Interview with Willie Walsh Exorbitant airport charges are bad for consumers page 3

Transcription

1 Airport Charges Dual Till vs Single Till page 2 Interview with Willie Walsh Exorbitant airport charges are bad for consumers page 3 Interview with Kadri Simson Priorities for the Estonian Presidency page 5 Dear Reader, A year after the launch of A4E s Free Movement Call for Action campaign, the European Commission has finally published its recommendations for measures to reduce the risks and impact of Air Traffic Control strikes in Europe as part of its statement on Aviation: Open and Connected Europe. A4E is pleased that, as the European Commission is requesting the EU member states and stakeholders to help mitigate the impact of strikes in ATM, this issue has now been put on the EU political agenda. Although we still have a lot of work to do, the Commission s initiative provides us with the tools necessary to step up our efforts in those countries where industrial action by ATC workers is causing most of the disruption, both locally and Europe-wide. Going forward, our campaign to push for a review of the EU Airport Charges Directive is gaining momentum, as we recently published the results of our latest study on airport profitability. It becomes increasingly clear that in order to create a level-playing field between airlines and airports, and for our customers to enjoy the benefits they are entitled to, there is a need for economic regulation of those airports which are in a monopoly position and for the European Commission to equally ensure that member states provide the independence, the competencies and the resources to enable national regulatory authorities to do their jobs. I wish you a wonderful summer break and smooth travels. Thomas Reynaert FROM THE MD s DESK OPEN AND CONNECTED AVIATION AIR TRAFFIC CONTROL STRIKES BEST PRACTICES On June 8, the European Commission issued a Communication entitled the Open and Connected Aviation package, detailing four ways it plans to deliver on the December 2015 Aviation strategy to maintain international aviation leadership and to tackle barriers to growth. As part of the Communication, the EU Executive presented recommendations for mitigation of air traffic control (ATC) strikes, one of A4E s top priorities since its creation in early page 6 Calculated numbers of flight cancellations for period 2005 to 2016 for Member states with highest numbers of strikes 357 Number of strikes Total number of cancellations in period CYPRUS Average number of cancellation per strike day BELGIUM SPAIN 524 PORTUGAL ITALY GREECE FRANCE Total cost of cancellation in period (million ) A4E S 1 ST LEGAL SEMINAR At the end of May, A4E held its first Legal Seminar a new format designed to bring together Europe s top aviation lawyers and the legal counsels of the member airlines. Besides updates on A4E priorities presented by Policy Directors Laurent Donceel and Guillaume Xavier-Bender, Filip Cornelis, Acting Director Aviation at DG Move, gave an overview of Topical issues in EU internal market rulemaking. page 4 Source: Study on Options for ATM Service Continuity in the Event of Strikes Ricardo & York Aviation 2016

2 2 REVISED AIRPORTS LEGISLATION WOULD SAVE EUROPEAN PASSENGERS MILLIONS OF EUROS BADLY REGULATED AIRPORTS MAKE FIVE TIMES THE PROFITS OF WELL REGULATED TOPIC OF THE MONTH Preliminary results of a York Aviation study on The Cost and Profitability of European Airports show that European passengers are paying excessive airport charges, particularly at monopoly airports and airports which operate under a Dual Till regime. Under a Dual Till regime, the profits from airports commercial activities such as shopping or parking are not re-invested in lowering airport charges for consumers, despite the fact that this revenue would not be generated without them in the first place. Reviewing the Airport Charges Directive could address this and other issues with the regulation, to the benefit of consumers. The Single Till principle requires revenues from an airport s non-aeronautical activities (such as shopping, car parking, restaurants, etc) to be deducted from the airport s revenue for aeronautical services before determining the level of airport charges. The existence and proliferation of Dual Till airports demonstrates that airports don t operate in a competitive market and abuse their market power. A4E is strongly convinced that Single Till is the model which benefits European passengers most and should be introduced across the continent. The study also reveals that neither airlines nor the relevant regulators in each EU member state are provided with transparent information by airports when the latter determine the level of airport charges. There is little regulatory scrutiny despite the fact that Data on airport charges is hard to find, inconsistent when it is found, and incomparable when it is consistent. This is not compatible with the transparency requirements of the ACD Thomas Reynaert this is what the ACD stipulates. A4E believes that it is essential that national regulators and competition authorities are equipped with the adequate resources and competencies to create a level playing field. ( SINGLE TILL REGULATION DUAL TILL REGULATION Total Airport Costs Total Airport Costs Regulatory Till less Commercial Revenues less Commercial Costs Regulatory Till Under single till regulation, commercial revenues are subtracted from airport costs to arrive at the regulatory till Under dual till regulation, commercial costs are subtracted from airport costs to arrive at the regulatory till This effectively means that commercial profits are not included in the regalatory till WACC = Weighted Average Cost of Capital OPEX = Operating Expenses

3 3 INTERVIEW WITH WILLIE WALSH EXORBITANT AIRPORT CHARGES ARE BAD FOR CONSUMERS WILLIE WALSH CEO, INTERNATIONAL AIRLINES GROUP Question: It seems A4E is back on a key policy issue of its launch last year. What s new? Walsh: Last year in Amsterdam A4E presented an Aviation Economics study which showed that airport charges at the largest 21 European airports have increased by 80 per cent over the last 10 years, while airlines fares in Europe dropped by 20 per cent in the same period. Now, we have commissioned an independent study by York Aviation to look into EU airports profitability and how they could be abusing their market power by imposing excessive airport charges on airlines and their passengers. Question: What were the key findings? Walsh: The current system incentivises airports to spend an exorbitant amount of money at airlines and passengers expense. This is driving extremely high costs, making European airports uncompetitive as hubs. The regulation of EU airports is still unsuitable in key respects. For example, the distinction between single and Dual Till. Airports with Dual Till are likely to generate excessive profits as their returns are significantly higher because under Dual Till all non-aeronautical revenues, such as from retail and car parking, are permitted to be accounted for outside the regulatory settlement and do not count towards operating costs. According to the York Aviation study, Dual Till provides airports with almost five times more profitability than Single Till. In addition, Dual Till airports have eight per cent higher operational costs implying they are less efficient. Airports make huge profits while airlines do not. This equation is not sustainable. Question: Why is the discussion about Dual Till vs Single Till important to the European passenger? Walsh: There is a direct and indivisible link between an airport s aeronautical and commercial activities. They should not be considered separately when determining the level of airport charges. People don t go to airports to shop but to fly. They shop while they are waiting for their flights. If airlines weren t operating at the airports, the shops wouldn t be there. Passengers contribute to the commercial success of the airports therefore profits from commercial activities should be used to decrease aeronautical charges in order to be competitive and attract more customers. Airports will tell you that their retail activities compete with the wider economy and so shouldn t be regulated, but this isn t true. With a restricted supply of outlets, retail customers at airports cannot benefit from the competition that exists outside. Meanwhile, airports routinely allocate retail costs under operational charges. Lower airport charges will mean lower average travel costs benefitting passengers and the European economy. Question: Would passengers really benefit from lower airport charges or wouldn t airlines just pocket the money and increase their own profits? Walsh: Airlines operate under fierce competition. In such conditions, lower charges will always drive lower average travel costs benefitting consumers. Even with rising airport costs, airlines fares have gone down to survive in a truly competitive market. Question: It is often said that airports operate in a competitive market and that they don t need regulation. Is this a myth? Walsh: Yes, in relation to the major hubs where airlines have no alternatives, the airports have significant market power. Unlike airports, the airline industry is extremely competitive. Airlines have to compete for passengers and this has driven huge transformation to become efficient and cost competitive. The current Airport Charges Directive (ACD) does not effectively address the fact that there is an abuse of airports market power. It allows most airports to disregard airlines views in their final decision on airport charges. They are a key cost component which airlines have to address but cannot effectively influence. The ACD should be amended to effectively regulate the way airport charges are set up. This is critical for European airports to be competitive which will benefit consumers and the European economies. Question: What s your call for action for the European Commission? Walsh: The current ACD is not fit for purpose and needs urgent reform. Economic regulation of airports is required where monopolies exist and transparency is critical in the calculation of airport charges. The European Commission must ensure that proper Market Power Assessments are in place to regulate the monopolies with corrective measures, and that national competition authorities have the competences and resources to effectively regulate the airports. An efficient airport regulation is critical to enable European economies to benefit from aviation. (

4 4 TRAVEL SERVICE BECOMES A4E S NEWEST MEMBER Airlines for Europe continues to attract new members, with Travel Service joining Europe s largest airline association. Based in Prague, Travel Service is the biggest Czech airline company and operates regular flights under the SmartWings brand as well as charter flights and private flights in the business jet segment. Travel Service also operates subsidiaries in Slovakia, Poland and Hungary. We are looking forward to joining Airlines for Europe, having carefully analysed which association could best represent the interests of a growing leisure and charter carrier who is also offering a vast portfolio of scheduled flights. Even as a new association in Brussels, A4E already has a proven track record of successfully working on important policy issues that have a direct impact on an airline s ability to operate efficiently, securely, safely and profitably. Travel Service will gladly join forces with Europe s leading airlines to ensure that EU policy will contribute to the competitiveness of the European air transport sector, said Roman Vik, General Director of Travel Service. ( EUROPE S AVIATION LAWYERS MEET IN BRUSSELS page 1 Charlotte Thijssen and Sam Mason from A4E Associate Member Kennedys discussed with the audience issues related to EC Regulation 261, including climate and trends. Also, Giulia Mauri from Pierstone discussed consumer issues in her case related to the EASA system with the more than 50 legal experts. The final presentation was held by Chloe Challinor and Paul Phillips from Stephenson Harwood and was about the implications of Brexit. It included updates on traffic rights, ownership and control laws and a debate on EC Regulation 868/2004. Following on the successful launch of this new format, A4E plans to organise a seminar at least once a year or whenever key issues with legal impact come up. Various networking opportunities throughout the seminar gave participants the opportunity to discuss further EU policy issues. ( A4E joined Routes Europe in Belfast, Northern Ireland, in April to update about the association s priorities. End of May A4E and Vueling met Catalan media in Barcelona to inform about the disruption during ATC strikes and the impact on tourism in Southern Europe.

5 5 INTERVIEW WITH KADRI SIMSON 25 TH ANNIVERSARY OF THE EU SINGLE MARKET FOR AVIATION: EUROPEAN CITIZENS AND BUSINESSES HAVE BENEFITTED CONSIDERABLY FROM AN OPEN MARKET KADRI SIMSON MINISTER OF ECONOMIC AFFAIRS AND INFRASTRUC- TURE, ESTONIA Question: To start with, what are the most important elements in the Aviation Strategy for Estonia? Simson: As aviation plays a crucial role in the economy of Estonia, we see safety and connectivity as the fundamental elements for us in the Aviation Strategy. Safety always comes first in aviation and in this context, the revision of EASA Basic Regulation must not be adapted to only today s challenges but also to new ones, such as the creation of the first EU wide legal framework for drones. The second element I would like to highlight is the need to improve connectivity, both intra-eu and extra-eu. Aviation Strategy tackles global connectivity well by building relationships in new parts of the world, in order to tap into new markets, such as Turkey or the Gulf or the ASEAN region. Although we don t have direct connectivity with the regions mentioned, we see those comprehensive aviation agreements with third countries as a tool to improve overall market access and provide more connections and better prices for passengers. These objectives are particularly important for Estonia but also for many other regions in the European Union, where air travel is still a challenge due to insufficient connections. If we want the fruits of global connectivity access to the potential new markets, growth of jobs and economy - to be available for all EU Member States and not just for better connected ones, we need to think about new ways on how to ensure good quality of air connectivity everywhere in Europe. Question: Your presidency is approaching, can you elaborate more precisely the Estonian priorities during the Presidency? Simson: Our Maltese colleagues have done a lot of progress during the negotiations between the EP and Council over the last months and it is a solid basis for us to continue constructive negotiations with the EP. It is our hope and conviction to reach a common agreement by the end of November on this important new Safety Regulation that is long awaited by the aviation sector. The second priority for us is a new proposal for safeguarding competition in air transport and which is a part of the aviation package Open and connected Europe. As Presidency we aim to achieve the best possible outcome for Europe meaning an appropriate and effective instrument to safeguard fair competition but at the same time ensure a high level of connectivity. Question: How do you see the upcoming EASA Basic Regulation from the small member state perspective? Simson: The new EASA Basic Regulation will enhance the overall efficiency of the system by introducing a risk and performance based approach. For a small member state, it can mean an appropriate framework for oversight and certification with less administrative burden and more flexibility. Also, the new regulation gives the opportunity for member states to delegate oversight activities or use experts from a dedicated pool. This allows better use of existing resources and maintain a high level of safety. It is also important to underline that the new regulation includes a common legal framework for the safe use of drones, which is very expected by stakeholders. Question: What are the main difficulties that hinder the growth of the connectivity? Simson: There are several commonly acknowledged reasons why the aviation market does not function properly and it does not concern just Estonia, but also other remote Member States: geographical location and lower population density makes it more difficult to build economically viable networks beyond a handful of core routes. This year we are celebrating the 25th of anniversary of opening the EU aviation market. Overall, European citizens and businesses have benefitted considerably from the open market but at the same time liberalisation of the market has left remote regions and regional/secondary airports fully dependent on the market. Although the Public Service Obligation (PSO) was primarily developed to enable Member States to provide air connectivity to remote regions in their respective territories, it could also be considered as one of the most market distorting measures. Therefore, one may argue that it is not entirely fit for purpose as a tool to ensure intra-eu air connectivity, when needed. Although some regions do have an excess of capacity or face unsustainable competitive conditions, it should not be a criteria to judge whether regional airports should be maintained or not. Protecting competition should go hand in hand with economic, social and territorial cohesion as highlighted in the Lisbon Treaty and for that reason we should think whether we need a state aid policy which is further tailored for the specificities of the market. I welcome the European Commission initiative to create a connectivity index. From our point of view it can be a useful tool to support tangible actions in order to overcome the connectivity gaps between economical centers and less developed peripheral countries. (

6 6 OPEN AND CONNECTED AVIATION PUTTING THE ISSUE OF ATC STRIKES ON THE EUROPEAN POLITICAL AGENDA page 1 The Commission s ATC strike best practices are non-binding, but they aim to maintain connectivity and minimise disruption in the event of industrial action. Brussels is notably encouraging better communication and cooperation between both sides of the dispute, earlier notification, and protection of overflights and maintenance of peak time flights during a walkout. It is also looking to further explore more integrated European airspace through the Single European Sky (SES). Being the first time in history that the EU Executive is publishing a report on mitigating the impact of strikes in ATM, this is a significant milestone in putting the issue of ATM strikes on the European political agenda. Despite improvements through the SES, traffic disruptions still continue to severely hinder air travel in Europe. Of all the causes of traffic disruption, industrial action is the one that the EU is the least equipped to handle. It has caused the cancellation of 243,660 flights and affected 27 million passengers from 2005 to Such disruptions are detrimental to EU s connectivity and impact its economy and passengers, the EC said. Welcomed by organisations like BUSINES- SEUROPE and IATA, these recommendations are the fruit of close cooperation between experts from A4E airlines, the European Commission and representatives of ANSPs. In addition, Brussels is to examine establishing an upper airspace region (EUIR) across the whole of the European Union to offset the impact of future strike action by air traffic controllers, a request made by the European Parliament. The launch of a pilot project will investigate strengthening the architecture of European airspace in an effort to improve the continuity of air navigation services across Europe. The Commission is also asking the Network Manager (NM) to maintain a strikes registry. ( PASSENGER DATA Over the past months, EU Member States have started implementing Regulation (EU) 2017/458 of 15 April 2017 which reinforces checks against relevant databases at external borders. Unfortunately, these measures have had immediate disproportionate consequences at many European airports, with long queues and excessive delays having a direct impact on passengers journeys. A4E has been urging the Commission to ensure that Member States take all necessary measures to prevent such disruptions, in particular that they deploy appropriate staff and resources in sufficient numbers to carry out systematic checks in order to prevent such checks from causing disproportionate waiting times and hindering the flow of traffic at external borders as stated in the Regulation. ( ECAC-EU dialogue in Rome Hosted by the Italian Civil Aviation Authority ENAC, over 150 senior leaders from airlines, airports, air navigation service providers, manufacturers, industry organisations and regulators debated on solutions to promote investment in aviation, overcome its specific constraints and reap the social-economic growth potential of the sector. Finnair, Ryanair and A4E joined various panels which were also chaired by Henrik Hololei, DG for Mobility and Transport. INSIDE A4E CELEBRATING 25 YEARS OF THE EU S INTERNAL MARKET FOR AVIATION A4E joins the European Commission in celebrating the 25th anniversary of the creation or the EU s Internal Market for Aviation. Today, air travel is cheaper, safer and open to more people than ever before with aviation supporting nearly 9 million jobs in the EU, and contributing over 621 billion to EU GDP (2014). More info: air/25years-eu-aviation_en AIRLINES FOR EUROPE Rue du Luxembourg 3 B-1000 Brussels Tel.: WHAT S HOT IN BRUSSELS contact@a4e.eu