The stage one agreement may have been the most important air services agreement ever signed, in the view of the European Commission. The deal has allowed open market access for air services between all 27 EU member states and the United States ― markets that together make up almost 60 per cent of global aviation. Furthermore, it created an unprecedented regulatory platform to address all mutual concerns related to EU-US air services, the EC said in a statement.
However, the EC notes the 2007 agreement did not directly address the “key issue of reform of airline ownership and control rules”, adding that “the provisional agreement reached this week includes a commitment to engage in a process towards such reform”.
“The European Union, based on the positive experience of the EU internal market, has long pressed for such an outcome, arguing that it would represent a key step towards liberating the airline industry from the outdated regulatory constraints in the area of foreign investment that prevent it from acting like any other industry,” the EC statement continues.
According to the EC, the provisional agreement singed on March 25 sets out a number of incentives to encourage reform. When the United States changes its legislation to allow EU investors majority ownership of US airlines, the EU will reciprocally allow majority ownership of EU airlines by U.S. investors and U.S. airlines will benefit from additional market access rights to and from the EU. Progress towards this outcome will be reviewed regularly.
Lufthansa begins commercial flights with the super-jumbo Airbus A380 in May 2010 and will become Europe's largest operator of the type
In the EC’s view, the negotiators also achieved other significant improvements in regulatory cooperation:
● The agreement will strengthen cooperation on environmental matters by requiring the compatibility and interaction of market-based measures (such as emission trading schemes) to avoid duplication; by promoting greater transparency for noise-based airport measures; and by enhancing green technologies, fuels and air traffic management. This cooperation is key to effectively “decarbonizing” international aviation, the EC says;
● For the first time in aviation history, the agreement includes a dedicated article on the social dimension of E.U.-US aviation relations. This will not only ensure that the existing legal rights of airline employees are preserved, but that the implementation of the agreement contributes to high labor standards;
● The agreement will raise the already high level of cooperation on security to allocate resources better at threats to the aviation system by promoting maximum mutual reliance on each other’s security measures, as well as swift and coordinated responses to new threats;
● It further extends the role of the EU-U.S. Joint Committee, the body that monitors the implementation of the agreement and coordinates the various work streams of regulatory cooperation. The new rules will reduce red tape (e.g. by mutual recognition of each other’s regulatory decisions) and avoid the wasteful duplication of resources (e.g. joint safety initiatives, one-stop security, facilitation of passengers’ travel); and
● Market access will be further opened, with EU carriers gaining further access to US Government-financed traffic (“Fly America”). Subject to certain changes to the legal framework for noise-based airport restrictions, EU airlines will gain in the future new commercial opportunities to fly between the U.S. and non-EU countries. Furthermore, a number of obstacles to EU and U.S. investments in third-party countries’ airlines will be removed.
Second-stage negotiations were launched in May 2008, followed by seven rounds of negotiations. At the initiative of the European Commission, two labor forums were also convened to assess the consequences of a change of airline ownership and control rules for airline employees. At a summit in November 2009, EU and U.S. leaders expressed their aim to reach a second-stage air transport agreement in 2010, in a deal that would include benefits for both sides.
The European Union and the United States’ markets are the largest aviation markets in the world. Together, they represent approximately 60 per cent of global aviation, according to the EC. The economic benefits associated with the implementation of the second-stage agreement have been independently estimated to be equivalent to the transatlantic benefits to be expected from a successful conclusion of the Doha round of trade liberalization negotiations.
A full second-stage agreement could put 26 million more passengers on transatlantic flights over a period of five years, Booz Allen Hamilton reported in 2007. This compares with EU-U.S. traffic of just under 50 million passengers in 2007. If passenger numbers increase as expected when the agreement is in place, the market would be 34 per cent bigger at the end of the five-year term than it would be without the second-stage deal.
Booz Allen Hamilton’s 2007 study estimated that, by eliminating bilateral agreements and their restrictions on traffic rights, the Open Skies deal would create reductions in the cost of tickets to companies and private customers that would result in consolidated economic benefits of between €6.4 billion and €12 billion over a period of 5 years.
The removal of barriers could lead to the creation of around 80,000 jobs, spread more or less equally between the U.S. and the EU, Booz Allen Hamilton calculated. The cargo market would see growth of between 1 and 2 per cent, which the EC says is a highly significant increase given the size of the market globally and the size of the European and American industries.
Related to this story:
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- Flybe and Finnair Agree Joint Deal to Buy and Develop Finncomm Airlines
- New Open Skies Deal to Liberalize Flights between the U.S. and Brazil
- U.S. Airlines Applaud News of Open Skies Deal with Japan
- Lufthansa and JetBlue Agree Codeshare Deal
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