In September 2012, the European Commission announced an ambitious package of proposals designed to boost the international competitiveness of the EU aviation industry, by opening negotiations with key partners to access new business opportunities in the fastest growing aviation markets, developing new tools to fight unfair competition, and creating the right regulatory conditions to stimulate investment.

The three key areas the Commission are focusing on are as follows:

New aviation agreements with neighbours and international partners

The Commission is looking to conclude EU-level Air Transport Agreements with key, and increasingly important, aviation partners such as China, Russia, the Gulf States, Japan, India and ASEAN countries, and complete by 2015 EU-level aviation agreements with neighbouring countries such as Ukraine, Azerbaijan, Tunisia, Turkey and Egypt.

The Commission estimates that the total economic benefits of all these agreements could be as much as €12 billion a year – with more than 70% of these benefits coming from lower prices resulting from increased competition, when limitations under existing bilateral agreements between individual EU Member States and partner countries are removed, giving greater access to these markets. In addition, the Commission is proposing that industrial and technological agreements should be signed with key partners and other countries in areas such as air traffic management (including cooperation with the EU’s SESAR programme) and on safety programmes, including the certification of aeronautical products.

Measures to strengthen fair competition

Following consultation with key stakeholders, the Commission is proposing to develop new and effective EU instruments to protect European interests against unfair practices. The existing EU Regulation (EC Regulation 868/2004) has proven to be impracticable, having been developed in the aftermath of 9/11 when there were concerns that EU airlines could be subject to price dumping in the transatlantic market. The Regulation followed anti-dumping procedures applied for trade in goods, but it has proven practically impossible to substantiate unfair practices in international aviation, in part because of difficulties in comparing complex fare setting systems applied by airlines for ‘like air services’. It is proposed that an additional safeguard will be developed against unfair competition practices by the inclusion of ‘fair competition clauses’ in existing bilateral air services agreements between EU Member States and non-EU countries.

Tackling archaic ownership and control restrictions

Current ownership and control restrictions, applied by most countries, deny airlines access to sources of new capital. Most countries restrict foreign ownership of airlines, with a limit of 35% of voting shares in the US, and 49% in much of the European Union. The Commission wants to increase cross-border consolidation opportunities for airlines by loosening the restraints on foreign ownership and control of airlines, and will push ahead now with the additional steps envisaged in the EUUS Open Skies Agreement. The Commission has said that the foreign ownership issue should also be pursued at ICAO level and debated at the March 2013 ICAO Air Traffic Conference.

So what happens next?

Once the Transport Council has consulted with EU Member States in December, the Commission intends to move forward with these proposals, including publishing a list of priorities for EU negotiating mandates in early 2013.

Vice-President Siim Kallas, the European Commissioner responsible for transport, believes that urgent action is required:

“It is of strategic importance that Europe maintains a leading global aviation industry at the centre of a network that connects the EU with the rest of the world. We have created huge economic benefits over the last decade as a direct result of the new business opportunities from our EU external relations. But the current systems no longer deliver what is needed. We urgently need a step change. Faced with the dramatic changes in global aviation, Europe must respond and adapt rapidly or be left behind.”