European Affairs

Summer 2005

 

Industry

The EU Wants Open Skies over the Atlantic

By Jacques Barrot

 

An efficient air transport system is vital for the success of Transatlantic economic relations. It enables our companies to do business, and goods and services to flow freely from country to country. And in recent years the European Union has made considerable progress in achieving greater efficiency. Since the EU aviation market was opened up in 1993, it has become as dynamic as the U.S. market. The same trends are under way on both sides of the Atlantic - the growth of low-cost airlines and alliances and mergers between traditional companies. The European Union now faces five main challenges:

First, the establishment of the European Air Safety Agency in 2002 illustrates the European Union's desire to ensure uniform safety standards and to simplify regulations by replacing 25 national procedures with a single system. We are seeking to establish cooperation between the U.S. Federal Aviation Administration and the European Air Safety Agency to further simplify the life of manufacturers and carriers, while uaranteeing a high level of safety. Our aim is to obtain a specific agreement on safety between Europe and the United States.

Second, in the air traffic management sector, the European Union's "single sky" legislation, adopted in 2004, has launched an ambitious program to restructure our airspace and make its use more efficient. Here again, as we modernize our air traffic management systems, we are discussing ways of improving cooperation with the United States.

Third, we want to make our air transport system more efficient, above all by making better use of our infrastructure. This will involve further liberalization of ground handling services; careful examination of our airport capacity and charges; new rules for allocating slots; and a general simplification of our regulations. This reform will benefit not only European airlines and passengers, but also American and foreign companies that use our airports.

Fourth, we must continue to ensure that our rules on state aid and competition are strictly applied, and that aid is only used for the restructuring of companies. We believe this will foster sustainable growth in the European aviation sector. How do you tell companies that are good performers that their competitors are surviving thanks only to the generosity of governments? It is no secret that the financial support received by U.S. airlines is a cause of concern for European companies that compete with them.

We have told our American colleagues that we want a constant, frank and transparent dialogue about state aids, because they distort the market. After all, the Commission has to ask EU member states to end state aids when the aim is not to restructure an airline but simply to ensure its survival. This practice cannot continue, whether in the European Union or the United States.

Fifth, adequate protection is needed for consumers. I recently launched a proposal to increase protection for passengers with reduced mobility. The United States is also developing rules on these issues and we must make sure our standards do not conflict. Passengers should also have the right to know the names of the companies carrying them.

At the wider international level, the rules governing civil aviation are outdated. In today's world economy, international aviation is too embedded in national law, making life unnecessarily complicated for airlines. There is a broad consensus among airlines and aviation organizations in favor of reforming the rules of international aviation.

In March 2005 the Commission adopted an ambitious agenda for Europe's external relations in the field of aviation. The first aim is to create a common airspace with Europe's neighbors in the Mediterranean and along our eastern border by 2010. This will require common rules on safety and security and will create new economic opportunities throughout the region. The Commission is currently negotiating air agreements with Morocco and the countries of the western Balkans.

"We also want to negotiate agreements with Russia and China"

Secondly, the Commission is recommending negotiations for unprecedented and significant air agreements with China and Russia. Three quarters of all passenger traffic from Russia is bound for the European Union, while China, with its great potential for growth, is opening up its air market. We also hope that the preliminary pacts we have negotiated with New Zealand and Chile will provide the basis for more ambitious agreements.

The Commission wants to open up world markets gradually and fairly. This strategy is clearly in the interests of the European economy and of passengers and air carriers in Europe. Europe's capacity to build new markets, in relationships of trust with its partners, should also provide a major boost both to air traffic worldwide and to the modernization of the international rules on aviation.

In this context, our relations with the United States are paramount. The United States and Europe are each other's leading aviation partners. A study carried out for the Commission in 2002 estimated that an open Transatlantic aviation area would generate some 17 million extra passengers a year and consumer benefits of over $5 billion a year, not to mention new jobs on both sides of the Atlantic. That is why the Commission is seeking to lend new impetus to negotiations on an overall air agreement with the United States. Although we have devoted an intense amount of work to the effort, we have so far proved unable to conclude even a first-step agreement.

"The U.S. Congress is wrong to fear loss of control in times of crisis such as war"

There are basically three issues at the heart of these negotiations, the first of which is regulatory cooperation. We have to make sure that American and European rules affecting airlines, and therefore passengers' journeys, neither conflict nor diverge. We do not want a single, uniform set of rules, but we do need to agree on better cooperation.

The second issue is market access. We have both seen the positive results of deregulation in our own markets. It is only logical that we should now pursue the route of greater deregulation between our markets.

The third priority is to relax the rules preventing the creation of open aviation markets and hampering economic and business development. We need to do away with the rules that are constricting the growth of the aviation sector. I firmly believe that there is no alternative to the conclusion of an agreement between the world's two largest aviation partners.

It is a great paradox that aviation, which is the most efficient instrument of globalization, is also subject to continuing governmental restrictions. U.S. capital cannot really be invested in European airlines, and the United States imposes limits on European investment. This is a serious problem that we have to overcome. We have to work toward allowing American airlines to own European airlines or to establish themselves in Europe and vice versa.

The U.S. Congress is reluctant, because it believes that foreign ownership of American airlines would mean a loss of control over aircraft in times of crisis, such as war. There is concern that the federal government would not be able to mobilize aircraft belonging to foreign-owned airlines. I believe these fears are misplaced. Foreign-owned airlines could be required by the country in which they were based to put their equipment at the disposal of the government in time of war. I do not see any problem with that.

We must also intensify our dialogue in other areas, such as security and the environment. These problems will not be solved by one side alone - we must tackle them together. The problem of emissions reductions, for instance, is probably not going to be solved by fuel taxes or other instruments of that kind, but through joint research that we conduct together. Both Boeing and Airbus can help.

There are two kinds of airlines today in both the United States and the European Union - the bold ones that see the future and think that we should liberalize really fast, and the others that are scared of the future and cling to the existing rules. Politicians are watching both types of companies and wondering which to bet on. They should show courage and go for liberalization, even though it faces problems on both sides of the Atlantic.

The Transatlantic aviation market is already highly competitive. But economic barriers to free competition still remain - barriers to free market access, barriers to free investment and barriers arising from different rules on either side of the Atlantic.

We in Europe want to remove these barriers. We have a free market in Europe and we want to extend it to create an open Transatlantic area. This is the best way to ensure a prosperous and competitive industry. We believe a comprehensive EU-U.S. agreement would reinforce our partnership and show other nations the best way forward for the future of international aviation.

Jacques Barrot is Vice-President and Commissioner for Transport at the European Commission. He previously served as French Minister for Labor and Social Affairs, Minister for Health and Social Security, Minister for Trade and Craft Industries, and State Secretary for Housing. Among the Parliamentary offices he has held are Finance Committee Special Rapporteur, Chairman of the Finance Committee, and Chairman of the National Assembly Committee on Cultural, Family and Social Affairs. In June 2002 he became Chairman of the UMP (Union pour un Mouvement Populaire) Group in the French National Assembly.