CELEX: 51991PC0275(02)
Language: en
Date: 1991-07-18
Title: PROPOSAL FOR A COUNCIL REGULATION ( EEC ) ON ACCESS FOR AIR CARRIERS TO INTRA-COMMUNITY AIR ROUTES

COMMISSION OF THE EUROPEAN COMMUNITIES
                                                    C0M(91) 275 final
                                                    Brussels, 18 September 1991
              COMPLETION OF THE CIVIL AVIATION POLICY IN THE EUROPEAN COMMUNITIES
                                TOWARDS SINGLE MARKET CONDITIONS
 w
                                         Proposal for a
                                    COUNCIL REGULATION (EEC)
                                  on licensing of air carriers
                                         Proposal for a
                                    COUNCIL REGULATION (EEC)
                    on access for air carriers to intra-Community air routes
                                          Proposal for a
                                    COUNCIL REGULATION (EEC)
                              on fares and rates for air services
                                  (presented by the Commission)
Hsgjms.-SKSs;
 ---pagebreak---                                    - 2 -
                          EXPLANATORY MEMORANDUM
I.   INTRODUCTION
The second phase of the air transport policy as     approved in June 1990
also made clear the steps which have to be taken     before 1 January 1993
in respect of further liberalisation. However,      it must be recognised
that liberalisation is only one element in the       common air transport
policy   and    it might    therefore   be useful    shortly   to   situate
liberalisation in the overall picture.
II. OVERALL POLICY
Objectives
The ability of the air transport system to bring people from all parts
of the Community and abroad quickly together is an indispensable
element for the integration process within the Community and for the
development of closer relations between the Community and other parts
of the worId.
Over longer distances air transport has to carry out an essential task
for fulfilling consumer demand and for the economic and social
integration process in the Community.
It may serve to establish closer and quicker links not only between
central regions but also between peripheral and central parts of the
Community.     The latter point is of particular importance because air
 links may help - in conjunction with        improved   telecommunications
systems -    to overcome    disadvantages  for peripheral     regions and
facilitate, thereby, regional economic development, in particular, in
the field of services including tourism.      The main importance of air
transport in the Community relates to the transport of people but air
cargo should not be forgotten.
A more specific objective in this context is the need to establish air
 links serving less developed peripheral regions with low traffic demand
where the actual and potential traffic volume on these routes would not
Justify a commercial service.       In such instances the air transport
system may      therefore  have to fulfil    occasional    public   service
requirements.
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The importance of regular air links between the major centres of the
Community and all other parts of the world is self-explanatory in view
of the close interrelationship between the existence of direct air
links and economic cooperation. An extensive external network is to be
considered as a prerequisite of developing good economic and other
relations between the Community and the rest of the world.       In this
context air cargo assumes a much more important role.
Apart from these basic transport aims, a number of further objectives
exist and must be considered.
It is clear that the transport function would suffer dramatically if
the cost of transport is too high. This might not be critical when
other modes of transport may serve but for distances over 1000 km air
transport is of particular importance and fares must be kept reasonably
low.
In many areas of the Community tourism    is dependent on air transport
being available at low cost.
It is also necessary to look at quality of services for       passengers
(safety, reliability, frequency, choice, flexibility).
Air transport activities depend on sufficient infrastructure being
available and the provision of such facilities is not without problems
in particular taking the environmental effects into consideration.
It is necessary to ensure that air transport is provided on a sound
financial basis.      This is necessary not only to ensure a reliable
service to the passengers and shippers but also to ensure acceptable
working conditions.
 It is important that the Community aviation industry is competitive at
world-wide level in view of the important role air transport and air
transport-related activities, for example, the aerospace industry play
 in creating    highly qualified   Jobs,   in the development    of new
technologies, also in other sectors and - last but not least - for
balance of payments considerations.
As a consequence the common air transport policy must on the one hand
ensure a financially healthy industry providing a certain economic
stability and reasonable conditions for employment and on the other
hand ensure a market structure where air carriers can adapt their
operations according to the growth and shifts in the market and provide
sufficient choice of services to the consumer at reasonable prices.
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Experience has shown that competition is desirable in order to achieve
these objectives. However, a completely unregulated market may lead to
abuse, and indeed to anticompetitive behaviour and a certain regulation
is therefore necessary to guard against such practices and to protect
consumers.
However, there should be no need to intervene unless things go wrong.
At any rate the regulatory framework which is to remain or which will
be created, should create a situation where unfair advantages to
individual air carriers will be banned in particular if they would be
at the expense of safety.
These objectives have     led to the development    of  four   main areas of
policy :
         A. Liberalisat ion
         B. Harmonisation
         C. Infrastructure
         D. External policy.
A.  LIBERALISATION
1.  Air transport policy
Four different elements are covered, namely: air fares, market access,
capacity control and licensing of air carriers. The aim of this policy
is to ensure the creation of a market structure which will encourage
competition and provide flexibility in the market so that air carriers
can pursue their operations on a commercial basis and so that choice
will be available to the consumer. The policy Implements the Treaty
principles    of  freedom     to provide    services   and    the   right   of
establishment. The present proposals aim to complete the policy in
this area and further details are presented on page 13 et seq.
2.  Protection against anticompetitive behaviour
The Commission has adequate means to intervene against anticompetitive
conduct.    Competition     regulations   are    in   place    and    recently
possibilities have     been added      to  intervene    immediately    against
predatory behaviour. At the same time the Commission has been given the
possibility to exempt co-operation between air carriers which leads to
a more efficient air transport system to the benefit of users.
The Commission has also power to control State aids in order to avoid
distortion of competition.
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3.  Protection against unfair behaviour
The Commission has already been given a very direct role to control
unfair behaviour. It has power of decision concerning too high or too
low fares, discriminatory traffic restrictions at airports, excessive
protection of new air services, too restrictive public service
obligations and the freezing of or reduction in capacity growth in the
case of economic hardship.
B.  HARMONISATION
The very fact that the liberalisation really will create one air
transport market within the Community has created the need to ensure
that norms and standards In a number of areas are harmonised in order
to ensure a level playing field for competition among EEC air carriers
irrespective of where in the EEC they are established.
It has therefore been agreed that harmonisation must take place in a
great many areas amongst which the most important are the following.
1.  Safety
For accident Investigation, cooperation and exchange of expertise a
directive already exists. Improvements are under consideration.
Common airworthiness requirements (JARs) will soon be approved by the
CouncI I.
Common requirements for I icences are under development.
The same is true for flight-time limitations.
The need for proposals for the last three subjects has been confirmed
by the CouncI I.
2.  Fair competition
A code of conduct for Computer reservation systems (CRS) is in force
which ensures unbiased competition and to some extent consumer
protect ion.
A code of conduct for al locat ion of slots has been proposed with the
purpose of ensuring transparency, non-discrimination and a certain
movement in the market.    This proposal is also a response to a need
expressed by the Council.
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Regular consultation between airports and users has been proposed.
These rules seek to ensure the best possible use of scarce facilities
but the proposals also introduce the principle of cost-re Iatedness for
airport charges.     In addition, it is proposed that airports as part
and parcel of the consultation process must be entitled to participate
in slot allocation procedures. This whole initiative should be seen as
a first step towards coming to terms with the capacity problem at
airports.
3.  Consumer protection
Denied boarding compensation rules have been adopted.
A code of conduct for travel agents is under development.
Common rules for IiabiIity (Warsaw Convention) are being developed.
4.  Env i ronment
Noise limitations in the form of non-operation rules for aircraft not
conforming to chapter 2 were adopted already 10 years ago. Non-addition
rules for aircraft not conforming to chapter 3 are also in force. Non-
operation rules for aircraft not conforming to chapter 3 has recently
been proposed. The Council is expected to agree quickly.
Airport environmental rules are under development.
C.   INFRASTRUCTURE
Serious capacity problems exist in the European aviation system.
These capacity problems derive both from an unsatisfactory air traffic
control system and from insufficient runway capacity at important
economic centers of the Community.     Legislation will be necessary in
both of these areas.
In fact the Council has itself       called  for  legislation on  common
specifications for ATC equipment.
The Commission is also studying the situation at all major airports in
the Community with a view in particular to investigate whether a kind
of environmental contract could be established which would allow
capacity increases at airports on condition that certain environmental
action is taken.    The study should be finished by July and immediately
afterwards preparation of legislative action will be commenced.
These problems will continue well beyond 1992.
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D.   EXTERNAL RELATIONS
Community legislation already exists for air fares, capacity control
and market access and for a great many other areas.    These first three
matters are traditionally the backbone of any bilateral agreement.
External relations and the discussion of Community competence is
therefore    not only an intellectually amusing question.    The fact is
that an agreement between a Member State and a third country in nearly
all instances will affect the commercial situation inside the Community
for air carriers from the other Member States.
There are thus important reasons for the Community to deal with the
matter of external competence with urgency. The procedural problems
are dealt with in a specific proposal COM (90) but action must soon be
taken in order to avoid squandering Community assets.
III. PROPOSALS FOR LIBERALISATION
Three proposals are to be found in the annex namely :
     a.  Licensing of air carriers
     b.  Market access
     c.  Air fares and rates
In order to establish a clear legal situation these three proposals
will cover all types of civil aviation.     This means for example that
air cargo has been incorporated in these texts.
The Council requested in art. 3 of Regulation 2343 that proposals
should be put forward concerning licensing of air carriers and route
 licensing. A specific proposal has been put forward on licensing of
air carriers but with regard to route licenses it was felt that it
would be inappropriate to discriminate between air carriers operating
 into a Member State and air carriers established in the Member State,
 I.e. reverse discrimination should not take place. The proposal on
route licensing has therefore been incorporated in the proposal on
market access which ensures that air carriers are treated in the same
way independently of In which Member State they are licensed.
 ---pagebreak---                                        - 8 -
    a.  Licensing of air carriers
    At present no specific Community rules governing the relationship
    between the competent national authorities and carriers established or
    to be established in the Member States exist. However, the Council
    has, in its decision on the second phase, stipulated that it is
    necessary to base policy in this area on harmonised Community criteria
    to be implemented from 1.7.1992 onwards.
    The Commission's proposals for the second aviation package already
    contained a first set of rules for governing decisions on operating and
    route licensing. The basic aim at that time was adoption of the
    principle that when an applicant company is considered as economically
    and technically fit then it is entitled to be licensed as an air
    carr1er.
    The Council, while recognizing the need for Community action, reached
    the conclusion that common rules concerning the requirements for
    economic   and   technical   fitness must    be adopted    prior   to the
    implementation of specific commitments in this area.
    The Commission always considered the lack of a coherent policy in the
    area of issuing (or confirming) operating licences for air carriers as
    a major outstanding policy question in the area of market access and
    market entry. It has therefore, in close cooperation with experts from
    Member States and interested parties (AEA, ACE, ERA and consumer
    organisations) thoroughly examined this issue. It has, in this context,
    carefully analysed existing systems in Member States and other parts of
    the world (U.S.A.).
    All interested parties and experts agreed that a high degree of safety
    and a sufficient degree of stability of air services have to be
    considered as the main objectives to be achieved.
    The Commission,    accordingly,   identified  five  key  questions   to  be
    addressed :
        1.   Which are    the  requirements   in relation   to  ownership   and
             location ?
        2.   How can reasonable and      meaningful   economic  and  financial
             standards be defined?
        3.   Is it necessary or useful to establish different requirements
             for different types of air carriers (or operations) ?
(2)
 ---pagebreak---                                   - 9-
    4.  Should the market situation in general    be taken   into account
        when deciding on an application?
    5.  Which standards   for  the assessment of  the  technical  fitness
        should apply?
The Commission, after having carefully analysed basic options related
to these questions, arrived at the following conclusions :
    ad 1 :  (see Art icle 4)
            Due to basic characteristics of the international aviation
            system, requirements on Community ownership, control and
             location are required. An air carrier must be owned and
            effectively controlled by a majority of Community nationals
            and the majority of the board must consist of such
            nat ionals.
             It is, however, clear that the ownership limitations may
            hinder a normal business development in the interests of
            Community air carriers.      It is, therefore, desirable to
            introduce a possibility to conclude more liberal agreements
            with third countries on a mutually beneficial basis,
            without prejudice to international commitments.
    ad 2 ;  (see Art icle 5)
            Financial and economic requirements need to be defined in
            order to fulfil the underlying political objective of
            achieving a sufficient degree of stability of air services
            (i.e. only financially sound carriers shall operate). The
            rules need to be well-balanced in order, on the one hand,
            to implement in all Member States effective and clear-cut
            rules and, on the other hand, to avoid too rigid and too
            bureaucratic standards which would damage the air carriers
            possibilities    in terms of market     developments.     The
            principle of non-discrimination must be ensured in all
             instances.
            The Commission has opted for a set of simple but clear
            economic and financial standards defining acceptable levels
            below which a licence should not be granted or maintained.
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        They differ between new entrants and already established
        carriers only to the extent necessary for ensuring that new
        entrants    start    operations on a sound        financial   and
        econom i ca i bas i s.
        The standards concern financial liquidity, monitoring of
        financial developments, the overall financial structure,
        insurance requirements and duration of the license.
ad 3 (see Art icle 5)
        The Commission has very carefully examined the need for
        linking operating licences to different types or scopes of
        economic activity (i.e. scheduled, non-scheduled, regional,
        etc.)
        These studies have led the Commission to the conclusion to
        abstain, apart from somewhat less strict rules for carriers
        operating with very small aircraft, from proposing specific
        rules for specific types of air carriers.
        Apart from the more general objective to avoid too complex
        rules this conclusion is based on the need not to establish
        a regulatory segmentation between very often overlapping
        markets and thereby create barriers for air carriers to
        react    quickly      following    rapidly  changing     business
        opportunities.
        Secondly,     however,     the   Commission   feels    that   the
        requirement of a business plan to be provided by the
        applicant carriers allows in a flex ible way to take into
        consideration the financial potential of a company in
        relation to the scope and type of the envisaged activities
        as well as the economic consequences of changes in the
        pattern of operation.
ad 4 :
        Certain Member States and airline organizations feel that
        the impact of a newly licensed air carrier on the market in
        general    and on the economics of already established
        carriers needs to be, in one way or another, explicitly
        taken    into account       when  deciding  on   an    individual
        application for an operating licence.
 ---pagebreak---                              - 11 -
       The Commission recognizes the potential importance of this
       argument    and  has,   therefore,    undertaken    a   thorough
       examination of ail elements related to this problem. It has
       reached the conclusion that these aspects can to the degree
       necessary be taken into account by requesting the applicant
       carrier to present a business plan.
       In their assessment of these business plans the authorities
       will   have a reasonable possibility         to evaluate     the
       soundness    of   the  underlying     assumptions    on   market
       developments and to identify completely unrealistic plans.
       The Commission, however, does not share the concerns of
       certain parties to provide, apart from checking to a
       reasonable extent the economic feasibility of a business
       plan for a new air carrier, for a specific protection of
       the interests of already established carriers. In view of
       a number of economic barriers to market entry which exist
       anyway such an additional protection would imply the risk
       of creating rigid market structures which, at the end, will
       work against the global competitiveness of the Community's
       air Iine industry.
       Finally, the highly useful role which new operators can
       play for completing the network and for identifying unused
       market   opportunities    needs   to be     recognized   by   an
       appropriate regulatory framework on operating licences.
ad 5 : (see Art icle 9)
       Technical standards cannot be compromised because of the
       safety objectives underlying the standards. Therefore, a
       license should not be granted or maintained for an air
       carrier (or applicant company) not meeting these standards.
       In the long run technical standards should refer to JAA-
       requirements    for   air    operators   certificates     (AOCs)
       currently under development. Until these rules come into
       effect Member States shall continue to decide on the basis
       of current national requirements.
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b.   Market access
3rd, 4th and 5th freedom traffic rights have been created by the second
package between all airports in one Member State to all airports in
another Member State. The 5th freedom traffic rights are somewhat
limited at present. From the 1st of January 1993 the Council has agreed
that 5th freedom will be fully implemented and cabotage will be
introduced.
This opening of market access possibilities will naturally open the way
for more competition. On the one hand this is positive but on the other
hand it may make life more difficult for new entrants and it does not
ensure the establishment of air services from some regions where they
should exist for regional policy reasons.
In order to address these problems a possibility already exists to
protect an airline on a new route for up to 2 years and to introduce a
public service obligation for a limited period. These provisions should
be retained and, where necessary, developed further.
5th freedom traffic rights are still limited but the restrictions
should in accordance with Council commitments be removed for both
passenger flights and air cargo.
In two other main areas the Commission has had to analyse basic policy
options and alternatives when preparing its proposals on market access.
In addition to the rules concerning air carrier licences (see above)
the Council has also asked the Commission to put forward proposals for
rules on route Iicences. It would seem clear that any air carrier which
has been licensed by a Member State must have an equal opportunity to
be given a route licence and it would be illogical that multiple
designation thresholds (if they are retained) would only be used for
incoming air carriers and not also with respect to the country of
or ig in as we I I.
It may be argued, however, that air carriers operating on routes not
covered by public service requirements or rules on the protection of
new services operated with small aircraft need to some extent to be
protected against new entrants.
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Such an approach would have, if any, some kind of Justification only
for "not so busy"-routes which would not Justify the operation by more
than 2 or 3 carriers. The Commission has carefully and without any
pre-concei ved   ideas examined the need for some kind of a non-
discriminatory selection procedure to be applied for thinner routes not
falling within the scope of the public service requirements. It has
reached the conclusion that further safeguards in addition to already
protected areas would - at the end - most probably turn out to be
counter-productive because it would stifle the normal competitive
effects of market forces.     This conclusion is based on the following
considerations :
         new legal barriers to market access, in addition to existing
         factual barriers resulting from infrastructure bottlenecks and
         grandfather rights, could     largely undermine the room for
         creating and maintaining the necessary degree of competition
         which is essential  for efficiency improvements in the airline
         industry;
         additional selection procedures aiming for transparent and non-
         discriminatory decisions on the basis of objective criteria
         cannot be established without creating new administrative
         machinery. The direct and indirect costs related to such
         bureaucratic procedures outweigh possible benefits which would
         materialize only in very specific situations.
Instead of proposing separate rules to protect these services the
Commission has decided to propose a redefinition of the rules related
to public services requirements.     It is proposed to use the threshold
on traffic volume (i.e. 30.000 seats per year) only for the possibility
of limiting access to one carrier and for the temporary protection for
new services operated with smaller aircraft.        It shall not apply,
however, for the possibility to define more permanent public service
requirements.
Cabotage
The second basic question refers to the introduction of cabotage
rights.     The Council of Transport Ministers already confirmed that
these rights belong to the internal market concept.           This would
basically mean that it is necessary to introduce these rights to the
full extent from 1 January 1993.
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The Commission has carefully examined whether there is a need to
introduce    these   rights   gradually   in order   to  prevent market
disruptions.     This examination has led to the conclusion that the
exercise of cabotage rights would only be of limited economic interest
for air carriers, in particular, If the operation would be unrelated to
the air carrier's normal network i.e. "stand-aloneM-cabotage.
The start up of a cabotage service will need a very careful preparation
and there would clearly, at least for a time, exist a handicap in the
competition with a "native" air carrier.
Under these circumstances the Commission does not see a case to
establish specific rules delaying the full achievement of the internal
market in this specific area.
The Commission also feels that specific situations can be dealt with
by having recourse to public service requirements.
Therefore, the Commission has reached the conclusion, that it would not
make much sense to establish transitional rules to be applied to the
availibility of these rights.
c.   Air Fares and rates
Considerable pricing freedom has already been created in particular for
non-fully flexible fares in the second package approved in 1990< 1 ).
However, it has been agreed by the Council of Ministers that from the
1st of January 1993 the Community system will be a fully developed
system of double disapproval for all air fares.
However, the normal situation in the internal market Is for the
Undertakings to be able to conduct their business in a normal
commercial    environment. This means that where competition exists
Undertakings should be able to set their pricing policy freely. This
has so far not been the case in civil aviation except for certain
promotional fares and It Is not the case with the double disapproval
 system. The Commission therefore proposes that when normal competitive
conditions have been established in civil aviation then pricing must be
 free. The present set of proposals needs a certain time to take effect
but after three years this should be the case except where special
 conditions exist such as congestion and it is therefore proposed that
 free pricing should be introduced in 1996 for scheduled air services.
The present situation of free pricing for non scheduled air services
 and air cargo should not be modified.
 (1) Council Regulation    No. 2342/90 of   24 July 1990; O.J. L 217 of
      11.8.1990
 ---pagebreak---                                  - 15 -
The double disapproval system already exists in the second package and
has been overtaken with only a few technical changes.
However, one question needs to be faced.
It concerns the existing system of safeguards which calls upon the
Commission to examine fares if requested by a Member State. This can be
quite cumbersome if not limited in one way or another.
A move to the double disapproval system where today automatic approval
already exists may also be questioned.
The issue has been discussed with national experts and interested
parties (airline industry, consumers) and to a great extent agreement
was reached that :
a)  The principle of cost relatedness should be maintained.
b)  Safeguards should be maintained but limited to situations where
    consumer interests would be in particular at risk i.e. the most
    used fully flexible fares on routes where competition is limited.
On the basis of these principles the Commission proposes to redefine
slightly the procedures to be applied in the case of a dispute whether
air fares need to be disapproved or not (Article 7 ) . It is proposed to
restrict the possibility of submitting an air fare for examination by
the Commission to fully flexible fares being charged on routes on
which, for one reason or another, competition is limited. This will
restrict the use of safeguards to be added to a double-disapproval
system to situations where this system would not work well because of
insufficient competition.
It is also proposed that an air fare which has been submitted for
examination by the Commission shall not be suspended but will remain
in force during the examination. This approach will avoid building a
new complex    fare examination machinery    at Community     level  and
undermining the philosophy of the double-disapproval system by moving
back to an over-regulated approach.
 ---pagebreak---                                      - 16 -
   The question remains as to whether the application of a double
   disapproval system would be a setback in areas where today automatic
   approval is given. The Commission, while recognizing that such a change
   cou id be seen as moving backwards to re-regulating liberalized areas
   has carefully studied, in close cooperation with experts from Member
   States, options aimed at avoiding useless re-regulatory developments.
   It has reached the conclusion that by setting aside certain fare-types
   from the use of complex safeguard procedures combined with an
   automatic approval regime for fares charged        in conjunction with
   Inclusive Tour arrangements (IT fares) or group travels (Article 4)
   the risk of re-regulating by moving towards double-disapproval as the
   general principle would be avoided.
   d.   A specific Issue - Non-scheduled air services
   The massive presence of air services carried out by non-scheduled air
   carriers Is one of the most specific features of the intra-European
   transport market. In terms of passenger-km's non-scheduled airlines are
   carrying out 65 X of all transportation by air within the Community.
   Community legislation has until now only dealt with scheduled air
   transport ai 1 not non-scheduled (except for air cargo). The scheduled
   airlines consequently have been complaining that they are subject to an
   increasing number of Community rules while the non-scheduled air
   carriers are not.
   On the other hand market access liberalisation for scheduled air
   services is now to some extent more advanced than the possibilities
   open to non-scheduled air carriers so these air carriers are also
   beginning to complain. In addition, liberal rules on fares allow
   scheduled air carriers to compete directly with non-scheduled in the
   leisure travel market segment. At the same time, non-scheduled air
   carriers are increasingly competing directly with the scheduled air
   carriers by selling seat only without any accommodation.
   The non-scheduled air services are very important for the tourism
   industry in many regions of the Community. A policy which would
   endanger these services would therefore be unwise . In this context it
   is important to recall the experience in the USA and on the North
   Atlantic when competition opened up. The result was a drastic
   reduction in the market share of non-scheduled services. The reason
   was to a large extent that air carriers could only offer certain types
   of air transport on non-scheduled air services while everything could
   be offered on the scheduled air services. There was also a certain
   preference among the travelling public to choose a scheduled air
   service, when it was available at the same price, over a non-scheduled.
3)
 ---pagebreak---                                      - 17 -
In the Community the opportunities of scheduled air services have been
substantially increased already and the present package will further
increase    these   possibilities. The       situation    is   therefore    that
scheduled air services can offer virtually anything in the market while
non-scheduled air services are only allowed officially to offer certain
products. It is difficult to say whether it is this difference in
market opportunities or whether it is the effect of a certain recession
but the fact is that the charter market has been suffering. There is
basically it seems a danger that the non-scheduled air services are
being given the same handicap as in the USA and on the North Atlantic
market.
It has been suggested to the Commission that the best policy would be
to protect the non-scheduled air services. This is, however, not a
satisfactory long term solution.
One possible solution would be a specific set of Community rules for
non-scheduled operations. These could parallel the market access rules
for scheduled operations and stipulate, subject to competition rules,
free pricing, However, if the rules should differ from those for the
scheduled operations, the danger would exist for a number of difficult
discussions and complaints. The risk through regulation of artificially
creating new market fragmentation meeting no consumer needs at all
should not be underestimated.
Therefore, a straightforward approach would be to propose that non-
scheduled air carriers should meet exactly the same obligations as a
scheduled air carrier in areas where they compete directly. But then,
they should also have the same opportunities in terms of having access
to routes.
The Commission has received mixed signals from Member States and
airline organizations on this issue. It is obvious that opinions on how
to   deal   with    this   problem    differ    even   inside     the   relevant
organizations. Under these circumstances the Commission's conclusions
are mainly based on its own internal assessment of this problem.
The Commission has carefully analysed and compared the pros and cons of
these two basic alternative options. This examination was carried out
under the assumption that convincing and Important reasons must be
given    if   different   rules    for   basically    the    same    product be
established.
 ---pagebreak---                                  - 18 -
The Commission is of the opinion that a strong case for establishing
two sets of rules does not exist. It has therefore decided to propose
to   integrate the different    air transport modes. This means in
particular to attach basically the same rules on fares (with specific
provisions for IT-fares), market access and operating licences to all
air carriers.
This policy will allow air carriers to decide on commercial grounds
whether a market should be served by non-scheduled or scheduled air
services. It would also allow an air carrier to develop a market with
non-scheduled services and then gradually Introduce scheduled air
services. This policy approach also fits logically with the new market
opening represented by the proposal on licensing of air carriers.
The inclusion of charter services has been achieved by removing
reference to scheduled air services in Regulations Nos 2342 and 2343/90
and only refer to air services. This has necessitated an article on
prices for charter products as well as a definition in Regulation No.
2342/90. It would mean that market access provisions will apply to air
carriers whether they operate in scheduled or charter mode. They would
be able to offer "seat only" If they can comply with the Community
rules on air fares and on allocation of route rights. However, "seat
only" might also be allowed in general on routes open for multiple
désignât ion.
 ---pagebreak---                                   - 19 -
                              Proposal for a
                         COUNCIL REGULATION (EEC)
                      on licensing of air carriers
THE COUNCIL OF THE EUROPEAN COMMUNITIES,
Having   regard   to the   Treaty   establishing  the   European    Economic
Community, and in particular Article 84(2) thereof,
Having regard to the proposal from the Commission^ 1 ),
Having regard to the opinion of the European Par Iiament^ 2 ),
Having regard to the opinion of the Economic and Social Committee^ 3 ^,
Whereas it is important to establish an air transport policy for the
internal market over a period expiring on 31 December 1992 as provided
for in Article 8a of the Treaty;
Whereas the internal market shall comprise an area without     internal
frontiers in which the free movement of goods, persons, services and
capital  is ensured;
Whereas the application in the air transport sector of the principle of
the freedom to provide services needs to take into account the specific
characteristics of the sector;
(1)
(2)
(3)
 ---pagebreak---                                       20 -
Whereas in Regulation (EEC) No 2 3 4 3 / 9 0 ( 1 ) the Council decided to adopt
for  implementation   not  later   than  1 July       1992   rules   governing  the
requirements in relation to the licensing of air carriers;
Whereas  it  is  important  to define non-discriminatory           requirements  in
relation to the location and the control of the undertaking applying for
a licence;  whereas it is also necessary to take into account the need
to provide flexibility in relation to third countries;
Whereas  in order   to ensure   stability of service          it  is necessary   to
ensure that an air carrier is at all times operating at sound economical
and high safety levels;
Whereas for consumer protection reasons it is important to ensure that
air carriers are sufficiently insured in respect of liability risks;
Whereas within the internal market air carriers should be able to lease
aircraft registered anywhere in the Community;
Whereas a sound and effective management structure, where individuals
appointed to senior posts have suitable experience and proven competency
in  aviation,   is  essential    for  ensuring       the   safe   conduct   of  air
operations;
Whereas procedures for the granting of licences to air carriers should
be transparent and non-discriminatory,
(1) OJ No L 217, 11.8.1990, p.8
 ---pagebreak---                                     - 21 -
HAS ADOPTED THIS REGULATION
                                  Article 1
1.   This   Regulation  concerns   the  economic  and  technical   competency
     requirements for the grant and retention of operational          licences
     and    air operators' certificates.
2.   An air carrier must at all times operate at sound economical          and
     high    safety levels.
                                   Art icle 2
For the purposes of this Regulation:
(a)  "undertaking" means any natural person, any legal person, whether
     profit-making or not, or any official body, whether having its own
      legal personality or being dependent upon an authority having such
     personali ty;
(b)  "air   carrier" means   an  air   transport undertaking   with   a  valid
     operat ing I icence;
(c)  "operating   licence" means an authorisation granted      by   the  State
     responsible to an undertaking permitting      it to carry out carriage
     by air of passengers, mail and/or cargo, as stated in the licence,
     for remuneration and/or hire;
 ---pagebreak---                                       - 22 -
(d) "air operator's certificate (AOC)" means a document              issued by the
    competent authorities of a State which affirms that the operator in
    question   is competent     to secure the safe operation of his aircraft
    for   the aviation activities specified in the certificate;
(e) "business plan" means a detailed description of the air carrier's
    intended   commercial     activities     for  the   period    in  question,  in
    particular   in relation to the market developments and             investments
    to   be   carried    out,     including    the   financial     and   economical
    implications of these        activities;
(f) "management account" means a detailed statement of income and costs
    for   the  period    in   question    including   a   breakdown    between  air
    transport-related and other activities as well as between pecuniary
    and non-pecuniary elements.
                                      Art icle 3
1.  No  undertaking    shall     be  permitted   within    the   territory  of  the
    Community    to  carry     by   air  passengers,     mail   and/or   cargo  for
    remuneration and/or       hire unless the undertaking         has been granted
    the appropriate operating licence and AOC.
2.  No operating    licence shall be granted by a Member State unless the
    undertaking concerned has a valid AOC.
3.  Member States shall not issue or maintain in force such licences or
    certificates    when    the   requirements    of  this    Regulation   are  not
    complied with.
 ---pagebreak---                                          - 23 -
     An undertaking meeting the requirements of this Regulation shall be
     entitled to receive such a licence and certificate.
                                  OPERATING LICENCE
                                       Art icle 4
1.   No undertaking shall be granted an operating                licence by a Member
     State   unless     air    transport      is   its   main   occupation     and   the
     registered    office and      principal     place of business      is  located   in
     that Member State.
2.   The undertaking must be owned and continue to be owned directly or
     through a majority shareholding by Member States and/or                  nationals
     of  Member States.        It must at all times be effectively controlled
     by such     States or nationals. The majority of              the board must     be
     representatives      of such States or nationals.
3.   Notwithstanding paragraph          2 air carriers which have already           been
     recognised    in Annex    I to Council Regulations (EEC) Nos 2343/90 and
     294/9l( 1 )    retain     their     rights     under     this    and    associated
     Regulations     as   long   as   they   meet   the   other  obligations     in  the
     present Regulation.
4.   Derogation      from   paragraph      2    may    be   agreed    bilaterally     or
     multilaterally between third countries and the Commnity.
5.   Any  undertaking      which    has  a controlling      shareholding     in an   air
     carrier must meet the requirements of paragraph 2.
6.   An air carrier must on request at any time be able to demonstrate
     to  the     State   responsible      for    the   operating     licence   and   the
     Commission that it meets the requirements of this Article.
(1) OJ No L 36, 8.2.1991, p. 1
 ---pagebreak---                                            - 24 -
         Where a Member State is not convinced that an air carrier meets the
         requirements of this Article         it may ask the Commission       to verify
         the   situation.
                                         Article 5
    1.   An air carrier      to which an operating       licence   is granted    for the
         f irst t ime must :
       (a)    have a net start up capital of at least ECU 100 000,
       (b)    be able     to meet   normal   costs   for a period     of   three   months
              according     to its business plans and taking         into account only
              income secured by contract,
       (c)    be able to demonstrate to the reasonable satisfaction of the
              competent authorities of the licensing Member State that it can
              meet   its actual and potential obligations for a period of 24
              months, and
       (d)    demonstrate     to the reasonable      satisfaction    of   the  competent
              authorities that      its debt and     leasing   liabilities will be at
              most    twice the size of      its equity capital at the end of the
              first year of operation.
    Points (b), (c) and      (d) shall not apply to air carriers which intend to
    operate aircraft with less than 20 seats and/or 10 tonnes MTOW.
    2. (a)    An   air  carrier   operating     aircraft   with   less   than  20   seats
              and/or     10   tonnes   MTOW    shall   at   all   times    be   able   to
              demonstrate that its net capital is at least ECU 100 000.
(4)
 ---pagebreak---                                     - 25 -
   (b)   Any other air carrier must at all times and in particular after
         12   months    of  operation    be   able    to   demonstrate     to   the
         reasonable satisfaction of the        licensing authorities      that it
         can   meet its actual and potential obligations for a period of
         12 months.
3.   For the purposes of this Article an air carrier shall provide all
     relevant    information   and,   in   particular     for   the   purpose    of
     paragraph 2(b), it shall, at the beginning of each financial year
     and when substantial     changes in operation, such as the operation
     of a new scheduled service        or a non-scheduled service to a new
     region, have been decided, submit:
   (a)   audited accounts as soon as they are available and not               later
         than   6   months  after   the  expiry    of   the   financial   year   in
         quest ion,
   (b)   3-year business plans including a 1-year budget,
   (c)   quarterly management accounts, unless the licensing authorities
         require monthly accounts, to be provided no more than 4 weeks
         after    the period to which they refer, and
   (d)   documentation concerning insurance coverage.
4.   The  licensing authority shall       review the financial       and economic
     situation of any air carrier at least every 12 months.
 ---pagebreak---                                          - 26
      The value of ECU 100 000 referred to in paragraphs 1(a) and 2(a) is
      based on the EEC consumer price index at the date of the entry                into
      force of this Regulation.          When the price index moves so that the
      value   would    increase   or   decrease     by   ECU 10 000   then   the   value
      referred    to   in   paragraphs    1(a)   and   2(a)   shall  be  increased    or
      decreased accordingly.        In such a case the Commission shall           inform
      the Member States and publish the new value in the Official                Journal
      of the European Communities.
                                      Art icle 6
An  air  carrier    must   be  insured   to cover     statutory    liability  risks   in
case of   accidents,      in particular     in respect     of  passengers, cargo     and
th i rd part ies.
                                      Art icle 7
A  condition    to   own   aircraft   shall    not    be  required   for  granting    or
maintaining a licence but a Member State may require the aircraft to be
used by an air carrier to be registered within the Community.
                             AIR OPERATOR'S CERTIFICATE
                                       Art icle 8
An undertaking which carries out commercial              aviation activities must be
in possession     of   an   AOC.  The   AOC   or   an   accompanying   document    shall
clearly   set  out    the   technical   organisation      and  expertise   required    in
order to ensure the safe operation of the specified aviation activities.
 ---pagebreak---                                       - 27 -
(a)   An undertaking shall not operate an aircraft           for the purpose of
      commercial    aviation    activities     otherwise   than   under    and   in
      accordance with the terms and conditions of an AOC. Annex 1 sets
      out the terms and format of an AOC.
(b)   An undertaking shall allow the licensing authority to examine all
      aspects of its intended or actual operations connected with an AOC.
                                      Art icle 9
1.    An  AOC   shall   be   issued   or   maintained   only   if   the  licensing
      authority    is  satisfied    that    the  undertaking    can   ensure   safe
      operations, if not, the AOC shall be varied, suspended or revoked
      as appropriate. For this purpose the undertaking shall demonstrate
      to the licensing     authority:
    (a)   the ability to maintain an adequate organisation,
    (b)   an adequate method of control and supervision of the operation,
           including flight operations,
    (c)   the necessary training programmes, and
    (d)   adequate maintenance arrangements,
consistent with the nature and extent of the operations specified and
as set out in paragraphs 2-10.
2.    The undertaking shall have a management organisation which, as a
      whole,   possesses    the   background    and  experience     necessary   for
      exercising satisfactory operational control and supervision of the
      kind of operations specified in the AOC.
 ---pagebreak---                                    - 28 -
3. The undertaking shall have appointed post holders, acceptable to
   the   licensing authority, who are responsible for, at         least, the
   following functions:
    -   fIight operat ions,
    -  maintenance arrangements,
    -  crew training,
    -  ground operations.
4. The undertaking shall     have an operations manual      and ail   flights
   shall   be conducted   in accordance with      it. The manual    shall  be
   provided for approval to the licensing authority.
5. The undertaking shall arrange for ground handling facilities, not
   necessarily its own,     to ensure the safe handling of its flights.
6. The   undertaking   shall    establish   procedures  for   releasing   its
   fIights.
7. The undertaking shall ensure that its aircraft are equipped and its
   crews qualified as required for      the area and type of operation.
8. The undertaking shall provide appropriate maintenance arrangements
   for all aircraft operated under the terms of its AOC.
9. The   undertaking  shall    maintain   accomodation  and   administrative
   support facilities at the main operating base, appropriate to the
   area and type of operation.
 ---pagebreak---                                         - 29 -
10. If the   licensing authority        is not satisfied with          the demonstrated
    ability as required under         this Article,        it may require        additional
    demonstration      which    may    include      the   conduct     of    one    or   more
    demonstration     flights operated       as   if these were           commercial     air
    transport    fIights.
                                     Art icle 10
1.  The application for the initial           issue and variation of an AOC shall
    include the information specified            in Annex 2.
2.  The application shall be accompanied by the required fee, if any.
3.  The  application      for  a variation      of an AOC shall         be submitted      at
    least 30 days, or, as otherwise agreed, before the date of                      intended
    operat ion.
4.  Other than in exceptional circumstances, the undertaking shall give
    ten   days   prior     notice   to   the    licensing      authority      of   proposed
    changes to appointed post holders.
                                     Article 11
1.  An undertaking      providing    an aircraft       and complete      crew to an air
    carrier    and   retaining    the    functions      and   responsibility        for  the
    operation    of   the aircraft     shall     itself    be subject      to the     safety
    requirements of this Regulation.
2.  Except   in cases      under  paragraph      1, an     air    carrier    utilizing    an
    aircraft    from or providing       it to another undertaking            shall    obtain
    prior   approval     for  the operation        from   the    appropriate      licensing
    authority.     The  conditions     of   the    approval     shall   be    part   of  the
    lease agreement between the parties.
 ---pagebreak---                                    - 30 -
                            GENERAL PROVISIONS
                                 Article 12
1. An operating licence and an AOC shall be valid as long as the air
   carrier     meets   the    obligations     of     this    Regulation.    That
   notwithstanding, a Member State may make provision for a review one
   year after a new      licence or AOC has been        issued and every    five
   years thereafter.
2. An air carrier which ceases operations           for any reason shall     not
   resume operations until the licensing authorities have reaffirmed
   the   financial and technical competency.
3. An operating    licence or AOC which has not been used for 6 months
   shall be resubmitted for approval.
4.  In case of a merger or a takeover          the relevant     licence and AOC
   shall be resubmitted      for approval    in accordance with Article 14.
   The air carrier    in question may continue its operations unless the
    licensing authorities consider that safety is at risk.
                                 Art icle 13
1. An   air   carrier  which   does   not  meet    the   requirements   of  this
   Regulation shall have its operational        licence withdrawn.
2. Notwithstanding paragraph 1, a Member State may grant a temporary
   operating    licence to an air carrier when safety         is not at risk in
   order    to avoid   a cessation     of business     during   a  high  season.
   However, an air carrier which has been declared insolvent shall not
   be granted a temporary licence except in situations where realistic
   financial reorganisation is underway.
 ---pagebreak---                                     - 31 -
                                 Art icle 14
1. Any  application    by  an   undertaking     to   be   granted    an   operating
   licence     and/or   an AOC    shall   forthwith     be   made   public    by  the
   Member State    concerned and the Commission shall be           informed.
2. The Member State concerned shall take a decision on the application
   as  soon as possible, and not         later than one month after          all  the
   necessary   information has been submitted,          taking   into account     all
   available   evidence.   The    decision    shall    be   communicated      to  the
   applicant    undertaking.    A    refusal    shall     indicate    the     reasons
   therefore.
3. Notwithstanding    paragraph    2,  a   period   of   3 months     shall    elapse
   after the day of publication before any decision             is taken    in order
   to permit  interested parties to submit evidence.
4. An undertaking whose application for a licence has been refused may
   ask   the  Commission    to   review     the   case    with    respect     to  the
   requirements of this Regulation and decide whether a licence should
   have been    granted.
                                 Art icle 15
1.  In order    to  carry  out     its  duties    under     this   Regulation     the
   Commission    may obtain    all   necessary    information     from   the   Member
   States and air carriers concerned.
 ---pagebreak---                                            - 32 -
    2.   When   an  air   carrier    does not    supply    the  information   requested
         within    the   time    limit   fixed    by   the   Commission   or    supplies
         incomplete    information, the Commission shall          by decision    require
         the information to be supplied.            The decision shall specify what
         information    is required,      fix   an   appropriate    time  limit   within
         which it is to be supplied and indicate           the penalties provided for
         in paragraph 4 as well as the right to have            the decision reviewed
         by the Court of Justice.
    3.   At the same time the Commission shall send a copy of its decision
         to the    competent authority of the Member State in the territory of
         which the registered office of the air carrier is situated.
    4.   The Commission may, by decision, impose fines on air carriers from
         ECU 1 000 to 50 000 where, intentionally or negligently:
       (a)    they supply incorrect information in response to a request made
              pursuant to paragraph 2 or do not supply information within the
              time Iimit fixed;
       (b)    they produce the required information in incomplete form.
    5.   Decisions taken pursuant to paragraph 4 shall not be of a penal
         nature.
    6.   The Court of Justice shall have unlimited jurisdiction within the
         meaning of Article 172 of the Treaty to review decisions whereby
         the   Commission     has   imposed   a   fine;   it may    cancel,  reduce   or
          increase the    fine.
(5)
 ---pagebreak---                                       - 33 -
                                    Art icle 16
In addition   to the rules of this Regulation        the air carrier must   also
respect the requirements of national corporate         law.
                                    Article 17
1.    The Commission    shall  publish   a report   on  the application  of this
      Regulation by 1 January 1994 and every second year        thereafter.
2.    Member  States   and  the Commission    shall   cooperate  in implementing
      this Regulation, particularly as regards collection of         information
      for the report referred to in paragraph 1.
3.    Confidential   information obtained    in application of this Regulation
      shall be covered by professional      secrecy.
                                    Article 18
This Regulation shall enter      into force on 1 July 1992.
This Regulation shall be binding       in its entirety and directly   applicable
 in alI Member States.
Done at Brussels,                                 For the Council
                                                  The President
 ---pagebreak---                                       34 -
                                                              ANNEX 1
             TERMS AND FORMAT OF THE AIR OPERATORS CERTIFICATE
An AOC will indicate the:
(1)  Name and location of the Undertaking;
(2)  Date of issue;
(3)  Description of the type of operations authorised;
(4)  Type(s) of aeroplane authorised for use;
(5)  Registration   marks of   the authorised   aeroplanes  except   that  an
     air   carrier  may  obtain   approval  for  an alternative   system   to
      inform   the authority   about   the aeroplanes  operated   under   its
     AOC;
(6)  Authorised areas of operation-,
(7)  Names of post holders;
(8)  Special limitations;
(9)  Special authorisations/approvals.
The format of the AOC is in appendix A.
 ---pagebreak---                                     - 35 -
                                                                  APPENDIX A
                                                                       PART 1
                                                                       NR . . .
National heading
                          AIR OPERATOR CERTIFICATE
                      (Statement of Issuing Authority)
 It    is hereby   certified    that   following   an   inspection   of   the
 operational and technical provisions, the undermentioned operator is
 competent to conduct commercial air transport safely in accordance
 with    ICAO Annex 6 part     I and (JAROPS 1) within the          indicated
 Iimi tat ions.
                                Name Operator
                               Locat ion Operator
      Type of operat ions                       Type(s) of aeroplanes
This certificate consists of three parts
                                                            date of issue
                 (Place)              (date)
                                (signature)
                                (Author ity)
 ---pagebreak---                           - 36 -
                                 PART I I
                                 Nr
Registrat ion marks
   Post Holders
 FIight operat ions
 Maintenance arrangements
 Crew training
 Ground operat ions
Area's of operations
 ---pagebreak---                               - 37 -
                                     PART I
                                     NR . . .
       Special I imitât ions
          (VFR only, etc)
Special authorisations/approvals
 CAT I I
 CAT I I I
 MNPS
 ETOPS
 etc + Carriage of dangerous goods
 ---pagebreak---                                       38 -
                                                                     ANNEX 2
              INFORMATION IN INITIAL APPLICATION FOR AN AOC
The following information shall be attached to the application for the
initial issue of an AOC:
(1)  A description of the management organisation;
(2)  The   names    of    the   major    post  holders,    including    those
     responsible    for   flight   operations,   maintenance   arrangements,
     crew   training    and    ground   operations   together   with    their
     qualifications and    experience;
(3)  Maintenance arrangements;
(4)  Procedures for the release of flights;
(5)  The   operations    manual,    inclusive  of   the   approval   of   the
     designated parts.
 ---pagebreak---                                         39 -
                                 Proposal for a
                            COUNCIL REGULATION (EEC)
        on access for air carriers to intra-Community air routes
THE COUNCIL OF THE EUROPEAN COMMUNITIES,
Having   regard    to   the   Treaty   establishing    the    European   Economic
Community, and in particular Article 84(2) thereof,
Having regard to the proposal from the Commission^ 1 ),
Having regard to the opinion of the European Par Iiament^ 2 ),
Having regard to the opinion of the Economic and Social Committee^ 3 ^,
Whereas  it   is important    to establish an air    transport    policy  for the
internal market over a period expiring on 31 December           1992 as provided
for in Article 8a of the Treaty;
Whereas  the    internal  market   shall  comprise  an   area   without  internal
frontiers   in which    the free movement    of goods, persons, services and
capital  is ensured;
(1)
(2)
(3)
 ---pagebreak---                                       - 40 -
Whereas Council Decision 87/602/EEC^1 ) and Council Regulation              (EEC) No
2343/90^2) constitute     the   first   steps   in respect     of   access   for   air
carriers to scheduled    intra-Community air routes to ensure the internal
market ;
Whereas   Regulation  (EEC) No     2343/90   provides    that    the  Council   shall
decide on the revision of the Regulation by 30 June 1992 at the latest;
Whereas   in Regulation    (EEC) No    2343/90   the Council      decided   to adopt
rules governing route licensing for implementation not later than 1 July
1992;
Whereas   in Regulation   (EEC) No 2343/90 the Council          decided   to abolish
capacity restrictions between Member States by 1 January 1993;
Whereas    in Regulation    (EEC)   No   2343/90   the   Council     confirmed    that
cabotage traffic rights are an integral part of the internal market;
Whereas arrangements for greater cooperation over the use of Gibraltar
airport were agreed in London on 2 December 1987 by the Kingdom of Spain
and   the  United  Kingdom    in a   joint   declaration    by    the  Ministers     of
Foreign Affairs of the two countries, and such arrangements have yet to
come into operation;
Whereas the development of the air traffic system             in the Greek    Islands
and   in the Atlantic    Islands    comprising   the   autonomous     region   of   the
Azores is at present    inadequate and for this reason airports situated on
 these  islands should   be temporarily     exempted    from    the application of
 this Régulât ion;
 (1) OJ No L 374, 31.12.1987, p. 19.
 (2) OJ No L 217, 11.8.1990, p. 8.
 ---pagebreak---                                         - 41 -
Whereas it is necessary to          phase out restrictions concerning multiple
designation, fifth-freedom and cabotage rights in order to stimulate the
development of the Community air transport sector and             improve services
for users;
Whereas    it    is  necessary    to  make   special   provision,   under   limited
circumstances,       for   public    service   obligations    necessary   for   the
maintenance of adequate air services to national development regions;
Whereas it is necessary to make special provision for new air services
between regional airports;
Whereas   for air     transport    planning purposes    it  is necessary   to give
Member States the right to establish non-discriminatory rules for the
distribution of air       traffic between airports within the same airport
system;
Whereas the exercise of traffic rights has to be consistent with rules
relating     to   safety,    protection   of   the   environment   and   conditions
concerning airport access and has to be treated without discrimination
on grounds of nationality;
Whereas taking into account problems relating to airport             infrastructure
and navigational       aids   it  is necessary   to   include the possibility of
 imposing certain limitations concerning the exercise of traffic rights;
Whereas, taking into account the competitive market situation, provision
 should   be    made   to   prevent   unjustifiable    economic   effects   on  air
 carr iers;
 ---pagebreak---                                  - 42 -
Whereas it is necessary to specify the duties of Member States and air
carriers for the purpose of providing necessary information;
Whereas it is appropriate to ensure identical assessment and evaluation
of market access for the same types of air services;
Whereas it is appropriate to deal with all matters of market access in
the same Council regulation;
Whereas any possibility   for an air carrier   from a third country  to
exercise traffic rights between Community airports shall be settled in
an agreement between the third country concerned and the Community;
Whereas this Regulation partially replaces Regulation (EEC) No 2343/90
and Council Regulation (EEC) No 294/91< 1 >,
HAS ADOPTED THIS REGULATION:
                                Article 1
1.   This Regulation concerns access to routes between airports within
     the  Community for scheduled and non-scheduled air services.
(1) OJ No L 36, 8.2.1991, p. 1.
 ---pagebreak---                                          - 43 -
2.   The application of this Regulation to the airport of Gibraltar is
     understood     to   be   without      prejudice     to   the   respective       legal
     positions of      the Kingdom of Spain          and the United       Kingdom     with
     regard to the dispute        over sovereignty over the territory in which
     the airport is situated.
3.   Application    of    the   provisions     of  this     Regulation    to  Gibraltar
     airport   shall    be suspended       until  the arrangements        in the    joint
     declaration made       by the Foreign Ministers of the Kingdom of Spain
     and   the   United     Kingdom     on   2   December     1987   have    come     into
     operation. The Governments of Spain            and the United Kingdom will so
     inform the Council of that date.
4.   Airports    in    the   Greek     islands    and    in   the   Atlantic      islands
     comprising the      autonomous region of the Azores shall be exempted
     from   the   application      of   this    Regulation     until   30   June    1993.
     Unless otherwise       decided    by   the Council, on       a proposal      of   the
     Commission, this exemption shall apply for a further period of five
     years and may be continued for five years thereafter.
                                       Art icle 2
For the purposes of this Regulation:
(a)  "air   carrier" means       an   air   transport    undertaking    with    a   valid
     operat ing    Iicence;
(b)  "Community air carrier" means an air carrier with a valid operating
     licence    issued    by   a   Member    State    in   accordance    with    Council
                                     1
     Regulation (EEC)               ( ) [on licensing of air carriers);
(1) OJ No L
 ---pagebreak---                                         - 44 -
(c)   "air   service" means     a   flight   or    a   series   of   flights   carrying
      passengers, cargo and/or mail for remuneration and/or hire;
(d)   "scheduled air service" means a series of flights possessing all
      the following characteristics:
     (i)   it is performed by aircraft for the transport of passengers,
           cargo and/or mail      for remuneration,       in such a manner that on
           each   flight   seats are     available     for   individual    purchase   by
           members of the     public (either directly from the air carrier or
           from its authorised agents);
    (ii)   it is operated so as to serve traffic between the same two or
           more points, either:
         1.     according to published timetable; or
         2.     with flights so regular or frequent that they constitute a
                recognisably systematic series;
(e)   "flight"    means   a departure     from    a specified      airport   towards a
      specified destination airport;
(f)   "traffic    right"    means   the   right    of    an   air   carrier   to   carry
      passengers,     cargo   and/or    mail   on    an   air   service    between   two
      Community airports;
(g)   "seat-only    sales"    means   the   sale    of   seats,    without   any   other
      service bundled such as accommodation, directly to the public by
      the air carrier or its authorised agent;
 ---pagebreak---                                  - 45 -
(h)  "Member State(s) concerned" means the Member State(s) between or
     within which an air service is operated;
(i)  "State of registration" means the Member State in which the licence
    mentioned in paragraph (b) is issued;
(J)  "regional airport" means any airport other than one listed in the
     Annex as a category 1 airport;
(k)  "airport  system" means two or more airports grouped    together as
     serving the same city, as indicated in the Annex;
(I)  capacity shall be expressed as the number of seats offered to the
     general public on a scheduled air service over a given period;
(m)  "public service obligation" means any obligation    imposed upon an
     aircarrier to take, in respect of any route which it is licensed to
     operate by a Member State, all necessary measures to ensure the
     provision of' a service satisfying fixed standards of continuity,
     regularity and capacity which standards the air carrier would not
     assume if it were solely considering its economic interest.
                                Article 3
Subject to this Regulation, Community air carriers shall be permitted by
the State(s) concerned to exercise traffic rights between airports or
airport systems within the Community when they are open for civil air
services.
 ---pagebreak---                                  - 46 -
                               Art icle 4
(a) A  Member    State,   following    consultations     with   other   States
    concerned    and after having informed the Commission, may impose
    a   public   service    obligation     in   respect   of   scheduled   air
    services   to a regional      airport    in its territory on a route
    which is considered vital for the economic development of              the
    region in which the airport is located, to the extent necessary
    to ensure on that route the adequate provision of scheduled air
    services satisfying fixed standards of continuity, regularity,
    capacity and pricing and which standards air carriers would not
    assume    if   they   were    solely    considering    their    commercial
     interest.
(b) The adequacy of scheduled air services shall be assessed by the
    Member States having regard to:
  (i)    the public interest;
 (ii)    the   possibility    of   having    recourse   to   other   forms  of
         transport    and   the   ability    of   such  forms    to  meet  the
         transport needs under consideration;
(iii)    the air fares and conditions which can be quoted to users;
 (iv)    the   combined    effect   of   all    air  carriers   operating   or
          intending to operate on the route.
 ---pagebreak---                                    47 -
(c) If   no  air   carrier    has  commenced    or   is about    to   commence
    scheduled air services on a route for which a public service
    obligation    has been    imposed   then the Member State may        limit
    access ta that route to        only one air carrier for a period of
    up to three years.       The right to operate the service shall be
    offered by public tender to any         Community air carrier entitled
    to operate such air services. The            tender shall be published
    in the Official      Journal of the European Communities and the
    date of submission       for proposals cannot      be earlier    than one
    month after the day of publication. The submissions made by air
    carriers    shall   forthwith     be   communicated    to  other    States
    concerned and to the Commission.
(d) The selection among the submissions shall be made as soon as
    possible    taking    into   consideration     the  quality   of   service
    offered and     in particular    the air fares and conditions which
    can be quoted to users.
(e) Notwithstanding subparagraph (d), a period of two months shall
    elapse after the day of submission before any selection is made
     in order to permit other Member States to submit comments.
(f) The Member States shall take the measures necessary to ensure
    that any decision taken under the provisions of this Article
    may   be reviewed     effectively    and,   in particular, as soon as
    possible    on   the grounds    that   such   decisions   have   infringed
    Community law or national rules implementing that law.
 ---pagebreak---                                      - 48 -
   (g) When a public service obligation has been imposed in accordance
       with subparagraph (a) then air carriers shall              be able to offer
       seat-only sales only       if the air service       in question meets all
       the requirements of the public service obligation. Consequently
       that   air    service    shall    be  considered     as   a  scheduled     air
       service.
   (h) Subparagraph     (c) shall not apply       in any case in which another
       Member    State    concerned    proposes     a  satisfactory     alternative
       means of fulfilling the same public service obligation.
2. Notwithstanding Article 3, a Member State, in a case where one of
   the air carriers licensed by it has started to operate a scheduled
   passenger   air    service on     a new   route    between   regional   airports
   with aircraft of no more than 80 seats, may refuse a scheduled air
   service by another air carrier for a period of two years, unless it
   is operated     with   aircraft    of   no more    than  80   seats, or     it  is
   operated  in such a way       that not more than 80 seats are available
   for sale between the two        airports in question, on each flight.
3. Paragraphs 1(c) and 2 shall not apply to routes when the capacity
   offered exceeds 30 000 seats per year.
4. At the request of a Member State with a legitimate               interest which
   considers    that    the   development     of    a   route    is  being    unduly
   restricted    by   the   terms   of   paragraphs    1 or    2, or   on   its own
   initiative or where        disagreement arises regarding the application
   of paragraph 2, the         Commission shall      carry out an    investigation
   and within    two months of         receipt   of   the  request   shall   take a
   decision   on    the    basis   of    all   relevant      factors   on   whether
   paragraph 1 or 2 shall continue to apply             in  respect of the route
   concerned.
 ---pagebreak---                                         - 49 -
     The Commission shall communicate         its decision to the Council and to
     the  Member    States.    Any  Member   State   may   refer   the  Commission's
     decision   to   the  Council    within    a  time   limit  of  one   month.   The
     Council,    acting    by   a   qualified     majority,    may   in   exceptional
     circumstances     take   a  different    decision    within   a period    of  one
     month.
                                      Art icle 5
In operating air services, a Community air carrier shall be permitted by
the State(s) concerned      to combine air services and use the same flight
number.
                                      Art icle 6
This  Regulation    shall   not   affect   a Member    State's   right   to   regulate
without discrimination on grounds of nationality or             identity of the air
carrier,  the  distribution      of   traffic    between   the  airports    within  an
airport  system.
                                      Art icle 7
1.   The exercise of traffic rights          is subject    to published    Community,
     national,     regional     or   local    rules    relating    to   safety,    the
     protection of the environment         and the allocation of slots, and         to
     the following       conditions:
 ---pagebreak---                                       - 50 -
   (a) the airport      or airport     system concerned         must  have   sufficient
        facilities to accommodate the air service;
   (b) navigational      aids must     be   sufficient      to   accommodate    the  air
        service.
2. When the conditions in paragraph 1 are not met, a Member State may,
   without discrimination on grounds of nationality or identity of the
   air carrier, impose conditions on,             limit or refuse the exercise of
   those traffic rights. Before taking such               a measure, a Member State
   shall   inform the Commission and provide            it    with all the necessary
   elements of     information.
3. At  the   request    of   a Member    State    or   on   its own     initiative   the
   Commission     shall   examine    the   application      of   paragraph    2   in any
   particular    case and       within one month of the date of              receipt of
   the request decide whether          the Member State may continue to apply
   the measure.
4. The Commission shall communicate           its decision to the Council and to
   the   Member    States.    Any  Member    State    may    refer   the   Commission's
   decision    to   the  Council    within     a  time    limit   of  one   month.   The
   Council,    acting     by   a   qualified      majority,      may   in   exceptional
   circumstances      take   a different      decision     within    a period    of  one
   month.
                                     Art icle 8
1. Capacity    limitations     shall   not   apply    to air     services    covered  by
   this Regulation except as set out             in Articles 6 and 7 and         in this
   Art icle.
 ---pagebreak---                                     - 51 -
2.   At  the request of any Member      State for which     the application of
     paragraph 1 has led to serious financial damage for the scheduled
     air   carrier(s) licensed by that Member State, the Commission shall
     carry  out   a review and, on     the basis of     all  relevant    factors,
     including    the   market  situation    and   in   particular     whether   a
     situation   exists whereby    the    opportunities of     air   carriers   of
     that Member State to effectively       compete in the market are unduly
     affected, the financial position of the          air carrier(s) concerned
     and the capacity utilisation achieved, shall           take a decision on
     whether the capacity for scheduled air services to            and from that
     State should be stabilized for a limited period.
3.   The Commission shall communicate its decision to the Council and to
     the Member    States. Any Member     State may    refer   the   Commission's
     decision   to the Council    within   a time    limit  of  one month.     The
     Council,   acting    by  a  qualified    majority,    may   in   exceptional
     circumstances    take a different     decision within     a period    of  one
     month.
                                  Art icle 9
The periods referred to in Articles 4 ( 4 ) , 7(3) and 8(2) shall only start
to run when all necessary information has been made available.
 ---pagebreak---                                      - 52
                                  Art icle 10
1. In   order   to   carry   out    its   duties    under    this  Regulation    the
   Commission may obtain all necessary              information   from   the Member
   States and air     carriers concerned.
2. When   an  air   carrier    does   not   supply    the   information    requested
   within    the   time    limit    fixed    by   the   Commission     or   supplies
   incomplete    information, the Commission          shall   by decision    require
   the information to be supplied.              The decision shall specify what
   information     is required,     fix an       appropriate    time   limit  within
   which it is to be supplied and indicate            the penalties provided for
   in paragraph 4 as well as the right to have              the decision reviewed
   by the Court of Justice.
3. At the same time the Commission shall send a copy of its decision
   to the competent authority of the Member State in the territory of
   which the registered       office of the air carrier is situated.
4. The Commission may,       by decision, impose fines on air carriers from
   ECU 1 000 to 50 000 where, intentionally or negligently:
   (a) they supply incorrect information in response to a request made
        pursuant to paragraph 2 or do not supply information within the
        t ime   Iimit f ixed;
   (b) they produce the required information in incomplete form.
5. Decisions taken pursuant        to paragraph 4 shall not be of a penal
   nature.
 ---pagebreak---                                        - 53 -
6.    The Court of Justice shall        have unlimited    jurisdiction within     the
      meaning of Article      172 of   the Treaty    to review decisions     whereby
      the     Commission    has  imposed   a  fine;    it may   cancel,   reduce   or
      increase the      fine.
                                     Article 11
1.    The Commission     shall  publish a report on the application of           this
      Regulation by 1 January 1994 and every second year           thereafter.
2.    Member   States   and  the Commission    shall    cooperate   in implementing
      this   Regulation, particularly as regards collection of           information
      for the    report referred to in paragraph 1.
3.    Confidential    information obtained    in application of this Regulation
      shall be covered by professional       secrecy.
                                     Article 12
Regulations    (EEC) Nos    2343/90 and    294/91   are hereby    revoked  with   the
exceptions of point (e) of Article 2 and          Annex   I of Regulation (EEC) No
2343/90, and of point (b) of Article 2 and the Annex of Regulation              (EEC)
No 294/91.
                                     Art icle 13
This Regulation shall enter       into force on 1 January 1993.
This Regulation shall be binding        in its entirety and directly      applicable
 in alI Member States.
Done at Brussels,                                  For the Council
                                                   The President
 ---pagebreak---                          - 54 -
                                                       ANNEX
              LIST OF GATEGORY 1 AIRPORTS
BELGIUM :                         BrusseIs-Zaventem
DENMARK :                         Copenhagen-Kastrup/RoskiI de
FEDERAL REPUBLIC OF GERMANY       Frankfurt-Rhein-Ma in
                                  DUsseI dor f-Lohausen
                                  Munich
SPAIN :                           Palma-Mallorca
                                  Madr id-BaraJas
                                  Malaga
                                  Las Palmas
GREECE                            Athens-He I I in ikon
                                  Salonica-Micra
FRANCE                            Paris-Charles De Gaulle/Orly
IRELAND :                         Dub I in
ITALY :                           Rome-F i urn i c i no/C i amp i no
                                  M iIan-L i nate/MaI pensa
THE NETHERLANDS :                 Amsterdam-Sch i pho
PORTUGAL :                        L i sbon
                                  Faro
UNITED KINGDOM                    London-
                                  Heat hrow/Gatwick/S tans ted
                                  Luton
 ---pagebreak---                                        - 55 -
                                  Proposal for a
                             COUNCIL REGULATION (EEC)
                     on fares and rates for air services
THE COUNCIL OF THE EUROPEAN COMMUNITIES,
Having   regard    to    the   Treaty   establishing    the   European   Economic
Community, and in particular article 84(2) thereof,
Having regard to the proposal from the Commission^ 1 ),
Having regard to the opinion of the European Par Iiament^ 2 ),
Having regard to the opinion of the Economic and Social Committee^ 3 ),
Whereas  it   is important     to establish an air    transport   policy  for the
internal market over a period expiring on 31 December           1992 as provided
for in Article 8a of the Treaty-,
Whereas  the    internal   market   shall  comprise  an  area   without  internal
frontiers   in which    the free movement     of goods, persons, services and
capital  is ensured;
(1)
(2)
(3)
 ---pagebreak---                                    - 56 -
Whereas Council Directive 87/601/EEC< 1 ) and Council Regulation (EEC) No
2342/90( 2 ) constitute the first steps in respect of air fares to ensure
the internal market;
Whereas in Regulation (EEC) No 2342/90 the Council decided to introduce
a system of double disapproval for all air fares by 1 January 1993;
Whereas air fares normally should be determined freely by market forces
where competition exists;
Whereas until    the free access to the market   takes full effect  it is
necessary to provide for a transitional period;
Whereas it is necessary to establish clear criteria for the assessment
of air fares-,
Whereas it is appropriate to ensure identical assessment and evaluation
of air fares for the same types of air services;
Whereas in situations where competition is limited it is appropriate to
provide for a transparent     and objective procedure according to which
Member States may ask the Commission to examine and decide on whether a
proposed air fare conforms with the criteria laid down;
Whereas it is necessary to specify the duties of Member States and air
carriers for the purpose of providing necessary information;
Whereas   it is appropriate to deal with all matters of pricing    in the
same Council Regulation;
(1) OJ No L 374, 31.12.1987, p. 12.
(2) OJ No L 217, 11.8.1990, p. 1.
 ---pagebreak---                                     - 57 -
Whereas possibilities for third country air carriers to charge air fares
on routes within the Community should be settled in an agreement between
the Community    and   the third country   concerned; whereas    in order   for
third country air carriers to participate normally        in the market    they
should be able to charge the normal economy fare or its equivalent;
Whereas    this  Regulation   replaces   Regulation  (EEC)   No   2342/90   and
                                                           1
partially replaces Council Regulation (EEC) No 294/91( ),
HAS ADOPTED THIS REGULATION:
                                   Article 1
This Regulation shall apply to the criteria and procedures to be applied
for the establishment of air fares and rates charged by air carriers on
air services within the Community.
                                   Art icle 2
For the purposes of this Regulation:
 (a) "air fares" means the prices to be paid in ECU for the carriage of
     passengers    and baggage on air    services and  the conditions     under
     which   those   prices apply,   including  remuneration   and  conditions
     offered to agency and other auxiliary services;
 (1) OJ No L 36, 8.2.1991, p.1.
 ---pagebreak---                                      - 58 -
(b) "rates" means the prices to be paid in ECU for the carriage of air
    cargo and/or mail on air services and the conditions under which
    those prices apply, including remuneration and               conditions offered
    to agency and other auxiliary services;
(c) "standard    rates"   means   the    rates   which   the    air   carrier    would
    normally quote including the availability of normal discounts;
(d) "seat-only    sales"   means   the    sale   of  seats,     without    any   other
    service      bundled such as accomodation, directly to the public by
    the air carrier     or its authorised agent;
(e) "air   service"   means   a  flight     or  a series     of    flights   carrying
    passengers,    cargo and/or mail for remuneration and/or hire;
(f) "scheduled air service" means a series of flights possessing all
    the     following characteristics:
         (i) it    is   performed     by    aircraft    for     the    transport    of
             passengers, cargo and/or mail for remuneration, in such a
             manner    that   on   each     flight   seats     are    available    for
              individual    purchase     by   members   of    the    public    (either
             directly    from   the    air   carrier   or   from     its   authorised
             agents) ;
        (ii) it is operated so as to serve traffic between the same two
             or more    points, either:
             1. according to published timetable; or
             2. with fl ights so regular or frequent that they const i tute
                 a recognisably systematic series;
 ---pagebreak---                                       - 59 -
(g)  "flight" means    a departure       from  a specified     airport    towards a
     specified   destination airport;
(h)  "air   carrier"  means    an  air    transport    enterprise    with   a  valid
     operating license;
(i)  "Community air carrier" means an air carrier with a valid operating
     license   issued   by   a  Member     State   in   accordance    with   Council
     Regulation (EEC) No             C ) [on licensing of air carriers];
(J)  "Member State(s) concerned" means the Member State(s) between or
     within   which an air service is operated;
(k)  "reference    fare"   means     the    lowest    one   way   or    return,   as
     appropriate, fully flexible fare charged by a Community air carrier
     on the route in question;        if more than one such fare exists, the
     arithmetic average of      all such fares shall be taken, taking into
     account the number of seats        offered at the fare by each Community
     air carrier on the route.
                                    Art icle 3
     (a) Member   States   shall   not    disapprove    air  fares   and   rates of
          Community air carriers       if they are reasonably related to the
          applicant   air   carrier's      long-term    fully-allocated     relevant
          costs, while taking     into account the need for a satisfactory
          return on capital and for an adequate cost margin to ensure a
          satisfactory safety standard.
(1) OJ No L
 ---pagebreak---                                    - 60
   (b) In disapproving air fares pursuant to subparagraph (a), Member
       States shall also take into account other relevant factors, the
       needs   of   consumers   and    the  competitive    market    situation,
       including   the fares of other       air carriers operating       on   the
       route and the need to prevent       dumping.
   (c) The fact that a proposed air fare is lower than that offered by
       another Community air carrier operating on the route shall not
       be   sufficient reason for withholding approval.
2. Air  carriers shall    not  charge air     fares or   rates   that   are, in
   relation   to  the   criteria    defined   in  paragraph    1(a)   and    (b),
   excessively high to the     disadvantage of users or unjustifiably low
   in view of the competitive      market situation.
3. Only Community air carriers shall be entitled to introduce               lower
   fares   than the existing ones.
                                 Art icle 4
1. Air  fares offered     to  tour   operators   or  offered   to   the   public
   specifically    combined   with    accomodation    arrangements     for    the
   duration of the trip and air fares for groups larger than 6 persons
   shall be   approved automatically.
 ---pagebreak---                                    61 -
2. Air fares referred to in paragraph 1 shall be communicated to the
   authorities at the latest    the day before the flight.
3. Seat-only air fares on non-scheduled air services are to be treated
   in accordance with Articles 3, 6 and 7.
                               Art icle 5
1. Rates  charged   by Community   air  carriers shall  be  set  by  free
   agreement between the parties to the contract of carriage.
2. Air carriers operating within the Community shall make available on
   request all standard rates to the general public.
                               Art icle 6
1. An air carrier shall submit     its proposed air fares for scheduled
   air services in the form prescribed by the Member States concerned.
2. Aeronautical authorities shall not require air carriers to submit
   air fares   in respect of scheduled air services more than 45 days
   before they come into effect.
3. An air   fare for a scheduled air service shall be considered       as
   approved   unless, within  30 days of    the day of   submission,  the
   Member State(s) concerned has(have) notified its(their) disapproval
 ---pagebreak---                                    - 62 -
   to   the  applicant   air   carrier   and   to   any  other  Member    State
   concerned, stating    its(their)    reasons or unless the procedure in
   Article 7 has been     initiated.     At the    request of either Member
   State,    consultations    shall   take    place   between      the   States
   concerned within the 30-day period.
4. On the basis of the experience acquired since the entry into force
   of this Regulation and after consultation with the Member             States
   the Commission may, when submitting on 1 January 1996 the report
   provided for    in  Article 11, decide that air fares which are not
   covered by Article 7 shall be approved automatically.
5. A Member State may refer the Commission's decision to the Council
   within a time limit of one month.        The Council acting by qualified
   majority may in exceptional circumstances take a different decision
   within a period of two months.
6. A Member State shall permit a Community air carrier to match an air
   fare   already approved for a scheduled air service between the same
   city-pair    on  the basis   that   this provision    shall  not   apply  to
    indirect   air  services which    exceed   the   length  of  the   shortest
   direct service, measured by the normal flight routing, by more than
   40%.   Member   States   may   also   permit   a   Community   air   carrier
   operating a direct scheduled air         service to match prices already
   accepted or published for a non-scheduled air service operated on
   the same route provided that both products are equivalent           in terms
   of quality and conditions.
7. Member States concerned may not limit their approval to less than a
   season unless requested by the applicant air carrier.
 ---pagebreak---                                     - 63
8. An  air   fare   for  a scheduled     air  service, once     approved,    shall
   remain in     force until   it expires or is replaced. It may, however,
   subject to Article 3 ( 1 ) , be prolonged by the air carrier concerned
   after   its original     date of expiry for a period not exceeding 12
   months.
                                  Art icle 7
1. A Member    State concerned may, for a scheduled           air service on a
   route   where    competition   is   limited,   request   the   Commission    to
   examine whether an air fare, which          is not covered by the Annex,
   complies with Article 3(1).          The Member State shall       at the same
   time   inform    the  other   Member    State(s)   concerned     and  the   air
   carrier concerned. The Commission shall forthwith             publish in the
   Official    Journal  of  the European Communities       that   the air    fares
   have been     submitted for examination.
2. For the purposes of this Regulation limited competition is said to
   ex ist on a route:
        where significant barriers to market entry are            in force, e.g.
        at coordinated airports, and where there are not at least three
        air carriers with pricing        freedom exercising     traffic rights,
        each at least once per day, between the airports concerned, or
        where public service obligations exist, or
        where at most 30 000 seats offered for         sale yearly by only one
        air   carrier   or   two  air    carriers   under   a   joint   operation
        agreement.
 ---pagebreak---                                      - 64 -
3.   An air fare which has been submitted for examination in accordance
     with   paragraph   1  within     21  days   of   its   submission     to   the
     aeronautical author ities concerned shall not, unless the Commission
     within   21  days  decides otherwise, enter        into  force   during    the
     examination by the    Commission.
4.   The  Commission   shall   give    a decision   on   whether   the   air  fare
     complies with Article 3(1) as soon as possible and in any event not
     later than two months after having received sufficient            information
     from   the air  carrier   concerned. The Commission        shall   take   into
     account all information     received from interested parties.
5.   Notwithstanding    paragraph     1,  the   Commission    may   on    its   own
      initiative   investigate   whether     an  air   fare   conforms     to   the
     provisions of this Regulation.
6.   The Commission shall communicate       its decision to the Member States
     concerned and to the air carrier concerned.
7.   A Member State concerned may refer the Commission's decision to the
     Council within a time      limit of one month. The Council         acting by
     qualified    majority   may    in   exceptional    circumstances      take   a
     different    decision within a period of one month.
                                   Art icle 8
At  least once a year     the Commission     shall  consult   on air     fares for
scheduled   air  fares and   related matters with      representatives of       air
transport   user organisations    in the Community,      for which purpose      the
Commission shall supply appropriate information to participants.
 ---pagebreak---                                        - 65 -
                                     Art icle 9
Air carriers from third countries with traffic rights between Community
airports shall    be able to match        the normal     economy    air   fare or    its
closest equivalent unless otherwise provided for in an agreement between
the Community and a third country.
                                     Art icle 10
1.    In  order   to    carry   out   its   duties    under    this   Regulation     the
     Commission    may obtain     all necessary      information     from   the Member
     States and air      carriers concerned.
2.   When   an  air    carrier   does   not   supply    the   information     requested
     within    the    time    limit   fixed    by   the   Commission      or    supplies
      incomplete    information,    the Commission      shall   by decision      require
      the information to be supplied.            The decision shall specify what
      information    is required,     fix   an    appropriate     time    limit   within
     which   it is to be supplied and          indicate     the penalties       provided
      for  in paragraph     4 as well      as the    right    to have    the    decision
      reviewed by the Court of Justice.
3.   At the same time the Commission shall send a copy of its decision
      to the competent authority of the Member State in the territory of
     which the     registered office of the air carrier is situated.
 ---pagebreak---                                     - 66 -
4. The Commission may,      by decision, impose fines on air carriers from
   ECU 1 000 to 50 000 where, intentionally or negligently:
   (a) they supply incorrect information in response to a request made
        pursuant to paragraph 2 or do not supply information within the
        t ime   Iimit fixed;
   (b) they produce the required information in incomplete form.
5. The Commission may, by decision, impose fines on air carriers for
   infringements of this Regulation up to a maximum of 10% of the
   annual    turnover   for   the relevant   activity  of  the  air carrier
   concerned.
    In fixing the amount of the fine, regard shall be had both to the
   seriousness and to the duration of the infringement.
6. Decisions taken pursuant to paragraphs 4 and 5 shall not be of a
   penal nature.
7. The Court of Justice shall have unlimited jurisdiction within the
   meaning of Article 172 of the Treaty to review decisions whereby
   the Commission      has   imposed  a fine;   it may   cancel, reduce or
    increase the fine.
                                  Article 11
1. The Commission shall publish a report on the application of this
   Regulation by 1 January       1994 and every second year thereafter.
 ---pagebreak---                                   - 67 -
2.   Member  States and the Commission    shall  cooperate  in implementing
     this Regulation, particularly as regards collection of     information
     for the report referred to in paragraph 1.
3.   Confidential  information obtained in application of this Regulation
     shall be covered by professional secrecy.
                                Art icie 12
Regulation (EEC) No 2342/90 is hereby revoked.
                                Art icle 13
This Regulation shall enter into force on 1 January 1993.
This Regulation shall be binding in its entirety and directly applicable
in alI Member States.
Done at Brussels,                             For the Council
                                              The President
 ---pagebreak---                                        - 68 -
                                                                        ANNEX
The Commission shall not be obliged to investigate air fares for which
any of the following conditions apply:
         Minimum stay of at least six days;
         Sunday rule;
         Reservation    for   the    entire   trip,    ticketing     and   payment    to
         be made    at  the same      time, except     that   reservation      for   the
         return   trip may be made at a           later  time; cancellation         only
         permissible    prior    to departure of outbound          travel    and   at a
         fee of at     least   20% of the price of         the ticket; change of
         reservation only permissible at a fee;
         Passenger    to be     aged   not   more   than   25   years    or  not    less
         than   60   years   or   father    and/or   mother    with    children     aged
         not  more    than   25   years    travelling    together     (minimum     three
         persons);
         specific    combination     with   accommodation     for   the duration of
         the trip-,
         off-peak;
         Any equivalent or more stringent condition.
 ---pagebreak---  ---pagebreak---  ---pagebreak---                                              - 69
                                                                   ISSN 0254-1475
                                                             COM(91) 275 final
                                                     DOCUMENTS
EN                                                                             07
                                Catalogue number : CB-CO-91-370-EN-C
                                                             ISBN 92-77-75316-1
Office for Official Publications of the European Communities
 L-2985 Luxembourg