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Liberalisation of Air Transport - A European Perspective Mr. Klaus Geil Air Transport Directorate Directorate-General for Mobility and Transport European Commission Institution for Transport Policy Studies – Lecture Meeting Tokyo – 3 June 2010
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z Presentation Outline 9 9 9 9
The Single EU Aviation Market EU Aviation Policy Challenges A Few Key EU Aviation Policy Areas EU External Aviation Policy – Liberalising Beyond Europe 9 Benefits of Open Aviation Markets 9 EU Relations with Asia and the Significance of Japan 2
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The Single EU Aviation Market
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z The EU Today • 27 Member States • 500 Million Inhabitants • One Single Market
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The EU Single Market
The territory of the 27 Member States represents one Single Market (in fact larger: Norway, Switzerland, Iceland)
9 Freedom of establishment & provision of services 9 Freedom of movement of goods, capital etc. 9 No barriers to trade (technical harmonisation of standards) 9 Firms have unrestricted access to 500 million consumers
EU law has primacy over national law 5
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From 27 National Air Transport Markets to 1 Single European Aviation Market
Before 1987: national markets within the EU were protected and fragmented through restrictive bilateral air service agreements between EU Member States
1987-1992: Three packages of market integration and liberalisation
After 1992: One Single market without restrictions on market access and pricing
Common EU rules in all areas of aviation The world’s largest and most successful example of regional market integration and liberalisation in air transport.
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From National Air Transport Markets to a Single EU Market
Results:
Non-discriminatory air carrier licensing across Europe (from national to EU carriers with equal rights and obligations) Market access: no capacity restrictions Full cabotage since 1997 Free air fare setting Any EU carrier can now operate on any route within the EU Comprehensive body of EU legislation in relation to all key aspects of aviation 7
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Single Market – Common EU Rules But open markets need coherent regulatory framework and common, non-discriminatory and transparent standards …
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Common requirements for licensing Strict application of competition and state aid rules (EU Treaty) High safety standards (and creation of EASA) High security standards Consumer protection – Passenger Rights Common, non-discriminatory rules for allocation of slots High standards on noise emissions Single European Sky and its SESAR project “Public service obligations” possible for routes to peripheral or development regions or “thin” routes when “vital” for the region.
Work still in progress!
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What Have We Achieved? Successes of the Single Market Number of Intra-EU27 routes with more than 2 carriers
…more competition…
500 450 400 350 300 250 200 150 100 50
…and…
Source: OAG summer schedules
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2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
0 1992
Intra-EU routes with more than 2 carriers have increased by 310% between 1992 and 2009
Routes
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What Have We Achieved? Successes of the Single Market Supply by carrier type within EU27
…and…
Others
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Low cost 5
4
3
2
1
20 10
20 09
20 08
20 07
20 06
20 05
20 04
20 03
20 02
20 01
20 00
19 99
19 98
19 97
19 96
0
19 95
Emergence of market for lowcost air services (now over 1/3 of the Intra-EU market. Japan: 9% in 2009)
Incumbent Weekly seats available (millions)
…new entrants…
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Source: OAG w inter schedules
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What Have We Achieved? Successes of the Single Market …more choice …
3.000
2.500
2.000
1.500
1.000
500
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
0 1992
Number of Cross-border Intra-EU routes has increased by 220% (19922009).
Number of international Intra-EU27 routes
Nbr of routes (city to city)
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Source: OAG summer schedules
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EU Aviation Policy Challenges
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Unprecedented Challenges 1. Global economic downturn 2. Volatile fuel prices 3. Increasing environmental pressure 4. Security measures 5. Increasing costs from congestion – on land and in the air 6. Most recently: volcanic ash
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Objective Driving EU Policy: zKey “Ensuring Sustainability of the Sector’s Growth” Means: 1. Continue to lead towards highest safety and security standards – a pre-condition for growth 2. Competitiveness of the industry
Cost reductions, efficiency and consolidation No bail-out – but accelerating structural reform Removal of out-dated ownership and control restrictions
3. Tackling the capacity crunch
Avoid/reduce bottlenecks on the ground and in the air
4. Ensure environmental sustainability
Comprehensive approach
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The Economic Crisis and Aviation - The EU Responses:
No bail-out. Strict application of competition and state aid rules Increased vigilance with safety oversight and financial viability Rationalisation and Consolidation Temporary flexibility (e.g. freeze of “use-it-orlose-it” rule for slots) Acceleration of the Single European Sky Charges and taxes under scrutiny External policy to ensure fair competition and equal opportunities (level playing field) 15
z Medium/Long-Term Challenge: Tackling the Capacity Crunch
Despite the current downturn, traffic is expected to double by 2020. 2025 could see up to 2.5 times the 2003 traffic.
In 2025, over 60 airports could be heavily congested and the top 20 airports could be constrained 8-10 hours per day.
Only 25% of airports would have a possibility to add new runways in the next 20 years.
The Capacity Crunch poses a threat to safety, efficiency and competitiveness of the entire air transport supply chain.
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z Capacity Crunch and Airport Policy 2007 Communication on Airport Policy and the Action plan :
Optimising the use of existing capacity; Improving the planning framework for new airport infrastructure Promoting co-modality Development and implementation of new technology Consistent approach to safety at airports Creation of an Airport Observatory (2008)
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z Airport Observatory
Made up of Members States and relevant authorities and stakeholders (Airports; Airlines; Local authorities; Environmental protection associations; Eurocontrol; SESAR;…)
To exchange and monitor data and information on airport capacity as a whole, and advise the Commission on the implementation of the “action plan for airport capacity, efficiency and safety in Europe”, as well as on any matter relating to airport policy
3 Working Groups: WG1: Capacity (inventory, capacity assessment methodology…) WG2: “Gate-to-Gate” (slot allocation process and SES2) WG3: Inter-modality
Chaired by the Commission, and set up for a period of five years ending on 31 October 2013 18
z Allocation of Slots
Slots never negotiated between states as part of bilateral negotiations on traffic rights
Allocation of slots is made on the basis of neutral, transparent and non-discriminatory rules by an independent slot coordinator
Capacity situation at airports should be subject to analysis and consultation in particular with the airport users
Allocated slots have to be used for at least 80 % (“80-20 rule”); unused slots return to the “pool”
Slots in the pool shall first be allocated to new entrants Allocation twice a year: summer season + winter season Secondary trading possible
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A Few Key EU Aviation Policy Areas -ATM – Single European Sky -Aviation and Environment
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Market Integration – Also in the Sky: Towards a Single European Sky
Modernising the operation of the European air space Reduce fragmentation (from 60 control areas to 9 Functional Airspace Blocks), congestion and waste On average, aircraft fly 49 km longer than strictly necessary due to airspace fragmentation. ATM and airport operations all together could reduce emissions by 10% of the average flight Ambitious new generation of technology (SESAR) Performance regulation (criteria: safety, quality of service, cost-effectiveness and environment) Towards a European ”network manager” for air space 21
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Ensuring Sustainability of Aviation Air transport accounts for around 2-3% of global GHG emissions and is growing Aviation must make fair contribution to fight against climate change The EU adopts a comprehensive approach:
New standards (e.g. new aircraft CO2 standard in ICAO) Research and development of green aircraft technology (e.g. Clean Sky, sustainable alternative fuels) ATM modernisation (Single European Sky, SESAR) Market-based measures, i.e. inclusion of aviation in the EU Emissions Trading Scheme (ETS) from 2012
Emissions trading
The most cost-effective market-based instrument, compared to taxes or charges Allows aviation to grow through trading with other sectors22
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Towards a Global Framework for Aviation and Climate Change EU ETS contains flexibility mechanisms: Scheme may be adapted if: 3rd country takes equivalent measures Agreement reached on global measures But climate change is a global problem and needs a global solution – and international aviation needs a global sectoral approach EU participating actively in ICAO to seek global agreement DGCIG – Directors General Informal Climate Group ICAO Assembly 2010 is a key opportunity Ready to work with Japan to find solution
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EU External Aviation Policy – Liberalising Beyond Europe
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Going Beyond Europe: The Three Pillars of the External Dimension
I.
Bringing existing bilateral agreements into line with Community law The creation of a “Common Aviation Area” with neighbouring countries
II.
III.
Parallel process of market opening and adoption of EU legislation (“acquis”)
Conclusion of ambitious global agreements with key partners (US, Canada, Australia, New Zealand, India, China, Russia, Brazil…….Japan?). 25
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Pillar I: Progress on the EC designation
104 non-EU states have accepted Community designation
Nearly 900 Bilateral ASAs (around half) have been brought into conformity with Community law (representing 70% of extra-EU traffic)
43 “Horizontal” Agreements covering 725 ASAs (since September 2004)
Negotiations/talks on-going with remaining countries. 26
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Pillar II: A Wider Common Aviation Area
58 States – Approx. 1 Billion inhabitants
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Pillar III: Comprehensive Agreements
With key and like-minded partners Aim: to “normalise” aviation by combination of:
Market opening
Removal of investment barriers (airline ownership) Regulatory convergence EU-US Agreement (1st and 2nd stages)
First stage agreement has been in effect since 30 March 2008 Second stage agreement initialled on 25 March 2010 following eight rounds of negotiations which started in May 2008.
EU-Canada Agreement
Phasing in of full Open Aviation Area (OAA) All market aspects covered Investment & regulatory convergence key
Australia and New Zealand (Negotiations started in November 2008)
Next: Brazil (Negotiating mandate requested 5 May 2010) 28
z What Are “Open Skies”?
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Conclusions: EU External Aviation Policy
EU external aviation dimension has evolved from the internal EU market Extension of the single aviation market and EU “acquis” in aviation The EU as such increasingly recognised Considerable benefits from EU external aviation policy – for the EU and its partners! External policy still evolving Regional integration and liberalisation may offer benefits also in other world regions including Asia. 31
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Benefits of Open Aviation Markets
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An Example of Liberalising Beyond Europe: EU-Morocco. Growth of passenger traffic between EU and Morocco/Tunis 10.000.000
Morocco
9.000.000
Tunis
8.000.000 7.000.000 6.000.000 5.000.000 4.000.000 3.000.000 2.000.000 1.000.000
Source: Eurostat
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The EU-Morocco agreement has clearly demonstrated the benefits of open markets.
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EU-US First Stage: Big Competitive Benefits A transformative agreement for Europe and the US Early results:
8% more EU-US flights scheduled in summer 2008 than 2007. >20% more Heathrow-US flights. An increase of 18 daily services. Further large increases in services from Ireland (doubling) and Spain.
European airlines operating from outside their home country: AF: Heathrow to Los Angeles. BA’s “OpenSkies”: Paris (CDG) and Amsterdam to New York.
Anti-trust applications: Sky-Team Alliance: approved. Star Alliance: approved Oneworld Alliance: under consideration
Additional transatlantic investment: Virgin Group’s 25% investment in Virgin America, May 2007. Lufthansa’s 19% stake in JetBlue, February 2008.
Forecast: First five years: 25 million extra pax; €12 billion benefit; and an extra 80,000 jobs in the US and EU (Source: Booz-Allen-Hamilton Study). 34
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EU-US Second Stage: a Future-Looking Agreement that Secures the Benefits of Stage One First stage Regulatory cooperation
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Comprehensive coverage of regulatory issues Commitment to 2nd stage talks
Second stage o
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Commercial freedoms
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Investment
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No limits on direct and connecting flights (1st5th freedoms) Cargo and limited passenger 7ths for EU Community carrier principle Limited 3rd country carrier investment opportunities (mainly Africa) for EU
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Deepened cooperation, particularly on the environment, the social dimension, security, and competition Reciprocal clarity on information exchange regarding noise restrictions Enhanced role for the Joint Committee Additional cargo and passenger 7ths, and 3rd country carrier investment opportunities to incentivise legislative change. Immediate access to Fly America (contractor traffic) for EU. 'The Parties commit to the goal of continuing to remove market access barriers…including enhancing the access of their airlines to global capital markets.' Annual review of progress towards legislative change on investment and in the area of European noise restrictions, Senior level consultations and possible sanctions 35 if no progress is made by a party.
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EU Relations with Asia and the Significance of Japan
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z EU-Asia Aviation Relations
EU-Asia markets growing rapidly (except Japan) Asian countries recognise EU law and EU designation in aviation Interest in going further Siberian overflight restrictions and payments artificially hamper EU-Asia market development
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Passenger Traffic Between EU and Asia 6.000.000
5.000.000
4.000.000
3.000.000
2.000.000
South-Korea
1.000.000
Japan China
1999-2008: Japan: +7% Korea: +147% China: +278%
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Forecast 2008-2013 (IATA): Japan: +2.6% p.a. Korea: +3.6% p.a. 38 China: +7.4% p.a.
z EU-Japan Aviation Relations
Japan a key market for the EU Japan has traditionally been very restrictive (counting capacity in “units” not frequencies) Japan now recognises the EU and EU designation – significant for our relations Summit leaders at the 18th EU-Japan Summit (4 May 2009) welcomed this progress and expressed their intention to expand and deepen cooperation in all areas of aviation including safety, security and ATM Japan developing its aviation policy Towards a Horizontal Agreement? More comprehensive cooperation/agreement should be the ambition for Japan and EU. 39
z Japan’s Evolving Aviation Policy
Asian Gateway Initiative – May 2007 Growth Strategy Panel Report – May 2010:
Open Japan’s sky to the world and Asia (promotion of full open sky) Strengthening Tokyo’s airports
Increase capacity Open Haneda for day time flights for longdistance Asian, EU and US
Drastic reforms of management of airports Strengthening of Kansai International Airport Maintain essential air transport network Promoting entry of LCCs to the benefit of consumers 40
z Conclusion: The EU Approach in a Nutshell
Market integration: from national to single EU market Market liberalisation: Gradual but complete High standards: a sine qua non for growth Common rules: level playing field, simplicity/clarity Pooling resources: European institutions (EASA) and ambitious EU projects (SESAR) Share successes and benefits with neighbours and key partners Aviation is international/global by its very nature States and World regions share the same key challenges in aviation (so do Japan and the EU) International cooperation will help us meet the challenges. 41
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Thank you for your attention! どうもありがとう。 Dōmo arigatō!
[email protected] http://ec.europa.eu/transport/air_portal/international/index_en.htm 42
