beyond its boundaries, working with aviation
regulators world-wide. Key recommendations to achieve this aim are:

(cid:1)  Civil  Aviation  Authority:  The  European  Union  must  take  on  the  role  of  policy  maker
and regulator in all areas of civil aviation, speaking with one voice on behalf of Europe
in  all  relevant  international  organisations  and  specifically  in  ICAO.  Ultimately  this
should lead to Community membership in these bodies, together with its Member States.
A  fully  empowered  EASA,  with  rapid  extension  of  its  remit,  is  a  first  step  in  that
direction.

(cid:1)  Air Traffic Management: A master plan for a Single European Sky initiative should be
developed within the framework currently discussed in the European Parliament and the
Council.

7.

VITAL NEED FOR EUROPEAN SECURITY & DEFENCE CAPABILITIES

A  primary  responsibility  of  government  is  to  protect  the  citizen.  It  is  now  accepted  that  in
many  circumstances  the  provision  of  this  security  must  be  undertaken  at  European  level.
Events  outside  the  EU’s  borders  can  have  profound  consequences  within  the  Union.
Turbulence in the Balkans has provoked major migratory movements with a direct impact on
EU  countries,  while  the  events  of  11  September  2001  have  demonstrated  the  need  to  be
prepared to meet new kinds of security threat, both internally and on a global basis.

European countries have approached these security and defence needs from three different but
inter-related angles:

– 

– 

– 

The national territorial defence commitments of all Member States continue to
play a primary role in their security and defence policies.

Eleven EU Member States are also members of NATO, which has given high
priority to the need to strengthen the capabilities of the European allies so they
can be fully effective partners in the Alliance.

By the Treaty on European Union the EU Member States have agreed to define
and implement a common foreign and security policy including the progressive
framing  of  a  European  Security  and  Defence  Policy  (ESDP),  thereby
reinforcing the European identity and independence in order to promote peace,
security and progress in Europe and in the world.

38

Each of these three approaches calls for increasingly demanding technological solutions. The
events  of  11  September  2001  further  underlined  the  need  for  more  intensive  measures  to
protect the citizen on both the civil and the defence fronts and  complicated the task  further.
But for Europe to meet more of these needs in civil protection and defence as signalled in the
EU Treaty it must have the capabilities to do so. To a large extent it is the aerospace sector
which is required to supply them.

The  European  or  Helsinki  Headline  Goal  already  identifies  what  is  needed  to  deploy  the
60 000-strong Rapid Reaction Force. It is too early to make assumptions as to the other goals
to  be  set  by  the  EU  Member  States  for  the  ESDP,  but  it  is  clear  that  commitments  already
entered into in the NATO context and at the national level imply major new requirements in a
medium  and  longer-term  perspective,  bearing  in  mind  that  any  forces  deployed  would  be
available for national, NATO or EU purposes.

The European Headline Goal

"A common European Headline Goal will be adopted for readily deployable military
capabilities and collective capability goals in the fields of command and control,
intelligence and strategic transport to be achieved through voluntary coordinated
national and multinational efforts, for carrying out the full range of Petersberg tasks"

Helsinki European Council conclusions, 1999

7.1.

Identifying the capability gap

The EU's immediate concerns are to conduct crisis management operations across the whole
spectrum  of  the  so-called  Petersberg  missions:  humanitarian  and  rescue  operations,
peacekeeping  functions  and  tasks  of  combat  forces  in  crisis  management,  including  peace-
making. In parallel, the Member States concerned will provide the necessary defence means
to  secure  national,  European  and  transatlantic  interests  within  the  existing  security
architecture, in particular NATO.

The need for increased capabilities to meet the European Headline Goal is fully recognised at
the  EU  level  and  is  closely  linked  with  the  future  of  the  aerospace  industry  in  Europe.  EU
Member  States  have  signalled  their  determination  to  improve  operational  capabilities  under
the  European  Capabilities  Action  Plan  so  they  can  carry  out  in  full  all  Petersberg  tasks,  in
particular  as  regards  availability,  deployability,  sustainability  and 
inter-operability.
Specifically,  they  have  agreed  to  pursue  their  efforts  in  the  areas  of  command,  control,
communications and intelligence (C3I), and strategic air and sea transport.

Command  and  control  and  intelligence  capabilities,  using  facilities  such  as  unmanned
surveillance  aircraft  and  satellite  communication  systems,  are  essential  for  Europe  in
undertaking Petersberg missions including crisis management in neighbouring countries (in
the Balkans, for instance) or elsewhere in the world.

Strategic air transport enables policy-makers in Europe to transfer forces rapidly to  more
distant  destinations  for  peace-keeping  or  intervention  operations  and  to  provide  rapid
evacuation from world trouble-spots while minimising casualties.

It has been agreed that within the EU context the progressive framing of a common defence
policy  will  be  supported,  as  Member  States  consider  appropriate,  by  cooperation  between
them  in  the  field  of  armaments.  The  Laeken  European  Council  in  December  2001

39

acknowledged  the  importance  of  improved  harmonisation  of  military  requirements  and  the
planning  of  arms  procurement,  recording  that  the  EU  and  the  ministers  responsible  would
seek  solutions and  new  forms  of  cooperation  in  order  to  develop  the  necessary  capabilities,
making optimum use of the resources available.

Aerospace is thus a key component, both as regards defence applications, and to remedy the
capability  gap  -  an  essential  step  for  the  credibility  of  the  European  Security  and  Defence
Policy.

7.2.

A challenge for Europe

Defence  budgets  in  European  countries  need  to  be  spent  in  a  more  coherent  manner.  The
effectiveness of the traditional coordination and cooperation mechanisms among Europeans is
inadequate.  European  military  requirements  are  not  harmonised,  markets  and  purchases  are
consequently fragmented and too small to allow industry to develop long production runs and
become more competitive.

As  a  consequence  of  the  fragmentation  of  the  defence  market,  research  and  technology  are
neither  shared  nor  of  sufficient  scale  to  allow  European  industry  to  exploit  the  best
technologies in a consistent way. And whereas European companies are expected to co-fund
much  of  their  military  research  and  development,  US  industry  R&D  is  fully  supported,  a
policy reaffirmed in May 2001.

This  combination  of  factors  places  huge  constraints  on  European  industry  in  its  efforts  to
remain  competitive  in  key  markets.  The  additional  $40 billion  package  that  the  US
administration has granted mainly to its defence industry as a consequence of the events of 11
September 2001, in addition to the $400 billion + budget proposed for fiscal year 2003, could
exacerbate this situation further.

The  great  imbalance  between  the  US  and  Europe  not  only  distorts  competition,  but  also
makes any cooperation or partnership across the Atlantic more difficult.

If  Europe  is  to  be  credible  in  foreign  and  security  policy,  it  requires  appropriate  European
defence  capabilities.  Military  systems  need  15  to  20  years  from  technology  assessment  to
operational  deployment.  In  areas  where  no  significant  R&D  programmes  are  undertaken,
Europe will have no choice but to give up operational capability in these fields or depend on
non-European providers.

Recent  events  underline  the  importance  for  both  civil  and  military  crisis  management  of
having  efficient  and  speedy  intelligence,  command  and  control  processes  and  accurate
weapons  systems  with  no  collateral  effects.  Such  requirements  call  for  innovative  and
complex  solutions,  whose  development  may 
feasibility  experiments  and
demonstrators,  leading  to  a  new  generation  of  equipment  in  key  areas  such  as  search  and
rescue,  reconnaissance,  C3I  systems,  unmanned  air  vehicles  and  smart  munitions.  Unless
Europe  maintains  these  capabilities  and  develops  them  further,  there  is  a  real  risk  that
Europe’s ability to act will be determined by the US through its dominance over the supply of
certain types of equipment, or support to systems already delivered.

involve 

There is a high risk that if the EU Member States do not increase their commitment to their
aerospace industry and  address these issues at a European level, they will limit the Union’s
autonomous ability to carry out even the basic Petersberg Tasks, to say nothing of obligations
which individual Member States have in NATO.

40

The new electronic environment

The  nature  of  warfare  is  going  through  fundamental  change,  driven  by  the  need  to
maximise the efficient deployment of military forces, increase surveillance against the
threat of terrorism, give a flexible response to such a threat  and recognise the vital
need to minimise military and civilian casualties resulting from military action. This
scenario  involves  the  use  of  unmanned  aircraft  systems  for  both  surveillance  and
force projection.

Much  of  the  technology  required  for  this  new  capability  is  generic.  Deployment  of
unmanned systems can provide a reliable and cost effective means of surveillance and
data management for fisheries protection, border patrols, law and order enforcement,
civilian  search  and  rescue  and  many  other  applications  with  considerable  market
potential. Both civil and defence applications can and should be met by the European
aerospace industry.

The  US  has  so  far  made  the  greatest  advances  towards  building  this  electronic
environment  and  in  development  and  deployment  of  unmanned  systems.  Unless
Europe can build its own independent capability in this area, albeit at an affordable
lower capability level, there will be severe limitations both in terms of being able to
play a significant role in military operations alongside the US or, most significantly,
being able to mount independent actions. The key issue here will be interoperability
amongst the European countries as well as with the US and NATO.

7.3.

A new approach to Europe’s defence needs

Of  all  economic  sectors,  defence  equipment  is  the  only  one  within  the  European  Union  to
remain  largely  governed  by  national  policies.  Definition  of  future  requirements  and
procurement of current needs are frequently carried out on a purely national basis with little
regard to  common  interests. This  is  expensive and  inefficient,  duplicating  effort  and  raising
costs at a time when budgets are squeezed. It is clear that:

– 

– 

A  fragmented  market  denies  Europe  the  economies  of  scale  necessary  to  reduce
costs, fund R&D and ensure the effective application of technology.

Traditional  methods  of  co-operation  within  Europe  do  not  provide  best  value  for
money.

Development of common objectives in foreign policy and cooperation in security operations
need to be matched by common objectives and co-operation in the design and the acquisition
of the tools. Work should accelerate on harmonising military requirements and the planning
of  arms  procurement,  as  recommended  at  the  2001  Laeken  Summit,  with  the  aim  of
developing  a  comprehensive  armament  policy  at  the  EU  level.  Initiatives  for  common
procurement  in  organisations  such  as  the  Joint  Armaments  Cooperation  Organisation
(OCCAR)  and  the  Western  European  Armaments  Group  (WEAG)  need  to  develop  more
quickly.

Rationalisation  of  spending  will  not  however  be  enough  to  cover  the  needs  of  the  new
security  agenda.  Additional  resources  will  be  needed  and  these  new  demands  come  just  as
several European governments have set out to restructure their armed forces to adapt them to
a  new  strategic  environment  where  the  military  demands  are  different.  Restructuring  costs
money  though,  and  any  potential  savings  will  not  materialise  for  some  time.  The

41

comprehensive approach to crisis management which is a feature of the Common Foreign and
Security Policy will call for expensive new capabilities, including policing.

European  freedom  of  action  comes  at  a  price  in  terms  of  the  appropriate  equipping  of
European armed forces as well as the creation of a strong industrial and technological base.
This is  why decisions on the level  of national  spending  on  defence  equipment, re-setting of
priorities within existing defence budgets and the appropriate response to new threats should
all  be  approached  in  a  European  context.  Furthermore,  the  current  limited  commitments  to
pooled  defence  R&D  projects  should  be  expanded  and  should  include  large  collaborative
demonstrator  programmes  which  bring  together  activities  from  different  Member  States  to
create a strong defence research framework.

The  commitment  of  the  Member  States  and  the  EU  to  an  efficient  defence  structure,
appropriate to Europe’s new strategies and priorities and increasingly autonomous, call for a
European armament process which comprises:

– 

– 

– 

Formulation  of  a  common  European  armaments  policy  based  on  a  sustainable
defence  technological  and  industrial  base,  with  development  of  effective  R&D
programmes to meet the defence and security needs identified for Europe’s Common
Foreign and Security Policy  and to  enhance  European  capabilities within  the North
Atlantic Alliance.

Promotion at the level of all Member States of efficient arrangements for armaments
co-operation  based  on  best  examples  derived  from  the  LoI  Framework  Agreement
for Defence Restructuring.

Creation  of  a  coherent  EU  framework  to  shape  an  integrated  European  defence
equipment market allowing industry to exploit economies of scale and to deliver at
an  affordable  price  the  equipment  and  services  required  by  the  European  common
policies and the export market.

However,  such  structural  improvements  will  not  be  sufficient  in  themselves  to  provide  the
new  capabilities  needed  to  meet  the  strategic  goals  of  Europe’s  leaders.  The  ever-widening
defence and security commitments of European countries call for the allocation of increased
resources. The inevitable conclusion is that overall spending must be increased.

7.4.

An internal market in defence equipment

Since  the  competitiveness  of  the  European  aerospace  and  defence  industry  is  vital  to  the
credibility of European security and defence objectives, existing instruments should be used
wherever  possible  to  eliminate  those  policies  and  practices  that  prevent  European  defence
companies from working more efficiently.

Consolidation  of  the  European  aerospace  and  defence  industry  goes  together  with  growing
transfers  of  products,  components,  intermediate  goods  and  raw  materials,  whether  between
independent companies linked by a customer/supplier relationship or between undertakings or
factories belonging to the same group. In either case it is important to ensure that goods can
circulate  within  the  single  market  in  such  a  way  that  the  competitiveness  of  restructured
European  companies is  not  compromised.  As  well  as  administrative  simplification,  this  is  a
matter  of  introducing  procedures  which  allow  goods  and  components  to  circulate  more
rapidly – a necessity for the modern, flexible management of enterprises.

42

Action to facilitate the free circulation of defence goods through simplification of the controls
associated with intra-Community transfers and the harmonisation of customs duties is a pre-
requisite for the creation of the integrated Single Market which is a cornerstone of the added
value of the EU dimension.

Policies developed for the Single Market where the EU has extensive regulatory experience,
such  as  public  procurement  principles,  may  also  be  relevant  for  creating  a  single  market  in
defence  equipment,  especially  in  the  context  of  a  developing  European  armaments  policy,
where the special characteristics of defence equipment are taken into account.

The European Parliament has supported this approach. In April 2002 it adopted a Resolution
on  European  defence  industries  reiterating  its  view  that  a  strong,  efficient  and  viable
European  armaments  industry  and  an  effective  procurement  policy  were  vital  to  the
development of the ESDP. It also reaffirmed its support for the Action Plan contained in the
Commission’s 1997 Communication on Implementing European Union Strategy on Defence-
Related  Industries,  which  called  for  urgent  restructuring  in  the  sector  and  the  creation  of  a
European defence equipment market.

In calling for an updated Action Plan to be submitted to the Council and Parliament as soon as
possible, Parliament has asked the Commission to consider how far the common commercial
policy and single market disciplines should be applied to defence industries, the possibility of
developing  a  multi-institution and defence industry body to  pool  and  coordinate  research  in
the  defence  field  in  a  similar  way  to  ACARE,  and  whether  further  measures  are  needed  to
facilitate  the  establishment  of  transnational  companies  and  integrate  the  industries  in  the
accession countries.

For  the  longer  term,  the  Convention  on  the  future  of  the  European  Union  provides  an
opportunity  to  identify  the  most  effective  institutional  and  operational  arrangements  to
achieve the Union’s objectives in the defence field and thus also reinforce the competitiveness
of the European aerospace and defence industry.

 STAR 21 recommendations in the defence sector
(cid:1)  Ultimate goal: a  European  armaments policy to  provide  structure  for  European  defence
and security equipment markets, and to allow a sustainable and competitive technological
and industrial base.

(cid:1)  Harmonisation  of  military  requirements  and  planning  of  procurement  budgets  and  of

arms procurement.

(cid:1) 

Increased  resources,  used  more  effectively,  with  encouragement  for  European
collaborative programmes and more effective task-sharing between Member States.

(cid:1)  More coherent defence research spending between Member States.

(cid:1)  Work towards establishment of a European defence equipment market and an armament
agency responsible for a wide range of activities related to acquisition, common research
and development, off-the-shelf procurement, etc.

(cid:1)  Promotion  of  EU-wide  actions  similar  to  the  Framework  Agreement  for  Defence

Restructuring.

(cid:1)  Bridging  the  gaps  identified  in  the  European  Headline  Goal  and  in  the  collective

capability goals.

43

8.

SAFEGUARDING EUROPE’S ROLE IN SPACE

Over  the  past  40  years  Europe  has  developed  significant  space  capabilities  through  its
spacecraft  and  launchers  and  the  ground  infrastructure  to  support  them.  These  are  now
essential tools for the well-being and the security of European citizens. They are key to many
applications in  both the civil and the defence  fields  and  their  importance  continues  to  grow
rapidly.  Space  applications  are  making  an  essential  and  expanding  contribution  to  EU
policies,  such  as  environment,  transport,  agriculture,  and  development.  The  evolving
Common Foreign  and  Security  Policy  and  implementation  of  Petersberg  Tasks  also  call  for
capabilities which require the use of space technologies.

These applications depend upon European capabilities in three inter-related areas:

– 

– 

– 

use of space for earth observation, navigation, telecommunications;

space science;

access to space.

8.1.

Importance of space applications

The strategic importance of space for Europe has been widely recognised. Since the European
Space Agency (ESA) was created for European collaboration in civil space activities in 1975,
one  of  its  main  goals  has  been  to  deliver  a  better  understanding  of  the  earth  and  of  the
universe  by  developing  and  operating  specific  programmes.  Through  such  multilateral
programmes, combined with national efforts, Europe has developed significant capabilities in
spacecraft  technology.  Similarly,  the  Ariane  family  of  launchers  has  been  developed  to
provide an autonomous access to space.

Satellite  monitoring  can  track  changing  weather  and  environment  patterns  and  will
help to define, implement and police Europe’s international commitments such as the
Kyoto  Protocol  to  the  UN  Framework  Convention  on  Climate  Change.  Global
positioning will bring major improvements to the safety, efficiency and inter-modality
of  European  transport  by  providing  precise  information  on  location  and  navigation.
Satellite  telecommunications  services  have  potential  for  enhancing  communications
systems in Europe.

In 2000 the European Commission (EC) and ESA set out a joint European Strategy for Space
and  created  an  EC/ESA  taskforce.  Two  joint  programmes  are  particularly  important  in  the
near term, the Galileo global positioning system and Global Monitoring for Environment and
Security (GMES).

44

is  a  European  satellite  radio-navigation  programme  based  upon  a
Galileo 
constellation of 30 satellites across the globe, with local ground receivers  to  provide
services  to  users  in  virtually  all  locations.  It  will  be  compatible  and  complementary
with GPS, the system operated by the  US  Department of  Defense.  EU  ministers  have
approved  the  development  phase  of  the  project,  which  will  run  until  2005,  to  be
followed by deployment and operational phases. Operational target is 2008.

GMES is a European initiative launched in 1998 which will benefit from existing and
planned  satellite  research  facilities  to  create  an  operational  system  for  space-based
information.  The  monitoring  capabilities  will  include  global  change,  environmental
pressures  and  possible  security  applications  if  these  are  required  under  the  EU
Common Foreign and Security Policy.

8.2.

Challenges facing Europe’s space industry

Space  activities  include  applications  of  purely  commercial  interest  in  the  civil  sector,
especially telecommunication satellites. For the past 10 years, the space sector in Europe has
invested  heavily  to  benefit  from  significant  growth  generated  by  this  commercial  market,
while  in  the  US  the  profitable  programmes  have  been  essentially  institutional.  The  recent
rapid decline in the market for telecommunications – and consequently in the launcher market
–  is  endangering  the  European  space  industry’s  viability.  The  decline  coincides  with  a
decrease in government space budgets which threatens funding to space agency programmes
in Europe.

The European space industry’s high level of dependency on the commercial market contrasts
with  the  US,  where  the  major  share  of  income  is  derived  from  government-funded
programmes.  Increasing  US  public  investment  in  its  space  industry  will  continue  to  put
pressure on Europe’s industry  –  global dominance in space equipment  and  applications  is  a
declared US policy goal.

The figures highlight the situation: in 1999, turnover of US aerospace companies from space
activities  was  €33 700  million,  of  which  €26 000  milli on  –  more  than  three-quarters  –  was
funded  by  the  Department  of  Defense  and  NASA.  European  companies,  by  contrast,  had
turnover of less than €5 500 million, of which onl y half came from institutional sources, the
rest coming from the competitive, commercial market-place.

Moreover, defence programmes have been conducted nationally or bilaterally (and only rarely
multilaterally)  in  Europe,  with  some  major  successes  but  limited  budgets  –  less  than  5 per
cent  of  the  US  total  for  industry  even  when  combined.  Efforts  to  give  more  support  to
European  collaborative  projects  have  not  so  far  led  to  results  and  their  future  remains
uncertain.  As  a  consequence,  in  contrast  to  civil  space  programmes,  there  is  as  yet  no
structure  at  the  European  or  multi-lateral  level  to  address  Member  States’  security  and
defence space technology needs.

If Europe does not respond to these challenges, the consequences will be profound and quite
possibly, irreversible. It could lose its independence in key strategic and commercial satellite
technologies,  such  as  navigation,  communications,  or  earth  observation,  both  civil  and
military,  as  well  as  in  access  to  space.  The  EU’s  choice  of  policy  options  and  its  major
industrial role in this strategic high technology field would be put at risk and it would become
dependent on others. It could in turn lose its position in commercial and service sectors which
depend on space capabilities.

45

8.3.

Need for a dynamic policy for space

A  dynamic  long-term  European  Space  Policy,  as  advocated  by  the  EC/ESA  Joint  Strategy,
should comprise certain key elements:

Galileo: Now  that the  go-ahead  for Galileo  has been  given  by  the  Council  of  the  European
Union, the next step is to ensure that the infrastructure is completed and then to move on to
operation and exploitation. Careful attention must be given to the resulting implementation by
clearly  identifying  the  additional  infrastructure  and  the  service  definitions  for  the  project  in
terms of public funding for the infrastructure and industry participation for the services.

Galileo  will  bring  a  wide  range  of  benefits  to  aerospace  industries  and  to  the  European
economy  as  a  whole  and  keep  European  industry  at  state-of-the-art  level  in  space
technologies.  It  will  also  provide  a  world-wide  operating  system  complementary  to  other
existing navigation systems, which could provide a secure fallback if needed.

GMES:  This  key  initiative  should  be  developed  rapidly  to  ensure  that  Europe  has  an
independent,  autonomous  and  operational  global  monitoring  capability  for  policy  needs
relating to environment and to security.

A full GMES programme must be established by the beginning of 2004 in accordance with
the  Council  Resolution  of  December  2001  if  goals  are  to  be  met  for  an  operational  and
sustainable  capability  by  2008.  As  a  first  step,  early  large-scale  prototypes  are  required
through networking between space and non-space infrastructure, supported by the necessary
budgets  in  the  European  research  framework  programme  and  ESA  programmes  and  by
actions to ensure that a suitable institutional structure is established for gathering and making
accessible space-based information for environment and security.

Meeting  EU  security  objectives:  Space  applications  could  support  several  objectives  under
the Common Foreign and Security Policy, supplementing the Member States’ own resources,
including information-gathering, communication and verification, but an integrated approach
will  be  needed  from  all  the  interested  parties  –  Member  States,  European  Commission,
Council and NATO – if specific or shared capabilities are to be developed. The priorities are:

– 

– 

– 

to make use of the existing and planned infrastructure, which is mainly national but
includes the EU Satellite Centre, to support the Petersberg tasks of humanitarian aid,
rescue  and  peace-keeping.  The  security  elements  of  GMES  should  be  dedicated  to
that objective

to continue building a space defence and security information capacity in Europe for
surveillance,  reconnaissance,  command  and  control, 
telecommunications  and
positioning, benefiting from Europe’s space assets and broadening the experience of
the Satellite Centre

to  encourage  NATO  to  consider  a  European  solution  when  commissioning  its
military telecommunications satellite and launch needs.

Space science and R&D: Space science should be supported, such as space exploration, earth
sciences  and  micro-gravity sciences (e.g. biotechnology  research) as well  as  its  applications
based  on  innovative  data  processing,  models,  etc.  which  are  needed  to  develop  new
operational  space  missions  and  services.  Space  agencies  and  the  EU  should  support  wide-
scale demonstrators integrating the various space and ground technologies.

46

Sustaining European launch capabilities: An independent and competitive launch capability
to  provide  access  to  space  is  a  pre-requisite  for  achieving  a  consolidated  European  Space
Policy  and  successfully  exploiting  space.  Unfortunately,  due  to  the  marked  decline  in
telecommunications satellite launches which represent most of the Ariane market, commercial
launches  together  with  the  limited  complement  of  launch  contracts  from  European
governments  are  insufficient to sustain  a viable  business  case  for  the  Ariane  system.  Public
support from ESA and the EU Member States is therefore vitally important as regards Ariane
launcher  upgrades,  new  developments  and  launch  facilities,  while  industry  works  to  reduce
costs and to improve the efficiency of production. Rapid action is essential at European level
if Europe is to compete on level terms with the government-funded US launcher industry.

EC/ESA framework: Having defined an overall strategy for the short and medium term, the
EC  and  ESA  must  implement  it  as  soon  as  possible.  For  defining  a  European  Space
Programme,  EC/ESA  should  also  develop  a  long-term  approach  with  adequate  funding,
establishing  appropriate  institutional  mechanisms  taking  full  account  of  user  needs  and
providing visibility to such users, investors and third countries.

 STAR 21 recommendations on space

(cid:1)  Develop  a  consolidated  European  space  policy 

in 

line  with 

the  ESA-EC

communication on space, to include a plan of action and adequate funding.

(cid:1)  Deploy Galileo on schedule, devoting adequate resources to world-wide promotion and
development  of  downstream  activities,  providing  opportunities  for  an  early
involvement of the private sector.

(cid:1)  Develop  GMES  to  ensure  autonomous  global  monitoring  capability,  through  a

significant support from EC and ESA programmes.

(cid:1)  Develop a fully European-based space defence and security capability for surveillance,
reconnaissance, command/control including telecommunications and positioning.

(cid:1)  Adapt public support for maintaining a European independent and  competitive access

to space.

(cid:1)  Adapt public support to space science and the development of its applications.

(cid:1)  Support  wide  scale  demonstrators 

integrating 

the  various  space  and  ground

technologies.

9.

CONCLUDING REMARKS

The  Advisory  Group  on  Aerospace  believes  that  Europe’s  aerospace  sector  is  at  a  critical
phase. This is  an industry  which must operate in  a long-term  perspective of 20  to  30  years.
Accordingly,  the  policy  framework  which  is  established  today  and  the  resources  which  are
allocated now will determine the perspectives and performance of the industry for decades to
come. If Europe is to remain a flourishing centre of excellence for aerospace in an intensely
competitive  world  market  in  which  US  companies  have  the  benefits  of  a  massive  home
market  and  strong  government  support,  then  comparable  opportunities  in  keeping  with
Europe’s goals must be available at the European  level.  Otherwise Europe risks losing vital
capabilities.

47

This is not to argue that the EU should seek to match the expenditure levels of the US when it
comes to aerospace and defence. Such levels of spending will necessarily differ in function of
respective  strategic  visions,  goals  and  priorities,  and  the  choice  of  instruments  to  achieve
them. Nevertheless, the political choices to be made in relation to Europe’s role and influence
in the world are inseparably linked to the ability to guarantee the means and the capabilities to
realise  its  goals.  A  competitive  European  aerospace  industry  is  essential  in  providing  these
means and capabilities.

The Group invites the widest possible response to its analysis and recommendations. It looks
forward in particular to the reaction of those parties which are best placed to give effect to its
recommendations, namely, the Member States and the Community Institutions. In the light of
these reactions and other relevant developments, the Group stands ready to further contribute
to the discussion.

9.1.

Summary of STAR 21 recommendations

Competing on world markets

– 

– 

– 

– 

– 

Ensure  a  level  playing  field  so  Europe’s  industry  can  compete  fairly  in  world
markets.

Improve access to world markets, especially that of the US.

Seek wider agreements to simplify export controls on products with US components.

Ensure fair reciprocal market access.

Continue developing international co-operation programmes.

The operating environment for European aerospace

– 

– 

– 

– 

– 

– 

The  application  of  European  competition  policy  should  continue  taking  account  of
specific aerospace features, particularly in defence-related activities.

The impact of different taxation schemes to promote innovation  world-wide should
be analysed. Possibilities for applying tax and other incentives to promote innovation
on  a  Europe-wide  basis  should  be  considered,  if  necessary  through  co-ordinated
national actions so as to avoid distortions of competition.

The  education  and  training  needs  of  a  long-term  skilled  work  force  should  be
recognised.

Cross-border  mobility  of  staff  should  be  facilitated.  Existing  problems,  particularly
concerning  social  security  schemes  and  security  clearance  procedures  in  defence
projects should be overcome.

Schemes  of  practical  training  in  accession  countries  should  be  developed  to
accelerate industrial integration.

For  civil  aeronautics  research  key  stakeholders  should  define  long-term  priorities.
Future research programmes on European, national, regional and industry levels need
better co-ordination and joint planning where appropriate.

48

– 

Allocation  of  sufficient  public  resources  to  sustain  a  long-term  civil  aeronautics
research strategy requiring an estimated total investment of €100 billion for the next
20 years from all sources, both public and private.

European governance of civil aviation

There is an urgent need for a strong European organisation to drive the overall policy of the
sector. Europe’s influence will have to extend beyond its boundaries, working with aviation
regulators world-wide. Key recommendations to achieve this aim are:

– 

– 

Civil Aviation Authority: The European Union must take on the role of policy maker
and  regulator  in  all  areas  of  civil  aviation,  speaking  with  one  voice  on  behalf  of
Europe  in  all  relevant  international  organisations  and  specifically  in  ICAO.
Ultimately this should lead to Community membership in these bodies, together with
its Member States. A fully empowered EASA, with rapid extension of its remit, is a
first step in that direction.

Air Traffic Management: A master plan for a Single European Sky initiative should
be developed within the framework currently discussed in the  European Parliament
and the Council.

Vital need for European security and defence capabilities

– 

– 

– 

– 

– 

– 

– 

Ultimate  goal:  a  European  armaments  policy  to  provide  structure  for  European
defence and security equipment markets, and to allow a sustainable and competitive
technological and industrial base.

Harmonisation of military requirements and planning of procurement budgets and of
arms procurement.

Increased  resources,  used  more  effectively,  with  encouragement  for  European
collaborative programmes and more effective task-sharing between Member States.

More coherent defence research spending between Member States.

Work  towards  establishment  of  a  European  defence  equipment  market  and  an
armament  agency  responsible  for  a  wide  range  of  activities  related  to  acquisition,
common research and development, off-the-shelf procurement, etc.

Promotion  of  EU-wide  actions  similar  to  the  Framework  Agreement  for  Defence
Restructuring.

Bridging  the  gaps  identified  in  the  European  Headline  Goal  and  in  the  collective
capability goals.

Safeguarding Europe’s role in space

– 

– 

Develop  a  consolidated  European  space  policy  in  line  with 
communication on space, to include a plan of action and adequate funding.

the  ESA-EC

Deploy  Galileo  on  schedule,  devoting  adequate  resources  to  world-wide  promotion
and  development  of  downstream  activities,  providing  opportunities  for  an  early
involvement of the private sector.

49

– 

– 

– 

– 

– 

Develop  GMES  to  ensure  autonomous  global  monitoring  capability,  through  a
significant support from EC and ESA programmes.

Develop  a  fully  European-based  space  defence  and  security  capability  for
surveillance,  reconnaissance,  command/control  including  telecommunications  and
positioning.

Adapt  public  support  for  maintaining  a  European  independent  and  competitive
access to space.

Adapt public support to space science and the development of its applications.

Support  wide  scale  demonstrators  integrating  the  various  space  and  ground
technologies.

50