SPEECH/04/401 Loyola de Palacio Vice-President of the European Commission, Commissioner for Transport and Energy Future challenges in the air cargo transport «Air Cargo Forum» Bilbao, 15 th September 2004
INTRODUCTION Ladies and Gentlemen, It is my great pleasure and privilege to be present with all of you here today. This Forum, is in my view, an excellent opportunity to define the main priorities of our future work in the area of civil aviation. The industry you represent has experienced strong growth in the first months of 2004 (around 14% for airfreight). 1 This is of paramount importance for our economic development. Nevertheless, we should not forget that the aviation sector as a whole remains vulnerable. Security threats, the dependence on international developments, and high oil prices, all these are examples of many of the problems and challenges that we are facing. In the course of my presentation, I would like to deal with three main points: I. First, the developments of EU aviation policy in the last decade; II. Secondly, I would like to present you our objectives in the field of international aviation; III. And finally raise two important elements for the air cargo industry: security and environment. I. AVIATION POLICY INSIDE THE EU Over the last 10 years, European air transport industry has undergone a process of transformation towards a single market. Air transport within the European Economic Area is now governed by common rules on licensing, market access and pricing freedom. After eleven years of implementation it can be said that thanks to these measures, there has been an unprecedented expansion of air transport in Europe. Old monopolies have been swept away; intra-community cabotage has been introduced. Competition has come into play, particularly on fares, to the benefit of consumers. Over the last decade, therefore, European aviation has moved from a highly regulated market to a highly competitive single market. Furthermore, the extension of the single aviation market to the new Member States has already brought its fruits to the consumer in Poland, Hungary or the Czech Republic. Airports in the new Member States report extensive growth rates in the first months of 2004. Potential for growth is higher than in the highly competitive market of EU-15. but shortcomings and obstacles remain However, some shortcomings might weaken the market opening process and the delivery of better services at lower cost. The problem of capacity restrictions and high costs of infrastructure is one of them. In terms of the regulatory framework, the Commission has noticed that, despite the provisions laid down in the third package, there are areas where Member States still tend to have differentiated practices, which can impede the proper functioning of the single market. 1 From January to July 2004, source: http://www.newstodate.aero/ 2
In this context the Commission has decided to revise the third package. A wide consultation process ended in February 2004, receiving 56 contributions from interested parties. The Commission is now preparing an external impact assessment on the basis of which it will present a proposal in 2005. - Fragmentation: the need for consolidation Generally speaking, the European aviation market continues to be too fragmented. The results of this fragmentation of the industry and the market are making themselves felt: European airline companies and their customers are not deriving the maximum benefit from the internal market. Worldwide, many European carriers are too small in comparison with their international competitors. Consolidation is a must! - Strict control of state aid In the area of State aid we are still faced with the problem of the restructuring of some still heavily indebted flag carriers and the attendant issue of state aid and competition that this implies. The Commission has pursued a very strict policy to avoid distortions. For the first time in Europe even flag-carriers have gone bankrupt. This policy must continue in the future in order to be more competitive and efficient. - Safety Let me turn now to safety. The creation of the single market has led to a number of important changes in the field of European civil aviation. Through the establishment of the European Aviation Safety Agency we seek to ensure within the EU a high uniform level of civil aviation safety, which is the counterpart to a truly integrated aviation market. - Single Sky Finally, the Single European Sky, I proposed, which was adopted in early 2004, will reform the architecture and structure of European Air Traffic Control in order to meet future capacity and safety needs. Further infrastructure, capacity, regional airports as well as interconnection will be needed. II. INTERNATIONAL AVIATION Let me turn now to the situation in international aviation. This is significantly different from inside the EU. International air transport is still governed by the framework of bilateral air services agreements which has its origin in the Chicago Convention of 1944. These air services agreements impose substantial constraints on the commercial freedom of airlines. Airlines can not determine the key parameters of their services (routes, frequencies, prices) exclusively on commercial grounds. Bilateral agreements impose which routes to fly and set limits on the number of weekly flights. Nationality restrictions in the existing air services agreements have led to a high fragmentation of the airline industry. Given this regulatory framework, the profitability of the sector is very low. It is obvious that this system is obsolete for an European Union with an internal market. 3
The current international system, although primarily focused on passenger traffic, also puts restrictions on the development of the cargo market. It is a key objective of the Commission to open these markets and to reduce the existing national restrictions. The November 2002 ruling The European Court of Justice in its very important open-skies judgements of November 200 declared that the Community has exclusive competence in some areas covered by bilateral air services agreements. Following these judgements, the Community, represented by the Commission, will in close cooperation with Member States step by step take over responsibility for aviation relations with third countries. EU-US Open Aviation Area A core piece of our external aviation policy is of course relations with the United States. The European objective is ambitious: It aims at creating an Open Aviation Area based on the mandate to negotiate a comprehensive aviation agreement with the United States given by the Council in June 2003. In other words, we would merge the two largest aviation markets worldwide to the benefits of our citizens, airlines, cargo operators and airports. Six rounds of negotiations have taken place so far with Washington between October 2003 and June 2004. Substantial progress has been achieved on a series of issues. The recognition of the Community designation clause by the United States is one of them, but let me also mention progress on market access or regulatory convergence. This would significantly ease your business environment. Despite these positive results, an imbalance in market access still persists. US airlines would gain greater access to the EU market (notably all 5 th and 7 th freedom rights within 25 EU Member States for US cargo operators). On the opposite, EU operators would not gain an equivalent and immediate access to the US domestic market. They would have to wait for a second-step agreement. This imbalance is particularly true for cargo operators. The Commission is ready to consider further opening of the EU market. But this opening of the EU market needs to be mirrored by further business opportunities granted to our cargo companies on the US market. Negotiations will resume with the United States at technical level after the US Presidential elections. I have no doubts that an agreement will be achieved in the very near future: it would be a mistake to miss such an opportunity. Already in 2002 the Commission announced that it will ask for further mandates with other third countries. Our priorities are the neighbouring and candidate countries as well as important aviation markets and partners of the EU such as China and Russia. In the meantime, the Commission has presented the request for mandates for comprehensive aviation agreements between the EU and the Balkan as well as between the EU and several Mediterranean partners, including Morocco. With regard to Russia, the Commission is continuously looking for a solution for the issue of Siberian overflight royalties. 4
III. SECURITY AND ENVIRONMENT Ladies and Gentlemen, The international dimension of aviation also requires common rules for safety, security and the environment in order to create a level playing field, to protect citizens and to make air transport as safe and secure as possible. (A) Security The events of September 11 have significantly changed aviation world. Security measures, on EU and international level, have been increased and are an important part of international aviation. Inside the EU, a framework Regulation establishing common rules in the field of aviation security came into force on 19 January 2003. It lays down common basic standards for aviation security, including rules and procedures to be applied for air cargo. The industry, in particular freight forwarders, has been complaining that Member States are implementing the rules differently and that practices in Member States vary considerably. What one sees in the existing EU legislation is merely the start of a long process to develop detailed harmonised EU aviation security legislation. However, we also know that we cannot accomplish this by ourselves. Close international co-operation is a precondition for ensuring the effectiveness of air cargo security systems. The reasons are obvious: Terrorism has become a worldwide phenomenon. The best national security systems will always rely on what happens in other parts of the world. Since aviation is a global business there is a need for co-ordinated approaches to be established together with other countries and air operators. We need therefore OACI international rules to deal effectively with this challenge. (B) Environment Environmental questions will also remain a fundamental factor for the development of the aviation market. Citizens rightly expect modern industries to carry out their activities according to high standards that properly respect the environment. On aircraft noise impacts, the European Court of Human Rights has effectively established that neither the industry nor the airport neighbours have automatic or prior rights of precedence. This will remain an area in which EU and particularly Member States have to make difficult decisions between the interests of different stakeholders. The EU has given legal effect to the so-called balanced approach recommended by ICAO. This establishes a formal process that gives industry and other stakeholders a right to be consulted and, in some circumstances, a right of independent appeal against unwelcome decisions. Moreover, from 2007 Member States will be required to monitor noise levels and publish exposure maps for major agglomerations and transport infrastructure. This includes airports with more than 50.000 movements per year. The authorities must draw up and publish action plans to reduce noise where necessary. This is not something that applies to major airports alone it applies to all major transport and industrial sources of noise. 5
On air quality impacts, EU has legislation that sets limit values for key pollutants such as NOx. These values will become mandatory in coming years. Again, this regime applies generally and the limit values are neither more nor less onerous at airports than anywhere else. Aviation s climate change impacts are perhaps the biggest worry. The impacts may currently seem relatively modest but they are forecast to become increasingly significant. No effective action has yet been agreed internationally. The EU will participate in the forthcoming ICAO Assembly and will argue that such action is necessary otherwise ICAO will lose its credibility as a forum for addressing aviation environmental issues. CONCLUSION Ladies and Gentlemen, Modern transport systems need an efficient and reliable air cargo industry. I am proud of the policy I have conducted in the Commission over the past five years to develop a more integrated European approach towards aviation to face the challenges to which we are confronted. A key objective will be to strengthen the European presence in international aviation and to open the restricted system of bilateral aviation agreements. The more significant task will however be yours: to perform efficiently in the markets. I am confident that your sector is well positioned to face this challenge. Close cooperation between the European Commission and the different stakeholders is important for that. I am sure that this will also be the position of my successor as Commissioner of Transport. I wish you every success for the conference. Thank you for your attention 6