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Brussels, 18 July 2006

More competition and better quality: European Commission wants to strengthen the Single Market for Aviation

The European Commission adopted today a proposal to modernise the Single Market legislation for aviation. The proposal will ensure a consistent application of EU legislation in all Member States, thereby creating equal conditions for all airlines. It imposes transparency in fares announced to passengers. It addresses shortcomings in the legal framework for the Single Aviation market in order to enhance its efficient working.

“The liberalisation of air transport is a European success story: citizens enjoy more travel opportunities and lower fares than ever before. We want to consolidate this success by removing all restrictions to the free provision of air services and ensuring fair competition between airlines”, said Jacques Barrot, Vice-President of the European Commission in charge of transport. “Citizens must enjoy the benefits of the Single Market and have the possibility for more choice and quality. They must be able to easily compare fares between airlines”, he added.

The liberalisation of air transport in the EU, initiated a decade ago, has been a great success. Air transport in Europe has experienced unprecedented expansion at affordable fares. The number of airlines has risen and there has been a general increase in the amount of traffic and competition on routes. Since the full liberalisation in 1997, the number of routes has increased by more than 60% : more cities are covered, including in remote regions. The emergence of new competitors made prices go down dramatically on many routes: today it is generally cheaper to travel by air and more and more European citizens can afford it. These developments contributed widely to economic growth and the creation of direct and indirect jobs.

This huge success must be consolidated. Difficulties remain due to the inconsistent application of the third package across the Member States. This can create restrictions on intra-Community air services that distort the level-playing field and limit competition. Furthermore, passengers do not always reap the full benefits of the Single Market because of unclear information on fares or pricing that discriminates based on residence. The new proposed regulation tackles all these issues.

  1. In order to help passengers compare fares, the proposed regulation imposes that fares should include all applicable taxes, charges and fees. This measure completes the Unfair Commercial Practices Directive[1] which requires that information on prices should include taxes as of December 2007. Today’s proposal aims at giving passengers precise information on the actual price and combats practices whereby fares are published that exclude charges, taxes and fuel surcharges. This will allow to compare fares effectively and avoid misleading advertisement. The proposal also prohibits price discrimination between passengers solely on the basis of their place of residence within the European Union.
  2. The proposal simplifies into one Single regulation three existing regulations[2] on operating licences, the rights to provide air services within the EU, and pricing in air transport – the so-called “third aviation package” adopted in 1992. Obsolete measures have been removed and the text clarified.
  3. The proposed regulation ensures correct application of the rules everywhere in the EU. It streamlines the financial conditions that all EU airlines have to fulfil and the monitoring of these by Member States. It clarifies the criteria for the granting and validity of the licence to operate in the EU. Such criteria include the financial situation of the air carrier and the ownership and control of the company. Operating licences of airlines should be monitored with the same level of severity in all Member States and the Commission should be able to revoke or suspend a licence in cases where Member States do not act rigorously. The proposal eases the leasing of aircraft registered in the Union but introduces stricter requirements for the leasing of third country aircraft – especially when leased with crew - to ensure safety standards and minimize adverse social consequences.
  4. The rules applicable to public service obligations have been revised to diminish red tape. The new rules will avoid excessive recourse by Member States to public service obligations as a pretext for closing certain markets from competition. The Commission may require an economic report explaining the context of the PSO and analysing its adequacy.
  5. The proposal clarifies the framework for relations with third countries. It supersedes completely the outstanding bilateral agreements between Member States that still restrict free provision of air services. For example, it lifts the possibility of bilateral agreements limiting the freedom to set fares on flights from a Member State to a third country but with a connection in another Member State. It also ensures that traffic rights for non-EU airlines to operate between European cities are being negotiated at European level.

[1] Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC and 2002/65 of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council (Unfair Commercial Practices Directive)

[2] Regulation (EEC) No 2407/92 on licensing of air carriers (Official Journal L240 of 24.08.1992, p.1), Regulation (EEC) No 2408/92 on access for Community carriers to intra-Community air routes (OJ L240 of 24.08.1192, p.8) and Regulation (EEC) No 2409/92 on fares and rates for air services (OJ L240 of 24.08.1992, p. 15)

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