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SPEECH/07/119












Jacques Barrot

Vice-President of the European Commission, Commissioner for Transport




Turbulent times
























Speech at Aviation Conference, Chatham House
London – 5th March 2007

Good morning Ladies and Gentlemen

It is a great pleasure for me to be here in London.

The title given to this conference is "turbulent times"

Richard Corliss –"Time" magazine's top film writer - once wrote the following words when the video recorder was threatening Hollywood.

He said:

"Today is a time of turbulence and stagnation, of threat and promise...... In other words, it is business as usual."

This quote was about the cinema – but it could equally be applied to the aviation industry.

By its nature, aviation is a turbulent industry.

It operates around the globe in every country. It is exposed to every little change... in the weather... in the economy... in politics... and in customer taste.

But the aviation industry is a remarkable one.

With the human desire for entertainment, and with the creativity of the film makers, cinemas outlived the video recorder.

With the human desire for travel, and with the creativity of the air transport industry, aviation also has a long future - in spite of the terrorists - in spite of high oil prices and - I am sure some of you will say - in spite of government "red tape"!

So let us not start this conference on a pessimistic note.

CONSUMER INTEREST- THE BASICS

I have been asked to open the conference today on the theme of "consumer interest".

I want to look at this question in the wider sense. When we talk about consumer interest, I believe we need to consider a range of different issues.

In the first place, we need to get the basics right.

To put it simply, our first responsibility to air passengers must be to make sure that they arrive at their destination in one piece.

By this I mean we need to address the basic issue of protecting passengers from unsafe aircraft operations and from terrorist attacks.

I believe that both governments and airlines can be proud of the record we have in this area. Year by year aviation has maintained and improved its excellent safety record.

In security, we continue to look for the right balance between strict measures, the quality of travel and the civil liberties of passengers. It is difficult to get this right. But if we err on the side of caution, it is because we know from the past how terrible a terrorist attack can be.

PASSENGER RIGHTS

Looking beyond these fundamental interests, we have also created some basic rights for air passengers in their day to day travel.

Today we find ourselves a few steps from the Ritz Hotel on Piccadilly.

It was César Ritz who first said:

"le client n'a jamais tort" – "the customer is never wrong".

But too often, air passengers have been made to feel as though they are "in the wrong"...even sometimes when the airline has made a mistake or failed to provide the service expected.

Two years ago, we introduced legislation in the EU to guarantee some minimum rights for air passengers.

The idea was to give passengers some legal certainty when their flight is overbooked, delayed or cancelled.

At this point, I must admit that the legislation is complex. However, complexity in legislation does not exempt us from proper implementation.

I am due to produce a Report in a few weeks time on the operation of these rights. I can say now that our general conclusion will be that there is still a certain amount of confusion and frustration.

We need to improve upon this situation.

As I said earlier – this is a turbulent industry – and passengers do understand that. Most people accept that flights are disrupted by bad weather, terrorist alerts or serious safety problems. But these excuses must not be abused.

I think we need a further effort to explain these rules more clearly and to apply them more consistently.

The Commission is ready to work with airlines, with airports, and with the national authorities, to make this happen over the next few months. But I stress...there must be an improvement.

ECONOMIC INTERESTS

The final area of consumer interest I would like to touch upon is the key area of the economic interests of consumers.

Today, there is a clear consensus across much of the World that government should keep out of commercial decisions about air service.

Indeed – most people rightly consider that the consumer interest is best served by ensuring that the market is open, that airlines are constantly competing with each other for the consumer's business.

Most also believe that the airline industry is at its strongest when it has complete freedom to innovate and offer new services and to match its output with the demands of its passengers.

This is not to say that there should be no limits. As I said earlier – governments must ensure that companies deliver safe and secure transport.

They also have a duty to ensure that competition between airlines is fair – this means that airlines in an open market must all play according to the same rule book. This means no discrimination and no special assistance.

This approach has served us well in Europe – just as it has worked in the domestic American market - and in other countries around the World.

Consumer interest is an important reason why we are now focused on expanding the concept of open aviation markets to our relations with other countries around the World.

We believe the template of an open market, underpinned by non-discrimination and high standards, is the right model.

Our international policy is young – but we have already made impressive progress.

We have succeeded in creating a regional aviation market that extends well beyond the Twenty-seven EU Member States:

- to the North and the East, we have a European Common Aviation Area with Norway, Iceland and the Balkans;

- in the Centre, we have a bilateral with Switzerland,

- and to the South we have a similar deal with Morocco.

Across this entire zone, as the agreements the Commission has negotiated are ratified by the Member States, air carriers are becoming free to do business and consumers are enjoying the benefits.

Of course, our biggest challenge until now – and the "holy grail" of air transport agreements – lies to the West. I am talking about the creation of a fully open aviation market across the Atlantic.

I attach great importance to this initiative. I am a long term supporter of close ties between the United States and the European Union – and I do not care if this surprises my former colleagues!

So today, I agree with the objectives of Angela Merkel who wants to use the German Presidency of the European Union to revitalise the transatlantic economic relationship. Indeed, I share her view that we should set our sights high.

This week I am publishing a book that tries to offer the French public a better perspective on the European Union. In that book, I have explained my support for the idea of a broad economic area between the United States and the European Union.

These two markets together represent 70% of the world's economic output. We have very similar views on regulation, standards, safety and security not just in aviation, but across the board.

We should build on this shared experience and economic scale to remove barriers and to drive quality and technological excellence ever higher. We should maybe even think about a establishing a joint body, consisting of representatives of both sides, who could rule on disputes arising from trade and standards.

This broad ambition for our transatlantic relations is inspired by my experiences in the transport sector for which I am directly responsible. For me, aviation is a strategic industry in a strategic relationship.

The air transport negotiations between Europe and America on aviation have certainly been ambitious. They have also been lengthy and difficult.

We now stand close to the end of the process.

In one respect – there is disappointment. On the European side, we wanted to be very ambitious on cross border investment. We wanted to agree on changes in the law to completely liberalise ownership of airlines between the European Union and the United States.

For us, a major part of the open market vision is to ensure not only that companies can compete with one another, but that they can invest wherever they wish in order to better serve the consumer.

Our view is that a European company that is successful in Europe should have the chance to repeat that formula in America.

Similarly, if consumers in Europe are benefiting from a service that is better than the rest, we do not think US consumers should miss out.

It is clear, however, that the there remains considerable political doubts about this step in the United States.

I still believe progress in this area is possible – and I will work to make transatlantic investment in aviation a reality – but realistically, this could take a considerable amount of time.

In the meanwhile, we must think hard about whether we should delay the consumer benefits that are within reach today.

On Friday, European and American negotiators arrived at a text which would be the most ambitious aviation agreement ever signed.

In the next few weeks, I will ask the transport ministers from around Europe to look hard at this deal. In particular, I will ask them to focus on the question of consumer interests and general economic benefits.

If ratified, this agreement would open-up the transatlantic market equally to all airlines – that means that any airline – European or American – can fly any route between any city in Europe and any city in America. Indeed, the US has agreed to grant not only the right for European airlines to fly from any EU city, but also to serve America from any airport in the entire European Common Aviation Area.

On the European side of the Atlantic, this is a revolution. We have already seen the benefits of an open market within Europe and our economic models can predict the effects on the transatlantic.

Our economic studies show that the sole action of opening up the point to point Trans-Atlantic routes in an equal way to both sides will lead to consumer benefits of up to Twelve billion euros. It would also create jobs – we believe around Forty Thousand in Europe and the same number on the other side of the Atlantic. The economy of the United Kingdom, its tourism industry, its financial centre would see the biggest gains.

Consumers, as well as industry, would also benefit from the enhanced coordination and cooperation that the agreement would bring in areas like security. Under the agreement, the European Union and the United States will have the means to cooperate much more intensively than today.

Finally, investment has not been forgotten. While the US itself is not ready to participate in a revolution in cross border investment, we have persuaded them not to block our progress towards that goal.

They have agreed to grant market access to airlines from countries across Europe and Africa even if they are owned and controlled by European interests. This will help clear the way for European investment across around fifty different states and deliver new levels of air service to millions of consumers.

The other side of the coin we must consider is the risk to consumer interest of not concluding an agreement.

Not concluding an agreement will mean that we deny consumers and our wider economy all those billions of Euro in economic benefits until we can reach agreement – this might be in several years time – or we might even find that the possibility never arises again.

Moreover, without being overdramatic, no agreement also means a legal mess. European companies now have a right to no-discriminatory access to international air routes. If an airline from one Member State wants to fly to the United States from another, I will have to enforce that right.

Ladies and Gentlemen,

We should be proud that Europe has a record of taking the consumer interest seriously.

We have built a policy in Europe that requires safety and security. It guarantees essential rights, but it also creates a healthy climate of competition.

Europe's airlines and airports have flourished under this system better than under restricted markets, while consumers and the economy at large have reaped the benefits.

We are correct in our desire to replicate this system on an international level.

Today we have a chance to reach an agreement with the United States that takes a huge step in this direction.

I will ask the transport ministers of Europe to now reflect very hard on the considerable economic benefits available for consumers, for society and for the economy from an aviation agreement with the United States. I repeat what I said earlier – this would be the most valuable aviation deal ever.

Moreover, politically, aviation could be both a symbol of a reinvigorated transatlantic relationship and an example of how to proceed.

If we cannot proceed, we must be sure that we are ready to live with the economic consequences of delaying those 12 billion euros in economic benefits and forty thousand new jobs in Europe for perhaps several years – and of the additional economic damage that legal uncertainty will cause to this sector.

I hope we can go ahead – but I am not ready to predict the outcome.

What I can say is that I have asked my staff to make a tentative hotel reservation at the Hyatt in Washington DC for the day of the next summit between the European Union and the United States on the thirtieth of April.

But just in case, I have also asked them to check whether rooms are available for the same day at the Sofitel in Luxembourg, just across the road from a certain Court of Justice.

I hope I will be in Washington and - I promise – if I go - I will fly through Heathrow.


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