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Europe Planning Aviation Sector Fightback

by Ulrika Lomas, Tax-News.com, Brussels

03 October 2012


The European Commission is to leave no stone unturned under new plans to support the region's aviation industry as it grapples with fierce international competition.

Aviation supports 5.1 million jobs and contributes EUR365bn (USD471bn) or 2.4% to European Gross Domestic Product. However, the competitive position of the European Union (EU) aviation industry, particularly its international airlines, is under severe threat, the Commission warned.

"The fastest growing markets are now outside Europe. The entire European aviation sector faces low growth and intense competition internationally," the Commission said. It highlighted that "in 2003, EU carriers had a market share of 29% of all inter-continental capacity in the world. By 2025, this share is expected to have fallen to 20%. This trend means that, if nothing is done, European airlines will be less able to generate growth for the European economy."

The Commission noted that half of the world's new traffic added during the next 20 years is to come from the Asia-Pacific region, which will thereby overtake the US as leader in world traffic by 2030, reaching a market share of 38%. Meanwhile, the fastest regional traffic growth in the world is expected to be in the Middle East, where by 2030 the region's airlines will represent 11% of world traffic, up from 7% in 2010.

The Commission has observed that Europe has been harder hit by the recession than many other regions, and infrastructure development is lagging behind places like the Middle East. The International Air Transport Association predicts that net profits of European commercial airlines will fall from USD0.5bn in 2011 to a net loss of USD1.1bn in 2012.

Vice-President Siim Kallas, European Commissioner responsible for transport, said: "It is of strategic importance that Europe maintains a leading global aviation industry at the centre of a network that connects the EU with the rest of the world. We have created huge economic benefits over the last decade as a direct result of the new business opportunities from our EU external relations. But the current systems no longer deliver what is needed. We urgently need a step change. Faced with the dramatic changes in global aviation, Europe must respond and adapt rapidly or be left behind."

To give the EU aviation industry better access to business opportunities in new markets, the Commission is proposing to:

  • Conclude EU-level air transport agreements with key and increasingly important aviation partners such as China, Russia, the Gulf States, Japan, India and Association of Southeast Asian Nations (ASEAN) countries; and,
  • Complete, by 2015, EU-level aviation agreements with neighbouring countries such as Ukraine, Azerbaijan, Tunisia, Turkey and Egypt. To move this process more quickly the Commission is asking member states to grant it a general negotiating mandate for the remaining neighbourhood countries.

The total economic benefits of all these agreements are estimated at EUR12bn per year. The Commission intends to put forward a list of priorities for EU negotiating mandates for these agreements to member states in early 2013.

To enhance the regulatory framework to encourage increased investment, the Commission has announced that it will champion the removal of ownership and control restrictions present between nations. This issue will be pursued at International Civil Aviation Organization (ICAO) level, beginning at the March 2013 ICAO Air Traffic Conference.

Lastly, the Commission is to develop new tools to fight unfair competition. In particular, the Commission highlighted that the existing EU Regulation (Regulation 868/2004) has proven impracticable and a new instrument needs to be put in place that is better adapted to the realities of today's global aviation sector.

As an additional safeguard measure, the Commission is proposing to develop standard "fair competition clauses" to be agreed and included in existing bilateral air services agreements between EU member states and non-EU countries.

TAGS: aviation

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