Committee Reports > List of Committees > Joint > 1980 > Committee on the Secondary Legislation of the European Communities > Report No. 72 - Air Transport Services

REPORT

Introduction

1. The Joint Committee has considered a memorandum sent by the Commission to the Council on 16th July, 1979 (8139/79) on the contribution of the European Communities to the development of air transport services [COM(79) 311 final].

2. A detailed examination of the memorandum was carried out for the Joint Committee by its Sub-Committee on Social, Environmental and Miscellaneous Matters under the Chairmanship of Senator Mary Robinson. Apart from considering written memoranda prepared by Aer Lingus and the Department of Transport the Sub-Committee had the opportunity of participating in wide-ranging discussions on the Commission’s document with representatives of those bodies. The Joint Committee is indebted to Senator Robinson and her Sub-Committee for their work.

Treaty Provisions

3. Sea and air transport is excluded from the common transport policy as laid down in the EEC Treaty but Article 84.2 provides that “the Council may, acting unanimously, decide whether, to what extent and by what procedure appropriate provisions may be laid down for sea and air transport”. However the Commission points out that these discretionary powers of the Council are subject to general objectives of the EEC contained in Article 2 of the Treaty which include “a harmonious development of economic activities”. Moreover the judgment of the Court of Justice in Case 167/73 [1974] ECR 371 would indicate that air as well as sea transport is subject to the general rules of the Treaty e.g. Articles 48 to 51 (free movement of workers), 52 to 58 (right of establishment), 59 to 66 (freedom to provide services), 85 to 90 (rules of competition) and 92 to 94 (state aids). Community involvement in the sphere of air transport is also justified in the Commission’s view by its relationship with other Community policies such as industrial policy (efficient aircraft and productivity), regional policy (regional accessibility), energy policy (rational use of energy resources) and environment (reduction of nuisances).

Council’s Attitude

4. Action by the Council in recent years leads the Commission to conclude that the time is ripe for Community initiatives for the further development of air transport services. In June, 1977 the Council asked COREPER to establish a working group to identify what aspects of civil aviation could be usefully pursued at Community level. In June, 1978 it approved the following priority list of items for examination which had been drawn up by the working group:—

(i)Common standards restricting the emission of nuisances due to aircraft;

(ii)Simplification of formalities (facilitation, particularly those relating to airfreight);

(iii)Implementation of technical standards (JAR):

(iv) (a)Provisions regarding aid;

(b)Provisions regarding competition;

(v)Mutual recognition of licences (air crew and ground staff);

(vi)Working conditions (air crew and ground staff);

(vii)Right of Establishment;

(viii)Possible improvements to inter regional services, and

(ix)Search, rescue and recovery operations and accident enquiries.

The Commission regards these items as constituting a series of headings on which much work is needed to turn them into a programme. It considers that its own memorandum “sets out more fully and specifically actions upon which the course for policy decisions is to be set”.

5. The Joint Committee understands that there was a fairly general welcome for the Commission’s memorandum in the Council when the Ministers gave their initial reaction to it in December, 1979. It was, however, stressed that this was an initial reaction only and that much work and study needed to be done before any decisions could be taken.

Commission’s Memorandum

6. The Commission’s memorandum is designed to promote discussion among Community institutions on long, medium and short term objectives for policy with regard to Community air transport services. In light of this discussion the Commission intends to submit specific proposals at appropriate stages.

7. The Commission sees the long term objectives to be pursued as falling within the context of Article 2 of the EEC Treaty. In light of the aims of the Community as expressed therein the Commission suggests that operational objectives to be pursued in the medium and short term are to be deduced from the interests of users, airlines, workers and the general public which it identifies as follows:

(a)Users—a total network unhampered by national barriers with efficient services at prices as low as possible without discrimination;

(b)Airlines—financial soundness, diminution of operational costs and an increase in productivity;

(c)Staff—safeguarding interests of airline workers in the general context of social progress including elimination of obstacles to free access to employment, and

(d)General Public—improvements in conditions of life and respect for the wider interests of economies and societies.

8. Civil aviation functions at present in accordance with the international rules established by the Chicago Convention in 1944 and the ensuing multilateral and bilateral agreements. Consequently there is a high degree of inter relationship between European air transport and the world system. The Commission therefore recognises that action is desirable at Community level only if it is possible to show that benefits could follow. It stresses that the Community should adopt an evolutionary approach in this field and avoid abrupt changes which would not leave sufficient time for adjustment.

9. The Commission described a number of possible measures for short and medium term action which could be taken in pursuit of the objectives mentioned in paragraph 6 of this report. The measures suggested are as follows:—

(a)Increased flexibility in market structure and procedures to benefit user and airlines.

The following measures are suggested to increase the possibilities of market entry and innovation in tariffs and services:—

(i)Wider application of cheap tariffs in the Community,

(ii)Improved possibilities for developing new scheduled services, and

(iii)Extended scope for non-scheduled services.

To assist in the implementation of these measures the following are proposed:—

(iv)A Regulation applying the rules of competition in air transport,

(v)Criteria for state subsidies,

(vi)Right of establishment,

(vii)Stabilising exchange rates for tariff construction, and

(viii)Compensation for passengers adversely affected by overbooking.

(b)Measures directly to reduce operational costs of airlines.

(ix)Simplification of formalities, and

(x)Harmonisation of technical standards for aircraft.

(c)Action affecting staff.

(xi)Working conditions of aircrew and ground staff, and

(xii)Mutual recognition of qualifications of aircrew and ground staff.

(d)Action affecting safety.

The possibilities of growth in air transport are limited by capacity and safety problems of air traffic control. The Commission intends to examine these problems.

(e)External Relations.

Action taken on the internal market may be dependent on or influence international developments. To deal with this the Commission suggests:—

(xiii)A consultation procedure, and

(xiv)Improved relations with the International Civil Aviation Organisation (ICAO) and the European Civil Aviation Conference (ECAC).

General Views of the Joint Committee

10. The Commission’s memorandum is expressly intended to promote dialogue between Community institutions on the measures necessary in the field of civil aviation to meet the requirements of the Treaty of Rome. As a basis for discussion the memorandum is to be welcomed and the Joint Committee believes that it is a useful exercise to try to identify what role the Community can usefully play in the development of air transport services. In particular it welcomes the Commission’s view that the Community should pursue an evolutionary approach. It is important in the Committee’s view that the benefits accruing from the worldwide system initiated by the Chicago Convention should not be jeopardised and that Community action should concentrate on those aspects of civil aviation which have an identifiable Community dimension and are amenable to treatment at Community levels. The Committee intends to report further on whatever formal proposals emanate from the Commission in due course. At this stage it proposes merely to comment on some points mentioned in the Commission’s memorandum and to suggest some areas in the field of civil aviation in which Community initiatives might prove useful.

Potential Market Entry and Innovation

11. The Commission suggests that “if an airline requested traffic rights in order to carry out a new route between Member States, a new type of scheduled service, or an existing service at a considerably lower price, accompanied by new marketing measures, then it should not be prevented from being authorised—unless the airline(s) already designated decided to offer a similar service or tariff”. It does, however, recognise that the implementation of such a policy would have to be accompanied by certain safeguards.

12. Aer Lingus has drawn the Joint Committee’s attention to the fact that in 1979, it had nine competitors (scheduled plus charter) between Ireland and the U.S., six U.K. competitors cross-channel and six scheduled plus seven charter competitors between Ireland and the Continent, and of course it also faced competition from surface carriers. In the Committee’s view the company can justly claim that it does not fear competition. However it has expressed a fear that the Commission liberalisation proposals could lead to the predatory entry by a carrier on its prime routes who takes only what suits him and for as long as it suits him. The Commission itself recognises the need to avoid predatory market entry but the Committee doubts if the control it envisages is adequate. In the Committee’s view safeguards are essential to ensure that the public service aspects of airline operations in terms of routes, frequencies and spread of fares are maintained.

13. The Joint Committee is concerned that any Community initiative for the liberalisation of air transport should not jeopardise the viability of Aer Lingus. The Commission mentions five freedoms of the air, the third and fourth of which refer to the right of an airline to carry passengers, freight and mail between its own and a foreign country. Any liberalisation based only on those freedoms could mean that foreign carriers would be given operating rights to and from Ireland for routes developed by Aer Lingus without any compensatory liberalisation of rights for the company. Any liberalisation must, therefore, in the Committee’s opinion also include the fifth freedom which would enable Aer Lingus to acquire operating rights within the United Kingdom or linking other EEC countries with each other. Moreover the Commission fails to advert to the so-called, sixth freedom i.e. the ability of large carriers to benefit from carrying longhaul traffic destined for Ireland or originating in Ireland on their longhaul networks without providing any direct links to Ireland themselves. The Committee is advised that some airlines earn more revenue in this way than they would earn from direct links. Aer Lingus for geographical reasons does not have the same opportunities for sixth freedom traffic. Consequently, wider participation in traffic within and between other European countries would give a fairer competitive balance.

14. The development of regional air services is one area in which the Joint Committee believes that the Community might be able to play a useful role. It believes that the Commission should be encouraged in its examination of this aspect of civil aviation.

Fares

15. In the Commission’s opinion there is scope for improvement in the tariff structure of European airlines. It recognises that the normal economy fare is necessarily fairly expensive because it includes payment for services which are useful to probably the majority of Government and business travellers, namely, reservations made ahead of time and changeable at short notice, a high degree of access to a seat (also at short notice), the ability to inter-line with another carrier and frequently of service. It points out, however, that under pressure of competition scheduled operators have modified the tariff structure from time to time, leading in fact to a multiplicity of tariffs on some routes. In the Commission’s view the shortcomings of the present system of fares are felt in particular by leisure traffic where the primary concern of travellers is cost and not availability.

16. The Commission suggests that initially and preferably in a multilateral framework Member States should ask the airlines to introduce arrangements allowing for tariff reductions on the most important traffic links. These arrangements would involve the provision of third-class, APEX, no-frills, rambler and stand-by fares. If the airlines do not respond the Commission believes that Governments “should allow the establishment of a limited number of services with such tariffs by other operators on the routes”.

17. Aer Lingus has pointed out to the Joint Committee that its basic economy fares are up to 30 per cent cheaper per mile than fares for comparable distances in the rest of Europe. And that its myriad innovative fares (spouse, fly-drive, all-the-way) are cheaper still. As well, Aer Lingus has one of the highest proportions in Europe of discount fare travellers: 70 per cent. Moreover, the company’s commitment to the regions has resulted in the extension of promotional fares to Cork and Shannon as well as Dublin. The company is opposed to the introduction of standby fares which it regards as unsuited to the market in this country but is not averse to considering other types of cheaper fares provided the ultimate decision is left to itself. It is strongly opposed to any suggestion that its marketing policy should be subject to the regulatory control of any outside body.

18. The Joint Committee believes that it is in the public interest that air fares be kept as low as the economic viability of airline operators permits. It can see no objection to the suggestion that Member States should ask the national airlines to review their tariff structure with a view to seeing what new form of travel arrangements could be introduced which would result in lower fares.

Air Traffic Control

19. It appears that the Council of Ministers does not favour dealing with air traffic control in a Community context because of the technical nature of the subject, the military aspects of air space problems (defence, NATO) and the fact that the Eurocontrol Convention concerns non-Member States and does not concern all Member States. The Commission has, however, indicated that it will consider submitting the matter to the Council again in light of the European Parliament’s investigation of the subject.

20. Aer Lingus has informed the Joint Committee that on average there is 13 per cent more flying than the distance to be travelled requires. Obviously this situation adds substantially to airline costs and if there is any initiative the Community can take to remedy it the Joint Committee believes that it should be supported.

External Relations

21. A consultation procedure was set up by Council Decision 80/50/EEC of 20th December, 1979 under which Member States and the Commission shall, on request, consult each other on air transport questions dealt with in international organisations and on developments that have taken place in relation to bilateral and multilateral agreements. The object of the consultation procedure is to consider jointly possible co-ordinated action within international organisations or any other appropriate approach.

22. It is the view of Aer Lingus that a concerted approach by the Community to relations with third countries would be of advantage from the point of view of a small airline from a small country. It considers that the evolution of such a policy would be more likely if the consultation procedure were in line with the Commission’s original proposals. These included provision for consultation prior to and during negotiation of multilateral and bilateral agreements with non Member States but this was not acceptable to several Member States including Ireland.

23. The Joint Committee accepts that a co-ordinated approach by the Member States in relations with third countries would be a most welcome development but it recognises that it may be very difficult to achieve. Nevertheless it hopes that the present consultation procedure, which is to last for three years, will make a positive contribution towards removing the obstacles to the development of such a policy.

Overbooking

24. The Joint Committee notes that the Commission is contemplating proposing a Directive to provide compensation for passengers who are not allowed to board because of overbooking although they have previously reserved a seat on a specific flight. The Committee agrees that airline companies should compensate persons inconvenienced in this manner and it was pleased to learn that this is already the practice of Aer Lingus.

Community Priorities

25. Finally the Joint Committee wishes to identify some areas within the field of civil aviation where it believes that Community action should prove useful. It suggests that consideration be given to Community initiatives in regard to the following:—

(a) Simplification of formalities.

It is appropriate, as the Commission points out, that simplifying procedures and documents used for freight should be tackled within the Community’s programme for the achievement of the customs union and fiscal harmonisation. Similar measures for passenger traffic would certainly be desirable.

(b) Airport Charges.

The Committee believes that Community action to bring about a uniform practice in relation to certain charges on airlines should be considered. The United Kingdom, unlike other Member States, imposes a charge on airlines in respect of airport security. It is understood that for Aer Lingus this charge now amounts to IR£1.60 per passenger. In the Committee’s view security costs should be the responsibility of Member States.

(c) Airline Productivity.

(d) Fuel Availability and Cost.

(e) Harmonisation of technical standards, and

(f) Harmonisation of time zones.

Acknowledgement

26. The Joint Committee wishes to express its sincere thanks to Aer Lingus for the considerable trouble the company went to in order to ensure that the Committee was fully briefed in dealing with the Commission’s memorandum. It desires to express a special word of thanks to Mr. Micheál Ó Riain. Assistant Chief Executive (Commercial) and Mr. Colm Culleton.

(Signed) ALEXIS FITZGERALD,

Chairman of the Joint Committee.

4th June, 1980.