AEA s response to the public consultation on the aviation package. Prerequisites for a competitive European airline industry policy

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1 Brussels, 8 June 2015 AEA s response to the public consultation on the aviation package Prerequisites for a competitive European airline industry policy Europe needs a cohesive, supportive aviation policy which begins with the premise that an air transport network is an essential resource, and that necessary or desirable regulation should be designed to take account of the competitiveness of Europe s airlines. The Association of European Airlines (AEA) welcomes the European Commission s initiative to launch a public consultation on its forthcoming aviation package. This is a unique momentum for Europe to check in for the flight forward and to regain its leading role in the global aviation market. Together with the announced new aviation package the Commission s better regulation project is a crucial step towards achieving this goal. The European aviation industry plays a vital role in Europe s mobility, social cohesion, prosperity and growth. Our airlines are ready to commit to the jobs and growth agenda of the Commission and are looking forward to the upcoming discussions. AEA has been the trustworthy voice of the European airlines for over 60 years. This paper, which has been drafted in collaboration with our member airlines as a complement to our response to the public consultation, sets out AEA s key requirements for a European aviation policy which can improve the competitiveness of the EU aviation sector. The decisions taken by this generation of regulators will shape the industry for better or worse well into the future.

2 WHY EUROPEAN AVIATION MATTERS EU air transport makes a significant contribution to the EU economy Air transport is a significant contributor to EU GDP, to the tune of EUR 1 billion 1 per day, generating employment for 5.5 million 2 people. Adding in tourism and other catalytic components supported by the air transport sector brings these figures to a GDP contribution of EUR 1.4 billion 3 per day and over 9 million 4 jobs. Air transport is therefore a key enabler of economic development. Air transport creates connectivity EU airlines connect the continent s remoter regions to the economic and financial centre of Europe and the continent to the world, offering scheduled services to 770 destinations in 152 countries. Almost half of global trade transported is carried on routes to and from Europe, of which European airlines carry the lion s share. For businesses access to frequent and reliable connectivity is vital, and a key criteria when deciding where to open their next office or build their next factory or distribution centre. They rely on the rapid delivery of time sensitive products, with approximately 60% of nextday shipments being transported by air, on an efficient air cargo network. However, it is not enough to focus only on strengthening EU connectivity. While connectivity has continued to grow, it is increasingly being met by flights which connect at hubs beyond EU borders 5, operated by non EU airlines. It is therefore vital that the Commission pursues a policy which strengthens the accessibility of European hubs. The EU s economic, political and strategic interest is compromised While the contribution of the airline sector is generally understood, often the economic reality it faces is not. The airline industry is highly competitive regionally and globally and typically airline margins are low. In this challenging operating environment, EU airlines are further weighed down by a plethora of 2

3 institutionally supported burdens and inefficiencies which the industry can ill afford. It is crucial to have an EU based airline industry which best serves Europe s strategic development interests, i.e. European employment, investment, competitiveness and connectivity. Meanwhile European airlines are losing market share, with an inevitable negative impact on the economy. Flights to and from the EU, performed by an EU based airline will result in at least four times more local employment than the same flight performed by a non EU airline. Promoting a sustainable EU airline sector is not an end in itself but a means to an end. A sustainable airline industry will ensure the economic benefits which are essential to promote the region s interests. Governments in other parts of the world have recognised this and are actively fostering air transport growth to deliver on growth, jobs and prosperity. THE FOUR DRIVING PRINCIPLES FOR A COMPETITIVE EUROPEAN AVIATION POLICY European airlines need a comprehensive and cohesive policy which takes into account the specificities of their business and their markets, and which does not burden them with rules that aim to solve one problem but end up creating others. The most efficient way to achieve such an aviation policy is to build on the four principles described below which are the basis of AEA s vision Flightpath The Commission is therefore requested to: Regulate when there is a need for legislation, for example by liberalising the ground handling market; 3

4 Enforce when existing regulation is not being enforced, for example by implementing the Single European Sky; Not overburden the industry, for example by encouraging Member States to abolish local or national aviation taxes. Together with its member airlines AEA has identified the following key areas which represent the starting point to achieve a sustainable and competitive airline sector in Europe: I. Infrastructure II. Environment III. Safety IV. Security V. Cargo VI. Consumers VII. Level playing field I. INFRASTRUCTURE Connectivity requires infrastructure in the air and on the ground which meets demand, is run efficiently and is affordable. Implement the Single European Sky Today airlines suffer from a highly inefficient and outdated air traffic management system while the solution the Single European Sky was proposed by the Commission more than a decade ago and has enjoyed wide support from the airline industry. Establish an independent economic regulator for European air navigation performance; Ensure greater independence and enhanced capability of National Supervisory Authorities (NSAs); Re organise and unbundle ATM support services; Maintain current infringement procedures against non compliant Member States. 4

5 Enhance capacity, if, where and when it is needed Due to the many regulatory burdens imposed on airlines and operating restrictions imposed on airports, the existing physical capacity cannot always be used efficiently. While airlines operate larger aircraft with higher load factors than ever before, operational restrictions at European airports prevent efficient use of existing airport capacity. Ensure that Member States implement the balanced approach. Operating restrictions such as night flight restrictions and curfews should only be introduced as a last resort; Push national governments to identify capacity challenges and define strategies to resolve them; Focus on inter modality; Apply the state aid guidelines to airports. Further liberalisation of the ground handling market AEA has long called for the opening of the artificially limited ground handling market in order to reduce costs for the airlines, and to enhance efficiency and overall quality at European airports for the benefit of the European consumer. Investigate Member States decisions on market limitations in order to ensure full enforcement and implementation of the current directive at Member State level; Conduct an assessment of the current situation of the ground handling market. 5

6 Need for cost efficient airport charges Despite the adoption of the Airport Charges Directive (ACD) in 2009, and its transposition into national law, key objectives of European airlines such as transparency, effective appeal procedures, abolition of long term or unlimited concession agreements, network charging and pre financing and the application of single till are not being achieved. Issue guidelines setting out detailed transparency requirements for consultations; Set up an independent unit to gather data from airports; Ensure that very long term contracts are also covered by the ACD; Encourage the application of single till; In the long term, revise the ACD. II. ENVIRONMENT Air transport is a global industry and CO 2 emissions from aviation is a global issue. Avoid a European stand alone solution to reduce CO 2 emissions from aviation AEA airlines take their environmental responsibility seriously and are committed to carbon neutral growth from 2020 as part of ambitious industry goals for CO2 emission reduction. To achieve these goals, AEA airlines fully support the four pillar strategy: Create a policy framework for affordable and available sustainable alternative fuels in aviation and to continue to support related industry research projects; Support the development by 2016 of a single global market based measure (MBM) for international aviation under ICAO to be implemented from 2020; Together with other European decision makers, replace the European regional MBM, the aviation ETS, with the global MBM. Ensure a global level playing field and to limit administrative burden. 6

7 III. SAFETY Rules governing safety must strike a fair balance between the need to maximise safety and the avoidance of extensive obligations and related implementation costs. Proportionate revision of EASA Basic Regulation The European Aviation Safety Agency s (EASA) opinion on the revision of its Basic Regulation aims to better enable the agency to meet the needs and expectations of Member States, the European Commission and European citizens. Involve the industry in identifying the areas to be covered by the revision; Avoid duplication of a performance based approach and ensure proper regulation of crucial aspects such as liability; Focus on the consistent implementation of existing rules rather than issuing new rules; Provide a proper justification for EASA to extend its mandate to ground handling, security and environmental issues; Ensure a stronger role for EASA in the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) process and in the interaction with the European Chemical Agency (ECHA), as REACH has a significant impact on safety. IV. SECURITY Airlines need effective and efficient security measures but not at the expense of the passengers experience at airports. Conclude One Stop Security Agreements The conclusion of One Stop Security (OSS) agreements gives EU airlines a competitive advantage by facilitating EU connectivity. The principle of OSS is that an EU country will not re screen any passengers, bags, cargo or mail arriving from non EU airports, as the security controls applied at origin are considered to be equivalent to its own. 7

8 Push for OSS agreements on a reciprocal or unilateral basis with like minded countries with a security system in place that can be recognised as equivalent to that of the EU. Improve current practice on overflights Member States shall provide timely, accurate and actionable information on conflict zones based on reliable security information. Airlines consider safety and security crucial for their daily operations and they should not be confronted with contradicting information which is not based on a proper risk assessment. Avoid new regulation; only an improvement of the current practice on overflights is needed in order to serve society better, together. Develop, in close coordination with the industry, an appropriate alerting system at European level, while acknowledging that the responsibility for deciding on actual overflight remains with the individual carrier. Promote risk based, outcome focused security Evolving threats are continuously mitigated to ensure a safe and secure environment for every passenger and for society as a whole. Ensure that any additional security measures are based on impact assessments; Change the focus from a one size fits all to a risk based security approach; Start looking at other methods of passenger screening, such as behaviour detection and the concept of unpredictability; Find means of passenger differentiation, in order to keep pace with the increasing number of passengers. V. CARGO AEA is pushing for a smooth functioning of the air cargo sector which entails proper infrastructure, a level playing field for the cargo industry and seamless customs and security legislation. Encourage risk based Pre Loading Advance Cargo Information (PLACI) and implementation of the Union Customs Code Following the Yemen incident in 2010, when plastic explosives were discovered on separate cargo planes during a stop over, PLACI programmes are taking shape and should provide an early risk assessment of a cargo shipment to identify cargo consignments that pose a threat to aviation security. 8

9 For PLACI programmes to be implemented successfully, a framework is needed for the customs requirements laid down in the new Union Customs Code (UCC) that will enter into force in May However, several issues may still have to be addressed in the context of the transitional provisions which could delay the enforcement of some provisions beyond VI. Co operate and co ordinate with Home Affairs, Customs and Security authorities at local, EU and international level to share information; Continue to push for alignment of the programme criteria and implementation timelines, based on international standards. Ensure that the new customs legislation is robust, compatible with international standards and avoids introducing additional red tape, such as a requirement for a harmonised tariff code at the first point of entry in the EU. CONSUMERS Passengers and airlines deserve better and clearer Air Passenger Rights legislation. Adopt balanced Passenger Rights legislation The existing regulation 261/2004 has a significant number of serious shortcomings. In the highly competitive environment of air transport, it is in the airlines interest to provide the highest quality of services and care for their passengers. Airlines and passengers need a transparent and fair Regulation, which benefits air passengers and provides clarity about their rights while avoiding extra burdens for the airlines and introducing shared liability among the stakeholders of the value chain. Besides Regulation 261, airlines are being subjected to other multiple consumer laws, such as those governing digital services and the Package Travel Directive being the most unfortunate of examples. Unbalanced consumer laws will diminish much needed ancillary revenues and work against the EU s digital agenda. 9

10 Together with other European decision makers, adopt a balanced regulation without further delay Streamline consumer laws across industries and transport modes to ensure that airlines are not subject to heavier burden than other modes of transport. VII. LEVEL PLAYING FIELD In order to guarantee a level playing field we need to get rid of distortions and discrimination. Abolish national or local aviation taxes Many taxes have been introduced or proposed in several EU Member States, at either national or local level, raising revenues for non aviation related purposes. These distortive taxes have a detrimental effect on jobs, growth and competitiveness of European airlines. Push the Member States and local authorities to abolish national or local aviation taxes. Keep employment costs under control The emergence of new employment models triggered a new discussion on social matters. Currently there are diverging views among regulators, governments and the airlines management on the need to harmonise social and labour legislation at EU level. Adopt a pragmatic approach in order to find a long term solution for social and labour related problems and to maintain the competitiveness of European airlines, while respecting the principle of subsidiarity; Continue to push for a more effective sectorial social dialogue in civil aviation to reconcile different positions. 10

11 Provide legal clarity for transmission of passenger data An increasing number of countries beyond the EU are requesting passenger data from airlines operating to those countries. The absence of a legal framework within the EU puts airlines in a difficult position, as they will be in contravention of EU law if they submit the data, and could face the threat of financial or operational sanctions by the requesting countries if they do not. Implement a sustainable solution for the growing number of PNR requests from third countries; Together with other European decision makers, adopt the EU PNR (Passenger Name Record) Directive without further delay; In the long term, ensure the global adoption of a multilateral agreement on PNR data exchange. Ensure fair competition In order to improve aviation relations between the EU and non EU regions and to increase the presence of EU airlines, the first priority for the EU should be to define and enforce a regulatory framework which ensures fair and equal opportunities to compete in the long term. Work with international organisations (ICAO, WTO) to define a global framework on fair and open competition; Adopt the revision of Regulation 868/2004 without delay. Ownership and control AEA has consistently advocated for the liberalisation of ownership and control rules. These should evolve on the basis of reciprocity with clear definitions of appropriate provisions to guarantee that all investors act according to normal market conditions. Moreover, liberalisation of ownership and control rules would allow all EU based airlines, irrespective of the nationality of their owners, to operate under the same regulatory framework, thereby preserving jobs in the EU. 11

12 Relax ownership and control rules on the basis of reciprocity; Ensure that, in terms of intra EU investments, EU competition policy evolves to favour consolidation; Ensure normal market shareholder behaviour with respect to foreign investment; Address investment in EU carriers by carriers from outside the EU. Market access AEA airlines are committed to an open market for aviation where all actors are able to compete on a fair and equal basis and strongly support the principle that the EU s external aviation policy must ensure a level playing field for carriers operating in the European market. Passenger services: On a case by case basis, ensure fair competition between the EU and third countries when operating 5 th freedom to/from EU Member States, even where full regulatory convergence is not yet possible. All cargo services: negotiate fifth freedom traffic rights for all cargo operations where EU cargo carriers forecast an economic benefit. Mandates: conclude mandates with key partners such as ASEAN, the Gulf countries and Turkey. On going negotiations with other partners (e.g. Brazil) should be concluded and implemented. Although AEA understands the Commission s plan to request Member States to freeze their bilateral negotiations once a mandate for negotiations with a non 12

13 European country is granted, regarding future negotiations this should not create a precedent. Moreover code sharing with non EU carriers should not be restricted. 1 ATAG 'Aviation Benefits Beyond Borders', 2014, page 47. Related to EU direct + indirect + induced effects, converted to euro at 2012 exchange rate. Reference year ATAG 'Aviation Benefits Beyond Borders', 2014, page 47. Related to EU, direct + indirect + induced effects. Reference year ATAG 'Aviation Benefits Beyond Borders', 2014, page 47. Related to EU direct + indirect + induced + tourism catalytic effects, converted to euro at 2012 exchange rate. Reference year ATAG 'Aviation Benefits Beyond Borders', 2014, page 47. Related to EU, direct + indirect + induced effects + tourism catalytic effects. Reference year ACI Europe, Airport Industry Connectivity Report, AEA research based on Table B.14: the combined growth of connections 2014/2004 at non European hubs (+53%) and European hubs non EU (+307%) amounts to +100% compared to that at EU hubs at +28%. 13

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