MEMO/09/218

Brussels, 06 May 2009

The EU-Canada aviation agreements – Q&A

GENERAL AGREEMENT

Why such an agreement?

Europe and Canada are close international partners, with strong economic, cultural and political ties. However, arrangements for air transport do not reflect this reality, with Canada having restrictive or no agreements on aviation with the vast majority of Member States. The new Agreement transforms this important market to the benefit of European and Canadian consumers and airlines. It also brings legal certainty to operations between the EU and Canada by recognising the principles of the EU internal aviation market and of a Community carrier.

What changes can passengers and the industry expect from the Agreement?

In 2007, nine million people were travelling between the EU and Canada. A study launched by the European Commission suggested that an open agreement would already generate an additional half a million passengers in its first year. After a few years, 3.5 million extra passengers are expected to make use of the opportunities of an open aviation area between the two partners. The Agreement gives additional freedoms to airlines - including the access to new markets and full pricing freedom – as well as an improved way of regulating the industry. An increase in direct flights between the EU and Canada is also expected, as well as more competition and lower prices.

What are the economic benefits of the Agreement?

The Agreement will directly contribute to the further development of trade between the EU and Canada. Aviation is crucial for bringing Canada and the EU closer together by facilitating the flow of people and valuable goods. The opening of our aviation markets could bring economic benefits of at least € 72 million and more than 1,000 extra jobs in the first year alone.

What are the new rights for EU airlines?

• The possibility for any "Community air carrier" to fly between any point in the EU to any point in Canada, without any restrictions on the number of flights. This freedom did not exist before.
• Freedom to enter into commercial arrangements with other airlines, i.e. code-share agreements^[1], which are important for airlines when serving a large number of destinations, and no restrictions for airlines to establish their tariffs in line with competition law.
• The Agreement contains provisions for the phased market opening linked to the granting of greater investment freedoms by both sides:
• Phase one applies where the foreign ownership of airlines is limited to 25 per cent, as was the case when the negotiations on the agreement were completed. Airlines have unlimited freedoms to operate direct services between any point in Europe and any point in Canada. There will be no more limitation on the number of airlines flying between the EU and Canada, and on the number of services operated by any airline. Cargo airlines will have the right to fly onward to third countries.
• Phase two starts as soon as Canada has taken the steps necessary to enable European investors to own up to 49% of a Canadian carriers' voting equity. Since Canada already introduced the possibility in March 2009 to allow up to 49% investment by foreigners, it is possible that the rights associated with phase two of the agreement will be applied from the start. This means certain additional rights, including the right for cargo operators to provide services to third countries from the other party to third countries without connection to their point of origin (so called "7^th freedom" rights) will be available.
• Phase three begins once both sides enable investors to set up and control new airlines in each others' markets. Then passenger airlines will be able to fly onward to third countries.
• Phase four is the final step with full rights to operate between, within and beyond both markets, including between points in the territory of the other Party (cabotage). It will be granted once both sides complete steps to allow the full ownership and control of their carriers by the others' nationals.

Which rules applied to EU-Canada services until now?

Despite a close network of bilateral aviation arrangements, eight Member States^[2] do not yet have an agreement with Canada. Furthermore, many existing agreements are old and do not offer full access to the respective markets. In some agreements, even the number of weekly flights is restricted, and prices are controlled. Existing bilateral agreements between Member States and Canada will be replaced by the EU agreement.

How will the EU and Canada cooperate on regulatory issues?

The Agreement deals with regulatory issues in order to give greater opportunities to airlines in areas where bilateral agreements were restrictive, such as tariff control, pricing, statistics or operating conditions. Airlines can now freely set their tariffs in line with competition law. In the field of safety and security, Canada and the EU are moving towards mutual recognition and one-stop security. This would mean that both partners finally recognise the high level of their respective security and safety systems, and would avoid double checks by authorities. The Agreement provides for a strong mechanism for the application of a non-discriminatory competitive framework. It ensures that airlines cannot be discriminated in terms of access to infrastructure or state subsidies. This would be a novelty in such international aviation agreements. A groundbreaking element is the provisions on environment establishing close cooperation between the Parties to mitigate the effects of aviation, notably global warming.

How will the mechanism to ensure a non-discriminatory competitive framework work?

If a Party believes that there are conditions which negatively affect a fair and competitive environment leading to a disadvantage for its own carriers (for example in the field of state aids), it will be able to take measures. The exact procedures and criteria for this mechanism will be developed in the framework of the Joint Committee.

How will the implementation of the Agreement be monitored?

The Agreement establishes a new governance mechanism: the EU-Canada Joint Committee. It will oversee the implementation of the Agreement, including the facilitation of close regulatory cooperation. The Joint Committee will in particular:

• confirm the move to a next phase of implementation
• discuss important operational issues and market developments
• ensure the non-discriminatory treatment of operators
• make proposals to further develop the agreement
• discuss other issues of bilateral or international importance
• make decisions where provided for in the agreement

When will the Agreement be applied?

Formal signature of the Agreement will take place as soon as all language versions are authenticated by the Parties. The rights of the Agreement will be made available from the day of signature.

How does this Agreement compare to the EU-US Agreement?

AIR SAFETY AGREEMENT

How will the new agreement work?

The agreement provides for the mutual recognition of certification findings and approvals in the areas of airworthiness of civil aeronautical products, services and manufacturing and maintenance facilities as well as environmental testing of civil aeronautical products. It foresees a set of procedures and contains technical requirements which, when complied with enable the two sides to validate each other certification findings without a full certification process.

Exploratory talks between the EU and Canada started in 2003 when the European agency in charge of aviation safety (EASA) became operational. These talks had as objective to clarify how the new EU system will work and how confidence can be built in that system taking into account past co-operation and the confidence already established with Member States administrations and the Joint Aviation Authorities (JAA – European body created by the European Civil Aviation Conference in 1990 to look into all safety matters in Europe). The negotiating mandate was granted by the Council on 21 April 2004.

To maintain confidence in each other's systems, it foresees for joint inspections, investigations, exchange of safety data (such as information of aircraft inspections and accident related information) and increased regulatory cooperation ("early warning system") and consultations at technical level to solve matters before they can become "disputes". It foresees for the creation of a joint committee and sub-committees in the specific areas covered by the annexes – certification of airworthiness and maintenance.

Successful exploratory talks and fruitful past cooperation pushed the negotiations further: Canada has not insisted on a prior confidence building process, provided the agreement contains appropriate safeguard provisions and they can retain a certain involvement in the certification processes themselves and is ready to go for full mutual recognition, in particular in the field of maintenance, which would imply that European administrations would issue maintenance approvals on their behalf and reciprocally.

The scope of the agreement is clearly linked to trade needs (coverage of those products and services actually produced by the parties) and the level of reciprocal trust and confidence of the parties in their ability to conduct the related certification tasks and monitor their continuing safety.

What benefits will the air safety agreement generate?

The Canadian and European companies - aircraft, engine and avionics manufacturer organisations which will benefit from this agreement - are among the world leaders. The combined exports of civil aviation technology exceed €50 billion. European and Canadian trade in aerospace products – in 2008 overall trade in aircraft, spacecraft and parts was worth more than €49 billion - is already significant and will be given yet another boost of growth.

They will save millions of euros a year thanks to shorter and simpler, hence also less costly, products approval procedures and mutual acceptance of products' tests. This, in turn, will also facilitate exchanges and healthier competition.

Airlines will also benefit, since the agreement provides for the use of each other's approved repair and maintenance facilities.

But the benefits of this agreement are even more significant. It will not only make the Canadian and European markets more competitive, it will also make them safer as regulators and enforcement authorities are moving closer to cooperate in all matters of certification, inspections and enforcement to ensure the highest level of safety for passengers and goods.

Last but not least, the agreement has the potential to quickly encompass further areas in safety where the European Aviation Safety Agency has recently seen its remit expanded, such as aircraft operations and pilot licences. These are areas where the relevant technical rules are currently being prepared, and for which the agreement gives an excellent opportunity to find appropriate solutions tailor-made to the needs of airlines and their flight crews.

^[1] These code-share agreements allow use of the code-share partners’ flight designator code to identify flights and fares in computer reservation systems, permit use of logos, service marks, aircraft paint schemes and uniforms similar to those of the code-share partner and provide coordinated schedules and joint advertising.

^[2] Cyprus, Estonia, Latvia, Lithuania, Luxembourg, Malta, Slovakia and Slovenia do not have bilateral air transport agreements with Canada