European Transport Regulation Observer : future policy options for the review of the EU air services regulation.
Date: 2020-08-17
Institutions: European University Institute
Subjects: air traffic, air traffic control, air transport, airline, common transport policy, public service, transport regulations

Issue 2020/25 
June 2020

EUROPEAN TRANSPORT 
REGULATION OBSERVER 
Future Policy Options for the 
Review of the EU Air Services 
Regulation
Matthias Finger, Juan Montero and  
Teodora Serafimova

Highlights

Regulation  1008/2008  (the  “Air  Services  Regulation”)  is  the  basic  legal 
act organising the EU internal market for air services. It was adopted in 
2008  as  the  legal  successor  of  the  three  “aviation  packages”,  which  have 
progressively established the EU internal aviation market. It also codifies 
the rules of three Regulations from 1992 (on licensing of carriers, on access 
to the EU market and on air fares and rates). The Regulation’s provisions 
therefore  touch  on  a  range  of  issues,  including  but  not  limited  to:  1) 
Operating licences, including on EU carriers’ principal place of business 
and  temporary  licence;  2)  Ownership  and  control  of  EU  air  carriers;  3) 
Leasing;  4)  Freedom  to  provide  intra-EU  air  services;  5)  Public  service 
obligations; 6) Traffic distribution rules; and 7) Price transparency.

As  announced  in  its  2015  Aviation  Strategy,  the  European  Commission 
carried  out  an  evaluation  of  the  Regulation  and  published  in  July  2019 
a  Commission  report.  The  objective  of  this  evaluation  was  to  provide 
insight  into  the  actual  performance  of  the  Air  Services  Regulation  and 
its overall intended and unintended impacts. While the Regulation does 
not include any specific social provisions, the indirect impacts associated 
with  its  application  and  the  liberalisation  of  the  air  services  market  on 
employment  and  working  conditions  of  aircrews  formed  part  of  the 
analysis. The  impacts  on  the  environment  and  the  ongoing  initiatives  to 
address concerns about CO2 emissions and noise were also analysed. 

The Evaluation report concluded that the Regulation and its predecessors 
have brought sizeable EU added value in creating the EU internal aviation 
market  by  removing  barriers  to  competition,  such  as  restrictions  on  the 
routes,  increasing  the  number  of  flights,  allowing  entry  of  new  market 

BRIEFPOLICYoperators,  in  particular  in  the  low  cost  segment,  and 
increasing the range of advertised fares. While it can be 
said  that  the  Air  Services  Regulation  has  been  effective 
in achieving its objectives (market efficiency, safety and 
consumer  protection),  it  was  revealed  that  there  are 
still areas where some improvement would be beneficial.

As  a  follow  up  to  this  evaluation,  the  Commission’s 
Directorate-General  for  Mobility  and  Transport  (DG 
MOVE)  launched  a  study  aimed  at  assessing  whether 
additional  measures  could  further  contribute  to  the 
well-functioning of the internal aviation market and its 
global  competitiveness,  while  also  contributing  to  the 
protection of consumer interest and to safeguarding high 
EU safety, social and environmental standards.

In this context, the 13th Florence Air Forum, co-organised 
by the Florence School of Regulation’s Transport Area and 
the Commission’s DG MOVE, sought to exchange views 
on the refined policy options for the revised Regulation. 
Discussions  were  sub-divided  around  the  following 
thematic sessions: i) Ownership and control, ii) Operating 
license  -  principal  place  of  business  and  temporary 
law  and  competent 
licence,  iii)  Applicable 
jurisdiction, iv) Leasing, v) Price transparency, vi) Traffic 
distribution rules and vii) Public service obligations. At 
the  same  time,  the  workshop  provided  an  opportunity 
for a timely discussion on the Air Services Regulation in 
the context of the Commission’s Green Deal.

labour 

2 ■  Robert Schuman Centre | June 2020

Air Services Regulation: Some Need for 
Review

Lesson No. 2: “Enforce Existing Rules Before Creating 
New Ones”

A comment by Matthias Finger and Juan Montero, 
Florence School of Regulation – Transport Area

On 25-26 February 2020, the Commission, together with 
the Florence School of Regulation’s Transport Area, has 
co-organised  a  workshop  with  the  main  stakeholders, 
where  the  different  Policy  Options  were  presented  and 
critically  discussed.  In  this  Observer  we  will  not  go 
through each of the seven topics, nor will we discuss which 
options were favored or disfavored by the stakeholders. 
Rather,  we  will  crystallise  the  main  four  lessons  learnt 
from  these  two  days  of  intensive  discussions.  Indeed, 
most of these lessons inform most of the topics, and we 
will highlight which ones of them in particular.

Lesson No. 1: “Back to the Essence”

Overall, it appeared that, over the past 12 years, discussion 
about many of the provisions of the Regulation has become 
too  convoluted,  sometimes  to  the  point  that  the  initial 
intention  of  some  of  the  provisions  of  the  Regulation 
might  have  got  lost  in  the  process.  Consequently,  each 
of  the  provisions  must  be  located  back  in  its  context 
12  years  ago;  one  must  then  ask  what  its  intention  was 
at  that  time,  whether  the  Regulation’s  provisions  have 
achieved their purpose, and therefore are still fit for their 
initial purpose or may no longer be needed. In addition, 
one would need to reflect whether, in today’s context, this 
very intention is still valid or has become obsolete or even 
“replaced” by new objectives. And this process is certainly 
applicable  to  all  of  the  seven  topics.  For  some  topics  – 
such  as  “Ownership  and  Control”,  “Traffic  Distribution 
Rules” “Leasing” and “Public Service Obligations” – one 
may indeed ask oneself whether such rules can be relaxed 
or  are  even outdated today. But  for  other  topics – such 
as  “Principal  place  of  business”.  “Temporary  licenses”, 
“Applicable  labor  law  and  competent  jurisdiction”  and 
“Price transparency” – one may ask whether the original 
rules are still adapted to today’s much more competitive 
environment and much more sophisticated firm behavior. 
And again reflect to what extent the initial objectives may 
have  been  “replaced”  by  newer  concerns/public  policy 
questions.

It is not uncommon that EU Regulations take some time 
to be enforced. But for a legislation that is now over 10 
years old, there are too many issues around enforcement. 
Some of these issues, maybe due to imprecise legislation 
to  begin  with,  which  is  often  the  result  of  too  many 
compromises  in  its  formulation  processes,  itself  the 
consequence of irreconcilable positions from the outset. 
These  imprecisions  should  be  addressed  in  the  current 
revision,  for  example  in  the  case  of  “Ownership  and 
control”,  “Principal  place  of  business”  and  “Traffic 
distribution  rules”.  But  it  became  clear  from  the 
discussions  with  the  stakeholders  that  many  of  these 
enforcement issues were actually not the result of a lack 
of clarity, nor were they the consequence of some active 
obstruction by Member States. Rather they are the result 
of developments on the market and of a lack of powers, 
competence  and  resources  of  the  respective  regulatory 
authorities in the different Member States. A crosscutting 
focus  during  the  current  review  of  the  Air  Services 
Regulation should therefore pertain to the strengthening 
of  the  national  supervisory  or  regulatory  authorities, 
including monitoring on behalf of the Commission that 
such strengthening actually takes places.

Lesson No. 3: “Consider the Current Revision to Be 
Part of An Ecosystem of Rules”

Aviation is a system, covering not only airlines, but also 
airports and air traffic management. And ultimately the 
system should deliver also for the EU citizens as passengers 
or  consumers.  This  calls  for  an  ecosystem  approach  to 
regulate these. In the case of Europe, the revision of the 
Air  Services  Regulation  is  by  far  not  the  only  ongoing 
revision. Simultaneously, the Commission is revising the 
slots regulation, the regulation of airport charges, not to 
mention the 20-year old process of revision of air traffic 
management regulation so as to create, hopefully one day 
a Single European Sky. And indeed, it appeared clearly that 
many of the Air Services Regulation’s provisions actually 
relate or even directly impact other regulations, such as 
particularly those relating to slot allocation rules. This is 
particularly the case of “Temporary licenses” (important 
in  the  case  of  bankruptcies)  or  the  determination 
who  holds  “Transport  Operating  Licenses”  (in  the 

3 ■  Future Policy Options for the Review of the EU Air Services Regulation

case  of  takeovers).  But  airport  slots,  and  the  airport 
slot  regulation,  are  also  directly  affected  by  “Traffic 
Distribution  Rules”  and  “Public  Services  Obligations”. 
And this is just an example. It is therefore imperative that 
during  this  revision  of  the  Air  Services  Regulation  one 
asks oneself whether some of the existing rules should not 
better be placed in other aviation regulations. Sometimes 
these  considerations  go  far  beyond  aviation  regulation 
and pertain to State aid rules (e.g., “Temporary licenses” 
and “Public Service Obligations”), consumer protection 
(e.g., Price Transparency”) or labor law (e.g., “Applicable 
Labor  Law  and  Competent  Jurisdiction”  and  “Principal 
Place of Business”).

Lesson No. 4: “Anticipate New Challenges”

Aviation,  like  all  the  other  infrastructures,  face  new 
challenges,  namely  decarbonisation  and  digitalisation. 
These  challenges  are  in  principle  tackled  separately,  as 
the original focus of the Air Services Regulation, and of 
aviation regulation more generally, is on creating a Single 
European  (internal)  Market.  There  is  the  possibility 
to  include  in  these  revisions  concerns  stemming  from 
digitalisation  –  such  as  for  example  rules  about  data 
sharing  in  the  case  of  “Price  Transparency”  –  as  well 
as  from  decarbonisation,  such  as  for  example  putting 
obligatory information on emissions onto websites, so as 
to have more transparency for the consumers. 

4 ■  Robert Schuman Centre | June 2020

Main Takeaways from the Discussion

By Teodora Serafimova, Florence School of  
Regulation – Transport Area

The  findings  of  the  European  Commission’s  recent 
evaluation reveal that while the Air Services Regulation 
has been effective in achieving the objectives of market 
efficiency, consumer protection and safety, some revisions 
will be needed to further improve the functioning of the 
internal  aviation  market  and  its  competitiveness.  This 
message  was  echoed  by  representatives  of  concerned 
stakeholder  groups  at  the  13th  Florence  Air  Forum, 
which  sought  to  discuss  future  policy  options  for  the 
Regulation’s  reform  and  to  feed  into  the  Commission’s 
Impact Assessment Report. The Impact Assessment will 
support  the  drafting  process  of  the  legislative  proposal 
which the Commission will put forward in the latter part 
of 2020. 

Summarised  below  are  stakeholders’  views  on  the 
future policy options for the following provisions of the 
Regulation: i) ownership and control, ii) operating license 
and  principal  place  of  business  and  temporary  licence, 
iii)  applicable  labour  law  and  competent  jurisdiction, 
iv) leasing, v) price transparency, vi) traffic distribution 
rules,  vii)  public  service  obligations,  and  viii)  the  Air 
Services  Regulation  in  the  context  of  the  Commission’s 
Green Deal. 

Operating License – Ownership & Control of EU Air 
Carriers

The  application  of  the  Ownership  &  Control  (O&C) 
provisions  of  the  Regulation  has  limited  the  pool  of 
capital  available  to  EU  air  carriers.  Some  air  carriers 
pointed  to  recent  difficulties  in  sourcing  capital  within 
the EEA only. 

In  light  of  this,  many  airlines  as  well  as  airport 
representatives  expressed  support  for  the  removal  of 
ownership restrictions for all investors while maintaining 
effective  control  rules.  Under  this  approach,  the 
ownership  limits  for  all  investors  would  be  removed 
(including any non-EU investors, institutional, airlines or 
any other investors) and these would be able to control up 
to 100% of EU carriers. However, effective control rules 
would remain in the hands of EU nationals or Member 

States unless (as under the current rules) an agreement 
with  a  given  third  country  allows  for  relaxation  based 
on reciprocity. This, in turn, would need to be supported 
by  an  adequate  definition  and  criteria  for  determining 
‘effective control’. This policy option received support by 
most  stakeholders  at  the  workshop,  offering  a  ‘middle 
ground’ in terms of facilitating access to foreign capital 
without  granting  foreign  investors  access  to  internal 
market  and  control  over  EU  air  carriers.  However, 
questions  were  raised  as  to  whether  non-EU  investors 
would accept to invest massively without control of the 
company.   

Some airline and airport stakeholders could also support 
an  option  that  entails  the  full  removal  of  ownership 
restrictions for institutional investors only (e.g., pension 
funds, mutual funds) while maintaining effective control 
rules. In such a scenario, a non-EU institutional investor 
would be able to own more than 50% of the shares of an 
EU carrier. Under this option, restrictions on ownership 
would be kept for non-EU air carrier investors. Here too, 
effective control would have to remain with EU nationals 
in all cases, criteria for determining control would need 
to  be  clarified  and  the  same  objection  as  above  would 
apply. 

The  further  liberalisation  of  ownership  provisions  was 
largely  supported  as  a  logical  solution  especially  in  the 
aftermath of Brexit, a consequence of which has been a 
reduction in available capital to EU air carriers. Having 
said  that,  participants  emphasised  the  need  for  a  long-
term perspective considering the global context, in order 
to avoid granting access to capital merely for the purpose 
of  temporarily  saving  an  airline  that  is  not  financially 
viable in the long run. 

The  travel  agents  and  tour  operators,  pointed  out  that 
the  facilitation  of  easier  access  to  capital  and  financing 
would  alleviate  issues  only  temporarily.  Only  enabling 
EU  airlines  to  invest  in  other  EU  airlines  could  lead  to 
further  market  consolidation  at  the  expense  of  smaller 
airlines  and  consumers,  who  may  be  confronted  with 
higher prices. Similarly, airport representatives cautioned 
against  the  risks  of  further  market  consolidation  (via 
airline bankruptcies), which could translate into negative 
impacts for airport connectivity and consumer choice. 

Furthermore,  European  aircrew  associations  stressed 
that  liberalisation  has  indeed  brought  about  significant 

5 ■  Future Policy Options for the Review of the EU Air Services Regulation

benefits  for  the  industry  and  consumers.  However, 
there  is  no  guarantee  that  if  control  of  airlines  were  to 
be left to third countries, workers’ social rights would be 
respected. It was, moreover, pointed out that investments 
in EU airlines by non-EU investors could be motivated 
by  strategic  considerations  and  hidden  agendas  to  gain 
market  access.  To  address  ‘social  dumping’  concerns, 
European  aircrew  associations  supported  the  idea  of 
undertaking  an  assessment  of  the  social,  safety  and 
environmental  standards  of  foreign  investors  prior 
to  granting  foreign  ownership.  A  vast  majority  of 
stakeholders  were  in  favour  of  exploring  the  possible 
interplay between O&C rules liberalisation and the newly 
established EU framework for screening of foreign direct 
investment in the EU, a logic that could be expanded and 
reinforced. 

The above concerns were shared by airline stakeholders, 
who  underlined  that  if  a  relaxation  of  ownership 
provisions  were  to  be  chosen,  measures  would  have  to 
be put in place (e.g., via bilateral agreements or strategic 
screening) to guarantee reciprocity from third countries 
vis-à-vis EU investors. What is more, in light of the fact 
that the EU is not as homogeneous as the US, some air 
carriers flagged the need to consider the different levels of 
market maturity and anticipate the risk of that ownership 
liberalisation  disproportionately  affecting  regions  with 
underserved connectivity needs. 

A number of stakeholders, in particular airlines, were in 
favour of a mere clarification of existing rules and criteria 
for determining O&C. Clarification of existing O&C rules 
was  in  fact  referred  to  as  a  ‘minimum  requirement’  to 
improve the legal certainty for air carriers and investors 
and to ensure consistent enforcement of the current O&C 
rules, while reducing enforcement costs. The clarification 
and  proper  enforcement  of  existing  O&C  provisions,  it 
was argued, could also mitigate the risk of social dumping 
by foreign investors.

Stakeholders  called  on  regulators  to  ensure  that  the 
reform of the Air Services Regulation be guided by the 
objective  of  safeguarding  competition,  while  ensuring 
connectivity  and  consumer  protection.  In  light  of  this, 
support was expressed for provisions that would enable 
larger access to capital while securing safeguards in order 
to  preserve  the  EU  internal  market  for  aviation  and  to 
protect strategic EU interests. What is more, the opening 
up  O&C  provisions  could  require  an  assessment  of  a 

6 ■  Robert Schuman Centre | June 2020

broader  set  of  legislative  pieces  falling  within  the  remit 
of not only DG MOVE, but possibly also DG COMP and 
DG JUST. 

Operating License – EU carriers’ Principal Place of 
Business 

The evaluation showed that in light of a growing number 
of  pan-European  airlines  that  spread  their  operations 
across  several  Member  States,  establish  subsidiaries, 
and hold multiple Air Operator Certificates (AOC) and 
Operating Licenses (OL) in different Member States, the 
effective and consistent financial monitoring of air carriers 
by  the  Member  State  of  the  principal  place  of  business 
(PPoB)  is  becoming  more  challenging.  In  parallel,  the 
question arises as to which functions should be exercised 
in the Member States of the PPoB and which competent 
authority is best placed to ensure the financial monitoring 
of  air  carriers  without  stifling  their  development  if 
adequate monitoring can be ensured in other ways. What 
is  more,  the  multiplication  of  operational  bases  outside 
the PPoB has brought about new challenges to aircrews 
and may have led to unintended consequences for their 
working and employment conditions. This, in turn, may 
have acted to undermine the level playing field between 
carriers.

Some  airline  stakeholders  pointed  out  that  the  issue  of 
fragmentation can be attributed to the fact that Member 
States  have  different  interpretations  of  the  Regulation’s 
PPoB  provisions.  The  cost  of  fragmented  regulation 
has,  in  turn,  been  borne  by  the  operators  and  passed 
on  to  consumers.  A  majority  of  airline  representatives, 
therefore,  called  for  a  clarification  of  the  definition  of 
the PPoB and measures to enhance cooperation between 
Member  States.  Such  an  approach  would  also  help  to 
improve  the  implementation  and  enforcement  of  the 
existing  regulatory  framework. This  would  simplify  the 
list of functions that need to be carried out in the Member 
State of the PPoB, which is responsible for granting the 
OL  and  for  financial  oversight,  and  link  the  air  carrier 
to  that  Member  State.  This  simplification  of  functions 
would,  in  turn,  make  it  easier  for  carriers  wishing  to 
outsource  functions  and/or  open  multiple  operational 
bases to organise their operations more efficiently. Some 
stakeholders,  however,  argued  that  there  is  no  need  to 

change the current system as quality oversight is possible 
under existing rules. 

What is more, this policy option would be accompanied 
by  a  clear  obligation  for  the  Member  States  in  which 
the  air  carrier  has  operations  to  assist  the  authority 
responsible  for  the  financial  oversight  to  perform  its 
functions  effectively  (along  the  model  of  “cooperative 
oversight”  as  provided  for  in  Art.  6  of  the  Regulation). 
In  other  words,  Member  States,  in  which  airlines  have 
operations, would be required to facilitate the exchange 
of information where necessary. 

Opponents  of 
this  approach,  however,  expressed 
concerns  that  simplifying  further  the  list  of  functions 
could  encourage  rule-shopping  in  the  absence  of  any 
requirement  that  operational  activities  link  the  carrier 
to  the  Member  State  of  the  PPoB.  To  avoid  this,  these 
participants instead called for the enactment of clear and 
objective rules. 

Representatives of the travel agents and tour operators, on 
the other hand, noted that measures to improve financial 
monitoring need to be accompanied by the introduction 
of airline insolvency protection schemes, which, in turn, 
are crucial in ensuring consumer protection. A number 
of airline representatives were also in favour of providing 
for a greater concentration of functions in the Member 
State of the PPoB. This option would consist in modifying 
the  definition  of  the  PPoB  to  establish  a  list  of  more 
functions than under the current Regulation that airlines 
would be expected to carry out in the Member State of 
the PPoB. This option would aim at ensuring more clarity 
for  air  carriers  thus  making  it  easier  for  the  Member 
State of oversight to perform its duties by requiring more 
functions to take place in the Member State. 

Flexibility as well as efficient and consistent supervision 
were  considered  as  crucial  elements  by  the  industry. 
Overall,  the  option  to  clarify  the  definition  combined 
with more cooperation between the authorities received 
more support at the workshop. 

Operating License - Temporary License

temporary 

The  existing 
license  system  does  not 
always  provide  an  adequate  framework  for  financial 
reorganisation  or  orderly  market  exit  of  air  carriers. 
While  the  temporary  license  was  identified  as  an 

important area of the Regulation needing improvement, 
some  participants  urged  the  need  to  consider  whether 
carriers’  market  exit  was  more  adequately  addressed  in 
the context of the Air Services Regulation or rather in the 
Slot Regulation. 

To  address  shortcomings  of  the  existing  system,  a 
significant  proportion  of  airline  representatives  were  in 
favour of retaining the temporary licence system for air 
carriers  in  financial  difficulties  provided  it  is  combined 
with  a  structured  dialogue  between  the  air  carrier  and 
the  Member  State  to  facilitate  restructuring  or  winding 
up an air carrier in financial difficulty. Under this policy 
option,  priority  would  be  given  to  structured  dialogue 
but, if this fails, a temporary licence would be granted, six 
months  later  than  currently  foreseen.  More  specifically, 
this  implies  that  an  air  carrier  would  be  required  to 
enter  into  a  process  of  structured  dialogue  with  the 
licencing authority from the moment that it cannot fulfil 
its  financial  obligations  for  the  next  12  months.  If  after 
six  months  no  adequate  restructuring  plan  has  been 
elaborated,  and  the  air  carrier  cannot  fulfil  its  financial 
obligations  for  the  following  six  months,  a  temporary 
licence could be granted.

Under  such  an  approach,  the  Slot  Regulation  would 
specify that air carriers that are in a process of structured 
dialogue may keep their slots for a period of 12-months 
even if they cannot fulfil the use-it-or-lose-it requirement 
of the Slot Regulation. As slots at congested airports are 
becoming  more  valuable,  allowing  airlines  in  financial 
difficulties to hold on to slots for a limited period of time, 
despite  not  fulfilling  the  use-it-or-lose-it  rule,  would 
prevent  sudden  interruption  of  all  services  and  give 
airlines some breathing room to recover.

Proponents  of  this  option  argued  that  since  temporary 
licences have not been widely used, giving more attention 
to an effective dialogue between the licensing authority 
and  the  air  carrier  in  financial  difficulties  can  lessen 
the  drawbacks  of  bankruptcies  in  terms  of  stranded 
passengers,  unemployment  and  inefficiently  used  slots. 
On  the  other  hand,  some  licensing  authorities  have 
defended the temporary license as a tool enabling them 
to exert pressure on air carriers in financial difficulties to 
take corrective action. Therefore, a complete removal of 
temporary license system could result in these authorities 
losing  some  bargaining  power  with  possible  negative 
consequences for passengers, workers and safety.

7 ■  Future Policy Options for the Review of the EU Air Services Regulation

Slot coordinators warned that a temporary license should 
only be granted if there is a realistic chance of satisfactory 
financial  reconstruction  of  the  air  carrier  in  order  to 
maintain  its  air  transport  activity.  The  license  of  an  air 
carrier  that  stops  its  operations  due  to  financial  issues, 
they argued, should be as a minimum suspended or even 
revoked but the temporary license status should not be 
used  when  the  carrier  no  longer  operates,  just  for  the 
sake  that  legally  it  can  still  hold  or  be  allocated  airport 
slots. Having said that, slot coordinators stressed that any 
process related to airport slots withdrawal from a failing 
company should strike a balance between the protection 
of  this  company’s  possible  future  and  the  best  possible 
use  of  scarce  airport  capacity  on  which  many  other 
undertakings rely too. 

Other  stakeholders  flagged  a  major  issue:  that  the 
issuance of a temporary license acts to switch on a ‘red 
light’ warning to all other market players, which leads to 
many stakeholders to only require cash payment from the 
air carrier in financial difficulty or credit card companies 
being unwilling to release financial resources for already 
paid tickets, thus precipitating its market exit. With this 
in mind, many airline stakeholders were in favour of the 
more drastic approach to completely replace the system 
of temporary licences with a system based on a structured 
dialogue  between  the  air  carrier  and  the  Member  State 
to  facilitate  restructuring  or  winding  up  an  air  carrier 
in  financial  difficulty.  Under  this  option,  at  a  certain 
threshold  of  financial  difficulty,  the  national  licensing 
authority would increase the frequency of the monitoring 
and, at the same time, enter into a structured dialogue, 
meaning more frequent and regular contact with the air 
carrier  to  elaborate  a  realistic  and  clear  framework  for 
restructuring or wind-up within a definite timeline.

The  licensing  authority  would  have  to  inform  the 
authority  overseeing  the  AOC(s),  as  well  as  the  CAAs 
in  other  Member  States  concerned  (i.e.,  where  the  air 
carrier  has  operational  bases),  of  the  carrier’s  financial 
difficulties.  The  structured  dialogue  would  also  include 
contingency planning to reduce the impact on stranded 
passengers  in  case  operations  are  disrupted  or  halted. 
During  this  period  (maximum  12  months),  the  air 
carrier would be allowed to keep the operating licence. 
Furthermore, the Slot Regulation would have to specify 
that  air  carriers  that  face  financial  difficulties  and  are 
in a process of structured dialogue may keep their slots 

8 ■  Robert Schuman Centre | June 2020

for a certain period even if they cannot fulfil the usage 
requirement  of  the  Slot  Regulation.  Slot  coordinators 
highlighted the need of cooperation between them and 
licensing  authorities  in  other  Member  States  involved. 
Some stakeholders, such as airports, questioned the fact 
that carriers in financial difficulties should be able to hold 
on to slots if this extends over a considerable amount of 
time.

Applicable Labour Law and Competent Jurisdiction

is 

the 

inconsistency 

interpretation  and 
in 
There 
application  of  applicable  labour  law  (by  airlines)  and 
their  enforcement  (by  Member  States)  that  leads  to 
complexity for some aircrews and an uneven playing field 
for air carriers. This issue is becoming ever more relevant 
in  light  of  increasing  multinational  operations  by  Pan-
European airlines and the implications for the aircrews. 

A  majority  of  airlines  and  European  aircrew 
representatives  supported  further  clarity  and  guidance 
on  the  specific  existing  criteria  for  determining  the 
competent jurisdiction and applicable mandatory labour 
law  for  aircrews  but  were  more  in  favour  of  binding 
rules as these were considered more effective in ensuring 
existing rules are consistently and effectively applied and 
enforced in aviation. The rules applicable to cross-border 
employment  contracts  are  harmonised  at  EU  level  and 
clarified by the CJEU in its case law. Without prejudice 
to the choice of the legal instrument, policy option SO2 
would entail the codification of specific existing criteria 
for determining, in the case of aircrews assigned to a home 
base outside the PPoB of the carrier, the habitual place of 
work for the purpose of applying the rules of Brussels Ia 
(on competent jurisdiction) and Rome I (on the Member 
State  whose  mandatory  labour  law  requirements  are  to 
be  respected  as  minimum  guarantee),  in  line  with  the 
case law of the CJEU. This policy option would apply to 
workers (i.e. all employed aircrews, including those hired 
by  intermediaries).  Some  airlines  raised  the  question 
whether  there  is  a  need  to  regulate  on  this  topic  and  if 
so whether the Regulation 1008/2008 is the appropriate 
instrument to regulate on this. 

A  number  of  airlines  and  representatives  of  European 
travellers  could  also  support  SO1,  i.e.,  the  issuance  of 
non-binding EU level guidance clarifying the criteria for 
determining in the case of aircrews assigned to a home 

base  outside  the  PPoB  of  the  air  carrier,  the  competent 
jurisdiction  and  the  Member  State  whose  mandatory 
labour law requirements are to be respected as minimum 
guarantee,  in  line  with  EU  law  as  interpreted  by  the 
Court  of  Justice  of  the  EU.  This  non-binding  guidance 
would clarify existing EU rules but would not go beyond 
the case law of the CJEU. 

In  other  words,  under  none  of  the  above-mentioned 
policy options would the applicable rules (Brussels Ia and 
Rome I) change, meaning that employment legislations 
would remain primarily a national competence. As such, 
these two options would not ensure a “full” level playing 
among air carriers, which in turn is something that could 
only  be  achieved  through  full  harmonisation  of  labour 
laws.

Both  approaches  would  clarify  the  criteria,  be  it  in  the 
form of binding legislation or non-binding EU guidance, 
and help, albeit to varying degrees, in ensuring consistent 
interpretation and application of existing rules by airlines 
and  relevant  authorities,  and  thus  contribute  to  a  level 
playing  field  between  airlines  and  the  protection  of 
aircrews’ employment and working conditions. 

However,  the  discussion  also  revealed  that  the  issue  in 
aviation  may  also  be  an  issue  of  law  enforcement  by 
the  authorities  which  may  be  more  difficult  in  aviation 
than in other sectors since all authorities may not always 
be  aware  of  the  presence  of  aircrews  on  their  territory. 
An  additional  requirement  discussed  was  whether  to 
include a systematic obligation for air carriers that assign 
aircrews to a home base outside their PPoB to inform the 
relevant authorities of which aircrew has been assigned 
to a home base on their territory. This obligation would 
cover both workers (i.e., all employed aircrews, including 
those hired by intermediaries) and self-employed. 

Most of the airlines and European aircrew representatives 
were  in  favour  of  such  a  requirement  which  could 
contribute  to  improve  enforcement,  in  particular  if 
such  an  obligation  should  apply  when  an  air  carrier 
opens a new operational base. Additional costs of such a 
requirement were considered to be marginal. 

Leasing

requirement 

According  to  airlines’  feedback,  the  existing  prior 
intra-EEA  dry-leasing 
for 
approval 
hinders  the  efficiency  of  their  operations  unnecessarily, 
particularly  for  pan-European  airlines  holding  multiple 
AOC and OL. While wet-leasing of third-country aircraft 
has been limited to date, arguments were made in favour 
of facilitating it in respect of like-minded third-countries 
(in  terms  of  aligned  safety  and  working  conditions) 
allowing  air  carriers  more  flexibility  in  adapting  their 
fleets to address seasonal capacity changes. 

Airline representatives were overwhelmingly in support of 
removing the requirement in the Air Services Regulation 
for air carriers to gain prior approval for intra-EU wet-
leasing  and  for  dry-leasing  (both  infra-  and  extra-EU). 
Such  a  policy  option  would  remove  the  requirement 
for  prior  approval  for  all  dry-lease  agreements  and 
intra-EU  wet-lease  agreements,  which  duplicates  a 
similar requirement within the framework of the EASA 
Basic  Regulation.  The  prior  approval  requirements  in 
the EASA Basic Regulation, however, would continue to 
apply. The removal of the prior approval requirement for 
dry-leasing,  both  intra-  and  extra-EU,  was  justified  on 
grounds  that  exceptionally  high  and  harmonised  safety 
and  social  standards  are  being  observed  across  the  EU, 
as well as in a growing number of countries worldwide. 

What  is  more,  airline  representatives  underlined  that 
leasing  usually  comes  at  a  higher  cost,  which  means 
that  carriers  usually  resort  to  it  only  in  exceptional 
circumstances 
in  order  to  maintain  services.  The 
alternative to leasing would thus be flight cancellations, 
which  comes  at  a  disadvantage  to  consumers.  Having 
said  that,  airlines  stressed  that  the  prime  objective  of 
the  liberalisation  of  leasing,  be  it  wet-  or  dry-,  should 
be  to  provide  flexibility  for  airlines  to  adapt  to  specific 
situations  and  spikes  in  demand,  as  opposed  to  cutting 
costs of operations. The necessity of extra-EU wet-leasing 
of  aircraft  was  highlighted,  in  particular,  in  the  case  of 
cargo operations, where large aircraft are needed but not 
available in sufficient quantities in Europe. 

With this in mind, some participants supported the idea 
of allowing wet-leasing from third countries provided EU 
standards  on  safety  and  social  matters  are  maintained. 
Under  such  circumstances, 
for 
“exceptional  needs”  or  that  the  lessee  demonstrate  that 

the  requirements 

9 ■  Future Policy Options for the Review of the EU Air Services Regulation

the  demand  cannot  be  fulfilled  through  an  intra-EU 
wet-leasing arrangement1 and the time limits, would no 
longer  apply.  This  approach  could  result  in  important 
savings benefits for air carriers as well as authorities, by 
removing the unnecessary burden and providing greater 
flexibility and thereby reducing operating costs. 

This policy measure would, however, need to be tailored 
accordingly to address concerns expressed by European 
aircrew associations regarding the risk of social dumping 
and  the  legal  uncertainty  about  non-EU  crew  on  the 
aircraft  operating  in  the  EU.  As  a  consequence  of  this 
measure, adjustments in employment may be expected, 
with EU carriers relying more on non-EU crew; but also a 
reciprocal change is to be expected, with non-EU carriers 
using EU crew more often. For longer term extra EU wet-
leasing, it should be ensured that the crew has a strong 
connection with the labour law of one Member State. All 
in all, further liberalising extra-EU wet-leasing appeared 
to  be  the  most  contentious  issue  dividing  participants, 
given the different social and safety standards in non-EU 
countries. Participants concluded that further reflection 
is needed on how to best approach the issue.  

Price Transparency

Issues remain in the way air carriers break down taxes, 
fees  charges  and  surcharges  on  websites  resulting  in 
sub-optimal  price  transparency  for  consumers.  There 
is  no  requirement  in  the  Air  Services  Regulation  as  to 
the  labelling  of  the  amount  that  is  refundable  in  case 
of  voluntary  ticket  cancellation.  Moreover,  differing 
practices  and  interpretations  as  to  what  constitutes  a 
final price or optional supplements make effective price 
comparison  difficult.  With  this  in  mind,  enhancing 
price  transparency  is  crucial  to  enabling  passengers  to 
make  informed  purchase  and  travel  decisions,  while 
maximising the quality of service provided. 

that 

To  start  with,  stakeholders  underlined 
the 
increasing  unbundling  of  services  observed  in  the 
aviation  industry  is  not  to  be  seen  as  a  negative  trend 
only, given that it has enabled low fares for consumers. 
Price  differentiation  offers  an  opportunity  for  airlines 
to  differentiate  themselves  on  the  basis  of  quality  and 
type of service provided, while consumers are provided 
with the freedom to choose the services they value and 

1. 

 In essence, Article 13(b)(i)-(iii) of the Air Services Regulation

10 ■  Robert Schuman Centre | June 2020

are  willing  to  pay  for  the  most.  However,  the  issue  lies 
in  the  lack  of  transparency  on  the  price  and  of  what  it 
includes, especially given that it has varied significantly 
from one airline to another, as well as from one channel 
to the other. Representatives of the European passengers 
highlighted  that  the  addition  of  basic  services  (such  as 
hand luggage and the guarantee of free seating together 
for families and passengers travelling together) could act 
to  increase  the  advertised  price,  resulting  in  significant 
differences between the price initially displayed and the 
final price. 

To address these shortcomings, representatives from the 
travel industry and from European aircrew associations 
were  in  support  of  setting  the 
‘unavoidable’  and 
‘foreseeable’ elements that must always be included in the 
final  price.  For  the  Air  Services  Regulation,  this  would 
entail setting a precise definition under its Article 23(1) 
of  the  ‘unavoidable  and  foreseeable’  price  elements  in 
terms of minimum services (and conditions thereof) to 
be always included in the final price and which cannot 
be  subject  to  optional  price  supplement.  Proponents  of 
imposing  such  an  obligation  on  air  carriers  to  include 
some services in the air fare instead of considering those 
as  an  optional  price  supplement  argued  that  it  could 
enable  consumers  to  make  better  informed  choices  as 
regards  the  basic  services  included  in  the  final  price. 
What  is  more,  a  clear  definition  of  ‘unavoidable  and 
foreseeable’  price  elements  could  enable  easier  price 
comparison between travel options, which, in turn, is an 
important pre-condition for effective competition.

While  the  definition  of  ‘unavoidable  and  foreseeable’ 
price elements enjoyed some support among participants, 
others outlined the challenging nature of agreeing on a 
definition that is future-proof in terms of accommodating 
the  constantly  changing  travel  habits  and  innovating 
environment. Airlines, in particular, expressed concerns 
that imposing a common definition of minimum services 
could act to hamper innovation, restrict carriers’ pricing 
freedom  and  ultimately  disadvantage  consumers, 
by  limiting  choices.  Opponents  of  the  definition  of 
‘minimum  services’  argued  that  the  question  the 
Regulation should instead be tackling, is that of how to 
ensure that the various options and services are displayed 
in  a  transparent  manner,  as  opposed  to  determining 
consumers’ choices. 

Airline  representatives  were 
in  favour  of  keeping 
the  current  TFCs  obligation  while  displaying  the 
reimbursable price elements in addition to it. This policy 
option  would  maintain  the  current  price  transparency 
elements  regarding  TFCs  and  ensure  that  reimbursable 
price  elements  in  case  of  voluntary  cancellation  and 
no  show  are  also  displayed  as  a  separate  element. 
Information  on  the  reimbursable  price  elements,  they 
argued,  would  be  an  important  additional  element  of 
enhanced  price  transparency.  While  TFCs  may  result 
in  information  overload  for  consumers,  this  price 
element  is  useful  in  enabling  adequate  monitoring  and 
enforcement. What is more, without an indication of the 
TFC, the calculation and verification of the reimbursable 
amounts is burdensome.

Representatives  of  European  passengers  as  well  as  of 
travel agents and tour operators, on the other hand, were 
in  support  of  only  displaying  the  reimbursable  price 
elements,  which  they  stressed  is  of  greatest  importance 
to  consumers  in  case  of  voluntary  flight  cancellation 
or  no-show.  Passenger  representatives  noted  that  the 
display  of  TFCs  today  adds  unnecessary  complexity 
for  consumers.  This  policy  option  would  eliminate  the 
current  obligation  in  Article  23(1)  of  the  Regulation 
to  break  down  the  final  price  into  TFCs  and  require  a 
breakdown  into  reimbursable  and  non-reimbursable 
price  elements  instead.  Dropping  the  current  TFCs 
display obligation, it was argued, would help to simplify 
the  choice  for  consumers  given  that  they  are  not  able 
to  influence  these  price  elements  anyway.  On  a  more 
practical  note,  stakeholders  representing  European 
passengers  also  noted  the  uncertainty  for  consumers 
as  regards  the  responsible  reference  point,  be  it  the  air 
carrier  or  consumer  organisation,  when  faced  with 
problems (e.g. flight cancellation). 

The  EU  air  sector  has  been  at  the  forefront  of  data 
sharing and standardisation, notably thanks to its Code 
of  Conduct  on  Computerised  Reservation  Systems 
(CRS)  dating  back  from  the  1990s,  which    mandated 
transparency and neutrality in the display of information 
by integrated transport platforms. As made evident in the 
Commission’s recent European Data Strategy, questions 
of  data  standardisation  and  sharing  will  only  gain  in 
importance  in  the  near  future.  The  direction  taken  in 
the  reform  of  the  Air  Services  Regulation,  especially  as 
regards  its  price  transparency  provisions,  will  therefore 

likely shape developments in other sectors and industries. 
Travel and digital intermediaries stressed the importance 
of access to data – for all modes, including multi-modal 
travel, in order to ensure seamless travel. Moreover, while 
the  growing  role  of  digitalisation  was  highlighted  in 
opening up new marketing opportunities (e.g., dynamic 
personalised pricing to benefit consumers by taking into 
account  their  previous  purchase  habits),  participants 
concluded  that  this  does  not  need  to  be  regulated  in  a 
sector-specific  manner,  and  that  multimodal  regulation 
other than a CRS Code of Conduct may instead be more 
appropriate.

Exceptions to the Freedom to Provide Air Services: 
Traffic Distribution Rules 

Existing  experience  shows  that  the  provisions  on 
traffic  distribution  rules  (TDR)  have  not  been  effective 
in  minimising  competitive  distortions  and  do  not 
sufficiently  prevent  the  discriminatory  effects  of  such 
rules.  The  root  cause  for  this  discussion  has  been  the 
underlying  lack  of  capacity  at  airports,  whereby  TDRs 
have  offered  a  tool  to  manage  air  traffic  distribution 
between airports. Stakeholders agreed that the purpose of 
TDRs should be to enhance connectivity and support the 
efficient use of airport capacity. Having said that, the Air 
Services  Regulation  presumes  that  airports  are  perfect 
substitutes whereas in reality this has not been the case, 
and thus puts into question the instrument’s effectiveness 
in addressing connectivity and capacity issues.

Cases  of  TDRs  to  date  have  been  rare,  and  the  limited 
experience  has  been  negative  in  most  cases.  Firstly, 
participants  acknowledged  that  there  is  a  clear  conflict 
of philosophy between the provisions of the Air Services 
Regulation  concerning  TDR  and  those  of  the  Slot 
Regulation. TDRs can ‘de facto’ force air carriers to give 
up slots at well-connected airports (thus interfering with 
their historic rights), and to hand them over for free to 
competitors.  Due  to  the  considerable  value  of  slots  at 
congested airports, the very possibility for Member States 
to provide for TDR has been strongly criticised by airlines 
as  an  interventionist  measure,  also  given  the  possible 
impact on the application of the Slot Regulation. What is 
more, stakeholders noted that the TDR adoption process 
has lacked transparency. Finally, the discussion showed 
that  TDR  may  also  be  used  as  a  means  to  motivate  air 
carriers to move from congested, often hub, airports to 

11 ■  Future Policy Options for the Review of the EU Air Services Regulation

alternative (non-perfect substitutes) airports, which has 
never been objective of the TDRs.
Airline  stakeholders  thus  overwhelmingly  supported  a 
revision of existing rules in the Air Services Regulation, 
in  order  to  preserve  opportunities  for  air  carriers  to 
access the internal market freely, while addressing strains 
on airport capacity. 

More concretely, a vast majority of airlines were in favour 
of  completely  abolishing  TDRs  through  a  deletion  of 
the relevant Article 19 of the Regulation, in light of the 
existing provisions being discriminative of certain airline 
business models. The proposed amendment would result 
in Member States no longer being able to adopt decisions 
to  regulate  the  distribution  of  traffic  between  airports. 
This would be left to market forces and the rules of the 
Slot Regulation. 

This  policy  approach  would  involve  no  intervention 
to  the  freedom  of  air  carriers  to  provide  air  services 
between  the  airports  of  their  choice  in  the  EU  subject 
to the availability of slots. This would therefore remove 
the risk of air carriers having to give up valuable slots at 
congested  airports  to  serve  a  secondary  airport  unless 
they take such a business decision. An abolition of TDRs 
would  translate  in  Member  States  no  longer  being  able 
to apply such rules to increase the efficiency in the use 
of airport infrastructure (e.g. to limit the use of smaller 
aircraft  that  disrupt  the  flow  of  air  traffic  at  congested 
airports).  However,  airlines  argued  that  alternative 
instruments exist for dealing with regional connectivity 
issues,  namely  public  service  obligations  (PSOs).  What 
is  more,  the  management  of  air  traffic  distribution 
at  airports,  and  in  particular  in  the  cases  where  new 
capacity  is  created,  is  also  possible  through  the  use  of 
market  based  instruments.  Congestion  charging,  for 
instance, could be applied to enable regulators to make 
use  of  differentiated  charging  to  encourage  airlines  to 
move into less congested airports. Secondary trading, on 
the  other  hand,  was  referred  to  by  airline  stakeholders 
as  another  useful  tool  to  ensure  efficient  use  of  airport 
infrastructure.  However,  slot  auctioning  was  strongly 
opposed by many airlines.

criteria  for  distributing  the  traffic,  the  consultation 
procedure)  based  on  the  Commission’s  and  Member 
States’ experience with the rules. For example, Member 
States  would  have  to  justify  why  they  do  not  take  into 
account  the  position  of  interested  stakeholders,  when 
they  do  not  amend  the  rules  after  consultation.  Under 
this policy option, Member States would be required to 
systematically submit a sensitivity analysis carried out by 
independent  consultants  to  show  the  different  impacts 
of  the  requirements  imposed  by  the  TDRs.  Greater 
transparency  and  contribution  by  interested  parties  to 
the process of drafting TDRs could generate better rules 
and increase acceptance of them. 

Member  States  are  indeed  often  involved  in  the  large 
financing  projects  surrounding  an  airport  or  other 
transport infrastructure (e.g. high-speed train connecting 
to an airport). Proponents of retaining an amend version 
of TDR rules argued that the possibility to adopt TDRs 
is  crucial  in  guaranteeing  that  a  newly  developed 
infrastructure will indeed be used and avoiding airport 
closure (i.e. capacity going to waste). TDRs are, moreover, 
instrumental  in  helping  to  offset  congestion  issues  at  a 
growing  number  of  super-congested  airports.  TDRs, 
in  theory,  allow  Member  States  to  address  concerns  of 
connectivity and may intervene on destinations that are 
“overserved”, thereby enabling governments to influence 
their  region’s  connectivity  taking  into  account  strategic 
interests.  TDRs  are  also  of  particular  importance  in 
securing the operation of general and business aviation 
as well as any operators relying on ad-hoc flights who are 
faced with increasing difficulties to access congested slot-
coordinated airports. 

In  revising  the  Regulation,  stakeholders  were  united  in 
calling for a close alignment in the provisions of the Air 
Service Regulation and the Slot Regulation, together with 
a clear definition of the mandate of slot coordinators in 
this regard. 

Exceptions to the Freedom to Provide Air Services: 
Public Service Obligations 

On the other hand, other airline stakeholders, along with 
airport  representatives  and  slot  coordinators,  were  in 
favour  of  softer  revision  that  would  see  an  amendment 
of  TDRs  in  order  to  clarify  certain  requirements 
to  limit  the  scope  of  the  rules’  application  (e.g.,  the 

The  current  legal  framework  is  not  always  effective  in 
ensuring that Public Service Obligations (PSOs) do not 
go  beyond  what  is  necessary  to  promote  connectivity 
and social and economic development of peripheral and 
development  regions  and  islands.  This  can,  in  part,  be 

12 ■  Robert Schuman Centre | June 2020

attributed to the fact that PSO notions are very general 
in nature and the Air Services Regulation fails to further 
clarify  these.  This  can  lead  to  inconsistent  and  even 
improper application of PSO provisions. What is more, 
issues  remain  in  the  tendering  process,  whereas  PSO 
contracts  have  been  perceived  as  excessively  complex 
procedures. 

PSO  routes  in  Europe  today  are  marginal2  and  limited 
primarily  to  islands  and  isolated  areas,  which  are 
oftentimes  economically  less  developed  regions.  The 
purpose  of  a  PSO  is  therefore  usually  to  service  a  less 
developed area, where passengers are unable to pay for the 
air fare. In addition to retaining existing PSO provisions, 
airport  stakeholders  supported  the  establishment  of  a 
route development fund. 

In light of the above arguments, airport representatives 
supported  a  clarification  of  PSO  criteria  and  the 
introduction  of  more  stringent  criteria  and  procedures 
linked  to  the  imposition  of  PSOs,  so  as  to  ensure  that 
their use by Member States is limited to genuine routes 
only. This policy approach would involve a clarification 
of  eligibility  criteria  (i.e.  peripheral  or  development 
region  and  thin  routes)  and  the  adding  of  further 
specification  to  the  necessity  and  adequacy  criteria 
(e.g.  in  terms  of  frequency,  capacity,  fares,  seasonality, 
targeted  population  and  recourse  to  other  transport 
modes). In addition, in order to improve the effectiveness 
of the PSO rules, the application of emergency procedure 
would  be  adjusted.  Also  the  minimum  period  between 
publication  of  information  notice  and  deadline  for 
submission of tenders (current minimum period is two 
months)  would  be  extended,  as  would  the  minimum 
period  between  publication  of  invitation  to  tender  and 
start of new concession (current minimum period is six 
months).  Last  but  not  least,  more  information  would 
be  required  from  Member  States  and  published  in  the 
Official Journal of the European Union. These measures 
are  aimed  at  ensuring  the  tender  process  is  more  open 
and transparent. 

A challenge when clarifying PSO criteria under the above 
option, would be to avoid being overly prescriptive which 
may hamper Member States’ flexibility to apply provisions 
to their individual connectivity needs. When it comes to 
the  tendering  procedures,  stakeholders  recommended 

2. 

 A total of 178 PSO routes, used by 12 countries, were recorded in the EU 
in 2018.

that  two  languages  be  permissible  to  answer  the  call  to 
ensure best deal for both airlines and regions. 

Airlines, on the other hand, were in favour of introducing 
a  PSOs  pre-approval  procedure  by  the  European 
Commission.  Under  such  an  option,  a  prior  approval 
by  the  European  Commission  (or  another  responsible 
body) would be introduced for envisaged PSOs for routes 
above  a  certain  traffic  level  (which  would  have  to  be 
determined). In this case, the Commission would assess, 
prior  to  its  publication,  the  envisaged  PSO  in  light  of 
current provisions (taking into account its interpretative 
Guidelines, where relevant). Advocates of the approach 
argued  that  a  prior-approval  procedure  would  increase 
the  stringency  of  the  process  for  PSO  imposition, 
address  the  risks  of  different  interpretation  of  the  rules 
and  foster  competition  in  PSO  tender  procedures.  In 
addition,  this  policy  option  would  be  accompanied  by 
the  above-described  measures  aimed  at  improving  the 
effectiveness of the PSO rules, relating to the application 
of  the  emergency  procedure,  the  duration  of  tendering 
procedures,  and 
for  additional 
information from Member States. 

requirement 

the 

Since  the  Article  9  of  the  Slot  Regulation  gives  the 
possibility  to  a  Member  State  to  reserve  slots  at  a 
coordinated  airport 
for  services  with  PSOs,  slot 
coordinators underlined that here again it is important to 
consider the Air Services Regulation in close conjunction 
with  the  Slot  Regulation.  Due  consideration  should,  in 
particular,  be  given  to  the  situation  where  PSOs  expire 
or where the route is no longer eligible for PSOs whereas 
slots  were  reserved  at  one  airport.  Slots  reserved  for 
expired  PSO  routes  should  be  returned  to  the  pool  or 
reserved for other PSO routes at that airport. A time limit 
for this reassignment to another PSO route should be set 
in order to avoid wasting scarce capacity at that airport.

While  PSOs  have  been  instrumental  in  serving  specific 
markets,  stakeholders  stressed  that  they  are  not  the 
only  solution.  Airport  representatives  argued  that  the 
existing State Aid Guidelines would benefit from greater 
flexibility via for instance, the possibility to exceed 50% 
of  total  charges  on  a  route,  for  specified  reasons;  the 
possibility to get funds for a route which is already served 
but only on a seasonal base and which should be served 
yearly, and the possibility to extend the 3-year period up 
to 5 years in some circumstances. In sum, stakeholders 
agreed  that  PSOs  help  to  restore  fair  competition  as 

13 ■  Future Policy Options for the Review of the EU Air Services Regulation

European  territories  are  not  equal,  but  these  must  be 
carefully  reviewed  in  order  to  avoid  abuses  and  ensure 
their application is limited to ‘genuine’ cases only.  

The Air Services Regulation in the Context of the 
Commission’s Green Deal

While  aviation  emissions  only  account  for  roughly  2% 
of  global  CO2  emissions,  their  share  has  been  growing 
steeply  and  alternative  powertrain  solutions  have  not 
enjoyed  the  same  rate  of  advancement  as  in  other 
sectors. In its European Green Deal, the von der Leyen 
Commission reaffirms the EU’s commitment to achieving 
climate  neutrality  by  2050,  and  moreover  promises  to 
deliver  a  sustainable  aviation  fuels  strategy  by  the  end 
of  2020.  Participants  acknowledged  that  the  effects  of 
the  Air  Services  Regulation  are  not  fully  in  line  with 
the  EU’s  climate  and  sustainability  objectives,  however, 
they questioned whether it is the appropriate instrument 
to  address  these  challenges,  or  whether  EU  efforts  are 
instead better invested in other pieces of legislation with 
higher CO2 mitigation potential. 

While  stakeholders  agreed  on  the 
importance  of 
stimulating  the  uptake  of  sustainable  aviation  fuels,  in 
Europe,  they  underlined  the  need  to  provide  necessary 
incentives  for  their  production  and  deployment.  This, 
in  turn,  would  entail  overcoming  regulatory  as  well  as 
technological  barriers.  Here,  the  upcoming  recast  of 
the  Energy  Taxation  Directive  was  pointed  out  as  an 
opportunity  to  close  existing  loopholes  (i.e.  current  tax 
exemptions  for  aviation  fuels)  with  a  view  to  ensuring 
more  efficient  pricing  of  air  travel  and  fostering  a  level 
playing field.

The  uptake  of  sustainable  aviation  fuels  could  be 
further  stimulated  by  empowering  consumers  to  factor 
environmental criteria into their travel decisions. While 
some online travel companies already offer the possibility 
to compare airlines and flights on the basis of efforts to 
offset  CO2  emissions,  participants  put  forward  the  idea 
of making this a binding requirement via an amendment 
of the price transparency provisions of the Air Services 
Regulation. Others urged the need to “think multimodal”, 
in  terms  of  acknowledging  that  air  travel  is  not 
necessarily the best or the only travel option. As already 
acknowledged  by  a  number  of  national  governments, 
short haul flights can in some cases be substituted by rail 

trips, and the provision of multimodal travel information 
can therefore be instrumental in encouraging consumers 
to  make  these  choices.  Stakeholders  stressed  the 
importance  of  combatting  consumer  misinformation, 
while empowering them to choose the most sustainable 
option.

What is more, stakeholders raised the idea of conditioning 
PSOs  on  the  use  of  “greener”  aircrafts  for  instance.  In 
other  words,  Member  States  and  regions  wishing  to 
introduce PSO schemes would need to accept to introduce 
sustainability criteria into their tenders. Given the global 
nature  of  the  aviation  industry,  airline  companies  also 
supported  the  idea  of  exporting  the  EU’s  sustainability 
values  to  third  countries  via  the  incorporation  of  more 
detailed  sustainability  provisions  in  international  air 
services agreements. 

Others  were  concerned  with  the  idea  of  “forcing” 
sustainability  commitments  and  criteria  into  the  Air 
Services Regulation, arguing that perhaps we should be 
exploring more promising solutions elsewhere taking into 
account the global nature of the aviation industry. Indeed, 
a number of other initiatives at EU and international level 
aim at addressing the aviation industry’s environmental 
impact.  Today,  intra-EU  flights  are  included  in  the  EU 
Emission Trading System (EU ETS), following a decision 
in  2012  to  exclude  international  flights  and  allow  the 
International  Civil  Aviation  Organisation  (ICAO),  to 
work on a global mechanism. The Carbon Offsetting and 
Reduction Scheme for International Aviation (CORSIA) 
has  already  gotten  support  and  its  trial  phase  is  due  to 
start  next  January.  Recently,  as  part  of  its  Green  Deal 
communication,  the  Commission  announced  its  vision 
to  reduce  the  EU  ETS  allowances  allocated  for  free  to 
airlines, and a reform of the ETS is scheduled for 2021. 
This, too, will be coordinated with action at global level, 
notably at the ICAO.

(another  commitment  under 

Lastly,  supporting  the  implementation  of  the  Single 
European  Sky 
the 
Green  Deal),  holds  significant  untapped  potential 
for  enhancing  airspace  efficiency  and  reducing  CO2 
emissions.  A  modulation  of  airport  charges  on  the 
basis  of  environmental  criteria,  by  means  of  reforming 
the  Airport  Charges  Directive,  on  the  other  hand,  was 
also discussed as a means to offset the climate impact of 
aviation while helping to alleviate congestion at airports. 

14 ■  Robert Schuman Centre | June 2020

A New Flight Plan: Modernising the Air 
Services Regulation

A Comment by Guillaume Teissonniere, eDreams 
ODIGEO

The most important question to answer when reviewing 
the consumer provisions in the Air Services Regulation 
2008/1008 is, what do air travelers want? The answer is 
straightforward.  Air  travelers  want  to  compare  apples 
with apples when they search for flights1. As an industry 
we  provide  people  with  clear  information  about  flight 
routes,  duration  and  layovers.  What  customers  lack  is 
transparency concerning which services are included in 
the price displayed and how good that price is compared 
to competing offers. Booking a flight can be a confusing 
experience  if  the  basics  are  not  clear.  Is  my  cabin  bag 
included in this price? Do I need to pay extra to choose a 
seat? How much do I get back if I cancel this flight?

Two  sets  of  actions  should  be  considered  in  order  to 
revise and modernize the Air Services Regulation. 

The first approach is based on standardization. It requires 
clear  definition  of  what  are  the  minimum  services  that 
must  be  included  in  the  default  fare  displayed,  and 
what  are  the  core  optional  services  to  be  displayed  in 
order  for  consumers  to  compare  offers  and  make  an 
informed choice. The second approach pivots away from 
information  standards  and  focuses  on  transparency 
by  ensuring  global  access  to  carriers’  data.  With  this 
second  option,  as  long  as  travel  intermediaries  can 
get  access  to  carrier’s  data,  market  forces  will  work  to 
deliver  transparency  to  consumers  on  the  benefits  and 
competitiveness of each alternative airline offer.

Let’s  investigate  each  regulatory  option,  bearing  in 
mind that the most consumer-friendly answer will be a 
combination of both ideas. 

Reform Option 1: Standardization

The concept of first price equating to the final price the 
customer sees is evolving as airlines unbundle fares and 
taxes  from  extra  charges  for  bags,  seats  and  boarding. 
Article  23  requires  that  customers  see  a  price  for  all 

1. 

 As set out in Recital 16 ‘customers should be able to compare effectively 
the prices for sir services of different airlines’.

charges that are ‘unavoidable and foreseeable’. This broad 
concept  based  on  generic  principles  has  the  advantage 
of providing room for interpretation and preserving the 
ability of ticket vendors to implement innovative pricing 
strategies. However, room for interpretation also means 
uncertainty for consumers and ticket vendors based on 
the minimum rules for pricing display. 

We believe pricing innovation is not incompatible with 
the  imposition  of  minimum  display  requirements.  A 
modern  interpretation  of  Article  23  would  consist  of 
defining  a  minimum  price  required  to  take  a  flight. 
You’ll always need to pay the fare, taxes, a place to sit and 
storage of a personal item (cabin size), so this becomes 
the ‘minimum available package’ to fly and the best price 
comparison tool.

A customer would see prices for:

Minimum available package
Basic

Unavoidable and 
Foreseeable

Optional
Core Optional 
Supplements

•  Air Fare 

•  Cabin luggage

•  Taxes

•  PRM services

• 

Seat allocation 
defined by the 
airline as long 
as minors are 
seated with 
their parent/ 
guardian

•  Check-in 
baggage

• 

Seat selection 
by passenger

•  Faster 

boarding

•  Ticket 

changes and 
cancellation

Standardized  information  around  the  amount  of  taxes 
refundable where a passenger does not board the flight 
would  constitute  real  progress  toward  transparency  for 
consumers.  However,  behind  the  good  intentions,  we 
must analyse the feasibility of such measures. The arrêté 
adopted in France on May 10, 2017 shows such measures 
raise  complex  implementation  barriers,  based  on  the 
fact  that  onboarding  taxes  are  defined  at  national  level 
and  refund  conditions  rely  on  complex  parameters. 
Authorities must ensure that ticket vendors, be it airlines 
or intermediaries, will be able to determine at scale and 
in  advance  the  amount  of  refundable  taxes  for  each 
segment of a flight journey. The question is particularly 
problematic for international flights.

15 ■  Future Policy Options for the Review of the EU Air Services Regulation

air  traffic  and  crewing  we  find  a  clause  for  consumers. 
The  current  review  must  prevent  the  situation  where 
Article 23 is doomed to fail consumers through lack of 
enforcement.

The Commission needs to hold Article 23 enforcement 
to the high standards of specifically drafted legislation for 
consumer protection and welfare on price transparency, 
that exist in Article 6(e) of the Consumer Rights Directive 
2011/83. 

Reform Option 2: Access to carrier’s Data

A  laissez-faire  alternative  to  defining  and  policing  all 
costs  visible  to  the  customer,  is  to  require  and  protect 
access  to  carrier’s  data  and  let  the  market  forces  build 
transparent  comparison  tools.  This  way,  even  with  the 
airline industries dynamic pricing models, customers will 
access  homogenous  price  details  no  matter  what  portal 
they  choose  to  shop  for  their  flight.  Carriers  changing 
prices  for  fares,  extra  bags  etc.  will  be  reflected  in  real 
time as customers pick and choose their travel options, 
and consumers will know the same price will appear in 
Search A as in Search B. 

Total  transparency  on  price  means  the  best  service 
provider  wins  the  customer’s  business,  promoting 
innovation and easy to use products for consumers. 

This idea of free access to carrier’s data is not novel even 
if  limited  to  specific  areas  so  far.  The  Computerised 
Reservation System Code of Conduct 80/2009 guarantees 
access  to  data  in  Article  9  and  a  similar  approach  has 
been adopted to promote multi-modal travel offers, even 
though  it  is  limited  to  ‘static  data’.  A  global  reflection 
around  granting  access  to  dynamic  data,  including 
airfares, should be launched as a real and ambitious “B2B 
open data policy”, which is the key to fostering innovation 
in Europe, especially in the travel sector. This “B2B open 
data policy” is the most efficient way to foster innovation 
in Europe and avoid widening the gap even further with 
powerful digital players based in the USA and China.

Industry Standards and Enforcement

Setting  an  industry  standard  which  defines  ‘minimum 
available  package’  and  ‘core  optional  supplements’  will 
require  consensus  building,  possibly  facilitated  by  the 
European Commission, between carriers, ticket vendors 
and consumers.

Timely  interventions  on  enforcement  will  be  critical. 
If  the  stricter  definition  model  is  adopted  a  review 
mechanism  will  need  to  be  built  in  to  keep  pace  with 
industry  developments.  Enforcement  would  be  simpler 
in the definition model as breaches will be clear-cut. 

In an access to data model the timeliness of enforcement 
intervention would be key. We must remind ourselves that 
Article 23 of the Air Services Regulation is an anomaly. 
In a technically ‘pure’ aviation text that deals with slots, 

16 ■  Robert Schuman Centre | June 2020

Passengers Need Clear Information

A comment by Delphine Grandsart, European  
Passengers’ Federation 

One of the main objectives of the Air Services Regulation 
(Regulation  (EC)  1008/2008)  is  to  allow  consumers  to 
effectively  compare  prices  among  different  providers 
and  to  ensure  non-discriminatory  access  to  air  fares. 
Unfortunately, this has become more and more difficult. 

Airlines  increasingly  unbundle  and  charge  extra  for 
ancillary  services  such  as  luggage,  seat  reservation 
etc.  For  passengers,  it  has  become  very  unclear  which 
services  are  included  in  the  basic  price,  and  which  are 
optional.  Additional  fees  for  such  services  vary  greatly 
across  airlines  and  are  often  not  included  in  the  final 
price  shown  at  the  beginning  of  the  booking  process. 
In some cases, such practices can be seen as misleading, 
because passengers reasonably expect for example hand 
luggage to be included. In addition, carriers do not always 
share price information on ancillary services with travel 
intermediaries. As a result, passengers are often not able 
to effectively compare offers across carriers on a like-for-
like basis. They need to consult multiple sources to get a 
good overview, which is complex and time-consuming – 
the opposite of what we would like: simplicity in booking.

In  order  to  safeguard  price  transparency,  the  European 
Passengers’ Federation (EPF) asks more clarity on what 
constitutes  i)  ‘minimum  services’  that  are  ‘unavoidable 
and foreseeable’ and should therefore always be included 
in  the  basic  price  (e.g.  hand  luggage,  children  and 
people  with  reduced  mobility  seated  together  with  an 
accompanying  person);  and  ii)  ‘core  ancillary  services’, 
the  price  of  which  should  be  clearly  indicated  next  to 
the  final  price  at  the  start  of  the  booking  process  (e.g. 
checked  in  luggage,  seat  reservation).  In  addition,  it 
would  be  useful  to  introduce  common  standards  for 
size  and  weight  for  both  cabin  and  hold  luggage.  Now 
rules  differ,  which  makes  it  difficult  to  compare  prices 
and creates problems  in  case of connecting  flights with 
different  airlines.  EPF  also  suggests  that  carriers  make 
available  the  basic  air  fare  (which  should  include  the 
‘minimum  services’  mentioned  above)  and  the  price 
for  at  least  the  most  important  ‘ancillary  services’  (e.g. 
checked in luggage, seat reservation) to third party sites, 
which would enable those to provide passengers with the 

comprehensive, transparent and comparable information 
they need in order to be able to make an informed choice 
when searching for and booking their travel.

Another  issue  that  needs  to  be  addressed  is  that  most 
passengers  are  not  aware  that,  if  they  cancel  a  flight 
or  do  not  show  up  at  the  gate,  they  are  entitled  to  a 
reimbursement  of  passenger-bound  airport  taxes  and 
charges.  EPF  therefore  suggests  that  the  revised  Air 
Services Regulation should explicitly include a referral to 
this right; specify which price elements are reimbursable; 
oblige  carriers  and  distributors  to  clearly 
inform 
passengers and to display at the time of booking which 
part  of  the  price  is  reimbursable;  and  promote,  where 
possible, automatic reimbursement of the relevant parts 
of the ticket price.

The  Air  Services  Regulation  aims  to  guarantee  non-
discrimination  in  access  to  fares  and  rates.  There  are 
however  indications  of  an  increased  use  of  dynamic 
and  personalised  pricing  in  the  air  transport  sector, 
meaning that prices may vary according to time, location 
or even device a person is using. What EPF demands is 
that  carriers  –  and  other  distributors  –  disclose  clearly 
what criteria and preferences a personalised or dynamic 
pricing mechanism is based on, and offer the passenger 
the  option  to  turn  off  this  functionality.  Also,  websites 
should be designed in such a way that they can be used 
by people with functional limitations, in accordance with 
the accessibility requirements of Directive (EU) 2019/882 
(Accessibility Act). 

Finally, more effective enforcement and consumer redress 
options are necessary. Currently, compliance with the EU 
rules is low. Additional price supplements are not always 
presented on an opt-in basis and the final price, including 
all ‘unavoidable and foreseeable’ surcharges, is not always 
indicated  at  the  beginning  of  the  booking  process. 
These  findings  are  confirmed  by  the  work  of  European 
consumer organisation, BEUC, and its members, and by 
the  sweeps  –  EU-wide  screenings  –  focused  on  online 
travel services carried out by the European Commission 
in  2013  and  2016.  In  addition,  for  passengers,  it  is 
not  clear  who  they  should  address  with  complaints. 
Therefore: i) adequate monitoring actions and effective, 
truly  dissuasive  sanction  mechanisms  are  needed;  ii) 
the  competence  of  NEBs  dealing  with  passenger  rights 
(Regulation  261/2004)  should  be  extended  to  include 
price transparency issues; and iii) the Regulation should 

17 ■  Future Policy Options for the Review of the EU Air Services Regulation

include a clear reference to passengers’ options in the case 
of individual complaints, e.g. the right to terminate the 
contract, compensation for damages, alternative dispute 
resolution, collective redress. 

From  a  broader  perspective,  also  considering  the 
Commission’s ‘Green Deal’ objectives, it is important to 
ensure  comparability  not  only  between  air  carriers,  but 
also across modes. The ultimate aim must be for passengers 
to  be  offered  a  complete  multimodal  and  cross-modal 
overview of their door-to-door travel options including 
first  and  last  mile,  in  terms  of  travel  time  and  overall 
price, but also in terms of comfort and, where possible, 
environmental impact and CO2 emissions. The European 
Commission  can  play  an  important  role  by  creating  a 
framework  that  encourages  or  even  obliges  transport 
service providers (all modes) to share data (on schedules, 
but also on fares). The case for multimodal information 
is  really  greater  consumer  choice,  more  competition, 
decarbonisation and modal shift.

18 ■  Robert Schuman Centre | June 2020

Robert Schuman Centre for Advanced Studies
The Robert Schuman Centre for Advanced Studies, created in 1992 and directed by Professor Brigid Laffan, aims to develop 
inter-disciplinary and comparative research on the major issues facing the process of European integration, European societies 
and  Europe’s  place  in  21st  century  global  politics.  The  Centre  is  home  to  a  large  post-doctoral  programme  and  hosts  major 
research programmes, projects and data sets, in addition to a range of working groups and ad hoc initiatives. The research 
agenda  is  organised  around  a  set  of  core  themes  and  is  continuously  evolving,  reflecting  the  changing  agenda  of  European 
integration, the expanding membership of the European Union, developments in Europe’s neighbourhood and the wider world.

FSR Transport 
The Florence School of Regulation (FSR) is a project within the European University Institute (EUI) focusing on regulatory 
topics. It works closely with the European Commission, and is a growing point of reference for regulatory theory and practice. It 
covers four areas: Communications and Media, Energy (Electricity and Gas), Transport, and Water.
The FSR-Transport Area’s main activities are the European Transport Regulation Forums, which address policy and regulatory 
topics in different transport sectors. They bring relevant stakeholders together to analyse and reflect upon the latest developments 
and important regulatory issues in the European transport sector. These Forums inspire the comments gathered in this European 
Transport Regulation Observer. Complete information on our activities can be found online at:  fsr.eui.eu

19 ■  Robert Schuman Centre - Policy Brief ■ Issue 2020/25 ■ June 2020

Florence School of Regulation, Transport AreaRobert Schuman Centre  for Advanced StudiesEuropean University InstituteVia Boccaccio, 12150133 FlorenceItaly Contact:FSR-Transport: fsr.transport@eui.euQM-AX-20-025-EN-Ndoi:10.2870/901755ISSN:2467-4540ISBN:978-92-9084-893-6Views expressed in this publication reflect the opinion of individual authors and  not those of the European University Institute.  © European University Institute, 2020Content © Matthias Finger, Juan Montero and Teodora Serafimova, 2020