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  1
  With 1992 approaching rapidly the Commission today adopted a complete
  package of measures and guidelines for shaping a coherent policy for air
  transport in the Community.   The package includes measures relating to
  the working of the market, particularly with regard to air fares and
  access to the market, and measures relating to the conditions under
  which air transport operates:  harmonization of technical requirements
  for air safety and airworthiness, vocational qualifications (licensing);
  ground and airborne equipment standards, air traffic control standards,
  and a guideline on the consequences of consolidating Community air
  transport policy in the field of external relations.
  Mr Karel Van Miert, Member of the Commission with responsibility for
  transport, and Sir Leon Brittan, Member of the Commission with
  responsibility for competition policy, the originators of the proposals
  adopted today, emphasized the pressing need - with 1992 coming up fast
  on the horizon - for a genuine "single market of the skies" to enable
  the air transport and related service industries to develop fully.
  Flexibility is the hallmark of these proposals and it will revitalize
  the airlines;  the outcome can only be good for the consumer in terms of
  cost and quality of air travel.
  The bulk of the proposals adopted today relates to the rules which, on
  1 July 1990, are to supersede the Council Directives and Regulations
  adopted on 14 December 1987.
  It is no doubt too soon for a detailed review of the impact of those
  measures, which only came into force on 1 January 1988.   On the one
  hand, the opening-up of the market, which was both modest and gradual,
  has not yet resulted in the emergence of lower fares to any observable
  degree.   On the other hand, the strong growth in traffic points up the
  need for an infrastructure policy and a common, coherent approach to air
  traffic control.
                          I.  Opening up the market
  Compared with the present rules, the new proposals will mean for any
  operator capable of meeting the technical and financial requirements
  substantial progress towards freedom of establishment and industry
  throughout the Community and towards freedom to price according to
  actual market conditions.
  
  1    COM(89) 373.
                                    - 2 -
                   1.  Pricing policy (fares and tariffs)*
  1987 package                         Proposal
  -    Approval of a fare proposal by  -       Only one of the two Member
        both Member States concerned           States concerned need
                                               approve
                                               the proposal for it to
                                               become
                                               operative
  -    Airlines are permitted to introduce      - In this case the zone
                                                  system is
       fare discounts on conditions which         inoperative and has
                                                  therefore
       become increasingly restrictive as         been abolished.
       the discount on the approved
       "reference fare" becomes deeper
       (the fare zones system).
  -    Arbitration system for          -       A very careful examination
                                               will
       settling disputes over                  be required for "dubious"
                                               fare
       approval.                                  proposals
                                               (dumping or predatory
                                               fares)
                                               (20% less than the
                                               preceding
                                               season) with the right of
                                               appeal
                                               to the Commission
                                       -       The non-approving State or
                                               airline concerned may go to
                                               arbitration.
  -    Price leadership may be         -       Price leadership may be
       exercised only by third- and               exercised by any EEC
                                                  carrier
       fourth-freedom carriers
                          2.  Access to the market
                               Capacity quota
  1987 package                         Proposal
  -    A Member State may not          -       The process of winding down
       intervene to affect the                 intervention will continue
       capacity sharing between its               with a "safety net"
                                                  level of
       airlines and other Member States'          25% to be attained by
       airlines provided that its share           1 April 1992.
       does not fall below 45% up to
       30 September 1989 and 40% thereafter.
  
  -    Safeguard clause.                       -  Strengthened safeguard*SeeAnnexfordefinitions.
                                                  clause.
  -    Passengers carried between              -  Limit raised from 70 to
                                                  100
       hub and regional airports by               seats and all
                                                  inter-regional
       aircraft with fewer than 70                services to be left out.
       seats are left out of the
       calculations.
                                    - 3 -
              Relations between a Member State and its airlines
  1987 package                         Proposal
  -    Subject deliberately left               -  Traffic rights must be
       out.                                    granted in a non-
                                               discriminatory
                                               manner on the basis of a
                                               specification of
                                               requirements
                                               and subject to compliance
                                               with
                                               technical and financial
                                               standards.
                                               The State may check the
                                               economic
                                               viability of an
                                               application;
                                               grounds for rejection must
                                               be stated.
                            Multiple designation
  1987 package                         Proposal
  -    A State may not object to               -  The limit to be reduced
                                                  to
       one of its airports being                  100 000 passengers/year
                                                  or
       served by a number of                   600 round-trip flights on
       airlines designated by another          1 January 1992.
       Member State, provided that the
       route in question accounts for
       over 180 000 passengers/year or
       1 000 round-trip flights (in 1990).
            Services on routes between hub and regional airports
                          and between hub airports
  1987 package                         Proposal
  -    Authorized in principle but             -  Removal of the
                                                  derogations
       with a very large number of                and introduction of
                                                  safeguard
       derogations.                               arrangements under which
                                                  the
                                               Commission may decide
                                               whether
                                               a derogation is to be
                                               granted
                                               (because of congestion at
                                               specific points).
                                               (Note:  An initial period
                                               of
                                               protection will apply for
                                               new
                                               inter-regional routes
                                               operated
                                               by aircraft with fewer than
                                               100 seats:  for three years
                                               another airline is not
                                               permitted
                                               to operate aircraft with
                                               more
                                               than 100 seats on the
                                               route).
                            Combination of points
  1987 package                         Proposal
  -    Combinations of points are              -  Removal of constraints
       permitted subject to:                   and exemptions.
       .  exemptions granted to
          certain Member States.
                                    - 4 -
                                Fifth freedom
  1987 package                         Proposal
  -    Authorized for 30% of annual            -  The limit is raised to
                                                  50%
       capacity.                                  in general and 100% for
                                               aircraft with fewer than
                                               100
                                               seats.
  -    Forbidden between hub airports  -       Authorized between all
                                               types
       except - and under stringent               of airport and for all
       conditions - in the case of                countries.
       Portugal and Ireland.
  -    Forbidden on flights to or
       from Spain.
                                  Cabotage
  1987 package                         Proposal
  -    Forbidden.                              -  Authorized for up to 30%
                                                  of
                                               capacity.
                                               (Cabotage flights must be
                                               extensions of a service
                                               originating or terminating
                                               in the country of
                                               registry).
                  II.  Application of the competition rules
  Application of the competition rules to Community air transport is of
  crucial importance: the aim is to dismantle the arrangements between
  operators which form part of the present compartmentation of the market,
  on the one hand, and, on the other, to guard against any developments
  which might jeopardize the benefits of liberalization.   One of the
  undisputed lessons of American experience since 1978 is the need to
  apply competition rules in this sector in order that the industry, like
  the consumer, may reap the benefits of opening up the market.
  The Council set up the legal framework when the first package of
  liberalization measures was adopted in September 1987.    After that the
  Commission was able to grant group exemptions in respect of bilateral
  and multilateral agreements between air carriers.   In this way the
  Commission adopted regulations on capacity planning and coordination,
  revenue sharing, fare and tariff consultations: slot allocation at
  airports; computer reservation systems; and airport ground asistance
  services.   These regulations expire on 31 January 1991.
  In the Commission's opinion group exemption met a genuine need for legal
  security on the part of air carriers.   The Commission has on every
  occasion been at pains to limit anything that restricts competition, and
  it intends to stick to this approach, with certain changes intended both
  to allow more flexibility (e.g. with timetable coordination) and improve
  transparency (with tariff and fare consultations and slot allocation).
  All this should in particular make it easier for new operators to enter
  the market.
                                    - 5 -
  The Commission also believes it will be of advantage to clarify the
  situation regarding the application of the Treaty rules on competition
  to domestic air transport (within a Member State) and international air
  services (to/from non-member countries).   The reason is that a recent
  judgment of the Court of Justice confirmed that those fields, though not
  covered by the 1987 directives and regulations, are nevertheless within
  the scope of the Treaty rules on competition.   What is of concern here,
  in particular, is a situation in which an airline with a dominant
  position in part of the market succeeds in driving out competition even
  from a domestic route or an international route.   The Commission has
  proposed that the Council should adopt a number of regulations enabling
  the Commission to review arrangements between air carriers for domestic
  and international flights, so extending the group exemptions relating to
  services between Member States mentioned earlier.
                           III.  Back-up measures
  In the communication examined today the Commission underlines the need
  for minimum standards of social provision and safety throughout the
  Community and the fact that it is unacceptable for airlines to be able
  to take advantage of differences between standards in order to win
  market share at the expense of their competitors.   The Commission
  proposes/intends to put up proposals for harmonizing the rules relating
  to personnel licensing (vocational qualifications) in aviation, and
  airworthiness requirements, according to the highest standards of safety
  and technical reliability.
  For example, the Commission will put forward a proposal for mutual
  recognition of licences.   The objective will be to enforce the most
  stringent international standards while ensuring unhindered mobility of
  crews and air traffic controllers throughout the Community.
  Another proposal, on airworthiness requirements, will have the essential
  aim of facilitating transfers of aircraft, spares and components between
  European airlines.   Other subjects will be maintenance schedules and
  training programmes.   Another aim will be to facilitate expansion of
  the leasing of aircraft which meet the most stringent common standards.
  It must be constantly borne in mind that civil aviation and the aircraft
  industry are, by their nature, subject to detailed rules and regulations
  which are generally internationally applicable.   Compliance with safety
  rules and requirements should in principle make all operators subject to
  the same constraints and costs; therefore it should not distort
  competition.   And Community airlines have an excellent safety record.
  The Commission's prime aim is to keep this record up  - or even improve
  it, if possible.   In view of this the Commission proposes to pay
  special attention to ensuring that increased demand for air transport
  and the opening-up of the market do not bring with them the temptation
  to reduce costs by "bending" safety rules, and it will take steps to
  make cooperation between national civil aviation authorities even
  closer.
                                    - 6 -
  The Commission also proposes urgent steps to achieve air traffic control
  on a Community scale and to address problems arising from congestion of
  the airways and at airports.   Some of the relevant proposals are
  already before the Council.   The Commission is now investigating the
  possibility of bringing in a code of conduct on the airport slot
  allocation designed to avoid discrimination between airlines and
  optimize the use of existing resources.
  The Commission would also point out that its proposed code of conduct
  for computer reservation systems was adopted by the Council in June.
  This should benefit consumers and airlines alike.   The Commission is
  now drafting measures to bring in minimum common standards for
  compensating passengers who are overbooked.   A notable aim here is to
  make clearer the rights of passengers who are refused boarding.   This
  will be all the more necessary because freedom to determine fare levels
  will mean that, logically, tickets will no longer be interchangeable.
  Today's proposals are only concerned with the scheduled carriage of
  passengers by air.   The Commission will produce proposals relating to
  air freight in the near future.
  A final point is that, as in other spheres, the implementation of a
  Community air transport policy and a Single Market in this sector, the
  Community as such will from now on, as representative, conduct relations
  with non-member countries as regards both international air traffic and
  cooperation within the relevant international organizations.
  By the end of this year the Commission intends to send to the Council
  proposals on the external-relations aspects with a view to negotiating
  traffic rights with non-member countries.   As with the Directive on
  banking adopted by the Council recently, the aim in negotiations will be
  to achieve genuine access to the market, and scope to compete, similar
  to those which the Community affords to the airlines of non-member
  countries.   The assumption here is that those countries' existing
  rights will not be called into question in advance.
  The proposals will lay down negotiating rules and procedure.   In
  particular they will be designed to institute a procedure for the prior
  provision of information by the Member States; they will set up a
  Community negotiating framework; and will lay down the conditions under
  which negotiating briefs will be requested of the Council.   Lastly, the
  Commission will examine the steps taken by the EFTA countries.
  For further information contact:
  E. Reuter - 235.43.23/235.1321
  E. Kaiser - 235.2210
                                                  ANNEX
                           SOME USEFUL DEFINITIONS
  (Examples are given for illustrative purposes only.)
  First freedom:       The right to overfly across the territory of a
                       State.
  Second freedom:      The right to make technical (non-traffic) stops.
  Third freedom:       The right to set down in a State passengers
                       emplaned in the State of Registry of the aircraft.
               (Example:  British Airways sets down at Frankfurt
               passengers emplaned at London.)
  Fourth freedom:      The right to emplane in a State passengers whose
                       destination is in the State of Registry of the
                       aircraft.
               (Example:  British Airways emplanes at Frankfurt passengers
               flying to London.)
  Fifth freedom:       The right to emplane passengers in a State other
                       than the State of Registry and to set down those
                       passengers in a third State.
               (Example:  British Airways emplanes at Rome passengers who
               are set down at Athens.)
  Sixth freedom:       Like the fifth freedom but with transit via an
                       airport in the State of Registry and possibly with
                       a change of aircraft.
               (Example:  passengers are emplaned at Madrid by Air France
               and set down at Brussels following an intermediate stop at
               Paris.)
  Cabotage: The right to emplane passengers in a State which is not the
            State of Registry of the aircraft and to set them down in the
            former State.
               (Example:  S.A.S. emplanes passengers at Nice and sets them
               down at Paris.)
  Combination of points:
               The right to make a stop in one or two (or more) States
               other than the State of Registry to emplane or set down
               passengers who are all either emplaned or set down in the
               State of Registry.
               (Example:  Alitalia may combine Rome, Frankfurt and
               Brussels by emplaning or setting down passengers at
               Frankfurt and Brussels but is forbidden in advance to
               emplane passengers at Frankfurt and set the same passengers
               down at Brussels (cabotage and fifth freedom!).)

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