Tuesday, April 1, 2008

Air Transportation: The EU-US Air Transport Agreement came into force

March 30, 2008/The EU-US Air Transport Agreement came into force March 30, 2008 (00:00 GMT)

The EU-US Air Transport Agreement, which was signed last year, on 30 April 2007, came into force as of 30 March 2008 at 0:00 GMT,.

What new rights for EU airlines does it provide?

The US recognises all European airlines as "Community air carriers", allowing for the consolidation of the EU aviation sector and the compliance with the November 2002 Court cases in the so-called 'Open skies judgments'.

It permits any "Community air carrier" to fly between any point in the EU to any point in the US, without any restrictions on pricing or capacity. Eg a British carrier to fly to the US directly out of a French airport.

It allows to carriers continue flights beyond the United States towards third countries (the so called "5th Freedom").

Allows the possibility to operate all-cargo flights between the United States and any third country, without a requirement that the service starts or ends in the EU ('7th Freedom').

And the so-called '7th Freedom rights' for passenger flights between the US and a number of non-EU European countries, i.e. direct flights between the US and Croatia or Norway.

A number of access rights to the US 'Fly America' program for the transportation of passengers and cargo financed by the US Federal Government.

More freedom to enter into commercial arrangements with other airlines (code-sharing, wet-leasing etc.).

Rights in the area of franchising and branding of air services to enhance legal certainty in the commercial relations in between airlines.

Possibility of antitrust immunity for the development of airline alliances.

Rights for EU investors in the area of ownership, investment and control of US airlines (up to 25%); Rights in the area of inward foreign investment in EU airlines by non-EU European investors (up to 49%); Rights in the area of ownership, investment and control by EU investors of airlines in Africa and non-EU European countries.

Which rules applied for EU-US air services until now?

16 member states of the EU already had bilateral "open skies" agreements with the US. Those "open skies" agreements gave EU airlines the right to fly without restrictions on capacity or pricing to any point in the US, but only from their home country eg French airlines only from France. These "open skies" agreements included the so-called '5th freedom' and thereby gave US airlines the rights to operate flights within the EU!

In the United Kingdom, Ireland, Spain, Greece and Hungary, air services were restricted to a certain number of weekly frequencies or a certain number of airlines, but of course finding landing/take-off slots will be a separate matter for such new flights in some key airports!

For the EU member states of Bulgaria, Cyprus, Estonia, Latvia, Lithuania and Slovenia there was no previous legal basis at all for direct flights from and to the US.

Accoding to the European Commission, already from the first day of the application of the Agreement numerous new flights between the EU and the US will take off to new destinations. It is reported that the total number of flights between the EU and the US in April-June 2008 will be 8% higher than in 2007.

Transatlantic services will increase particularly in those EU member states where there had been restrictions so far. In London-Heathrow, flights to the US are increased by 18 daily flights, an increase of more than 20%. The number of direct flights between Spain and the US will significantly increase.

Furthermore, there has been new transatlantic investment in the airline industry. A German airline has acquired 19% of a US carrier in February 2008.

What are the economic benefits of the Agreement?

According to the European Commission, the transatlantic market is by far the biggest international air transport market with about 50 million passengers in 2007. More than 400 daily flights are operated between the EU and the US in April 2008.

Among the benefits, this Agreement opens the possibility of an additional 25 million extra passengers on transatlantic flights over a period of 5 years. By eliminating the restrictions of the bilateral agreements, it is expected that the price of flights between the EU and the US will fall for both business travellers and leisure passengers. As a consequence, the Agreement could generate economic benefits up to 12 billion over a period of 5 years, and around 80.000 jobs in the US and the EU.

But then of course the increase in the volume of flights over the Atlantic will have an envirinmental impact as well.

Towards an "Open Aviation Area"?

Whereas this EU-US Air Transport Agreement will produce substantial benefits for passengers, shippers and the air transport industry on both sides. the EU is determined to go further, to remove further barriers to trade, in particular in the area of foreign investment, where aviation remains restricted and closed in comparison with other sectors of the economy.

The EU-US Agreement itself includes a commitment of both sides to continue negotiations aiming at further liberalisation of traffic rights and additional foreign investment opportunities, especially re the 25% ownership limit of US airlines by EU citizens and the 49% equivalent EU limit. These second-stage negotiations will start on 15-16 May 2008 during the Slovenian EU Presidency.

The ultimate EU objective is an "Open Aviation Area" between the European Union and the United States. If no substantial progress has been made by November 2010, the EU can decide to suspend certain rights granted to US airlines under the agreement of April w007.

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