Air Transport Agreement between the EU and US: A New Era?
(5/4/2007)
Air Transport Agreement between the EU and US: A New Era?
In the framework of the external relations of European Union and specifically relations of the EU with third countries in the air transport sector the Council of Transport Ministers issued on 5th June 2003* a mandate to the European Commission with the purpose to negotiate an air transport agreement between Europe and the USA which would replace the existing bilateral agreements signed and ratified by the EU member states. After 11 rounds of negotiations the Commission submitted a draft agreement to the Council of Ministers which was finally approved. The agreed text includes a number of provisions for both sides but the most important provision reflects the willingness of both sides to consider the text as a first step towards further air transport liberalization.
Both sides agreed to the potential development of the air transport market as a result of the establishment of an open aviation area between the EU and the US. In particular, the five-year forecast predicts that passenger and cargo traffic will increase up to 25 million passengers; benefits for users will exceed 15 billion Euros; and 80 thousand jobs will be created.
During the last decade there were many contacts between the EU and the US to identify the possibility of establishing a transatlantic common aviation area between the two sides. The US pursued an agreement to abolish existing restrictions in a large number of bilateral which were detrimental to the commercial interest of the US airlines. The agreed text refers to issues such as market access, traffic rights, ownership and control, safety and security matters, subsidies, CRS, environmental protection, technical and commercial cooperation, ground handling, etc.
Ownership and control remains the critical issue given that the agreement does not resolve the existing problem deriving from the US law: EU investors are not allowed to control more than 25% of voting equity and/or 49.9% of total equity of US airlines. The agreed text does not reflect the interests of EU airlines to invest in the US airlines and acquire majority equity of a US airline. The US airlines enforce their position into the European market by the abolishment of restrictions deriving from bilateral agreements. Ownership and control can be considered a very important issue which should be resolved by the agreement avoiding discrimination between US and EU airlines. US airlines based on this open skies agreement enforce their presence and operations to European points and further by gaining access to slot constrained airports such as London-Heathrow. The endorsement of the EU-US agreement does not reach a balanced result for airlines of the EU. At first glance, EU airlines will have the right to invest in US airlines but in non voting equity up to 49.9% i.e. having shares without controlling the airline.
The agreement must be considered as a historic and very important step to the air transport relations between EU and US but with more benefits for the US airlines. It includes provisions for further negotiations at a second stage but there is no commitment for a balanced agreement.
With respect to the existing possibilities of the Greek airlines we cannot foresee any realistic attempt to exploit the US market. On the other hand the agreement opens new horizons for the Greek incoming tourism from the US due to the increased accessibility given to the US airlines by the agreement. Further to tourist interests the agreement could enhance trade exchanges between the US and Greece.
Emmanuel Keramianakis, Partner AirConsulting Group
*Mr Keramianakis participated in the committee of the EU States’ representatives negotiating with the US.
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