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IP/06/582

Brussels, 5 May 2006

South East Europe flying towards the EU: first steps taken for extending the Single Aviation Market

Today in Salzburg, the European Union and Transport Ministers of eight South-East European partners (Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the Former Yugoslav Republic of Macedonia, Romania, Serbia and Montenegro and the United Nations Mission in Kosovo) as well as of Iceland and Norway signed a political agreement to create a European Common Aviation Area (ECAA). The Agreement provides for new market opportunities for the European aviation industry by creating a single market for aviation consisting of 35 countries and more than 500 million people. It will ensure high and uniform safety and security standards across Europe as well as uniformly applied competition rules and consumer rights.

The European Commission’s Vice-President Jacques Barrot welcomed this unprecedented development: “The creation of the European Common Aviation Area will put impetus on the political and economic integration of Europe, for which air transport plays a key role. The agreement will open up market opportunities for the aviation industry and give people better travel options.”

The ECAA Agreement is the first comprehensive aviation agreement accomplished since the adoption by the Council, in June 2005, of a roadmap aiming to develop the Union’s external aviation policy. One fundamental aim of this policy is to create a wider Common Aviation Area with neighbouring countries by 2010. A Euro-Mediterranean aviation agreement with Morocco has already been reached (15/12/2005).

The ECAA Agreement will ensure high and uniform safety and security standards across Europe as well as uniformly applied competition rules and consumer rights. This harmonisation of standards, especially in the fields of aviation safety and security, will ensure that the public’s growing demand for air services is met adequately, limiting incidents or delays. To assist in the improvement of standards in South-East Europe, the EU is financing more than 30 workshops, study visits and expert advice to all beneficiary countries in 2006 and will continue to grant long-term assistance in order to achieve a true common aviation area by 2010.

The Agreement provides for new market opportunities for the European aviation industry by creating a single market for aviation consisting of 35 countries and more than 500 million people i.e. the ECAA partner countries will add an extra 52 million inhabitants to the single European market. Air traffic between the EU and South-East Europe has seen significant growth recently, 121% growth since 2001. As existing restrictions on flights between the EU and the Balkan region will be removed, a level playing field for European carriers will be created and the trend for growth would be accelerated. Tourism, which is a huge growth area in South East Europe, and the high number of under-utilised airports, will create opportunities for further growth to be attained, as well as creating investment opportunities and enabling capital flow from both sides as a result of relaxing current restrictions on airline ownership and control rules.

Meanwhile, as forecasts for aircraft movements in the region are predicted to increase by more than 6% annually in the coming years, the Agreement also aims to ensure that congestion in the skies will be eliminated by controlling air traffic flows in the most efficient manner. Existing blockages in the air traffic management system resulted from closure of airspace during the war period. The ECAA initiative commits all Partners to extend the Single European Sky initiative to South-East Europe.

The formal signature of the agreement in all language versions is expected for 8 June at the next Transport Council.
For more information please visit:

http://ec.europa.eu/transport/air/international/index_en.htm

ANNEX 1 -

Background : State of play of external aviation relations

Air transport plays a vital role in the European economy and for international trade. The creation of a single air transport market in the EU has created substantial benefits for consumers and improved the competitiveness of the EU air transport industry. The EU air transport industry generates €120 billion annual revenues, employs 3 million people and accounts for more than 30% of worldwide air transport. However, until recently, air transport relations with third countries did not appropriately reflect the achievements of the EU air transport market.

Following the European Commission’s Communication on external aviation relations presented in March 2005[1], a comprehensive agenda was set by EU Transport Ministers in June 2005 for developing this important field of activity. This roadmap for the EU’s external aviation policy is being implemented through close cooperation between the 25 Member States and the European Commission, with extensive consultation of stakeholders.

The three pillars of the external aviation agenda aim at:

  1. Ensuring legal certainty of existing bilateral air services agreements between EU Member States and third countries. This guarantees the necessary continuity of air services and creates a stable operating environment for the EU airline industry.
  2. Developing a Common Aviation Area with the EU’s neighbouring countries by 2010;
  3. Negotiating comprehensive air transport agreements on EU level with certain third countries. Such agreements will go far beyond the scope of traditional air services agreements. The aim of such agreements is to create new economic opportunities for the European air transport industry and to ensure fair competition in a level playing field through a process of regulatory convergence.

I. Legal certainty of existing bilateral agreements

Traditionally, air services agreements have restricted the right to operate flights between two countries to the national airlines of both countries. Such nationality restrictions have been found incompatible with EC law. Since the establishment of a common aviation market in the EU, all EU airlines are entitled to have non-discriminatory market access. Therefore, it is necessary to remove the nationality restrictions in bilateral agreements in order to allow all EU airlines non-discriminatory market access to third countries.

During the past 18 months, the European Commission and EU Member States have brought more than 400 bilateral air services agreements into legal conformity with European Community law. A total of 62 countries in all continents have recognised the EU common market in their air services agreements, allowing European air carriers to operate flights between any EU Member State and these countries. They have done so either in bilateral negotiations with EU Member States – e.g. United Arab Emirates, Dominican Republic and Senegal – or in so-called horizontal negotiations with the European Commission. 23 countries, including Chile, Australia, New Zealand, Singapore, Malaysia, Morocco, Georgia, and Ukraine, have corrected all their bilateral agreements with EU Member States in a Horizontal Agreement with the European Community. More horizontal negotiations are currently under way with countries in different geographic regions.

II. The wider European Common Aviation Area

The EU has made substantial progress in developing a wider Common Aviation Area by 2010.

1. European Common Aviation Area

In December 2004, the Council of Ministers authorised the European Commission to start negotiations with eight South-East European partners (Albania, Bosnia and Hercegovina, Bulgaria, Croatia, the Former Yugoslav Republic of Macedonia, Romania, Serbia and Montenegro and the U.N. Mission in Kosovo) on a “European Common Aviation Area” (ECAA) agreement. The objective was to integrate the EU’s neighbours in South-East Europe in the EU's internal aviation market, with open market access and full application of the EC aviation law.

The negotiations opened on 31 March 2005 with a multilateral high-level meeting, at which all negotiating parties expressed support for reaching an ECAA Agreement as quickly as possible. In order to give the ECAA partners time to prepare for the full application of EC aviation law, the EU developed a country-specific gradual approach: Once ECAA partners have fully implemented EC aviation law, ECAA airlines will have open access to the EU market. The transitional arrangements were negotiated in October and November 2005 with each ECAA partner individually. After only nine months of negotiations, the text of the ECAA agreement was agreed between all parties in December 2005.

The ECAA creates an integrated aviation market of 35 countries and more than 500 million people. The European airline industry has welcomed the new market opportunities created by the ECAA. The ECAA Agreement will extend the application of the complete EC aviation law to ECAA partners, including issues such as economic regulation, aviation security, airport security, air traffic management, environmental protection, passenger protection and competition rules. In consequence, the Agreement will lead to equally high standards in term of safety and security across Europe.

Since air transport is crucial for linking people, countries and economies, the ECAA Agreement provides an additional impetus to the economic and political integration of Europe. (For further information on the ECAA Agreement see Annex 1)

2. Morocco

The Council of Ministers authorised the European Commission in December 2004 to negotiate a Euro-Mediterranean Aviation Agreement with Morocco. After five rounds of negotiations, the Agreement was initialled at the Euromed Transport Minister Conference in Marrakech on 14 December 2005.

The aviation agreement with Morocco is an unprecedented example of what can be achieved in air transport negotiations between the EU and a third country. The agreement sets a benchmark for future agreements in the neighbouring region of the EU. The agreement provides for a very high degree of regulatory convergence. Morocco will implement most parts of EU aviation legislation. The EU’s internal air transport market will be gradually opened for Moroccan carriers in accordance with the degree of regulatory convergence.

The first phase starts on a provisional basis from the date of signature of the EU-Morocco Agreement. From the beginning, all EU airlines will have the right to operate without any restrictions between any point in Europe and any point in Morocco. Moroccan airlines will have the same rights, however, subject to a satisfactory evaluation of Moroccan regulatory standards, notably on aspects of aviation safety.

The second phase will start once Morocco has satisfactorily implemented the relevant EU aviation law. Moroccan carriers will have access to intra-EU routes. EU air carriers will have the right to continue cargo flights and – with some restrictions - passenger flights beyond Morocco.

Safeguard clauses in the agreement with Morocco ensure that appropriate measures can be taken in case Morocco should not comply with the relevant EU legislation. (For further information on the EU-Morocco Air Transport Agreement see Annex 2.)

3. Ukraine

Negotiations with Ukraine would be an excellent opportunity to extend the Common Aviation Area to the East. Therefore, the European Commission proposed in November 2005 to open aviation negotiations with Ukraine. Ukraine is, next to the Russian Federation, the largest neighbour of the enlarged EU and a clear priority in the context of the European Neighbourhood Policy. On the occasion of the signature of the horizontal air services agreement between the EU and Ukraine in December 2005, President Yushchenko confirmed that Ukraine is ready to conclude a full aviation agreement with the EU and to implement EU aviation rules and regulations.

As in the case of Morocco, the agreement would seek the maximum possible level of regulatory convergence, as well as appropriate safeguard measures. Since Ukrainian standards still have to improve significantly in several areas (such as safety, competition, economic regulation), Ukraine would need to comply with the relevant EU standards before opening the EU market to Ukrainian air carriers. The European Commission provides assistance to the Ukrainian aviation authorities in the form of aviation seminars etc. in order to promote the swift implementation of EU standards in Ukraine.

4. The Russian Federation

Against normal international practice, Russia obliges air carriers to pay high sums for the overflight of Russian territory. These overflight payments create a cost burden of around €300 million per year for EU airlines when flying between Europe and the Far East. Therefore, the European Commission has undertaken significant efforts to reduce these payments. A solution to the Siberian overflight problem is sought in the framework of Russia’s accession to WTO. Following the political pressure, Russia finally agreed to put an end to the current system of overflight payments in 2014.

In order to improve the EU’s negotiating position, the Council of Ministers formally authorised the European Commission in March 2006 to negotiate an agreement with Russia on Siberian overflight payments. The negotiations aim at adopting commonly agreed principles regarding the phasing out of the overflight payments during a transition period and the framework for overflights from 2014 on, including an increase in overflight rights for EU airlines which is vital for their commercial operations to the Far East.

III. Comprehensive air transport agreements

In comprehensive air transport agreements on a Community level, the EU can establish a coherent framework for air transport. Such agreements always follow a double agenda: A market opening creating new economic opportunities for the EU air transport industry and related industries (e.g. tourism), and a process of regulatory convergence aimed at establishing a level playing field and fair competition. Various economic studies have demonstrated that such agreements would create economic benefits for the EU in relations with certain key partner countries.

1. Negotiations with the United States

The European Commission was authorised in June 2003 to open ambitious air transport negotiations with the United States. An EU-US agreement will establish an open market with a level playing field for two thirds of the global air traffic. The mid-term objective is to create an Open Aviation Area with unlimited market access including the US domestic market, open investment opportunities and a high degree of regulatory convergence.

The completion of the negotiations with the United States remains a clear priority for the EU’s external aviation policy. In November 2005, negotiations on the first phase of the EU-US agreement were concluded. The first-phase agreement will remove the remaining market access restrictions for air traffic between the EU and the US. According to a study undertaken by the Brattle Group, this will create more than €8 bn economic benefits per year. Furthermore, the agreement will ensure a level playing field for EU and US airlines by introducing trans-Atlantic co-operation on issues such as aviation security and state aid.

The EU Transport Ministers expressed their unanimous support for the draft agreement in December 2005, subject to changes in the US policy concerning foreign control of US airlines. Once the US Government has decided on new rules, the EU will assess these rules and subsequently take a decision on the first phase agreement.

2. Other key partners for EU air transport negotiations

The European Commission has proposed in 2005 to open air transport negotiations with some other third countries. Such negotiations would always aim at creating new market opportunities and ensuring a level playing field. Agreements with these countries on a Community level would ensure a consistent framework with equal opportunities for the EU air transport industry.

a) Australia, New Zealand and Chile all share the EU’s market-driven and consumer-oriented approach to aviation policy and are among the most advanced nations with regard to the regulatory framework for aviation and market liberalisation. They are key drivers of aviation liberalisation in their respective regions. This should allow for swift negotiations with positive results for the EU side. More importantly, negotiations with these countries could set benchmarks for air transport agreements worldwide. Agreements with these countries could go beyond the EU-US agreement in terms of open market access and regulatory convergence, including cooperation on competition issues and mutual recognition in a number of critical areas. This would facilitate air services between the EU and these countries and reduce the regulatory burden for EU air carriers. Furthermore, it would create equal opportunities for all EU airlines in relations with these countries.

b) China’s aviation market is characterised by a very rapid growth in air traffic and a trend towards gradual market opening. In this strategically vital market for EU air carriers, EU negotiations would provide for an opportunity to ensure fair competition and a level playing field. Negotiations would aim in the first phase primarily at a process of regulatory convergence and solving “doing business” problems for EU airlines. The process of gradual market opening would be subject to a satisfactory degree of regulatory convergence.

c) India has agreed to launch a broad dialogue with the EU in the sector of civil aviation, including closer co-operation in air transport technology, regulation and infrastructure at the recent EU-India Summit. An EU-India Aviation Summit will take place in November 2006 in Delhi.

ANNEX 2 -

European Common Aviation Area Agreement

Background

In October 1996, the Council granted the Commission a mandate to negotiate a multilateral agreement with the then candidate countries as well as Iceland and Norway. The reason for such a mandate was to open up markets between Europe and its neighbours, so that an ECAA between the Community and third countries follow the same pattern as the internal market itself:

  • Full market opening in terms of access, capacity and fares and freedom of establishment without nationality clauses (on a reciprocal basis).
  • Alignment with Community legislation on issues such as safety, security and air traffic management (ATM).

The negotiations with the then candidate countries were discontinued in 2002, in view of impeding accession. The extension of the mandate to the Balkan region was an important step forward and will help these parties to come closer to the EU in this sector of key economic importance. The text of the multilateral agreement was accepted by all ECAA partners during the final round of negotiations on 20 December 2005. The text has been significantly simplified since it was first negotiated in 1996 with the then ten candidate countries. For instance, competition issues will now be dealt with through the Stabilisation and Association process.

Objective of the Agreement:

The ECAA was expressly designed as an open framework accessible for European countries which wish to fully integrate into the European aviation family and to fit into the Neighbourhood Policy of the Commission.

Architecture of the Agreement

A common, “multilateral main text” forms the basis of the ECAA, which is applicable to all signatories. To this common text are added a series of Protocols accommodating for specific needs of each country joining the ECAA, including the appropriate transitional arrangements. Finally, the Annex to the agreement lists the Community aviation acts that will become applicable within the ECAA.

Technical Assistance:

To benefit from the ECAA Agreement as early as possible, the Commission’s essential role is to provide technical assistance to the Balkan partners. The Commission, with funds from TAIEX organised a seminar in May 2005 to inform the Balkan Partners about legislative developments in the field of aviation. An assessment mission to each partner has also taken place in June-July 2005 to verify the level of harmonisation already achieved. The ensuing report identified several areas for further improvement and the Commission will organise further monitoring visits and assistance for training, twinning etc, with the continued help and assistance from DG ELARG.

The key benefits of the agreement:

  • Creating new market opportunities to reach the combined population of the Balkan region of the order of 52 million people, creating a single market for aviation consisting of 35 countries and more than 500 million people. Air traffic between the EU and South-East Europe has seen significant growth recently, 121% growth since 2001, and this trend would be accelerated through full integration in a common air transport market;
  • An opportunity for industry and consumers, especially as tourism is a major growth area in the coastal regions. Forecasts for aircraft movements in the region predict an average annual growth rate of more than 6% per annum between 2005 and 2011. There are potentially 414 airports in the region to operate to; therefore there is an opportunity for further growth to be attained. As a result, affordable air travel will be increasingly accessible to a greater number of people;
  • Committing all eight ECAA partners to continue harmonising legislation with EU laws, which should result in equal high standards in term of safety and security as well as fair competition across Europe;
  • Removing the remaining market access restrictions on flights between the EU and Balkans, creating a level playing field between Community carriers;
  • Removing existing blockages in air traffic management system, left over from the war period, which resulted in closure of airspace;
  • Committing the region to work together and to improve inter-regional relationships, to the benefit of further European integration;
  • Establishing a Joint Committee which will be responsible for resolving questions relating to the interpretation or application of this Agreement;
  • Creating investment opportunities and enable capital flow from both sides as a result of easing ownership and control rules present in bilateral agreements.

Conclusions

The outcome of these negotiations constitutes significant and valuable progress. The level of regulatory convergence is unprecedented, as all 8 ECAA partners have accepted to align their national aviation legislation to the complete aviation acquis of the Community. Harmonised rules in Europe will create a common, free and safe air transport market, which can be a driving force for other sectors and contribute to the development of the whole region, benefiting consumers and industry alike. This a major step forward where air transport will play a key role in putting impetus on the political and economic integration of Europe.

ANNEX 3 -

EU-Morocco Euro-Mediterranean air transport Agreement

Background:

The Council granted its mandate to the Commission as a first test case for negotiations with our Mediterranean neighbours. The agreement will therefore serve as a reference for any other neighbouring country who may wish to harmonize their legislations with Community law in order to come closer to the EU. This harmonisation is the guiding principle in the EU-Morocco aviation agreement according to which the opening of the markets is considered, supported by an increased technical co-operation.

Architecture of the Agreement

The main elements of the EU-Morocco agreement follow a similar structure and content as the EU-US draft Agreement, but the Moroccan authorities committed themselves to harmonise specific national laws with Community law. The agreement is organised in two phases:

1st Phase: The first phase will enter into force upon the satisfactory evaluation on certain aspects of safety and other matters (consumer protection and use of an operating license). From entry into force, reciprocal opening of direct services between the Community and Morocco will be granted.

2nd Phase: Upon satisfactory implementation of the list of acquis detailed in Annex 6 of the Agreement, validated by a decision of the Joint Committee (time limit: 2 years from entry into force) based on an audit by the European Commission, removal of all restrictions on routes within the EU for Moroccan carriers and rights beyond Morocco for EU carriers (5th freedom rights) will be granted.

The agreement will be a tool to aim for the convergence of Moroccan aviation regulation with Community law. In exchange, the Community will offer a privileged relation of association in the various aspects related to aviation (safety, European single sky, etc), and the access to its market (450 million inhabitants), through the granting of the fifth freedom rights inside the Community.

There are safeguard clauses in the agreement to ensure that if Morocco does not comply with the relevant acquis, Member States or the Community can take action to withdraw from Morocco some benefits gained through the agreement.

The Agreement will be provisionally applied from the date of signature pending ratification.

Technical Assistance:

To Commission will provide technical assistance to Morocco to help speed up implementation of the relevant Community acquis. After the seminar in May 2005 for Moroccan officials to inform them about legislative developments in the field of aviation, an assessment mission to Morocco will also be organised at the beginning of 2006 to verify the level of harmonisation already achieved. Further monitoring visits and assistance for training, twinning etc, with the help and assistance of DG AIDCO are planned.

The key benefits of the agreement:

  • New market opportunity to reach the population of Morocco of the order of 31 million people. Current annual growth of air traffic is around 7%. Around 60% of Morocco’s exports are to the EU and tourism is a growing sector, clearly dependent on air transport, where about 50% of arrivals in Morocco are by air. The Moroccan government has recently adopted a policy which is directly related to increasing tourism. There is an opportunity for European carriers to transport the growing numbers of tourists to Morocco;
  • Morocco places great emphasis on its integration into the European airspace and is in the process of harmonising with EU laws. The opening of the market would be brought about with implementation of the most important EU aviation legislation (notably safety, economic and social legislation). This would benefit EU carriers as they already operate in, are familiar and comply with the regulatory framework that will be put in place in Morocco;
  • Removing the remaining market access restrictions on flights between the EU and Morocco, creating a level playing field between Community carriers. Although Morocco applies bilateral agreements in a relatively liberal fashion, the EU should grab the opportunity to give legal effect to the new liberal policy of Morocco;
  • Removal of capacity limitations may also attract new entrants to the market as opportunities to operate to new airports as well as the legal certainty of operations would encourage new market entrants. Currently, around 24 EU destinations are served from Morocco, eight of them in France (representing about 44% of the total traffic from Morocco), 5 in Germany and 4 in Spain. There will clearly be an opportunity for new entrants from other Member States if capacity limitations in bilateral agreements are removed, as there are a number of Moroccan airports to which Community carriers cannot operate, because of bilateral restrictions;
  • Removal of all restrictions on pricing on all routes between EU and Morocco; price leadership by Moroccan airlines on intra-EU routes will however remain prohibited;
  • Unlimited code sharing between EU, Moroccan and third country airlines;
  • Creation of new opportunities for EU airlines to wet-lease aircraft to Moroccan airlines for use on international routes between Morocco and any third country;
  • The adoption of standardised rules at a Community level to govern relationships with Morocco (and its Mediterranean neighbours) should contribute to market efficiency;
  • Airport developments are underway in Morocco and may put additional impetus on increasing opportunities for European air carriers. These projects running from 2003-2007, totalling around US$135.5m. Further infrastructure developments in Morocco due to the policy of attracting more tourists can be expected in the long-term, such as hotel construction and development of internet provisions for booking flights. In the long-term this should bring further opportunities for the benefit of all carriers operating to Morocco;
  • Most bilateral agreement between Morocco and Member States do not grant fifth freedom rights beyond Morocco. Unlimited fifth freedom all cargo beyond rights would clearly benefit Community cargo carriers. Beyond rights in Africa creates opportunities for cargo carriers for carriage of produce from Africa northbound;
  • Establishing a Joint Committee which will be responsible for resolving questions relating to the interpretation or application of this Agreement.

Conclusions

The outcome of these negotiations constitutes significant and valuable progress, not only in terms of relations between the EU and Morocco, but also the potential of the agreements to serve as a reference for other countries in the neighbourhood who would be willing to harmonise their aviation legislation with Community law. The level of regulatory convergence is unprecedented with a non-European country. This a major step forward where air transport could play a key role in putting impetus on further political and economic integration of the Mediterranean region.


[1] COM(2005)79 on Developing the agenda for the Community’s external aviation policy


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